Posted : 2009-11-03 17:35
Updated : 2009-11-03 17:35

Samsung Electronics’ Success

Keeping the Lead Is Harder Than Taking It

Samsung Electronics' spectacular growth from scratch over the past four decades is like the epitome of Korea Inc. itself.

Starting as a nondescript TV maker in 1969, it is now the world's top home appliance supplier, whose third-quarter profit doubled the total of its nine Japanese competitors combined. Back then, a Samsung CEO could meet Japanese executives for two minutes at the most; now the Japanese are lining up to meet Samsung officials. Small surprise then that Samsung Electronics, along with Hyundai Motor, has become the symbol of Korea's industry and a corporate pin-up for its people.

Its diligence in catching up with its advanced rivals, ceaseless efforts for self-renovation, and bold, timely decisions are cited as factors behind Samsung's success ― and the same is the case for its home country.

Interestingly enough, the Japanese media, while acknowledging their electronic firms' complete defeat, are finding the reason not in their products but in the different managerial cultures, citing, among other things, Samsung's top-down decision-making structure, which has made it big ― at least so far ― just like former President Park Chung-hee's state-led development strategy changed Korea.

Former Samsung Group chairman Lee Kun-hee has retired from the managerial front but is still pulling the strings from behind: Reports say the latest recall of 210,000 units of defective refrigerators was made at the behest of the senior Lee, an episode pointing out at least two things with respect to Samsung Electronics' future.

First of all, Samsung executives might have already fallen complacent ― or arrogant, as some critics put it ― with their success, not to find the problematic fridges. More importantly, they couldn't decide whether to recall them or not until their boss got furious and stepped in.

It is not so much the problematic products as the company's decision-making process that still heavily depends on its leader that spawns skepticism over whether Samsung Electronics will be able to hit its goal of emerging as one of the world's top-10 corporations and five biggest brands by 2020.

Samsung has a long way to go before reaching the targeted status even in purely technological terms, as it relies on Japanese suppliers for up to 60 percent of its core components and key equipment. Of course, the stellar performance of the third quarter itself was thanks heavily to the weak currency.

Again, what's more important than these technological issues are the managerial aspects, such as how the company can make a smooth transfer of corporate command from former chairman Lee to his son, Jae-yong. It was only a few years ago that the controversial third generational succession within the family without paying proper taxes has won a virtual pardon with just a slap on the wrist. But it has yet to pass tests in the market ― and in consumers' minds ― and the latter point may be more important than previously thought, especially concerning the company's third goal of becoming one of the most respected corporations in the world.

Samsung Electronics will be able to attain that objective only when it ensures more transparent management and a socially harmonious corporate climate that encourages not just cutthroat internal competition among elite executives but a more human labor-management culture. Most Koreans will want to like the company not just from their heads but also from their hearts.
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