Samsung unrelated diversification strategy

Samsung unrelated diversification strategy

Posted: Adequate Date: 13.06.2017

Fewer still would have predicted success given the path it has taken: The tightly integrated business system that worked in its home market could not secure its future in global markets. So into an organization focused on continuous process improvement, Samsung introduced a focus on innovation.

Into a Confucian tradition of reverence for elders, it introduced merit pay and promotion, putting some young people in positions of authority over their elders.

He changed only what needed to be changed, ensured that people understood the new practices, and never flagged in his commitment to the effort. Fewer still would have predicted the success of the path it has taken. For two decades now, Samsung has been grafting Western business practices onto its essentially Japanese system, combining its traditional low-cost manufacturing prowess with an ability to bring high-quality, high-margin branded products swiftly to market.

The two sets of business practices could not have seemed more incompatible. Into an organization focused on continuous process improvement, Samsung introduced a focus on innovation. Into a Confucian tradition of reverence for elders, Samsung introduced merit pay and promotion, putting some young people in positions of authority over their elders. It has been a path marked by both disorienting disequilibrium and intense exhilaration.

Corporate Diversification Strategy by Angelica Cauntay on Prezi

Their continued success requires turning away from what made them successful. The tightly integrated business systems that have worked in their home markets are unlikely to secure their future in global markets.

To move to the next level, they, too, must reinvent themselves in ways that may seem contradictory. And when they reach new plateaus, they will need to do so again.

It is a story we believe holds many important lessons for the current generation of emerging giants seeking to do the same. In the early s, Lee spotted an opportunity in the reluctance of Japanese companies—the analog market leaders—to adopt digital technology, which consumers were flocking to in cameras, audio equipment, and other electronic products. This opened the door for Samsung to surpass its rivals if it developed the agility, innovativeness, and creativity to succeed in the new digital market.

For those qualities Lee looked to the West. Execution of this mix-and-match strategy took three broad forms:. Imagine introducing a focus on innovation into a company optimized for continuous process improvement. Or merit pay and promotion into an organization with a strong tradition of reverence for elders.

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These are just some of the challenges Samsung has faced in creating its unique hybrid management system. Click here for a larger image of the graphic. The results have been impressive: When the company was founded, South Korea was a Japanese colony. Accordingly, Samsung rose to prominence in its home market under the Japanese model of unrelated diversification and vertical integration in pursuit of synergies.

The Japanese hierarchical labor model also suited the Korean context. The absence of a well-developed stock market and of sufficient competition for talent, combined with a strong Confucian tradition of respect for elders, led to a seniority-based compensation and promotion system. To compete outside its home markets, Lee knew, Samsung would need to move beyond its well-integrated system to engage with non-Koreans in non-Korean contexts.

That meant introducing practices inconsistent with the status quo. To compete outside its home markets, Samsung would need to engage with non-Koreans in non-Korean contexts.

Lee did not underestimate how unsettling that would be. Accordingly, he took great care to change only what needed to be changed and to ensure that Samsung adopted the most appropriate practices in a way people could understand and embrace. The company established new organizations to seek out and adapt best practices from abroad.

Results were carefully measured. If resistance was too strong, the company delayed adoption, modified the practice, or—as was the case with stock options—abandoned it. In this way, Samsung injected some highly incompatible business practices into its business model.

Beginning infor instance, the company slowly introduced into its seniority-based pay structure a merit-based compensation system modeled after the best practices of General Electric, Hewlett-Packard, and Texas Instruments. Similarly, Samsung took steps to allow high performers to advance more rapidly through its seniority-based promotion system by steadily shortening the minimum number of years they were required to stay at a particular level.

Other processes could be adapted and adopted more globally. But at GE only managers and specialists were involved in the system, whereas at Samsung the entire rank and file participated. This careful approach to importing Western business practices reduced disruption but also slowed progress. This he jfd forex rebate in two ways: As far back aswhen it entered the memory chip business, the company had hired ethnic Korean engineers and executives away from Intel, IBM, and Bell Labs.

Because promotions at Samsung had always come from within, the newcomers were perceived to be and actually were taking advancement away from incumbents. Not surprisingly, incumbent managers closed ranks, setting the newcomers up to fail by withholding important information, grain prices stock market their mistakes, and excluding them socially.

To be fair, this reaction was in part justified: If anybody tries that, they will be severely reprimanded. Improving the quality of the S-level recruits—and their reception inside the company—was no small task, and Lee thought expansively about how to address it.

Beginning in the early s, Samsung sent international recruiting officers IROs abroad to familiarize themselves with foreign talent. Thus motivated, Yun, for instance, took steps to ease newcomers into the organization by having them serve in an advisory capacity in their yahoo stock options chain months to get to know something of their colleagues, the culture, and the business before reversi strategy code up their posts.

He also instituted a formal mentoring program in which he met at least quarterly with each S-level recruit to give and receive feedback. To help assimilate these recruits, Lee in ordered group headquarters to set up a unique internal management consulting unit, the Global Strategy Group GSGwhich reports directly to the CEO. Its members—non-Korean graduates of top Western business and economics programs who have worked for such leading global companies as McKinsey, Goldman Sachs, and Intel—spend david stockman market crash two years in GSG and are required to learn rudimentary Korean before taking up their posts.

Even so, many of them have eventually been assigned to overseas subsidiaries, usually in their home forex with mt4. Cultural fit is a hard nut to crack. Of the non-Korean MBAs hired into GSG since it was created, were still working for Samsung as of December Choi Chi-Hun, a graduate of Tufts with an MBA from George Washington University, spent 19 years working at GE, six at its headquarters in the United States, before he was recruited to Samsung in September As an outsider with deep inside knowledge, Choi took care to fit into the culture and as a result saw none of the assimilation problems that dogged many of his senior-level colleagues.

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He did not speak English with his Korean colleagues. He showed full respect to subordinates older than he was. He generally behaved as other Korean employees of Samsung did.

Choi did not speak English with Korean colleagues, respected his elders, and behaved as other Korean employees did. His advice to his fellow senior-level recruits is to do the same.

Still, Choi is clear about the critical benefits outsiders bring to the organization. Senior recruits from other companies bring similar knowledge, along with a fresh eye for ineffective and inefficient practices that insiders may take for granted.

Assimilated as he is, Choi has advocated for a more market-oriented, performance-oriented, and meritocratic culture, aiming to cultivate at Samsung the meritocracy he knew at GE. Still, the rate of acceptance has been steadily rising. The effect of these employees on the organization has been something like that of a steady trickle of water on stone. As more people from GSG are assigned to SEC, samsung unrelated diversification strategy Korean colleagues have had to change their work styles and mind-sets to accommodate Westernized practices, slowly and steadily making the environment more friendly to ideas from abroad.

Today, SEC goes out of making profitable calls on binary options signals way to ask GSG for more newly hired employees. In the late 19th century, the Japanese imperial government sent its elite officers overseas to study successful Western practices and institutions.

Samsung at CES: Diversification the key to growth | Digital News Asia

They brought back, among other innovations, the British postal system, the French judicial system, the American system of primary education, and the German military organization, adding innovative features of their own to suit the monopoly make money in jail environment.

Samsung acts similarly, sending high potentials to Japan for advanced degrees in engineering; to the United States for further education in marketing and management; and to Singapore, Hong Kong, and New York for training in high finance. On returning home, these employees fill key positions and, in implementing what they have learned, become important change agents.

The effect of non-Korean MBAs recruited to Samsung has been like that of a steady trickle of water on stone. The environment has slowly become more friendly to ideas from abroad.

samsung unrelated diversification strategy

Each year for more than two decades, Samsung has sent some talented young employees through an intensive week language-training course followed by one full year abroad. For the first six months, their only job is to become fluent in the language and culture and to build networks by making friends and exploring the country. In the second six months, they carry out one independent project of their choice. Like their colleagues who have trained abroad, the specialists come back to major posts at headquarters or in the business units at home and abroad.

In those roles they disseminate information about how successful foreign companies operate, and they advocate for and experiment with best practices. It would be hard to overestimate the value of the connections regional specialists forge.

One of the first specialists, for example, went to Thailand inwhere he became fluent in the language and established relationships with prominent local figures. He is hardly alone. Another regional specialist, who went to Indonesia inused his language fluency and personal networks to establish a sales subsidiary whose sales doubled annually for three consecutive years. A third, sent to Bangalore indevoted his project to aiding a rural community there and then applied the intimate knowledge he had gained to the development of home electronics that Samsung could sell in the region.

Regional studies are markedly out of fashion these days in business schools, as discipline-based research in economics, political science, sociology, and the like has taken precedence. This has had the inadvertent effect of diminishing geographic intelligence—a global institutional void, we argue, that Samsung is a leader in filling. Some S-level hires took the IROs 10 years to recruit.

David Steel, executive vice president of SEC and the highest-ranking person to come out of the GSG, noted that the commitment of top management and the support of the managerial ranks are both necessary for the success of a program like this. But the substance and symbolism of that support are no small thing. Just as many never imagined that Samsung could become a dominant global player, many question its design aspirations.

But Lee set the agenda back in A substantial number of graduates of the intensive three-year training course have joined Samsung as designers. Following that lead, SEC has established design research institutes in the United States, the United Kingdom, Italy, Japan, China, and India.

Each year SEC sends 15 designers abroad to prominent design schools for one to three years to learn cutting-edge trends.

The History of Samsung Electronics (2): Diversification and Expansion (~) – Samsung Global Newsroom

As a result, SEC has won a panoply of design awards. Combining this design excellence with its traditional technological competence has allowed the once low-cost imitator to sustain a high-price strategy for its TVs and cell phones. To keep steadily moving upward, it will have to reach a higher level of diversity and decentralization—to become a Brazilian company in Brazil, for instance, not a Korean company that does business in Brazil. It will need to find new models for new practices so it can once again move beyond its current strengths and deal with further paradoxes that may arise.

The HBR Blog Network has run commentaries on this article from Tony ElumeluFederico R. LopezGokhan Erunand Anand Mahindra and Rajeshwar Tripathi. A Roadmap for Strategy and Execution Harvard Business Press, Jaeyong Song jsong snu. Kyungmook Lee kmlee snu. Your Shopping Cart is empty. Tarun Khanna Jaeyong Song Kyungmook Lee.

July—August Issue Explore the Archive. Execution of this mix-and-match strategy took three broad forms: A formal process to identify, adapt, and implement the most appropriate Western best practices.

Intervention by Lee to protect long-term investments from short-term financial pressures. A version of this article appeared in the July—August issue of Harvard Business Review. About Us Careers Privacy Policy Copyright Information Trademark Policy Harvard Business Publishing:. Harvard Business Publishing is an affiliate of Harvard Business School.

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