The article of Tarun Khanna, Jaeyong Song, and Kyungmook Lee: The Paradox of Samsung’s Rise, published by Harvard Business Review on July 2011, defines a unique situation of a company in competing in international market and becoming a world leader. Samsung is one of a company which can successfully combine the best-of-both-world best practices, from its Japanese roots and western practices, such as from the United States. As a second successor of the company, Lee Kun-Hee was not satisfied with Samsung being only the leader in its domestic market.
Having the Japanese electronic producers surpassed them in global competition and the rise of domestic wages home, Lee knew that he needed to do something to win the game. The key to success is to outperform through the agility, innovation, and creativity that the Japanese companies are reluctant to adapt. At that time, Lee came up with the solution of a new management initiative, taken from Western best practices, aiming at improved marketing, R&D and design, while keeping the core competencies in manufacturing, continuous improvement, and plant operations.
The mix strategy was formed in three general ideas; adapting to the most appropriate Western practices, creating an open-minded way of thinking by bringing out insiders and sending insiders abroad, and Lee’s direct intervention to ensure the stability of the company, which slowly but smoothly form the so called Hybrid Management System which brought Samsung to its glorious time. The case of Samsung can be considered as unique.
Not only that the company exposed to major changes (such as compensation and promotion system based on seniority), initiated by a persistent leader of the company, but also it was able to overpass the cultural difference from different countries where the company took its best practices from. The support from the leader was constant. The fact that Lee did not underestimate how uncomfortable the change would be, carefully made him focus on the most critical part and fit it with the employees as a whole.
It seems that the company can escape the paradox of an emerging corporation. Samsung was proven to be a ‘western’ company without being ‘western’. Although it had taken so much of western influences, the company did not lose its sense of nationality. More importantly, the success of the Hybrid Management System was also supported by the culture of the people of South Korea itself.
Weary of being behind the Japanese who was once colonized the country for a good amount of time, the Korean was already familiar with the idea of globalization from 1994, when Kim Young Sam government introduces segyehwa, attempted a top-down reform of the Korean political economy to meet the rapidly changing conditions of the world economy (Gi-Wook Shin, Stanford 2003). At that time, the government introduce the Globalization Promotion Committee (segyehwa ch’ujin wiwonhoe), or GPC.
Segyehwa was kept as a name for Korean way of globalization. With this administrative cultural distance of historical background, the company was able to corporate it with. The cultural change was also equipped with the exposure of the natives going out or foreigners going in. It certainly had shaped the mind of the employees of adjusting and adapting to global condition. At first, people at Samsung were very resistance of having someone with relatively different background to join the team.
Samsung tried its best to have more non-Korean to work in the company because Lee believed that it can benefit the team as whole (having people with different perspective and exchange point of views). Sure it was hard but, from 208 non-Korean MBAs hired in 1997, 135 were still working as of 2010. The number of people who were going out was also proven to be beneficial for the company, as they were the ‘platform’ of the company to build network overseas. With Samsung having this strategy, it certainly had shaped the expansion of South Korean company abroad.
Referring to the statistical data of MNE given during the lecture, export platform and efficiency seeking of South Korean companies had passed way beyond the Japanese, the roots of the country. For market seeking efficiency, South Korea was soon to catch up with the Japanese. It has proved that the globalization of South Korea as a nation has contributed to the success of Samsung as a global company. | |Horizontal FDI /Market |Vertical FDI/Efficiency |Export Platform FDI | | Seeking |Seeking | | |Japan |0. 92559758 |0. 027391631 |0. 047010789 | |South Korea |0. 847645429 |0. 05953623 |0. 093745444 | However, it seems that South Korea is not really coping with the western, assume US, practices according to Kogut-Sigh index compared to Japan. From the data computed, South Korea has a bigger cultural distance towards US compared to Japan.
But, looking at how eager the Korean in pursuing the behavior of globalization,in the case of Samsung, the index seems to hit the limitation. In reality, just like what happened in Samsung, the illusion of causality and stability applied, among the others. From the article, we can learn that a good practices of adaptation and retaining fundamental beliefs is a good combination in competing in international market, because that is what Samsung does and proven to be successful.
However, Samsung seems to be focused only in enhancing its internal management without really paying attention to management of it external factors, such as the customers and their buying behavior. Samsung also has limited market segments, which proves that the company does not really diversified its products. It can be guaranteed if Samsung is more decentralized in managing the company and diversified in its products, it will have a bigger market share in the international market which will make the company the world leader in technology manufacturing industry.
However, after reading this article, there are several things which remain unclear regarding the issue. Firstly, there is no explanation about what kind of obstacles which Samsung faces while adapting the western practices. Besides that, the writer does not really discuss if there is something else needed to be successful in entering international market besides adapting to western practices. The article also lacks in giving an insight of what will happen if Samsung has reached its limit in adapting the western practices.
From those limitations and several other things, several questions arise, they are: 1. By adopting the western practices, does it mean that Samsung is a follower of more successful companies? And what if Samsung reaches its limit in adapting to western practices? Is the company going to be as successful as it is now? 2. It seems that Samsung is not a market-oriented company, since it has a little number of market segment and lacks in marketing department.
Isn’t having an advance internal management will be useless without a significant approach towards the external side, most importantly the customers, of the company? 3. Is what Samsung does applicable to all kind of companies? 4. Does it necessary for Samsung to have its own unique resources (Since it is proven that the company is doing great without really having one)? 5. How does the rise of China’s low cost manufacturing industry influence Samsung’s strategy, since it spends a lot in R/D but sells low price products at the same time?