Samsung in the 1990s: challenge and response

The 1990s have presented Samsung with a number of challenges requiring adaptive strategies. The key strategic shift is from “quantitative” to” ‘qualitative” growth. This has been manifested in a series of organizational reforms and in new approaches to technology management. Another major thrust of recent years has been an increasingly aggressive globalization of production.

Declining competitive advantage leads to organizational Restructuring

In recent years, Samsung has had to cope with a very changed environment from the world it faced twenty years earlier as it entered the electronics business. On the one hand, its investments in semiconductors paid off handsomely. But on the other hand, its traditional cash-generating product lines—in which it has considerable sunk investments—began to face serious challenges in both foreign and domestic markets. In 1993 Samsung Chairman Lee Kun-Hee described the electronics business as suffering from cancer. One aspect of this decline is a series of changes that have occurred in the markets which Samsung serves. First, Samsung’s major export markets for consumer electronics in the United States and Europe have become saturated. The reduced growth in demand has severely increased price competition, and has increased the importance of smaller markets with specialized demand —turning Samsung’s marketing weakness into a major problem  Second, Korea’s domestic electronics market, which had long been protected from foreign competition, has been liberalized as Korea prepares to join the ranks of industrialized nations, eroding an important source of profits. Liberalization of imports by the Korean government has led global players to enter the Korean domestic market, which had long been protected from foreign electronics products. In 1989, import quotas on consumer electronics goods were removed. From July 1991, foreign retail distribution outlets were allowed to possess up to ten stores with less than 1,000 square feet in size —far bigger than the 100–130 square feet that local Korean outlets usually occupied By 1993 there was a plan to cut the average tariff computer products was much higher than that of Taiwanese firms.27 Its position in computer systems outside of Korea was particularly weak. The recent major investment in AST Research provides Samsung an alternative means of overcoming its internal weakness in the computer business.28 The agreement enables Samsung to share the AST brand name and to sell memory chips to AST. SEC is actually not entitled to be directly engaged in AST’s management for the first four years of acquisition However, Samsung’s acquisition of foreign firms   was not aimed at ameliorating Samsung’s internal weakness in product design and development, but at acquiring frontier technologies seen as essential to the production of next generation products.