DÀ N BÀ I CHANGE MANAGEMENT

SAMSUNG
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1. Introduction of the Organization
1.1. Introduce SAMSUNG

Samsung means "tristar" or "three stars". The word "three" represents something
"big, numerous and powerful"; the "stars" mean eternity.

Samsung Group is a South Korean multinational conglomerate company

headquartered in Samsung Town, Seoul. Samsung comprises around 80 companies. It is
highly diversified, with activities in areas including construction, electronics, financial
services, shipbuilding and medical services.

1.2. Samsung’s history

On March 1, 1938 Lee ByungChul formed Samsung in Taegu, Korea and focused
primarily on trade export, selling dried Korean fish, vegetables and fruit.

In the 1970s, Samsung laid the strategic foundations for its future growth by
investing in the heavy, chemical, and petrochemical industries.

In 1987 with the death of Lee Byung-chull, the Samsung group was separated into
four business. Lee Kun-hee (Lee Byung Chul’s son) joined the Samsung group in 1968
and took over the chairmanship on December 1, 1987 after his father’s dead.

In 1993, Samsung reorganized to focus on three industries, electronics,

engineering, and chemicals. Samsung has also continued to expand in the 1980 – 1992.

Nowadays, Samsung became the top company in smartphone industry and they
continue to expand the business bigger and bigger.
 Image: Top 10 smartphone 2015,Q1

(Source : http://vnreview.vn/tin-tuc-thi-truong/-/view_content/content/samsung-
dan-dau-top-10-hang-san-xuat-smartphone-q1-2015)

1.3. CEO Lee Kun-hee

Lee Kun-hee is the second generation of Samsung, he is also the third son of the
first chairman Lee Byung-chull. After the dead of Lee Byung-chull, Lee Kun-hee
officially become the Samsung‘s chairman when he was 26 years old. As soon as he run
the business, he recognized the problem of the organization and began a new revolution.
Thank to Lee Kun Hee guidance, Samsung become a major international force and
arguably the most prominent Asian brand worldwide.
1.4. Samsung Electronics

Samsung has been the world's largest manufacturer of LCD panels since 2002, the
world's largest television manufacturer since 2006 and world's largest manufacturer of
mobile phones since 2011. Samsung Electronics displaced Apple Inc. as the world's
largest technology company in 2011 and is a major part of the South Korean economy.

1988–1995: Consumer struggles

Samsung Electronics launched its first mobile phone in 1988, in the South Korean
market. Sales were initially poor and by the early 1990s, Motorola held a market share of
over 60 percent in the country's mobile phone market compared to just 10 percent for
Samsung. Samsung's mobile phone division also struggled with poor quality and inferior
products until the mid-1990s and exit from the sector was a frequent topic of discussion
within the company.

1995–2008: Component manufacturing

Lee Kun-Hee decided that Samsung needed to change strategy. The company
shelved the production of many under-selling product lines and instead pursued a process
of designing and manufacturing components and investing in new technologies for other
companies. In addition, Samsung outlined a 10-year plan to shrug off its image as a
"budget brand" and to challenge Sony as the world's largest consumer electronics
manufacturer. It was hoped in this way Samsung would gain an understanding of how
products are made and give a technological lead in the future.

As a chaebol, Samsung Group wielded wealth that allowed the company to invest
and develop new technology rather than build products at a level which would not have a
detrimental impact on Samsung's finances.

2008 to present: Consumer products

The Samsung display at the 2008 Internationale Funkausstellung in Berlin for four
consecutive years, from 2000 to 2003. Samsung posted net earnings higher than five-
percent; this was at a time when 16 out of the 30 top South Korean companies ceased
operating in the wake of the unprecedented crisis.

In 2005, Samsung Electronics surpassed its Japanese rival, Sony, for the first time
to become the world's twentieth-largest and most popular consumer brand, as measured
by Interbrand.

In 2007, Samsung Electronics became the world's second-largest mobile-phone

maker, overtaking Motorola for the first time. In 2009, Samsung achieved total revenues
of US$117.4 billion, overtaking Hewlett-Packard to become the world's largest
technology company measured by sales.

In the first quarter of 2012, the company became the highest-selling mobile phone
company when it overtook Nokia, selling 93.5 million units compared to Nokia's 82.7
million units. Samsung also became the largest smartphone vendor as a result of strong
sales of its Galaxy SII and Galaxy Note devices.

In April 2013, Samsung Electronics' new entry into its Galaxy S series smartphone
range, the Galaxy S4 was made available for retail. Released as the upgrade of the best-
selling Galaxy S III, the S4 was sold in some international markets.
 In Q1 2015, Samsung’s profit dropped 39% to USD 4.35 billion due to heavier
smartphone competition from Apple's iPhone 6 and 6 Plus, as well as a slew of Android
competitors.

2. Analyze the context of change (external/internal)

2.1. External
2.1.1 PESTLE

Political

The 1992 Rio Declaration on Environment and Development highlighted the issue
of regulating substances that contribute to global warming. Two yearslater, in March
1994, the Convention on Climate Change went into force. Thisagreement is aimed at
curbing the emission of greenhouse gases, which have adirect impact on climate change.
Under the treaty’s Kyoto Protocol, 38 signatorycountries are required to reduce their
greenhouse gas emissions. Between 2008and 2012, their combined emissions must be
lowered by 5.2% from the 1990levels. As one of the global leaders of the information era,
Samsung Electronicshas introduced the “Catch CO² Project,” a voluntary initiative to
reduce our CO²emissions. We are also making efforts to make more efficient electronic
products and curb the use of materials with high global warming potential
(GWP).Samsung Electronics strives to curtail the discharge of substances thatcause
global warming, with a particular focus on CO² emission, during themanufacturing
processes. We have also been a leader in energy conservationefforts through company-
wide energy saving initiatives.

 Economic

A crisis hit the Asian economy in the fall of 1997, and by early 1998, Lee Kun Hee
anticipate the future and judge the crisis inflation. Lee Kun Hee decided to change the
policy, reform of Samsung to be prepared for the crisis without adversely affecting
Samsung. Lee Kun Hee has emphasized the sense of crisis through the strategy statement,
the new management and consciously choose to change and reform the Samsung Group.
By presage sensibility to the first signs of economic crisis and make timely reforms, has
changed dramatically Lee Kun Hee entire samsung just before the storm of the financial
crisis, IMF.

Social-Cultural

Lee Kun Hee was a talent, who had observation and visionary ability than people.
He soon realized the era of mobile phones will come even before mobile phones became
popular as today. at the same time, he gave the directive needs to more strongly promote
mobile projects to all employees in the company in the early 1990s.

Technological

The advent of the iPhone has broken the ecosystem of mobile phone which is only
known to those of ordinary phones, and quickly attracted ordinary phone users become
customers of smartphones and create ecosystems behavior new mobile phone focusing on
smartphone.
11/2009, Apple attacked into the Korean market, made the Korean have invested
their dedication devoted to the project to launch a smartphone to compete.

Legal

On August 4, 2010, when Samsung launched the Galaxy S, a new entry into the
smartphone market. The Galaxy S, they thought, was pure piracy. The overall appearance
of the phone, the screen, the icons, even the box looked the same as the iPhone’s. Apple
sued its component supplier Samsung included specific federal claims for patent
infringement, false designation of origin, unfair competition, and trademark infringement,
as well as state-level claims for unfair competition, common law trademark infringement,
and unjust enrichment.

Samsung counter-sued Apple on April 22, 2011, filing federal complaints in courts
inSeoul, Tokyo and Mannheim, Germany, alleging Apple infringed Samsung's patents for
mobile-communications technologies. By summer, Samsung also filed suits against
Apple in the British High Court of Justice, in the United States District Court for the
District of Delaware, and with the United States International Trade Commission(ITC) in
Washington D.C., all in June 2011

24/08/2012: As mentioned in the last section, Samsung had to face heavy penalties
for its alleged imitation of the Apple’s iPad and iPhone 4 and this had led to the company
taking a beating as far as public perceptions and consumer approval of its strategies are
concerned.

Eco – Environmental

With the rise of the ethical consumer who wants his or her brands to source and
make the products in a socially and environmentally responsible manner, Samsung has to
be aware of the need to make its products to satiate the ethical chic consumer. This means
that it has to ensure that it does not compromise on the working conditions or the wages it
pays to its labor who are engaged in making the final product. Production facilities
grounded on environmentally friendly designs.

2.1.2 Key competitors

 LG Corp
 Nokia
 SK Group
 Apple Group
 Sony Corporation
 SK Hynix Inc
 Seagate Technology
 Motorola
2.2. Internal
2.2.1 Human resource

6/1993, The inspection delegation to Frankfurt, Germany. Lee Kun-hee received 1

report from the Japanese adviser at the Center for Design Samsung. The report reveals
the tragic reality as the whole 1 office with several hundred people perform extremely
sluggish. Even a test product line very expensive overlying dust for several weeks
because of broken electrical socket that also no one wants to touch hands. So Lee Kun
Hee decided to change the company by appied “Declaration Frankfurt 1993” to renovate
the human resource of company.

2.2.2 Product

1990, after receiving a report on the phones of Samsung currently, almost of them
were faulty. He asked to recall all products and destroy them. He said that a poor quality
product is a big danger to business and it is a crime to clients.

 Samsung’s products that time really bad, low quality, cheap. It could not
comparable with the other brands.
2.2.3 Reputation
- 1990, Japanese Companies are considered the best, which are also the big
monopoly on analogue technology. At that time, Samsung Electronices just a little
presence and didn’t has position to compete with Japanese companies. Sony, Toshiba,
Sharp, NEC, Hitachi were the best brand to attract consumers in the world.
- In Korean, the people thought Samsung company as a second grade of cheap
product in the electrical appliances market. No one expected Samsung would become the
world’s leading corporations. But Lee Kun Hee could do it successfully, he gradually
turn the dream into reality.
 2. Introduce the change situations/events/programs

"Change everything except your wife and kids"

3.1. Quality of people

- Lee Kun Hee joined the Samsung Group in 1968 and took over the chairmanship on
December 1, 1987, just two weeks after the death of his father, Lee Byung Chul, who
founded Samsung.

- Applying “ Open recruitment” with no discrimination of ages, female or male,

academic level…

- In 1995, Samsung established a laboratory to reform design of the products. He also

hired the design experts and created many opportunities for them to study, to learn the
ideas from leading designers from USA.

 The number of design experts from Samsung were 470 people.

- Samsung had to reduce 24,000 workers (30%) and moved the factories to the other
countries with cheaper labor sources such as China, Malaysia, Mexico, ...

 That a plan to deal with the financial crisis in Asia ( 1997).Beside that, Samsung
also want to save the cost to focus on the other more important plans

- In 1999, Lee Kun Hee had personally hired a Korean-American marketing expert
Eric Kim in charge of product marketing for Samsung.

 Meanwhile, Lee's subordinates were opposed because they thought no one could
understand psychology of Korean people than themselves. Lee declared: "Who
dares to obstruct Kim just stepped over my body".
3.2. Quality of Management
- At the beginning, President Lee decided... not to come to the company. He worked
at home, no phone, no reception. Lee forced his subordinates to make their own
decisions and take responsibilities.
 These things have created the discipline and culture "always refresh" of Samsung.

- June 7, 1993, Samsung Group had announced a new business statement or

Frankfurt statement. It was focused on producing high quality products and design.
Lee Kun Hee realized that it’s time to change, it’s time to create a new vision to
develop, to be successful. Samsung need to have a global strategy and become a
valuable brand in the word with quality element is the best in each product.
  Lee spent almost his time coming to the biggest branches of Samsung in the world
like: Seoul, LA, Tokyo, Osaka, Berlin, London… to directly inspire the new
vision, the strategy to each subordinate in 350 hours.
 He also published a book "new management policy" of Samsung with 200 pages
and gave to each worker.
 In 1995, at Gumi factory, President Lee required 2.000 workers to gather in the
yard. In front of them, there were many products made by Gumi’s workers. All of
them had to wears red tape on their arm with the sentence "Quality is No. 1" then
they were ordered to use a hammer to hit or to destroy their products. Many
workers were in tears because they had to destroy the products made by
themselves.
3.3. Quality of products and Marketing
3.3.1 Products

- The designers of Samsung was also sent to visit the great buildings around the
world in Egypt, India, France, Germany, USA to find new ideas.

 Since 2000, the fund for designing in Samsung has increased from 20% to 30%
annually.
 2002, Samsung had launched SGH – T100. It was sole in 6 month with 4,5
milions. This is first success of Samsung.
- With the target “beat Apple and want to be the best position in technology market”.
They imitated the way to create the smartphone from Apple. After that, Samsung has
designed the smartphone from the other way, they innovated products, more unique,
cheaper, convenient and quality.
 From that time, in 2010, Samsung Galaxy S was launched with achieving the high
sales (10 milions) and the high revenue for Samsung.
 Each year, Samsung always releases new products with many kind of galaxy S,
galaxy Note, galaxy Grand… for all of the customer segmentation.
 3.3.2 Marketing

- Samsung focus on Marketing. Each year, they spent more money for advertising,
marketing. Nowaday, we can see the Samsung brand everywhere in the world.

- 2013, Samsung spent nearly $13 billion for marketing activities.

 - Samsung had Proactive Change in Marketing, it’s “a new rule of the game”
 The Olympic Games 1996 took place in America, there are a lot of famous brands
like Pepsi, Honda, Puma, RedBull… sponsored for Olympic. But there is no digital
company can sponsored for Olympic. It was difficult for a small Korean company to
sponsor for a big event in America. After negotiating and beating Motorola, Samsung
was the first digital company could sponsor for Olympic Games.
 That’s a remarkable event in Marketing changing of Samsung. It brought a huge
reputation for Samsung brand.
3. Theoretical Approach (linked to change management techniques/theories that
relevant to the above change events)
4.1.1 The Resoures base-view (RBV)

The resource-based view is an approach to achieving competitive advantage that a

organizations should look inside the company to find the sources of competitive
advantage instead of looking at competitive environment for it.
 Picture 1: Resource based view model
 Tangible assets

- Land

Samsung’s mobile device factory in Gumi, South Korea, so they can use their local
employees to help woker in Korea will have a job. In addition, the employees working at
Samsung is young, they are young women in their late teens and early-to-mid twenties.

- Buildings

In 1993, Samsung Advanced Institute of Technology (SAIT) to research and develop the
good materials for machines.

In 1995, Samsung invested in Research and Development (R&D).

In 1999, Samsung company had developed Smartphone, a small, multi-function phone.

In 2005, Samsung Electronics developed the first-ever speech recognition phone.
In 2010, Samsung Corning Precision Glass changed company name to Samsung Corning
Precision Materials. This office is creating high-tech products and technologies to bring
the product more convenient and enriched life.
 Picture 2: Samsung Corning Precision Materials Building
- Machinery

Samsung's mobile device factory in Gumi, South Korea

Picture 3: Outside the Samsung's mobile device factory

Picture 4: Inside the Samsung's mobile device factory

- Equipment

In 1991,Samsung was developed of mobile phone handset completed and developed

mobile phone system in next year.
 - Capital
Samsung is financing electronics research at universities or institutions, such as the Korea
Research Institute of Chemical Technology and the Korea Institute of Science &
Technology.
 Intangible assets
- Brand reputation

Brand position: Friendly, innovative and clever. Samsung’s product is always changing,
constantly improving technology and design.

The Samsung Philosophy:

 To devote our talent and technology.

 To creating superior products and services that contribute to a better global
society.
- Trademarks

"SAMSUNG", "SAMSUNG.com" and "SAMSUNG DIGITall Everyone's invited" are

trademarks of SAMSUNG in the United States or other countries. Unauthorized use or
duplication of these marks is strictly prohibited by law.

- Intellectual property

Samsung care about the creation and protection of Intellectual Property. In 2010
Samsung was awarded 4,551 patents by the US Trademark and Patent Office and ranked
second on the world’s most inventive companies list. Samsung has its own Intellectual
Property group to protect and develop their inventions.

 Heterogeneous

Samsung mobile phones is able to bring products to the market more quickly than Apple
because it controls the entire manufacturing process for its cellphone. Samsung makes
everything from chips to screens at Samsung’s factories, allowing it to change designs
and make new products at a quick paced. But Apple relies on many suppliers to make
parts for its devices, it’s will spend more time to combine between all the companies.
Even, Apple is now the biggest external customer for Samsung components, ordering
Samsung providing additional components like chip or screen for iPhones and iPads.

 Immobile
On September, 1993, "Samsung CEO Training School" was born with 850 students are
all of Samsung's senior management to train for 6 months. In the 5 years from 1994 to
1999, each year Samsung selected 400 young people have at least 3 years experience for
training overseas. Lee hopes this seed team may return with knowledge and deep
experience of the local market to learn and invent the products of samsung.This Samsung
program had spend $100 million to train 2,000 strong employees to challenge
international market. Until now the Center for Human Resource Development in South
Korea's Samsung plays still receive around 50 thousand participants each year and
constantly evolving. In addition, Samsung has high product reliability, annual 9%
investment in R&D activities, they also focus on achieve and maintain its low cost
depend on cheap labor, better sourcing and better manufacturing processes.

4.1.2 Strategic management: The level of ambition

Nowaday, Samsung Group that their products are present everywhere, every corner of the
world and their business work is developing and increasing. To compete globally,
Samsung has used these resources very effectively include the human resources,
technology, marketing manufacturing, and design departments.

Picture 5: Chairman Lee’s “New Management” System

Chairman Lee was used “New Management” in 1993, he decided to transform Samsung
group into leading global company in the twenty first century. Finally, Samsung is one of
the great business achievements in the 21st century.

In 2012, while CEO Tim Cook of Apple company introduced Iphone 5 at San Francisco,
Samsung was reparing to launch a new product name Galaxy S III and their
advertisement was attracted 70 milion views and became the most popular technology
advertisement in 2012. Samsung's secret to success is to use their product strategy to
caught the attention of biggest competitor – Apple and made Samsung’ fans feel proud
when they are taking their products same with Iphone 5.

4.1.3 Lewin’s model

•Directed to transform Samsung Group into leading global company.

Unfreezing •Making Samsung's New Management Program in 1993

•Changing the logo

•Hiring the design expert from USA
Moving •Internationalization of the workforce by promoting foreign employers
•Reduce 24,000 workers (30%) and moved to foreign factory
•New strategic for marketing and products

•Concentrating research and development to innovate product and enrich

people's life.
Refreezing •Implementation of commitments is " being the world's best has won us the
No.1 global market share for 13 of our products".
 4. Provide the result of change and evaluate the effectiveness/success of the
change program
 Profit

- Samsung' profit increases from 2011-2013, cause of sales of smartphone with

affordable prices for customers can not afford to purchase the expensive products like
iPhone.
- However, Samsung's sales decreased in 2014. The problem is not about quality of
products or crisis of brand because Samsung is still the largest mobile manufacter in the
world with a dominant market share in many regions around the globe. The problem is
that because of the curent market of Samsung are becoming saturated, leadinh to a
decline in sales.
- The development of technology is part of the reason for this decline. Smartphone
sales in late 2012 and 2013 can still use good and fully meet the needs of users. There is
little reason for consumers to upgrade from the Galaxy S4 to S5 or Galaxy Alpha or Note
 - Samsung has yet to face with a serious decline as Blackberry or Nokia in the past,
Samsung still are one of the strongest brands in the world.

- The current decline may be temporary. Hopefully Samsung will soon get back on
track in the future.

 Reputation, brand
- In 1998, Samsung has deployed to a revolution in product, moving from
centralized production mechanism to access market mechanisms. Follow the request of
President Lee, Samsung spent $6 billions for research, marketing is a way to learn
psychology of consumers and promote the image of Samsung worldwide.


Brand value of Samsung in 2000 reached US $ 5.2 billion. And after Samsung
invested $ 508 million to promote the brand, the company worth up to $ 6.3 billion in
2001. By 2006, Samsung has become a famous brands worldwide, with a total market
value of Samsung Electronics reached 100 billion USD (2 times Sony), profit of USD 9.5
billion (2007) …

 Products
- Each year, Samsung always improve and new products: Galaxy S, Galaxy Note,
Galaxy Grand...to help customers have more choices with various designs, it makes
customers feel enjoy.

Ex: Create the Spen on Galaxy Note 4 acts as the mouse on computer and
“Dictionary” can translate language everytime easily. Moreover, Galaxy Note 4 had
added new software called "Photo note" can capture and scan content of the photo.


These new applications are very useful in daily life, it makes clients trust and
choose Samsung.

 Marketing strategy
- In 1999, the hiring of well-known marketing expert Eric Kim in charge of product
marketing has brought huge profits for Samsung.
 
After 18 months, Samsung has got profit from their marketing campains.

- With Eric Kim, vice president of international marketing at Samsung, the first day
joined the Group in 1999 is difficult time. His task: to turn electronic corporations of this
nation was the main competitor of "giant neighbor" Sony about the reputation, revenues
and profits.
- Kim and his staff team were invested billions of dollars for marketing activities.
That increases the pressure on Kim's team: they had to obtain the highest return for every
dollar contract that corporations spend. The difficult is that the marketing budget to use
efficiency and right place, but Samsung too diverse goods and products: the products of
Samsung are sold in over 200 countries around the world, with 14 items including 476
different product types. Kim has restarted one complete marketing plan based on the
identify new market and the goal products.
- Previously, Samsung's marketing budget is allocated according to current sales
and not related to the development potential. Kim was using a softwave called M-net.
The system analyzes the results of marketing plans in recent years and proposed
marketing budget should be allocated where country and follow what items.
- Moreover, Samsung spent heavily on marketing through the ads on TV, in stores
or supermarkets. Consumers can easily see the ads in the large shopping center.


Profits proved that budget has been allocated properly.

 
  Globalization strategy

- Samsung has listed at top five makers of mobile phones leading. Samsung is
considered the fastest growing brands in the world in 2001-2002. The group jumped from
No. 42 to No. 34 in the ranking of Interbrand.

- Samsung always towards sustainability in business, through many years of

operation, with the effort to defeat big rivals in the market like Apple, Lenovo, Huawei,
LG and others. Currently, revenues and total assets of Samsung have amounted to
hundreds of millions of dollars.

- In addition, effective from marketing strategy is one of the factors that helped
Samsung Electronics become to one of the brand has fastest rising value.

BEST ACHIEVEMENT OF SAMSUNG

Ranked No.1 in the "Top 100 Company leading IT" by BusinessWeek

2001 Magazine.
 Ranked No.5 in the list of " The most Company Electronics admired"
2003 published by the Fortun Magazine.

Ranked the head about revenue of mobile phones in Russia.

2007

Samsung Electronics won 5 awards in EISA in Europe.

2010

Samsung was in the top 10 most value brands in the world with value of
2012
brand: 32,9 billion, increase 40%.

- Nowaday, Samsung can be proud of being one of the most expensive brands in the
world, overcome both Sony and Nike. Products of Samsung has been present in most of
markets around the worls, from major markets like the US, Europe, Japan to even very
small market like Irag, Aghannistan, Africa,... Anywhere, Samsung's products always
occupy a very large market share and prestige in the eyes of customers.
5. Recommendations for more effective change management program

As a chairman, Lee Kun-Hee should recognize the problem earlier. At that time
(1988-1995), Samsung still has been knew like a organization which produce cheap
product in the electrical appliances market. What Samsung need is changing strategy and
lee kun hee finally done it. But if Lee Kun-Hee recognize the position of the organization
at that time and decide to make a change , it will be more effective.

In 2012, Samsung had to face heavy penalties for its alleged imitation of the
Apple’s iPad and iPhone 4. In my group opinion, Samsung was right when they learn
from their competitors success but they can't copy everything. Before they ready to
release a new line product, they should make a survey that users experience the
smartphone and feedback. By that way, Samsung would know its status and performance
to make sure of the quality. If user said the product has some similar to the other brand
(Apple) they can have a strategy to deal with it. Example: Change the button in the
middle of product (like Iphone) to aside.
 Apple still a big competitor, they make users get excited everytime they prepare
for a new product. This is what Samsung should learn.

First , Samsung should often renew product – it makes customer believe the
organization does work hard to make new product and the customer can always get the
newest technology.

Second, they need to have a diversity designer team, the member can come from
different major such as interior designing, fashion, education, waste management.. etc to
help improve the product. Producing a smartphone which can attracted numerous
consumers want to buy is not simply depend on manufacturing, people want different
features in products such as application, quality of the camera, battery saving status ... It's
mean Samsung need experts in various fields to help them design and contribute ideas for
marketing activities. For example, a designer fashion can give his/her opinions on the
designs, color and design, which is a trend or can get customers attention.

Third, interacting with people on social media. Social media now is very popular,
people can see and give their opinion about things anytime. Apple always get people's
attention by Apple's video clip or which video supposed to be next Apple's product.