Reimagining SamsungJust four decades ago, Samsung Electronics was a company producing cheap electronic fans whose heads easily earned more than 300 million won ($285,000) a year. Its size was just one-twentieth that of its local rival Gold Star. Today, the same company rakes in 200 trillion won a year and records an unprecedented 10 trillion won in quarterly operating profit. It has become a corporate benchmark and a leader envied by companies around the world. Numerous books and studies analyze the Samsung way and its unique corporate culture to provide insight into the recipe and key to its success.
There may be a host of reasons behind Samsung’s staggering success. But I can cite two of the company’s unique qualities: a knack for competitive manufacturing and replication. Samsung Electronics has always excelled at commercializing products faster and more productively. It invested and worked hard to build on this skill. It expedited speed in development by uniting research and commercialization procedures in order to beat the competition to market with a product. For instance, Samsung Group companies share all technology data in order to join forces to develop and turn out innovative products. It built a unique product data management system structured to include all of the group’s companies, as well as business and marketing divisions.
Samsung Electronics groomed its talent for turning copying into an art and added its own technical innovation. As an industrial latecomer from a developing country, it thoroughly dissected and studied products and technologies of advanced companies and nations. It not only impeccably reproduced them, but added creativity, style and technology. It not only imported and absorbed technology, but copied quality control, employee training and education, and management methods of successful companies. In the end, Samsung Electronics evolved and created a unique character and business system.
But there are two sides to a coin. Samsung Electronics’ strength prevails in industrial and technology competition with established standards and a clear business outlook. But it struggles with products and technology areas without clear industrial standards and business prospects. Its winning asset of manufacturing edge and replicating skill does not shine in experimental stages, and the company lacks reliable and tested market leaders to follow and catch up with. This is why people have mixed feelings about the future of Samsung Electronics. In view of its manufacturing competitiveness and skill in turning a copycat brand into a product leader, the corporate outlook for Samsung Electronics is solid.
But there are grounds for pessimism and sarcasm about the company when taking into account the importance of creativity and innovative power in the future. Choi Yoon-sik, a professional futurist, predicts in his book “2030 Bold Future” that Samsung Electronics’ best days will end in two to three years. Samsung could soon lose its competitiveness in manufacturing. In order to maintain its lead in the global market, it will have to increase the number of its brands, and in doing so, it won’t be able to sustain productivity. Other market leaders - Nokia, Sony, Motorola and Yahoo - have all gone through such a rise-and-fall process. Information and technology companies on average can stay on three to five years. The only key to breaking the cycle is innovation. Nokia and Sony fell because they failed to invest and innovate. Samsung Electronics must pave the way and create a new market in order to sustain its leadership in the global market.
But Samsung has the general image of being second, never first in the contest of innovation. If Samsung Electronics wants to outperform others, it must break its long-held practices and become a leader and a trendsetter, instead of a follower.
Still, there are more reasons to be upbeat about the country’s largest manufacturer and corporate name. In a comparative study by Kiwoom Securities between Nokia of the 2000s and Samsung Electronics in the 2010s, Samsung is unrivaled today in its manufacturing competitiveness. In smartphone production, the company tops in every aspect - securing necessary parts around the world, beating the competition in coming up with timely and trendsetting products, and offering various product lineups on an overwhelming scale.
Samsung Electronics’ strengths shine in mature markets. What matters at the end of the day, as in the case of the smartphones that most people own, is price competitiveness. Samsung Electronics may not rock the market with jaw-dropping innovations and designs, yet it helps to reshape the trend in the industry. Kiwoom Securities concluded that Samsung Electronics may not earn as much in the future as it does today, but its market dominance will continue to increase.
I want to place my bet on the optimistic side. I like to believe in Samsung Electronics’ mastery in manufacturing and future. It may not be the world’s brightest and most innovative, but the company has the potential to be the market leader. Although it may not always stay in today’s rank and scale that is vital to the country’s economy, it must continue to reinvent itself. As long as the leadership refuses to be self-indulgent, the outlook on Samsung Electronics remains bright.
*The author is an editorial writer of the JoongAng Ilbo.
by Kim Yeong-ook