Samsung is a South Korean business conglomerate that is involved in a wide range of industries, including electronics, construction, home appliances, as well as others. The company was founded in 1938 and is currently the largest South Korean company. Samsung transitioned between multiple business models and used a variety of strategies over its 80-year history of operation. Currently, it is a multinational conglomerate that operates in almost every country of the world. The value of the company is one of the highest, and it uses more than half a million employees in its daily operation (Stoller 2017). This assessment will provide an analysis of the international strategy of Samsung, its international operations, management structure, strategic use of joint ventures, as well as the social responsibility strategy of the company.
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The Integration-Responsiveness Framework
Samsung is a multinational conglomerate with subsidiaries in almost every country in the world, with each subsidiary aiming to provide a comparable product to the local customers. One of the main aspects of international strategy for firms of this scale is the choice of approach to integration and responsiveness. Four primary types of international strategy are present in the Integration-Responsiveness framework (see figure 1). However, only two may be applied to Samsung’s international strategy. The first is called “global strategy,” and it is focused on economic effectiveness through integration into a variety of businesses, standardization of product with the goal of achieving lower costs of manufacturing, and a uniform standard of product quality throughout the world.
By examining primary evidence, it may appear that Samsung aims to be a global company. For example, its flagship series of smartphones, “Galaxy,” is available in the majority of countries, and its specifications or features are uniforms regardless of the needs of the country (Samsung Galaxy Note 8 2017; Shukla 2018; Ismail 2018). While such product series as “Galaxy S,” and “Galaxy Note” are identical in every region in which they are sold, there is a reason for it that is not tied to the global strategy of Samsung. These series of phones act as anchor points for the remaining product line of the company in each of its regions of operation. Samsung is one of the largest smartphone manufacturers in the market. To increase awareness of its brand, the company uses its most powerful and feature-rich products in advertisements. A customer may not be aware of the full line of smartphones, but they are certain that phones that belong to the flagship series would always contain all the features that are presented in advertisements.
However, this uniformity is not achieved through a loss in responsiveness. The second type of international strategy is called “transnational.” This strategy is focused on developing economies of scale, adaptation to local markets, a search of activities in optimal locations, as well as an increase of knowledge flows and learning. This strategy has a high level of global integration while also being very nationally responsive. Samsung’s international strategy could be described as “transnational” due to the majority of its business operations aligning with the main aspects of this approach. For example, the company often aims to open manufacturing plants in new regions, such as plants in Egypt and South Africa, in 2016. They have opened ahead of the previously announced Nigerian plant due to differences in infrastructure and tax reliefs available in those regions (Adepetun 2016). This example shows that the company is concerned with the development of economies of scale.
Moreover, the Nigerian manufacturing plant was later delayed due to further concerns about the market, which include the prevalence of counterfeiting in the region and logistical difficulties. The company is still partnered with the government of Nigeria, however, and reportedly seeks to go through with the manufacturing plant plans in the near future (Adejumoh 2018). Samsung applies the same attention to the needs of the countries in which it operates. A prime example of this regional strategy is a line of budget smartphones called “Galaxy A.” This line is currently unavailable in the United States, where phones are rarely bought without a carrier discount, but it may be bought in countries where such practices are not common. The “Galaxy A” series of smartphones presents a slightly less advanced bundle of features and lower specifications than the flagship “Galaxy S” series, but its price is much more affordable. This approach broadens the range of Samsung customers by offering a budget option to those who cannot afford the flagship products (Kawadkar 2018).
A similar approach to product diversification can be seen in Samsung home appliances and other company divisions. However, the quality of these products is held to the same standard as any of the company’s flagship items. This combination of uniform quality and attention to regional needs allowed the company to compete with the most popular manufacturers of smartphones, televisions, electronics, and home appliances (‘Tools of the trade’ 2018; Kwang-Jae Kim et al. 2018; Chen & Ann 2016). After a closer examination, it appears that despite the uniformity of the flagship company products, Samsung’s international strategy belongs to the “transnational” approach in the integration-responsiveness framework. The company actively utilizes economies of scale, and its product line includes variations specifically designed for the needs of countries in which the company operates. It has shown to be a relatively successful approach for the company, despite its involvement in a variety of different industries. It is possible that not all of the company’s divisions share the same international strategy due to their limited presence outside of the domestic market, but the most successful and large divisions utilize the transnational approach to their global business.
International Operations and Management Structure
The Role of Samsung HQ Versus Its Subsidiaries
Large conglomerates like Samsung may choose from a variety of relationship structures when defining how much influence its headquarters should have on the subsidiaries. This choice affects the initiative that various subsidiaries might have in the business process and how the headquarters plans for the future of the company. While Samsung does not reveal the entirety of its management structure, it is possible to determine how the company operates based on its evolution and growth throughout the years, as well as the way in which it implements change on a global scale. The conglomerate is comprised of more than 50 affiliates and subsidiaries, with the majority not being listed on the global stock exchange. The company headquarters, located in Seoul, South Korea, holds a dominant position over its subsidiaries.
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Initially, Samsung was founded as a trading company but quickly began to purchase subsidiaries to diversify its business. The diversification was very wide and included fields of operation that did not utilize common resources or knowledge. It appears that due to this fact, their operation remained relatively independent of other subsidiaries (Choi 2016). Therefore, the HQ-subsidiary relationship could not be integrated or distributed. The shipbuilding division of the company had no interaction with the food processing division, while both still received orders and management from the company headquarters. It appears that whenever a new subsidiary is acquired by the company, their focus shifts to the utilization of their technology or resources for new company products. For example, the recent acquisition of a smart vehicle company HARMAN led to an immediate transition to the development of a new smart vehicle platform (Golightly 2018). The technology presented as a part of the platform was developed before the acquisition took place, but the project developed under Samsung leadership is created based on Samsung’s plans and specifications (Reyes 2018).
The relative independence of subsidiaries from the company HQ could also be seen in the recent scandal in which a high-ranking Samsung executive was convicted on multiple charges of corruption and bribery, as well as involvement in the corruption case of the former South Korean President Park Geun Hye. The executive, Lee Jae Yong, was recently released from prison after a successful appeal, but the company did not suffer in his absence. None of the important projects were postponed or changed in any way, and virtually no issues were encountered. This indicates that despite the main office is heavily involved in the initial control over the subsidiaries, its influence is not required for the daily operation of its affiliates (Fifield 2018; Samsung posts 2018). It is plausible that higher-level planning had to be restructured during the absence of Lee Jae Yong, but no public statement was made on this matter by the company.
The structure of the company is likely to resemble a “coordinated federation” with the dominant headquarters having strong control over the main idea of a project but with the majority of other aspects being left for supervision by the subsidiary (see figure 2). With dozens of companies being a part of the larger Samsung brand, this approach appears to be sensible. It is unlikely that executives operating from the main headquarters would be effective at micro-managing a shipbuilding company and an electronics company at the same time. This is likely why Samsung had no major issues in its operation despite being involved in a large political scandal.
The ability of the Firm to Implement a Significant Global Change
The recent history of Samsung shows that the company would not be able to achieve its current success without having the ability to implement change across all of its subsidiaries in a timely fashion. The most significant example of such implementation began in 1996, when the chairman of Samsung Group, Lee Kun-Hee, presented a new mission to make Samsung one of the most competitive companies on the global market. Before 1996, Samsung experienced a period of stagnation (Yoo & Kim 2015). Despite success in the 1980s, the company was in a downturn due to a series of unsuccessful acquisitions and failed bids. The company almost completely seized its work on innovative technologies and was likely to stagnate further if nothing was done to prevent that. Kun-Hee’s mission statement began a turning point for the company (Choi 2016).
Samsung began to invest heavily in designers for all of its divisions with the goal of creating new and innovative products that could elevate Samsung as a company in the modern era. This change was spread globally over a period of a year through communication channels and changes in company strategy. However, the company encountered an issue with its suppliers that were not used to the new design-oriented company strategy. One such issue revolved around protective covers that were used by the supplier of LCD panels. The covers did not comply with the proposed design, and the supplier refused to change their technique. This led to the designers creating a new supply-chain for LCD panels, which was much more cost-efficient (Yoo & Kim 2015). The company was capable of achieving this success by having a consistent vision across all of its subsidiaries which was communicated clearly and supported by the actions of the company. Currently, it fulfilled its mission and continued to operate, with innovation being one of its core business practices. This approach allowed the company to be at the forefront of new television and smartphone technologies and compete on a global scale (O’leary 2016).
Samsung’s Strategic Use of Alliances
Samsung and Apple Inc. Partnership
One of the most significant partnerships that Samsung was involved in is its alliance with Apple Inc. The partnership began in 2005 when Apple Inc. required memory supplied for their smartphones and other portable products. At that time, the memory market was in a volatile state, and Samsung was the only viable partner for Apple Inc (Kang 2016). Technological advancements reached by Samsung during the previous decade to it in control of almost half of the NAND flash memory market. This partnership allowed Apple Inc. to have a steady supply of electronic parts such as processors and memory for their devices, while Samsung gained insight into the emerging smartphone industry. At the peak of the partnership, both companies were cooperating on the creation of the main processor for Apple’s flagship products (Samuelson 2016). However, the situation did not remain this cooperative for long. Samsung’s focus on research and development and familiarity with the manufacturing process of Apple’s devices convinced the company management that it should enter this business.
The first Samsung smartphone was called “Omnia.” It utilized a mobile version of windows to handle its applications. It was met with a poor reception as its features were seen as outdated. The second attempt launched the “Galaxy S” series of smartphones, which was much more competitive and strongly resembled the version of the iPhone that Apple Inc. was selling at the time. This brought immediate concern to its executives Steve Jobs and Tim Cook. They contacted Samsung’s leadership with a formal complaint in hopes that Samsung will change its design. The Galaxy S design did not change, and by 2011 Samsung repeated this strategy with the release of the “Galaxy Tab,” a tablet device very reminiscent of Apple’s iPad (Samuelson 2016). Both companies were still in close partnership with each other because Apple still required Samsung to be a memory supplier. Nevertheless, Apple leadership came to a decision that legal action was required. A lawsuit was filed by Apple in April 2011 (Samuelson 2017).
This lawsuit was one of the most expensive and large-scale lawsuits in the electronics industry as it continued to involve various subsidiaries of both Apple and Samsung in a prolonged legal battle (Samsung, Apple 2014). The final judgment provided Apple Inc. with more than a billion dollars and could have prevented Samsung from selling any devices that were found to be infringing on Apple’s copyrights. However, the last part of the ruling was rejected during the last step of the trial (Samuelson 2017). Even during and after the trial, the partnership between the organizations continued, but on a much smaller scale. This alliance provided billions of dollars to both Apple Inc. and Samsung as their smartphone divisions grew to massive proportions. In recent years, these companies announced that a new partnership between them would be created, which shows its high strategic value (King 2015).
To better understand this situation, it is important to ask what were the goals of the original partnership, whether they were met, and if the choice of partner was appropriate. The first of the original goals was to create a revenue stream through the provision of memory and other electronics to Apple Inc. This goal was met completely as the company started to produce flash memory in high numbers for Apple. The second goal was to examine the innovations available in the field of smartphones and possibly capitalize on their emergence. While this goal was not stated by the company outright, its innovation-focused approach to business and its deep involvement in the creation process of the iPhone show that Samsung management was likely to enter this market. The processes of manufacturing, research and development that occurred during the partnership were performed in a way that was beneficial to both companies. Finally, the choice of partner was very appropriate because Apple Inc. was also focused on the development of innovative electronics. This was an extremely lucrative partnership, and the fact that both companies are working together after a costly legal battle is a very rare situation.
International Dimensions of Samsung’s Social Responsibility Strategy
“Home Country” Dominant Policy
The majority of corporate social responsibility theories are based on the idea that companies should work with the needs of their stakeholders in mind. A company that operates solely for the purpose of making a profit at the expense of its employees and the environment is not ethical in nature, and its actions may lead to a variety of negative consequences for all stakeholders. If Samsung management chose a global approach to its international strategy, their actions would likely involve a “Home Country” dominant strategy which would prioritize the actions of the headquarters over the needs of the countries in which the company operates. However, as it was mentioned earlier in the text, Samsung does not actively enforce a “home country” dominant policy.
In fact, due to its transnational approach to international strategy, the company attempts to adapt to the unique environments in which its subsidiaries are located. This tactic leads to the creation of new manufacturing plants in different regions, along with new places of work. However, the company gained a lot of negative attention due to its irresponsibly low working conditions in Asia, Europe, and the United States. The organization has been involved in a variety of anti-trade union activities, incidents of workers becoming ill due to chemicals that are involved in the production, as well as instances of threats being used in an attempt to silence independent human rights researchers who monitored Samsung manufacturing plants (200,000 Petitions & Counting 2018). The organization appears to deliberately obfuscate these stockholder issues and has not attempted to resolve the situation in a responsible manner (González 2018).
Examining this situation from the perspective of the concentric circles model of CSR, the company appears to be very concerned with economic responsibility as its core of operations. Samsung is very concerned with its revenues, profits, and other similar aspects that allow the company to continue its operation. On the second circle, Samsung appears to be less concerned about legal responsibility. Until recently, the company was heavily involved with corruption in South Korea and appeared to be using illegal tactics worldwide as a way to improve efficiency through lesser safety standards. The third circle is related to ethical responsibilities, and it also appears to be disregarded by the company. With more than 300 cases of cancer being recorded among workers in Samsung manufacturing plants, it is clear that the company is not concerned about the health of its workers (González 2018; Lee 2017). Moreover, when the company was confronted about its harmful work environment, its representatives used threats in an attempt to prevent this situation from becoming public (González 2018).
The final circle concerns the philanthropic responsibilities of the organization. This aspect appears to be more important to Samsung management, as they do attempt to contribute to local economies, and their actions may serve to improve it. Overall, the organization does not fulfill the majority of its responsibilities and focuses almost entirely on profit. It is a unique situation because transnational organizations are often more attentive to the needs of the regions in which they operate, not only the needs of customers but also those of workers. It is unfortunate that this is not the case since, with the high profits of the company being recorded almost every quarter, they should be able to organize healthy working conditions without taking a dramatic financial loss. The negative public response to the firm is only starting to build at the moment, but hundreds of thousands of people have already become aware of the issue and chose to voice their displeasure of unethical practices that the company performs.
Overall Assessment of the Firm’s Strategy
Samsung is one of the largest conglomerates in the world. The scope of its business involves dozens of large subsidiaries located across the planet. Their ability to operate on such a large scale is clearly substantial since, despite their size, the company continues to report profitable statistics from year to year. The international business strategy of the company combines elements of the global approach with the transnational approach to business. Quality of manufacturing is core to its products, and wherever a customer decides to buy a flagship phone, television, or home appliance, they are guaranteed to receive exactly the same product as in any other country. However, Samsung also seeks to fulfill the needs of customers from regions in which expensive smartphones are not economically viable for an average consumer through a special line of products that are slightly less capable than the flagship line but still provide sufficient features to the customer. This can be considered a successful approach to international strategy as the company becomes able to improve its brand recognition without trying to sell expensive products to people who cannot afford them.
The role of the HQ versus its subsidiaries appears to be relatively diminished. Samsung headquarters are involved in the work of all subsidiaries but do not micro-manage them, which recently shown to be an effective technique as the HQ was affected by a political scandal, but its subsidiaries remained stable. Samsung has also shown to be very capable of implementing global changes to its policy and operation. The design-focused approach that was introduced in 1996 is still in operation, and its consequences brought some of the most successful developments to the company.
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Samsung was also involved in an extremely lucrative partnership with Apple Inc. during their development of the iPhone line of products. The company strategically used the knowledge and resources at its disposal to analyze the potential benefits of joining the emerging smart device market. This partnership led to the development of its highly successful line of “Galaxy” products but also resulted in an extremely expensive lawsuit. Nevertheless, the partnership was lucrative, and it shows that the company operated strategically.
Finally, the social responsibility strategy of the company appears lacking. It is missing two of the four main responsibilities: ethical and legal. The recent reveal of the company being involved in political corruption and unsafe working conditions shows that actions need to be taken to resolve these issues. However, Samsung management refused to provide a clear comment on the situation. Overall the company is very capable of performing internationally, but its lack of attention to the needs of workers and laws may result in future problems.
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