COMPANY Case Samsung: From Gallop to Run its in South Korea, well ahead of the number two Hyundai-Kia Automotive Group at 6.4 percent. Under the direction of Lee KunIn the world of consumer electronics, copycat brands are a dime a hee, CEO and chairman, the third son of founder Lee Byung-Chull, dozen. These are the brands consumers turn to if they don't want to pay the price for the high-end market leaders. So if consumers want a top-tier television, they'll probably look at one from Sony THE NEW MANAGEMENT STRATEGY or LG. If they want something cheaper that's probably not quite as In 1993, Lee unveiled what he called "new management," a good, they'll look at brands such as Insignia, Dynex, or Vizio. top-to-bottom strategy for the entire company. As part of Lee's But what about Samsung? Believe it or not, Samsung Electron- new management, he took Samsung Electronics in a very ambiics was a maker of cheap consumer electronic knock-offs from the tious new direction. The goal: He wanted Samsung to become a time it started making calculators and black-and-white TVs in premier brand that would dethrone Sony as the biggest con1969 through the mid 1990s. Today, however, Samsung is the sumer electronics firm in the world. Instead of being a copycat, world's largest television manufacturer and offers the most cutting- Samsung was to become a cutting-edge product leader. The edge models around. company hired a new crop of fresh, young designers who unPutting the brand in context, Samsung Electronics is part of the leashed a torrent of new products-not humdrum, me-too prodworld's largest conglomerate, South Korea's Samsung Group. ucts, but sleek, bold, and beautiful products targeting high-end Founded in 1938, the huge Samsung Group also owns the world's users. Samsung called them "lifestyle works of art." Every new second largest shipbuilder, a major global construction company, product had to pass the "Wow!" test: If it didn't get a "Wow!" and the largest life insurance company in Korea. The conglomer- reaction during market testing, it went straight back to the deate is so big that it accounts for 25 percent of all corporate prof- sign studio. As part of Samsung's revamped strategy and positioning, along recorder and player. But perhaps the best thing going for it is the with developing stylish and innovative new products, the com- fact that it will not be tied exclusively to any single carrier, as are pany altered distribution to match. It abandoned low-end distrib- many of the top smartphones. More than 100 mobile operators utors like Walmart and Kmart, choosing to build strong around the world will offer the GalaxyS. relationships with specialty retailers like Best Buy and Circuit City. "We're not el cheapo anymore," said one Samsung designer. MABUUUNGIE In less that two decades, Samsung Electronics has achieved its Lee was recently named the top CEO of the Decade by Fortune lofty goalsand much more. In 2009 , the company rang up rev- Korea. True to that title, he has just recently announced that the enues of \$117 billion with profits of \$8.3 billion. Compare that to "new management" is now old news. After 17 years of remarkSony at $77 billion in revenues and a net loss of almost $1 billion. able success, Lee admitted that the world's largest technology Interbrand crowned Samsung as the world's fastest growing firm's current main products may likely become obsolete within brand over one five-year period. Most recently, Samsung hit num- the next 10 years. That forward thinking has him again in reform ber 17 on Interbrand's list of most valuable global brands as Sony mode. He has dubbed Samsung's newest strategy "mabulijungje," fell to number 29. a Chinese axiom that means "horse that does not stop." In a Samsung is now by far the largest consumer electronics com-_ memo to Samsung employees, Lee said, "The 'new management' pany in the world and has been since 2005. It's the world's largest doctrine for the past 17 years helped catapult the company into TV manufacturer and the second-largest cell phone producer. being one of the world's best electronics makers. Now is not a Samsung competes strongly in the markets for DVD players, home time to be complacent but a time to run." theaters, digital cameras and camcorders, home appliances, and As with any truly forward thinking, innovative company, Samlaser printers. But more than just making finished consumer prod- sung doesn't claim to know what will replace today's products as ucts, Samsung Electronics is also the world's largest technology they become obsolete. Rather, it is investing heavily to ensure that electronic components company. It makes a sizable share of LCD it is the company that develops them. Samsung recently unveiled and LED panels, mobile displays, and telecommunications compo- a \$23 billion investment plan-its biggest to date. That amount is nents used in other company's products. It's also the world's three times the one that Samsung discarded only months earlier. largest manufacturer of flash memory. It's also bigger than the combined investment budgets of Intel, WORKS OF ART expenditures, new equipment, and plants to ensure that Samsung Samsung has become more than just big. It has also achieved its stays ahead of the game. The rest is for R\&D. At a groundbreaking goal to become a producer of state-of-the-art products. In fact, ceremony for a new chip plant outside of Seoul, Lee announced both Fast Company and BusinessWeek recently placed Samsung that despite Samsung's past success, the company risked losing high on their lists of most innovative companies. As evidence of its market share if it did not completely overhaul its business model. design prowess, Samsung took home eight prizes at the Interna- According to Timothy Baxter, president of Samsung Electronics tional Design Excellence Awards (IDEA), where entries are judged America, as a major pillar of mabuljungje, Samsung will capitalize based on appearance, functionality, and the thinking behind each on interactivity-as in mobile phones with TVs and TVs with the one. Design darling Apple took home only seven awards._ Internet. Samsung's future will bring many products that will talk Consider some of this year's winners. A Samsung "Touch of to each other. At a recent expo, Baxter stared at a pair of aces disColor" Blu-ray DVD player featuring a hint of red tone blended played on his Samsung Omnia II mobile phone. After tapping a naturally into a piano black frame had the judges ogling. Com- few phone buttons, up popped a poker table on a Samsung bigments indicated that, with color and appearance that changed in screen TV with a pile of cards held by his opponent-a poker different lighting, the DVD player looked like a work of art made b buddy in another city. "There's no reason these phones can't interof glass. Samsung's Luxia LED TV series also packed "wow" ap-_ act with the TV," Baxter said, indicating that if he has his way, Texas peal. With specs that exceed anything on the market, a 55-inch Hold 'em is just the first in a series of such synergistic exchanges. model is a mere one-inch thick and weighs just 49 pounds. Sam-_ But such advances in product interactivity go beyond just presung's EcoFit monitors feature a transparent stand that give the senting consumers with flashy hardware features. They will take appearance of floating in the air. The Samsung YP-S2 Pebble is Samsung into a competition for consumer eyeballs with companies part MP3 player, part fashion item. Designed to conjure up images such as Apple. Samsung knows that it cannot thrive in the long of nature with its pebble shape and stunning colors, it can be term by merely offering sharper colors or better sound quality. Pricworn around the neck and sports five tactile keys that make it sim- ing power comes only from unique features or control over conple enough for grandma to use. And the Samsung Kiwi mini note- tent. Samsung is putting plenty into discovering the unique book PC is a 10-inch laptop that is high-tech, convenient, cute, features. But its investment strategy will also position Samsung as and familiar all at once. These and the other Samsung winners at somewhat of a broker between advertisers and the devices that last year's IDEA awards earned Samsung the designation of "a carry the ads. Although Samsung is now hush-hush about its plans, company that's hitting its design stride." it has announced its intention to unvel a tablet computer and an Samsung is moving many of its product categories forward. For app store similar to Apple's that will give Samsung control over that example, as the cell phone industry moves from "dumbphones" _ content. Samsung sees apps as the advertising vehicle of the future. to smartphones, Samsung aims to double its market share of the In its favor, Samsung has access to a piece of the puzzle that higher-end market from 5 to 10 percent. With the release of its Apple doesn'tbig screens. Thus, as its small devices interact with latest high-tech communication phone, the Galaxy S, Samsung no its Web-enabled TVs, Samsung could bring in lots of ad dollars doubt has a shot. One industry analyst says, "Samsung may easily from companies eager to pitch their products on screens 25 times meet [its] target as the handset market is sharply transferring to the size of an iPhone's. If successful, Samsung will pose a threat to smartphones and the hardware features of the Galaxy S are pretty not only Apple but also cable companies. That's because the type competitive in the market." Running on Google's new Android of network that Samsung has planned will also make it a data coloperating system, the phone features a four-inch screen, an e-book lector, privy to insight about the kinds of applications its TV ownreader, a five-megapixel camera, and a high-definition video ers like so that it could help suggest what ads they should receive. Questions for Discussion Sources: Mark Borden, "The World's 50 Most Innovative Companies: \#36: 1. How was Samsung able to go from copycat brand to product Samsung," Fast Company, February 17, 2010, p. 90; Shinhye Kang, leader?BusinessWeek,June21,2010,accessedatwww.businessweek:comews/"SamsungAimstoDoubleitsSmartphoneMarketShare,"Bloombergs 2. Is Samsung's product development process customer 20100621/ samsung-aims-to-double-its-smartphone-market-share-update 1 centered? Team based? Systematic? .html; Laurie Burkitt, "Samsung Courts Consumers, Marketers," Forbes, 3. Based on the PLC, what challenges does Samsung face in June 7, 2010, accessed at www.forbes.com/global/2010/0607/marketingmanaging its high-tech products? "Samsung Renews Resolve to Reform," Korea Herald, June 8, 2010, ac- 4. Will Samsung likely achieve its goals in markets where it does cessed online at www.koreaherald.com