Culture, Goal-Oriented Communication (Leadership), and a Fast Growing Organization: the Case of Samsung Electronics

Culture, Goal-Oriented Communication (Leadership), and A Fast Growing Organization: the case of Samsung Electronics Hur, Chulboo, Professor Emeritus, Myongji University, Seoul, Korea and Adjunct Professor of Business Management, Yanbian University of Science and Technology, Yianji, Jilin, China Mobile phone 010-9872-7492, e-mail: [email protected] com and [email protected] ac. kr Summary In response to the globalization and rapid economic growth of China, the Korean economy has transformed itself.

A few Korean firms, spearheaded by Samsung Electronics, have successfully driven the economy, even if the Korean economy has difficulty in the ‘nut cracker’ situation. The success of Samsung Electronics has been attributed to the strategies of ‘selection and concentration,’ ‘successful restructuring following the IMF crisis,’ ‘long-term vision and unprecedented risk-taking strategy,’ ‘speed management,’ ‘world class brain management’ and ‘successful benchmarking of both Japanese and American management,’ among others. But in regard to Samsung’s strategies, cogent questions need to be examined.

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The paper explores the dynamic process of this phenomenon. 1 1. Introduction: Korean Economy and Samsung Electronics After three decades of rapid industrial growth, in itself a dramatic transformation from the poverty-stricken agricultural economy of 1961, the Korean industries became exposed to the predicament of borderless competition as well as the threat of the formidable super-speed chaser, the Chinese economy.

In the time between Korea’s acceptance as a member of the WTO in 1992 and the IMF Control of the Korean Economy in December 1997, pessimism was high among the Korean leading circles regarding the future of the Korean firms and the economy. Nut Cracker Theory of the Korean Economy (Maekyung Booze Allen & Hamilton Report, July 1997) Japan 10. 22 2. 8845, 4,029, 3. 5696 Korea 1 1 1 1 China 2. 35, 5. 7994, 6. 09, 5. 8399 2000 World Bank estimated GDP ratio in black color 2007 IMF estimated GDP ratio in Red color 2007 US CIA estimated PPP adjusted GDP ratio in blue color 2000 World Bank estimated PPP adjusted GDP ratio in violet color The figures have been corrected in this diagram from the author’s 2004 article But miraculously, the Korean economy has partly escaped the “nut cracker situation,” thanks to a few large firms spearheaded by Samsung Electronics. For example, three Korean firms were selected in the Fortune 100 companies in 2006. They were Samsung Electronics, LG, and Hyundai Motors. But this year, Samsung Electronics was listed as the only Korean firm with US$92. 26 billion in sales in the Forbes 100. It 2 is ranked 6th among Asian firms, following Toyota, PetroChina, Mitsubishi, UF Financial, and Bank of China.

Samsung electronics ranked 3rd in the Info Tech 100, in the 2007 Businessweek scoreboard, following AT&T and Hewlett Packard. Four Chaebol groups were responsible for 48% of the country’s exports, 49% of the Seoul stock market, and 42% of GDP based on sales in 2004. And in 2008,10 major export products from Chaebol groups account for 61. 1% of the nation’s total export (ChoongAng Daily, Feb. , 6, 2008). The Korean Economy Pulled by 4 Chaebol Groups ChoongAng Daily, April 29, 2004 The major Korean firms exhibiting global competitiveness are centered on the following industries: semiconductors/ TFT-LCD, mobile phones, petrochemical roducts, shipbuilding and small- and medium-sized automobiles. Businessweek (July, 2007), in cooperation with the English Interbrand Co. , reported that 3 Korean firms were included in the 100 global top brands value. They are Samsung Electronics, (21 th place); Hyundai 72nd place); and LG Electronics (97th place). Samsung’s brand value increased 4% from the previous year’s 15 billion dollars to 16. 4 billion dollars, but lost one place in ranking. Businessweek reported that Samsung Electronics is 3rd in Asia, after Toyota and Honda.

Samsung is superb in LCD and high capacity memory chips, but suffered loss because it failed to enter into the low price cellular phone market in the year 2006. Hyundai Motors attained success by jumping to 72nd position from 2005’s 80th through explicit brand strategies and aggressive strategies in the overseas market, and thus 3 became the 8th global auto maker. LG also ascended 14% by improving brand value of 400 million dollars. USA captured 1st through 5th places, and registered 52 firms: Germany, 10; France 9, Japan, 8; England 6; Swiss 4; Korea, 3; and Finland, Italy.

Sweden, Spain, and Bermuda each listed 1 firm in the 100 brand powers. BusinessWeek July 2007, based on the Interbrand Co. , England Research data. 2007 Businessweek Top 100 Global Brands Scoreboard 2007 2006 Change Brand Name 2007 Coca-Cola Microsoft IBM GE Nokia Toyota Intel Honda Samsung E. Sony Hyundai Brand Value $m 2007 65,324 58,709 57,091 51,569 33,696 32,070 30,954 17,998 16,853 12,907 4,453 Brand Value $m 2006 67,000 56,926 56,201 48,907 30,131 27,941 32,319 17,049 16,169 11,695 4,078 Parent Company Coca-Cola Microsoft IBM GE Nokia Toyota Intel Honda Motor Samsung Sony Hyundai Motor Matsushita

Brand Brand in Rank Rank 1 2 3 4 5 6 7 19 21 25 72 1 2 3 4 6 7 5 19 20 26 75 Country Rank 0 0 0 0 1 1 -2 0 -1 1 3 U. S. U. S. U. S. U. S. FINLAND JAPAN U. S. JAPAN S. KOREA JAPAN S. KOREA 78 77 -1 Panasonic 4,135 3,977 electric Industrial JAPAN 92 97 98 92 94 90 0 -3 -8 Lexus LG Nissan 3,354 3,100 3,072 3,070 3,010 3,108 Toyota Motor LG Nissan Motor JAPAN S. KOREA JAPAN Three years earlier in 2004, Businessweek (August 9~16, 2004) listed only Samsung Electronics as the sole Korean firm in the list of 100 global brands, and also placed the firm in 4th place in the global top 5 brands (world ranking was 21st).

The Weekly also published a special edition on the Samsung brand (November 29, 2004) and reported that Samsung’s competitive edge came from cost reduction through innovation and world class industrial designers who enabled the firm to capture five world class 4 design prizes in 2004. The firm had also won over 100 design prizes between 2000 and 2004. Samsung Electronics ran her own innovative design institute, and its designers took lectures directly from IDEO, the top class US design company, and from faculty members of a US design school located in Pasadena, California.

The number of the firm’s designers increased from 170 in 2000 to 480 in 2004, accordingly. In the following table, the 2008 Forbes global 2000 big companies are reclassified according to country. Reflecting unfavorable world trade, there are signs of setback for the firms of traditional trading countries like Korea and Japan in profit ratio, but one can notice an increase in the number of firms in oil exporting countries and BRIC countries. For example, in terms of sales volume, Japan had 87 firms and South Korea had 24 firms in the 2007 Fortune 500, as oppose to France’s 38, Germany’s 37, and Great Britain’s 33 firms. 008 Forbes 100, 500 and 2000 Large Companies* Countries USA France Germany Great Britain Japan China Swiss Canada Spain Italy Netherland Brazil Australia Belgium South Korea Russia Norway Finland Luxemberg Panama 100, 500, 2,000 29, 165, 590 9, 32, 67 9, 26, 59 8, 34, 120 7, 47, 260 5+1, 12+7, 70+39** 5, 11, 37 4, 20, 59 3, 13, 28 3, 10, 37 3, 10, 24 3, 7, 34 2, 12, 50 2, 3, 12 1, 12, 52 1, 9, 29 1, 5, 14 1, 3, 12 1, 1, 8 1, 1, 2 Class I II III 5 Sweden India Taiwan Singapore Ireland Bermuda South Africa Mexico Turkey Austria Greece Saudi Arabia Portugal Denmark Thailand Israel Cayman Islands Czech Republic 0, 10, 29 0. , 48 0, 4, 41 0, 4, 18 0, 4, 10 0, 3, 25 0. 3, 17 0, 3, 16 0, 3, 14 0, 3, 13 0, 3, 12 0, 2, 11 0, 2, 10 0, 2, 9 0, 1, 14 0. 1, 10 0, 1, 4 0, 1, 1 IV 6 Malaysia United Arab Emirates Kuwait Chile Indonesia Iceland Poland Qatar Egypt New Zealand Hungary Parkistan Philippines Peru Columbia Morocco Barain Jordan Liberia Channel Islands 0, 0, 15 0, 0, 11 0, 0, 7 0, 0, 7 0, 0, 5 0, 0, 4 0, 0, 4 0, 0, 4 0, 0, 3 0. 0, 2 0. 0, 2 0, 0, 2 0, 0, 2 0, 0, 2 0, 0, 2 0, 0, 2 0, 0, 2 0, 0, 1 0, 0, 1 0, 0, 1 V *The global 2000 by Forbes. com, April 2, The Forbes 500 and 2000 figures include Forbes 100 and 500 figures respectively. *The Hong Kong figures were added to the Chinese figures. Samsung Electronics has maintained its position as a leader in semiconductors for 12 years after seizing first place in the global memory semiconductor chip sector with the introduction of the first 256-megabyte D RAM chip in 1994. The firm has been the world leader in the 8 hitec products such as D RAM, 28. 7%; S Ram, 33. 3%; Flash Memory, 30. 7%; TFT-LCD, 20. 5%; Display Driver Chips; 20. 5%; Monitor, 15. 2%; digital TV sets, 10. 6%; and Mobile Phones, 14. 3% (2 nd place after Nokia, beating Motolora in 2006). The Group, in total, has 25 world best products.

The firm has also been the number one exporter in Korea for 12 years since 1994. In 2004, Samsung Electronics has recorded W110 trillion in accumulated sales and W29 trillion in profits, clearing all the loss accumulated since 1973 when the firm first entered the semiconductor industry. In the entire semiconductor industry, including non-memory chip sectors, the firm is the world’s second largest chip producer following Intel, the 7 world leader. The Samsung Group contributes 21% of the nation’s exports; 20% of the entire stock market; and in sales volume, 18% of the country’s GDP.

As of 2005, Samsung has 23,000 researchers with over 2,400 doctoral degree holders spending an annual research fund of 4. 7 billion dollars. In 2000, Samsung ranked 6th in U. S. A. patent right applications. During 2005 and 2006, Samsung placed 5th. and aspires to be in the top 3 by the year 2007. (Lee, Chae Yoon, 2006) Samsung Electronics’ revenue was over 92. 26 billion dollars last year, but the firm recorded a 10. 3 billion dollar net profit in 2004, the 7th largest position among 9 world 10 billionaire firms. This surprised many Japanese opinion leaders, recalling the imilar phenomenon in 1999-2001, when a spectacular performance of net profit amounted to 120 billion won from semiconductors and mobile phones, at a time when almost all world leaders of semiconductor manufacturers recorded red ink (with the exception of GE, IBM, and Nokia. ) A bad period for chip producers worldwide, many leading semiconductor manufacturers closed down their production lines. The number of worldwide semiconductor manufacturers has declined from 22 in 1998 to 12 since 2004, including such famous IT leaders like Toshiba, Motorola, and Fujitsu.

Samsung Electronics faced some difficulty in mobile phones in 2006, but it improved in 2007, as there were some progress in the mobile communication services. Samsung Electronics agreed to begin 3rd generation WiBro commercial services across the United States on a nationwide basis with the service provider Sprint and Nextel, starting in 2008. WiBro is a wireless high-speed Internet technology that enables the transmission of data anytime, anywhere, even within vehicles moving faster than 100 kilometers (62 miles) per hour or on mountaintops.

The connection speed is even faster than a fixed-line Internet connection. In addition, Samsung Electronics has recently announced the development of the 4th generation WiBro technology which is expected to operate five times faster than the presently available 3rd generation WiBro system. Korea’s WiBro technology, also known as mobile WiMAX, is the result of three decades of continuous research. As it was solely developed in Korea, it is potentially far more lucrative than CDMA had been. The project was a product of collaboration between the Samsung Electronic research team and the governmental research lab 8 nder the governmental policy led by Minister Chin, Dae Jae, former President of Samsung Electronics, all under the influence of Samsung corporate culture, exemplified by: “look for our next lines of business, ten years ahead …” The story of Korea’s advance in telecommunications began in the 1970s, when the mechanical national telephone system reached a saturation point. To resolve the problem, the Korean government decided in 1976 to develop Korea’s own time division exchange, or TDX, a form of electronic operator. With 1,060 researchers working on the project, Korea became the 10th country in the world to develop her own TDX.

At the helm of this project, part of his national development plans, was Park, Jung-hee. President Park, Jung-hee, a self-educated economist, was the nation’s top class expert on the history of Japanese modernization since Meiji Restoration (1869). He laid the ground of the Korean industrial development in 1961, following the Japanese track. He also indirectly influenced the growth of the Korean Chaebuls and their technological development/learning processes. In 1989, the Korean government developed the TDX-10, together with the governmental research intitutes, the researchers in the Chaebol groups, and from the universities.

The outcome was a more sophisticated digital operator system, and as a result, Korea could afford to export the technology, although only a half of the parts used in the TDX were locally produced. However, all stages of the TDX-10, from design to software, were devised and produced in Korea. Samsung Electronics played a major part in the developmental procecess, but we must also note that Samsung alone started to build up global capabilities of semiconductor manufacturing all by herself as early as 1973. The foundation of Korea’s subsequent success in mobile phones was laid in 993, when Korea became the first country in the world to commercialize the code division multiple access technology, or CDMA, conceptually developed in the laboratory level by a small U. S. firm, Qualcomm. Unlike the time division multiple access, or TDMA, system used in Europe, which assigned a specific frequency for each user, CDMA allowed multiple subscribers to a single frequency. The CDMA was adopted by Korea because of low connection error compared to other technology in the Korean situation of high population density, of mountainous areas and multiple concentrations of high rise building blocks. Expectations were high with the hope that the Korean firms would turn huge profits from the Korean’s share of CDMA technology improvement, as countries such as China, India, and Brazil decided to adopt the system. But with Qualcomm demanding high royalty payments on CDMA source technology, its price competitiveness soon eroded. (The Korean firms have paid over 1 trillion won or $1 billion in royalty payments to Qualcomm, the CDMA source technology holder up to date. )

Moreover, Europe looked to nurture her own telecommunications companies with the development of the Global System for Mobile Communication, or GSM. The adoption of this updated version of TDMA meant Korean firms were further handicapped because the Korean firms were not able to sell CDMA technology to one of the world’s biggest cellular phone markets. In short, Korea found success by copying foreign telecommunications technology in the 1980s; and by the 1990s, Korea was commercializing foreign developed technology but still had a long way to go until technological independence. (ChoongAng Daily Aug. 10, 2006)

Future of Samsung Technological Capabilities: In close coordination with Government, Chaebol, and university research instututes, Korea developed a new generation of mobile phone wireless Internet technology. WiBro system, the new technology, is leading the rest of the world by years ahead. It is accepted as one of the standards by the World electronic organizations. Samsung Electronics has made trial-runs with Brazil, Venezuela, Croatia, and Saudi Arabia, and has begun entry into the US market, while telecommunication companies in Japan, Britain, France, and Italy, are showing keen interest in the technology.

WiBro shall be the fourth generation technology, if the CDMA technology used today is considered as the third generation. According to the agreement with Sprint, the US partner, Samsung Electronics will provide base stations, handsets, and chipsets. About 100 small- and medium-sized business firms will participate as well. Samsung estimates that the deal will produce 33 trillion won and create 270,000 new jobs. (ChoongAng Daily Aug. 9, 2006) Samsung Electronics has made successive technological breakthroughs, most recently in the world’s first 50-gigabit NAND flash memory chip, employing a new method called the charge trap flash, or CTF.

The firm is a world leader today in LCD TV, 10 mobile phone parts, and various memory chips. The CFT technology provides the foundation for entering the tera-bit [1,000-gigabit] age after 2010. Dr. Hwang, Chang-kyu, president in charge of Samsung Electronics R & D Division added that Samsung’s semiconductor division was different from its competitors in terms of its dual investment in facilities as well as in research and development. “This year, we spent 2. 8 trillion won ($2. 9 billion) on semiconductor research and development.

For CTF technology, we started to develop it five years ago and created an independent developing team three years ago. We have 30 to 40 of these development teams, so imagine what kind of developments we can achieve in 5 to 10 years,” he said. He had rosy predictions for the DRAM and graphic DDR DRAM markets, saying they were diversifying and could lead to a supply shortage. “Even now, Samsung is only able to meet 70 percent of the demand. Prices shall be good until 2009,” he said. “Samsung currently occupies 50 to 60 percent of the graphic DDR market and will provide 100 percent of the chips for the Nintendo game players,” he added.

Samsung Electronics developed the first 256-megabit NAND flash memory in 1999, and ever since, the company has doubled the capacity of its semiconductor on a yearly basis. The industry has even dubbed this phenomenon as “Hwang’s Law,” an allusion to Moore’s Law, which states that the processing power of chips will double every 18 months. NAND flash memory chips are mostly used to store data in small devices such as digital cameras and music players. The chip Samsung presented was made using 40nano technology; last year, chips were made using 50-nano technology. The difference allows more semiconductors to be produced from each wafer.

Forty nanometers is 3,000 times thinner than a human hair. It is expected that the new NANO chip would create new Flash memory chip demand worth $60. 6 billion by the year 2016 when the technology becomes fully commercial in 2008 2. Previous Research works on the Samsung Transformation Samsung Electronic’s evolution from a fledgling company within a developing nation to a powerhouse global leader and technological innovator has attracted much attention from academicians and journalists, and as a result, numerous articles have documented the transformation, mostly from Samsung in-house researchers, journalists, and some 1 Japanese observers and scholars, as well as a few Korean scholars. Senior researcher Chang, SangSoo from Samsung Economic Research Institute (SERI, August, 2005) observed that the Samsung Group has gone through four stages of growth in an accelerated pace, owing to the superb leadership of the CEO and the inspiring corporate culture in which the upper management work under a shared value system, exemplified by: “a single mind towards a single goal. ” His four growth stages are as follows: 1) Inauguration of the enterprise and foundation of the system between 1938 to late 1950’s: Included in this period were the turmoil and confusion of the Liberation (1945), the Independence (1948), and the Korean War (1950 -1953). Samsung has started the first Japanese-style public new employee recruit examination in Korean history as early as in 1957. (Recruitment of recent college graduates based on general examinations—in effect, an IQ test. ) (2) Growth from a small- and medium-sized firm to one of the large firms in Korea. It had elements of the early stages of a business group.

It was the period of General Park, Chung-hee’s Military Coup and the launching of successive five-year economic development plans between late ‘50’s to mid ‘60’s. (3) Ascendance to the Korean top enterprise between late ‘60’s to late ‘80’s. This period includes the 6th Five-Year Economic Development Plan and the 1988 Seoul Olympic Games. (4) Ascendance to the global top Enterprise between late ‘80’s to now. This period started with the transfer of the leadership from the first generation group chairmanship to the second generation group chairmanship, thereby marking “new management. There were crises, rising from the Korean WTO participation, and turmoil caused by the IMF crisis, as well as the 2002 Korea-Japan World Cup. Chang believes that the quantum leap resulted from the superb human resources management and the overall strategies of the Samsung group. Samsung Electronics, the forerunner of the Samsung group, has gone through a paradigm shift of personnel management in the following ways: 1. 2. Growth strategy based on mass production and economy of scale centering on seniority pay system until 1996. Survival strategies under IMF crisis–employing a merit system of individually 12 ifferentiated salaries between 1998 and 1999. 3. Core competence based personnel administration of up-grading overseas personnel and team based compensation system adopting profit sharing and stock option programs between 2000 and 2002. 4. Further strengthening of the core competence based personnel administration aiming at solidifying the pool of the global top grade human resources. And the evolution of the human resources management has been reinforced by: (1) The regional expert system for the employees to get on-the-spot training for one year. Over 2800 persons have gone through the program between 1990 and 2004. 2) Through Samsung MBA program since 1995, the firm conferred the master degree to some 460 persons. The program is divided into Socio-MBA and Techno-MBA programs. (3) Under the overseas genius program, over 100 full scholarship grants were awarded to top 5% level students enrolled in India, China, and Russian top universities since 1995. (4) An in-house semiconductor college was established for 30 graduates with BS degrees, 20 graduates with masters degrees, and 3 graduates with doctoral degrees. (5) An in-house manufacturing technology college was set up for the retraining of 100 overseas engineers. 6) Five to six week courses for the functional expertise educational programs were set up to provide training for some 700 specialists in the fields of finance, planning, procurement, marketing, and personnel administration. Autographic writer Hong, Ha Sang (2005) sketched 16 Samsung top managers, both in Korean and Japanese. He emphasized, similar to the opinions of many Japanese journalists, that the troika leading the Samsung transformation consisted of (1) Chaiman Lee, Kun Hee, (2) a group of professional managers, and (3) the Center for Structural Realignment.

Cho, Tu Sup, Professor of Yokohama National University and former Professor of Nagoya University in Japan with Yoon, Chong-sup, his Ph. D. student and a researcher of SERI, wrote a book in Japan titled, “Samsung strategy to technological capability – technological learning process towards global business,” based on Yoon’s dissertation 13 (2004). Their research is centered on a single business entity, an organic cluster comprised of four Samsung companies. They are: Samsung Electronics, Samsung SDI, Samsung Corning, and Samsung Electricity.

And their classification of the technological learning process includes the following four stages: (1) Absorption stage: It took place in the early 1970’s in a declining industry of black and white TVs, tuners, cathodes, tubes, DY and FBT. Samsung relied on a simple assembly line technology of joint venture partners, such as Sanyo, NEC, and Corning. But Samsung also intensified its technological absorption, having its engineers attempt to reverse-engineer beyond the level of formal technological cooperation by penetrating into the tacit knowledge behind the explicit knowledge.

The firm implemented strategies of producing the parts domestically rather than simply relying on the importation of parts from partner companies. Samsung Electronics also established the vertical integration of the electronic products, even starting to export black and white TV sets to Japan on OEM basis. Depended on the Japanese technology. (2) Emulation stage: It started in the late 70’s as it evolved into color TV set assembly. Samsung had developed some level of maturity in technological capability through reverse-engineering. And as a result, Samsung could take ver some of the decision power of the joint ventures. (3) Improvement stage: It took place in ‘80’s, a rapid growth stage for Samsung technology in the area of large size flat panel TV including large size CPT, CTD, and CRT. Samsung became self-sufficient in designing numerous models and developed mass production technology. The firm could export plants and compete with overseas manufactures of color TV sets with its own R&D division. Samsung diversified its products including the development of an overseas sales network. (4) Innovation stage. The ‘90’s and beyond marks the development of high efinition TV and digital TV. Samsung solely developed TVs of an original concept, such as thin TV sets. Samsung could enjoy the freedom of cross licensing, strategic alliance, and it could export products on her own brand, through her own network of overseas production bases. The book does not deal with semiconductor technology capability building, because Samsung had to build the capability all alone, as no advanced nations were willing to provide assistance in the sensitive area. However, the corporate culture of strategic 14 learning has been preserved and documented. When Korean technological and ducational capabilities were poorer in comparison to that of advanced nations, Samsung’s intense in-house higher educational system continued to benchmark themselves against the GE in-house educational system, and Lee, Kun Hee’s “genius management” provided many effective solutions. Professor Kim Shin proposed a strategic model of Samsung in comparison with Toyota Motors. (June, 2003. Japan Korea Association of International Management, Tokyo. ) Samsung Electronics World rank 3rd in IT, Fortune ranking 115th and Financial Times, 67 2002 records th Toyota Motors 3rd in Auto, Fortune ranking 10 h Sales, 40. 5 billion; Net profit 7. 25 bil. (Won) 14. 5% of total South Korean export Sales, 16 billion; Net profit, 1. 4 bil (Yen) Management strength Superior adaptation motivation human to resources, change, high speedy work Positive adaptation to change, Rational management based on strong community spirit JIT inventory management Unique management concept Digital convergence Production mode Production of multiple products in small quantity Production of multiple products in small quantity Japan is in trouble but Toyota is an exception Corporate image Digital best Strategy

Global HRM, increase the number of the world best products and social Globalization, Concentration on and sustained cost reduction R&D friendliness Chang, Se-Jin (2008) also compares Sony and Samsung, the winners of both analogue electronics and digital electronics centering on strategies and HRM. Journalist/writer Lee, Chae Yoon (2006) compared Samsung and Toyota in a similar manner: He observed that Toyota benchmarked Ford to overcome the adverse productivity rate of 8 to 1 as early as 1935, and again in 1949, and, in that process, Toyota developed what is known as the Toyota Production System, or Just In Time 5 (JIT) and Kanbang system (zero inventory), all contributing to the “Toyota Way. ” He also observed that since 1987, Samsung has benchmarked GE and Toyota in the development of world best products, speedy decision making, and R&D and Market strategies. A senior consultant and an expert on the Korean industry, Midarai Hizami (????? ) from the Nomura Research Institute of Japan observed that the strength of the Korean business system reform lies in the efficacy of the Samsung Electronics’ decision making mechanism, which was lacking in the Japanese firms. (2005) He observed that Mr.

Lee Kun Hee, in power, was making important decisions, and the system of external board members and board of directors was nominal in the corporate governance. He summarized that the uniqueness of Samsung Electronics was due to (1) the corporate chairman’s unique ability for judgment and leadership, (2) existence of a corporate strategic center called the Center of Structural Realignment, (3) delegation of power to professional managers and their compensation system, and (4) business projects based on strategic marketing viewpoint. Finally Midarai proposed that the Japanese company reform planners had to be mindful of the Samsung system.

A business consultant and Chairman of Japan Debate Association, Kitaoka, Doshiaki (? ??? ), published a book titled “I am afraid of Samsung” documenting a year long debate series on the threat of Samsung and how the Japanese firms could roll back. He concluded that Mr. Lee Kun Hee was a genius, who had an exceptional gift in both technology and management, and who would concentrate solely on long-range strategic research to command outstanding think tanks and watch dogs called the Strategic Realignment Center and the Samsung Economic Research Institute.

He also argued that, with Mr. Lee’s long-range strategic view, swift decision making, and enormous scale of resources allocation, Samsung could have overrun all the world top class giants of the Japanese electronic firms when the IT bubble collapsed in 2002. He felt that the Japanese CEOs were handicapped because they would stay in their positions for a relatively short term (2-3 years), while Mr. Lee, Kun Hee could stay in his office for life, thereby able to formulate long-range strategies for Samsung.

He argued that the Koreans were so dogged that they were posing a potential threat to the future of the Japanese firms’. 16 Hasekawa, Tanashi (???? ), management professor of Kyotokakuen University, contributed an article to Nikkei Business Monthly Magazine and commented that the Samsung quantum jump from Korea’s best to global leader was dependent solely on Mr. Lee Kun Hee’s leadership. (July 11, 2006) He observed that when the global IT bubble collapsed in 2000, Samsung surpassed the poorly performing Japanese electronic firms including Sony, and became a global IT power.

In the process, Mr. Lee’s “New Management” became the leading vehicle of the transformation process. According to Dr. Hasekawa, ex-CEO Lee Kun Hee. lead the Samsung innovation even before the Korean economy was crushed by the 1997 liquidity crisis, by taking the shareholders seriously, putting emphases on the transparency of management and accounting, personnel management based on ability, and the introduction of an annual salary system. In addition, he observed that the Center for Strategic Realignment, in cooperation with Mr.

Lee Kun Hee and the professional managers, played key roles in information gathering, sense-making, and planning in an organic manner to effectively operate the overall business. An example can be found in the merging of the semiconductor and telecommunication business units. The decision to select and concentrate on three major areas, namely electricity-electronics, finance-trading, and service, has provided the basis for the Samsung jump into a position of global power. 3. Discussion

The points of Chang, Sang Soo’s (SERI, August, 2005) four stages of growth, the jump from the Korean top to the global top based on the superb leadership of ex-CEO Lee Kun Hee and the superb corporate culture of upper managements’ shared value, exemplified by “a single mind towards a single goal,” is well understood in a post facto analysis. But his proposal of a superb human resources management, outstanding educational system, and retraining systems can be better understood as an end result of the strategic means rather than as the actual cause of the transformation.

After all, most of the leading global firms of Japan, USA, and Korea share similar characteristics with Samsung. Nonetheless, it is possible that Samsung has simply benchmarked itself against these rival companies, surpassing them even, in regards to these specific factors. Although Chang, Sang Soo’s proposal could be understood as a occurrence of novelty, with a serendiptious effect resulting from its organizational development techniques. However, Samsung’s transformation has not been a transient phenomenon. 7 In fact, Kim, Chang and Lee,s comparson of strategeis and HRM is not sufficient to explain the rapid change processes of Samsung. And many writers make a point to emphasize the rapid and timely decisions made by Lee, Kun Hee in regards to the speedy growth process, as well the leadership undeterred by outside inteference. Samsung, at its inception under the leadership of Mr. Lee, Byung Chul (founder and the first CEO of the Group), had been an ardent follower of Japanese Management. Mr.

Lee received his education from Waseda University in Japan before WWII, and was famous for his annual “Tokyo Conceptualization:” He would stay in Tokyo at the beginning of every year in order to learn firsthand the forecasts of the coming year as made by Japanese journalists and economists through TV and mass communication media. He also had a Japanese girl friend in Tokyo. Also, he carefully studied the Japanese government’s new year economic plans and new year strategies for major Japanese corporations.

He would personally follow through this information with Japanese experts and leading Japanese businessman friends. He, then, would collect necessary books and articles and return to Korea to encourage his top managers to read the material before formulating each year’s strategies and planning for the entire Samsung group. In addition, they also examined the forecasts made by the Korean experts. Mr. Lee, Byung Chul was not only the first generation CEO for Samsung but also one of the pioneers of the contemporary businessmen of Korea.

Partly we can state that Samsung Group is an outcome of the Korean government’s modernization effort to transform the economy from one of the world’s poorest agricultural economy to an advanced industrial economy under President Park, Jung Hee between 1961 to 1979. However Samsung had been a forerunner of a small group of successful large corporations who quickly grew to keep pace with the rapid growth of the national economy. It was well known that President Park, Jung Hee, the architect of the Korean economic miracle, had thoroughly studied and became one of the Korean op level experts on the Japanese industrialization history since the Meiji Restoration. But General Park was not particularly favorable towards Samsung from the beginning of May 16, 1961, the date of his military coup d’etat. Rather he was hostile, in the early days of coup, toward all the Chaebol or rich men because of his concept of socialistic and Confucian justice, at the time, reflecting the general sentiment of Korea and the ever critical Korean mass communication. General Park’s economic development policy was greatly influenced by socialistically oriented economist Park, 18

Hi Bum, the then dean of Commerce College, Seoul National University, and they agreed to mobilize capital from the rich families including the Chinese restaurant owners in Korea. Furthermore, the Military Government staged a currency reform with disastrous results. The event provided Mr. Lee, Byung Chul from Samsung Group momentum to stage a personal confrontation with General Park (who then was elected to the Presidency of Korea) in 1963, and persuaded President Park with a plan of industrialization of import substituting, export oriented growth policy, and the normalization with Japan.

Lee, Byung Chul contributed an article on the same idea of Korean economic development plan to Hankuk Daily Newspaper in Seoul, then, owned and operated by Deputy Prime Minister of Economy, Chang, Ki Yung. In the earlier phase of Korean industrialization, there was serious debate among the scholars and policy makers of Korea, with forceful arguments that Korea should build agriculture first before industrialization, because Korea had no basis of industrialization at all.

These models were available in Taiwan and Denmark. And Denmark educated agricultural economist Yoo, Dal Young and Max Weber economist Choe, Moon Whan, both from SNU, who were in turn personally tutoring President Park, who would later formulate Saemaul movement to change the Korean farmers’ culture, in the manner of McClelland’s achievement motivation education from Harvard, in order to develop an agricultural economy without much material investment. Since Mr.

Lee, Byung Chul and President Park, Jung Hee’s meeting, President Park decided to take Mr. Lee, Byung Chul’s Japanese style of the “industrialization first policy” with a Weberian push, in addition to his all-out effort on the export oriented industrialization projects and thereby attained the ‘Han River miracle’. But in the process, he delayed the ever mounting public desire for democratization and ended his life tragically in October 24, 1979, with his famous last words, “spat upon my tomb later. After a few years of trial and effort, President Park’s economic plan was more or less settled around the US educated econometrician Nam, Duk Woo, an engineer oriented bureaucrat Oh, Won Chul, along with the use of the history of Japanese industrialization as the main textbook after normalization with Japan in the mid ‘60’s. Also, his policy line did not deviate much from Samsung’s first CEO Lee, Byung Chul’s 9 original 1963 proposal. Along the same line of thought, Hong, Ha Sang’s (2005) sketching of Samsung’s top professional managers can also be taken as providing the necessary condition for the transformation because all leading OECD global corporations have plenty of top level professional managers similar to Samsung’s “genius management. But the genius does not automatically yield global management. Anyway, Mr. Lee, Kun Hee, in a way, has adopted American style management on top of his inherited Japanese style management with a Korean color, by recruiting global scale top managers with engineering backgrounds, which is rare in traditional Korean managers unless the founders also have engineering backgrounds.

Because of business closely linked to the governmental economic development plan at the same time to deal with every level of governmental Confucian feudalistic heritage, most of the top managers from large corporations have consisted of economists and lawyers to cope with the governmental or pseudo governmental interference and for lobbying purposes. Mr.

Lee, Kun Hee maintained groups of lawyers and economists, but he stepped aside from the Korean conventional practice and recruited professional top managers from a combined elite of engineering and business specialties and encouraged them to break away from their traditional conservative bureaucrat nutshells and exhibit their high level entrepreneurship of experimentation including a certain a latitude of failure tolerance

Nikkei Business weekly magazine, (July 14, 2006) maintained that “Samsung power originates from passion and solidarity,” and this was the very aspect that was missing in the Japanese firm. It was pointed out in the article that the strength of Samsung human resources management can be found in the strength of regional expert development program to strengthen Samsung marketing in strategic regions such as China and India, as well as in the potential growth markets, like France and Italy.

The missing link was not fully described in the article regarding the “passion and solidarity” behind the superb HRM. The question remains: What makes the top managers and employees deeply moved with this burning passion? A Korean diplomat, who was stationed in Japan for a long time, wrote a very persuasive book in Japanese, contrasting the two different cultures of Korea and Japan: Park, Seun Moo, ‘Sunbi’ (humanity scholar-poet-politician) and ‘Samurai’ (sword man-scholar-politician), 20 Tokai University, Japan (2004).

One aspect of contrast can be seen between emotive idealism and cool headed pragmatism. And there are some scholars and businessmen in Korea who can harness the Korean passion and emotive energy into the productive Korean style business management: Lee, Myun-woo, “Create W theory of Korea, 1969” (as oppose to McGregor’s X theory and Y theory and Okuchi’s Z theory or Americanized Japanese theory) and Lee, Chang-woo, “Han Management, 1992” (Harness Long suppressed emotion, Han, 1994) Chin, Dae-jae, “Manage Passion, 2006” The secret also lies in the American style competitive compensation system.

In the words of Mr. Lee: “The incentive system is the greatest invention of the century, turning the tide favorably for capitalism, vis-a-vis socialism” where the top managers’ annual income is roughly several times higher than that of the comparable top managers in Korea, and the system runs down throughout the Samsung system to the very bottom. Cho, Tu Sup and Yoon, Chong Sup’s joint work narrates the learning and maturity process of Samsung’s technological capability. The work is descriptive of the past track, but it is limited in causal analysis.

However, the strategy of technological capacity has been the core of the Samsung organizational learning in the age of globalization, “the first comer takes all. ” “There is no place for the second comers,”-all translated into the catch phrase—increase the number of the world best products. Also, Samsung observers do not fail to mention the golden triangle of Mr. Lee, Kun Hee, the Center for Structural Realignment, and the outstanding abilities of elite top management groups, as the source of the Samsung transformation from the Korea best to the global best.

But Japanese observers tend to put more emphasis on the outstanding leadership of ex CEO Lee, Kun Hee. There are at least three books published by a group of Korean journalists and a writer. They are “Samsung Rising: Why Samsung Electronics is Strong,” (2002, Hankuk Economic Daily) “Lee, Kun Hee,” by Hong, Ha Sung (2003, Hankuk Economic Daily), covering the period immediately after the Samsung Spectacular Performance between 1999 – 2002, and a slightly critical autobiography by Kang, Jung Man, titled “Lee, Kun Hee’s Era,” reflecting increasing criticism of Mr.

Lee because of a ”no union policy” and a suspected immoral deal in the process regarding his property inheritance for his son, etc. (2005, Personality and Thought) 21 What has Samsung achieved in the process of organizational transformation that made a paradigm shift to facilitate an essential part of the Korean-style management? In other words, what kind of model or models could be applied to explain the transformation processes of Samsung Electronics and Samsung Group? There are at least three models, which can explain the change process of Samsung.

These are: Strategy models such as R&D strategy and core competence models. Organizational theory models such as HRM, leadership, learning and culture Knowledge management model But each of these models can only provide a partial explanation of the dynamic processes of organizational transformation within the Samsung Group. Strategy models: R&D strategy and core competence model: There is the effect of equifinality, one of the concepts of General Systems Theory and/or contemporary complexity theory) in most of the successful firms’ strategies and outcomes.

All the global leaders have similar strategies in the large framework of aspiration towards global leadership. The question is, how does one attain them. Almost every Chebol group with better technological leadership adopted a similar strategy when South Korea signed the WTO membership in 1992, but only Samsung has reached the goal(s). The simple contrast cannot explain the dynamics behind the quantum leap of Samsung from a developing nation status to the advanced nation status of Sony, Erickson, and Motorola, the established leaders of the industrialized countries.

Samsung can be better compared to the NEC case of 1980’s vis-a-vis GTE. C. K Prabalad and Gary Hamel (Harvard Business Review, 1990) observed that top executives will be judged on their ability to identify, cultivate, and exploit core competencies that make growth possible. And Mr. Lee is the right person in that capacity for Samsung. GTE 1980 Sale 1988 Sale $9. 98 billion $16. 48 billion NEC $3. 8 billion $21. 89 billion 22 In 1988, GTE has become a telephone operating company with a position in defense and lighting.

GTE has divested Sylvania TV and Telenet and put switching, transmission, and digital PABX into joint ventures. In the same year NEC has emerged as a world leader in semiconductors, consolidated a position in mobile telephones, facsimiles, laptop and mainframe computers. As early as in 1970, NEC communicated her strategic intent of computer and communication convergence (C&C) both internally and externally. The NEC’s strategy has been adopted by most South Korean firms as the Government proclaimed in 1983, the 1st year of the Korean Information Age.

Samsung Group has concentrated her whole effort towards the strategic intent of “world best” and “increase number of world best products. ” It’s organizational culture is simplified in this precise catch phrase and readily communicated to every corner of the system. According to the authors Prahalad and Hamet, The most powerful way to prevail in the global competition in the ‘80’s were top executives’ ability to restructure, de-clutter, and de-layer their corporation, but in the ‘90’s on, they will be judged on their ability to identify, cultivate, and exploit the core competencies that make growth possible.

And this was exactly what Mr. Lee did since the beginning of his chairmanship. Samsung’s successful transformation in the last decade or more can be explained from successful organizational change and innovation model and/or leadership model and/or strategy of core competence building model and/or knowledge management model and more. But it can be enveloped into organizational learning, centering on transformation of organizational culture and cultivation of core competence. Some observers attested that Jack Welch started from restructuring to reform of organizational culture, but Mr.

Lee went the other way around because the very unfavorable Korean socio-cultural environment and the 1997 IMF crisis have facilitated the process. Now under Mr. Lee, Kun Hee the leadership of the new Korean management style is a blend of both Japanese and American styles of external labor market and differential compensation and no life long employment, with the element of Silicon Valley’s revolutionary spirit. And it is also actively benchmarked by many Korean firms, as observed by Professor Lee Byung Chul (2002).

There are indications that Japan, too, is groping reluctantly towards a new model. 23 After all, many aspects of the Japanese cultural model can be considered as a reflection of globally small firms in the stage of rapid growth, rather than the uniqueness of the culture. A new approach is recommended to tap “culture” holistically and longitudinally instead of by simple snapshot of two firms for better causal explanation as practiced by political scientists, communication scientists, and sociologists relying on secondary sources of data too. Samsung leadership under Mr.

Lee has gone through a systematic, dynamic, organic and nonlinear process of leadership of strategic or targeted organizational learning centering on core competence building. In the global arena, prevailing firms are mutually inspired by a competitive mutual benchmarking process among the world best firms. And it is observed that, of late, Samsung and Toyota are mutually benchmarking. (Lee, Chae Yun, 2006) Recently, Mr. Lee stated, in the presidential meeting of Samsung corporations, “we don’t need top executives who are copying someone else’s ideas and strategies”. As many of our products are in the leading positions in the global market, we lost the target to benchmark or imitate. Samsung must strive towards a unique and differentiated creative management. ” “With negotiation on FTA with U. S. A. for an accelerated domestic market opening and with China making a big stride in the global market, we are faced with both crises and opportunities. We must discover and cultivate a creative management system and creative personnel. ” (Hankyung Economic daily, June 28, 2006) As many observers have attested, Samsung Electronic has the elements of GE and Toyota.

It is natural that any firm among the global leaders would attempt to benchmark the best practices for the best performing companies. But one should not overlook the fact that there is an organic approach in the Samsung word “fusion. ” Technological capability advancement, strategies of marketing and finance, and the process to convert into market taste of design are simultaneously used to break through the barriers of bureaucracy, or the tyranny of the small business unit, as written by Prabalad and Hamel (1990). Bureaucracy is the greatest invention of the Industrial Revolution.

The founding fathers of economics and sociology, Adam Smith and Max Weber, respectively, described the merits in an elaborated manner: specialization and division of labor. How to retain the merits of the system and at the same time reduce the inherent problems of delay and red tape? In 1992, Mr. Lee was awarded the Korean Management Prize 24 of the Year at Korea University by the largest Korean business professor’s academy, The Korean Association of Business Administration. In his acceptance speech, Mr. Lee said in a slow and hesitant voice, “I was once approached by a Japanese engineer at Kimpo Airport.

He said that Samsung Electronic developed a high quality DRAM no sooner than the time when the Japanese rivaling company announced its own development. Our production was 6 months delayed by Samsung’s inner paperwork. So, for the next time, I assembled every concerned party so that we could announce the next generation chip simultaneously with the world big leaders, and eventually we beat them. ” This was exactly the way how the late President Park handled the problems by regularly holding the Blue House Expanded Presidential Export Expansion meetings.

Quite a few Japanese specialists on Samsung have observed that Samsung’s strength lies in the fact that Lee, Kun Hee’s term of office is indefinite, allowing him a free hand to delve into long range opportunities and strategic visions, while the Japanese CEO’s term of office lasts only 2-3 years, on average. This reminds us of the similar observations made by American scholars in the ‘70’s and ‘80’s. The Japanese CEOs were obligated to satisfy the major shareholders, the bank, whereas the American CEOs had to satisfy shareholders every year.

However one should take note of the Samsung golden triangle in terms of its dynamics. Kang, Woo-ran, SERI (2006) conducted a survey to find that the Korean firms with Owner CEO- Professional managers combination out-achieved, as compared with Professional CEO only model or Owner CEO only model between 1986 and 2004. Michael Porter (1996 2004) suggested that the often acclaimed strategy of Japanese management was nothing but operational effectiveness. The Japanese businessman quickly caught up with the American businessman in a relatively short time span, between the 1960’s and 1980’s.

In the process, Japanese firms exhibited core competence and accompanying Japanese best practices. They were recaptured by the American scholars in the form of new management theories: Total quality management, 6 sigma management, MIS network linked inventory-delivery systems, lean management and restructuring, knowledge management, benchmarking, organizational learning, to name a few. So the Japanese firm’s comparative advantages have been shared by many global firms in a slightly differentiated manner. 25 4.

Culture, Goal Oriented Communication (Leadership) and A Fast Growing Organization, Samsung Electronics Samsung Electronics’, the centerpiece of the Samsung group, market value was only 420,680 million won in 1987 when ex CEO Lee, Kun Hee assumed the chairmanship. Ten years later in 1997, it was 3,996,909. 66 million won or roughly 950% increase. That is not bad. But from that time on, there has been a steep ascending of the market value of 12,179% increase of 91,671,138. 128 million won in 2007. One would naturally be tempted to ask, “What happened to the leadership of the first 10 years with ex-chairrman Lee, Kun Hee? Sams u ng Electro nics Market V alu e (1,000w o n) 12 0,00 0,0 00,0 00 10 0,00 0,0 00,0 00 80 ,00 0,00 0,0 00 60 ,00 0,00 0,0 00 40 ,00 0,00 0,0 00 20 ,00 0,00 0,0 00 Name 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Name Samsung Electronics Market Value (Unit 1,000 won equals roughly 1 to 1. 30 US Dollars) 1983 63,350,000 1989 1,640,470,000 1984 76,950,000 1990 1,318,439,793 1985 137,500,000 1991 1,328,438,858 1980 41,440,000 1986 308,000,000 1992 1,587,069,540 1987 981 59,500,000 1988 1982 64,400,000 420,680,000 1993 1,020,330,990 1994 6,272,521,240 3,013,541,426 1995 9,052,186,755 2001 44,932,513,615 2006 1996 3,579,480,030 2002 51,542,526,788 2007 1997 3,996,909,660 2003 73,785,248,588 1998 10,918,438,172 2004 73,174,129,278 1999 44,086,251,261 2005 108,281,475,740 2000 25,544,557,299 26 2006 0 101,254,538,541 91,671,138,128 Key Figures Representing Changes in Samsung Group in 20 Years Unit Sales Trillion Won 1987 17 2006 152 Ratio 8. 9 Profit Tax Before 0. 27 14. 2 52. 8 Market Value 1 140 140

Export 9 663 73. 7 Brand Value 100 dollars million None 169 (2007) N/A Number of Employees 10,000 men 16 25 1. 6 Source: Samsung Greoup PA Office Materials, Feb. , 2008. Scanning through the observervations made of Samsung Electronics’ rapid growth, one factor clearly emerges–the ex-CEO Lee, Kun Hee’s leadership as the success factor including his bold and swift large scale investment decisions at key junctures: When there was a debate over DRAM and SRAM, it was Lee, Kun Hee’s decision concerning DRAM, difficult to develop, but with he promise of a greater potential market. And the decision turned out to be a very wise one. When Samsung started to build Kiheung semiconductor lines, it was completed in 6 months while similar lines would take one year and a half in the overseas cases. Chang, Sang Soo (2005) observed that Samsung Group has gone through 4 stages of growth in an accelerated pace based on superb leadership of ex-CEO Lee Kun Hee and superb corporate culture of upper managements’ shared value: “a single mind towards a single goal. It indicates that Samsung’s global technological capability development has been possible due to the transformation of corporate culture as one of the pillars of Samsung global competence. So the leadership in transforming the Samsung culture and core competence by Lee Kun Hee has created the paradigm shift. 27 To understand Lee Kun Hee’s leadership, the comparison of first and second generation corporate culture is in order. Over the years, Mr. Lee, Byung Chul an ardent Japan learner had shaped Samsung as a rational bureaucratic model under a fragile and protective Korean economy.

Korea did not have any capital, so the government obtained good quality loans and grants from the USA, West Germany, Japan, and World economic organizations, and in turn provided loans to selected Korean firms under the condition that the firms use the funds to set up industries within the guideline of the Government Plans. The interest rates were at international level, but the Korean market bank loan rate was several times higher under the high inflation rate, and thus the economic developmental loans were highly covetous in Korea.

And this is one of the sources of the blame on the Chaebol and rich families receiving the governmental special favor, or the politician-capitalists corruption suspicion to date. Having neither technological nor managerial capabilities, most Korean firms exploited the cheap labor from the agricultural sector, at the same time attempting to build scale economy as sources of international competition emphasizing quantity in light industry and new and primitive petro-chemical and heavy industry. And Mr. Lee, Kun Hee emphasized quality over quantity in his first statement soon after his chairmanship inauguration.

Against such backdrops, Chang, Sang Soo compared the first generation and second generation corporate culture as follows: Change of Samsung Core Values First Generation Corporate Culture (1938-1987) (1988 – 1993. 3) Second Generation Corporate Culture 1993. 3- to date Second Founding Father’s Doctrine(1993) Dedicate to the human society through the best Founding Father’s Doctrine (1973) Contribute to nation through business Put priority on human resources Seek rationality Samsung Spirit (1984) Creativity High ethical standard Be Number one in the nation Perfectionism Co-prosper anpower, technology and the best services Samsung Spirit (1993) Co-prosper with customers Challenge to the world Create future Core Value (2005) Priority on human resources Aspire to be the best Leader of change Righteous business management 28 Co-prosper Principles of Management (2006) Stick to principles of law and ethics Maintain clean corporate culture Principles of Business Management Respect customers, stockholders and employees Respect environment, safety and health Fulfill social responsibility as a corporate citizen

From the chart, we can examine the Samsung aspiration to be the leader of the industrial age in the first generation founding father’s culture of rational bureaucracy, and the transformation of the second founding father’s culture as the leader of the globalization and digital and/or knowledge economy. In a similar vein, reporters from DongA Daily Newspaper depicted the change of corporate culture as follows: Change of Samsung Corporate Culture Past Minimizes Risk Taking New Investment

Present Put Emphasis on Taking a New opportunity Failure Decides after a Through Internal Decision Making Down Power Strong Management Management Management Staff Step Aside from the Operational Staff Decision Control size Delegated Decision First recognizing Investigation Culture Staff of Making while Financial System is Retained Conservative Emphasizes Process Rationality in Every Detail DongA Daily Newspaper, June 4, 2004 Image Evaluation Emphasizes Speed Emphasizes the Outcome Mr. Lee, Kun Hee has received thorough CEO training from his father for 21 years before taking over the position.

He and his father-in-law, a lawyer and owner of ChoongAng Mass Communication, were ever present at his father’s staff meeting, usually during lunch hours. He could not retire from his office until he personally confirmed that his father was in bed. Mr. Lee, Byung Chul had chosen Mr. Lee Kun 29 Hee, the third son, against the conventional Korean tradition of passing the reins onto the eldest son, because the first son had a grave disagreement with his father. The second son was talented in business, but Mr.

Lee Kun Hee was more futuristically oriented, even forcefully starting his own hi-tech venture in the early days when Korean technology was at an infantile stage.. Leadership Styles Compared: Mr. Lee, Kun Hee went through CEO training from his father, but his leadership style is so different from his father, though sharing some similarities. Mr. Lee, Byung Chul emphasized the importance of personnel management and human resources, and he also mentioned that 80% of management dealt with the question of how to manage persons.

He personally participated in the recruitment process in examination problems and personnel interviews, and at times, personally selected topics for group discussion in the screening process. Mr. Lee, Kun Hee expanded the inner labor market of selection and promotion systems to open system for the external labor market in recruiting outstanding personnel and managers. His father, a strict time keeper, who enjoyed talking, was concerned with every detail of the Business operation. His father practiced regular walks around management and was strict in awarding prizes and punishment for the subordinates.

In contrast, Mr. Lee, Kun Hee is a good listener and often repeatedly asked, “why? why? why? ” He rarely came to his office in the company building and mostly delegated his authority to his professional top managers, and confined himself mostly in his electronic fortress called Seungjiwon, modeled after Microsoft CEO Bill Gates’ work place/residence, and developed long range visions of strategies for Samsung, specializing in a comprehensive and long range gatekeeper role. His organizational management has a flavor of human touch. He is a night worker and his sleeping hours are irregular.

Although he confined himself in Seungjiwon, he gets instantaneous high qu

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