Samsung's Catastifying Culture

Samsung

Trials and Tribulations of Samsung’s Competing Culture

Accounting & Finance

Donna-Marie Cawley

K00180823

Signature: ____________________________________________ Date: __________________

Abstract

This case study will be based on three accounts (see below) of Samsung’s mergence into the electronic market, from its humble beginnings starting as a rice mill in Korea in 1936 (Verma & Mukerjee, 2006) to owning just under one quarter of the smartphone vendor worldwide at 24.1pc in the first quarter of 2015 (Rossignol, 2015).

The three accounts are:

1. Jong Yong Yun, Samsung Electronics’ CEO: Competing through Catastrophe Culture, written by Roopa Umashanker

2. Rejuvenating Samsung, written by Kumar Mukerjee

By 2009, Samsung surpassed their Japanese competitors, Sony, by emerging with a ₩40bn surplus. A critical factor that contributed to Samsung’s financial success was its strong investment in its employees. Trace and discuss the key organisational changes that drove the performance and success of Samsung.

Prior to 1988, when Kun Hee Lee became Chairman of the Samsung Group, Samsung followed a traditional and old-fashioned culture of top-down decision making, a focus on amassing market share, volume of production, that sacrificed the quality of its products. Samsung became known as a ‘discounter’ brand.

In 1988, Samsung began focusing on quality over quantity of their products and slowly began to discard its previously ‘complacent’ culture (Umashanker, 2005). Samsung was forced to reform its entire business and strategy following the Asian financial crisis during the late 1990’s. Subsequent to the financial crisis, Lee appointment Jong-Yong Yun (Yun) as CEO. Yun instilled the philosophy of “perpetual crisis” by motivating his employees to innovate, and place emphasis on branding.

“I’m the chaos maker, I have tried to encourage a sense of crisis to drive change. We instilled in management a sense that we could go bankrupt any day” – Jong Yong

In order to initiate plans to cut costs, Yun, and nine other Samsung executives, had to highlight unimportant expenses that could be discarded. They “pledged to cut costs by 30pc in a period of five months” and they promised to resign if they failed (Umashanker, 2005). Executive bonuses including chauffeurs, luncheons and golf-memberships were among the first to be abolished. Employee incentives such as the distribution of calendars were stopped with immediate effect. “Yun slashed 16,000 jobs, suspended the production of 52 product lines and sold some of Samsung’s non-core assets” (Umashanker, 2005). Yun provided his employees with a handheld phone and notebook computer to aide in boosting productivity, morale, communication and submission of reports. By 1999, Samsung had reduced their debt ratio from 370pc to 260pc and slashed debts by $4.7bn. Reducing the debt and debt ratio allows Samsung to utilize and invest their revenue stream