978-1259278211 Case 28 Solution Manual Part 1

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Teaching Note: Case 28 – Samsung Electronics

Case Objectives

1. To help students understand the challenges and pitfalls of leadership and managing the

innovation process.

See the table below to determine where to use this case:

NOTE: There are both PRIMARY and Secondary chapters that can be used for this case. The

Chapter Use Key Concepts Additional Readings

PRIMARY

Innovation; innovation dilemmas;

NOTE: see web-linked

SECONDARY

5: Business-Level

Strategy

Generic competitive strategies –

7: International

International markets NOTE: see web-linked

8: Entrepreneurial

Entrepreneurship; opportunity

10: Organizational

Design

Organizational structure

11: Strategic

Leadership

Leadership NOTE: see web-linked

articles

Case Synopsis

Since 1998 Samsung Electronics had undergone a dramatic transformation. Under the leadership

of Jong Yong Yun, CEO from 1996 to 2008, Samsung had emerged from being a company that

earned modest profits on low-cost products based on competitor’s technology to a company

producing cutting-edge hi-tech products that impressed consumers – what they called “wow

products.” Yun had believed that developing products with attractive designs and advanced

Although it made everything from refrigerators to televisions to vacuum cleaners, Samsung had

become best known for its smartphones and tablets. Going into 2015, Samsung Electronics was

However, by Samsung innovating in markets that were created by others, the firm had gotten the

reputation of being a “fast follower,” and even had to go to battle with Apple over allegations of

patent infringements. Samsung needed to challenge this perception that it wasn’t innovative. One

way to do that was to focus resources on the research and development process, tapping into the

talents of its designers and engineers across its multiple lines of business, eventually making

Samsung products – such as the television, handheld computers, phones and even appliances –

the centerpiece of a digital home. In an environment where technologies were continuously

evolving, even leading to periodic revolutionary shifts, could Samsung succeed with its Vision

2020 goal of becoming a top 10 global company, and be considered an innovative leader?

Teaching Plan

This case is best positioned after students have a firm grasp of strategic analysis, including how

to assess both internal and external environments. Samsung provides an opportunity to discuss

innovation and strategic leadership in a global non-U.S. company environment.

Summary of Discussion Questions

Here is a list of the suggested discussion questions. You can decide which questions to assign,

and also which additional readings or exercises to include to augment each discussion. Refer

1. What leadership decisions has Samsung made in order to manage its innovation process?

2. OPTIONAL QUESTION: What competitive strategies did leadership adopt to turn

Samsung around? What challenges does Samsung face in the future?

Discussion Questions and Responses

1. What leadership decisions has Samsung made in order to manage its innovation

process?

Referencing Chapter 12: Managing Innovation and Fostering Corporate Entrepreneurship

Remember, from Chapter 1, strategy is all about the ideas, decisions, and actions that enable a

firm to succeed. See Exhibit 1.1: Strategic management consists of the analyses, decisions, and

actions an organization undertakes in order to create and sustain competitive advantages:

●strategy directs the organization toward overall goals and objectives;

●includes multiple stakeholders in decision making;

In doing this, leaders face a large number of complex challenges. Leaders must be proactive,

anticipate change and continually refine changes to their strategies. This requires a certain level

See Chapter 1, Exhibit 1.3 for a depiction of the strategic management process. During strategic

analysis, the leader does “advance work” to anticipate unforeseen environmental developments,

In strategy implementation, depending on the type of organization structure, the leader might

include key individuals in a discussion around selecting which strategies might be best to

implement at which level within the organization. The leader must ensure proper strategic

Samsung’s major challenge was to create a sustainable competitive advantage in the marketplace

One of the most important sources of growth opportunities to achieve competitive advantage is

innovation. Innovation involves using new knowledge to transform organizational processes or

create commercially viable products and services using the latest technology, experimentation,

Some of challenges of innovation involve choosing when and how to continue to innovate, the

scope of future innovation and the pace, as well as whether or not to collaborate with innovation

These challenges can be daunting even for highly successful firms. They have been characterized

as five dilemmas:

●Seeds vs. Weeds – companies have an abundance of innovative ideas, and they must

choose which ones to pursue (seeds) and which ones to cast aside (weeds).This choice

●Experience vs. Initiative – companies have to decide who will lead the innovation project.

●Internal vs. External – innovation projects need competent staffs to succeed. Insiders may

know the company’s routines, but may not be able to think outside the box, while

●Building Capabilities vs. Collaborating – innovation projects need new skills, which can

●Incremental vs. Preemptive Launch – companies must manage the timing and scale of

innovation projects. Incremental launches are less risky because they use fewer resources,

After Jong Yung Yun took over at Samsung in 1996, he handled the five dilemmas of innovation

and took Samsung from new bankruptcy to over $100 billion in revenue in just over 10 years. He

did the following:

Seeds v. Weeds: Reduced bureaucratic layers between designers and top managers and created the

Experience v. Initiative: Discarded Samsung’s rigid seniority-based system for advancement in

Internal v. External Staffing: Recruited new managers and engineers, many of whom had

Building Capabilities v. Collaborating: Forced Samsung’s units to compete with outsiders (Not

in the case: In one example, Samsung purchased half of its LCD filters from a Japanese

Incremental v. Preemptive Launch: Pushed to speed up new product development and launch by

making it easier for managers to get approval for new products, budgets, and marketing plans;

In addition, it helps if leadership can embrace the entrepreneurial orientation – autonomy,

innovativeness, proactiveness, competitive aggressiveness, and risk taking – necessary to sustain

the pace of innovation. A culture of entrepreneurship means that a search for venture

opportunities permeates every part of the organization. Strategic leaders and the culture generate

It appears Jong Yong Yun did incorporate the dimensions of entrepreneurial orientation into the

reorganization of Samsung from 1996 to1998 by demonstrating the following:

Autonomy: The willingness to act independently in order to carry out a vision or opportunity and

see it through to completion: Yun decreased the levels of bureaucracy within the organization

Innovativeness: A firm’s efforts to find new opportunities and introduce novel solutions and

processes: To stay ahead of its competitors, Samsung employed more designers and engineers

Proactiveness: A firm’s efforts to seize new opportunities in anticipation of future demand:

Samsung was thinking proactively in its approach to “designing for the digital home” by creating

Competitive Aggressiveness: A firm’s efforts to outperform its industry rivals, characterized by

combative posture and aggressive responses aimed at improving position or overcoming threats:

Yun’s aggressiveness was illustrated in the steps Samsung took to get their products to the

Risk Taking: Making decisions and taking action without knowing for certain the outcomes that

will arise: By focusing on hardware, Samsung was taking a big risk, as its competitors moved

NOTE – ADDITIONAL READING, SLIDESHOW OF PRODUCTS, VIDEO:

Samsung Electronics placed a focus on innovative design. Here’s a slideshow of some of

Samsung’s more innovative products:

http://images.businessweek.com/mz/04/48/samsung/0448samsung01.htm?thisSpeed=6000

In 2013 several analysts were taking note of Samsung’s ability to grab market share in the smart

phone industry, “putting Apple on the back foot” with its strategy, which appeared to consist of

the following “pillars”: being the “ultimate fast follower,” learning from its competitors; “using

cash aggressively” being “more willing and able to put their money to use – Samsung’s research

An investigation in 2013 into Samsung’s approach to innovation revealed that it gained a lot

from an early partnership with scientists at the Russian Academy of Science, including the

“TRIZ” approach to problem solving, which “asks users to seek the contradictions in current

In the opinion of this article, “the answer to why Samsung is so innovative – with at least two

major product announcements this month – is that it is heavily invested in its people, it goes in

search of special talent wherever it can find it, but specifically made astute moves into Russia

early on; it targets its innovations towards specific competitors and patents that it wants to

overhaul (as Apple did under Jobs); and it has an innovation culture based on extensive training,

In 2013, Samsung expanded its presence in the U.S. with a new Open Innovation Center in

California. Here is a video interview with David Eun, a Samsung executive vice president in the

smartphone division, where he talks about Samsung’s commitment to innovation and strategy in

this market: http://www.bloomberg.com/news/videos/b/bc686c47-74f4-43c5-b0b0-aae3b32e0eab

One place to keep track of Samsung’s product developments is via

http://mashable.com/category/samsung/ NOTE that Samsung announced its “smart watch,” the

Samsung had not always been so nimble. In the past, there were concerns: “Samsung is the world

best in producing goods or services that others make at cheaper costs and differentiating them by

adding new features,” said Song Jaeyong, a professor at Seoul National University who has

Not only Samsung, but the whole country was worried about innovation, partly because,

according to some, South Korea has “cultural values that inhibit risk taking: an emphasis on

respecting seniority and hierarchy, long working hours meant to demonstrate loyalty to company

Some also note how Korean businesses seem able to perform above expectations and grow

market share even in highly competitive markets. As one CEO said, “In times of crisis, Koreans

become more creative in seeking positive change and more innovative in making them a reality.

This is why Korean companies successfully rise to the challenge in crises.” Another CEO said,

How was Samsung able to be so focused? Is it a result of the Korean business model or because

of Samsung’s strategy? Is more innovation in design needed to continue to push Samsung’s

growth?

2. What competitive strategies did leadership adopt to turn Samsung around? What

challenges does Samsung face in the future?

NOTE: There are no PowerPoint slides to accompany this discussion.

Referencing Chapter 5: Business-Level Strategy

The question of how to compete in a given business to attain competitive advantage requires an

assessment of the types of competitive strategies, including the three generic strategies that are

used to overcome the five forces of competition and achieve a competitive advantage:

●Overall cost leadership

oLow-cost-position relative to a firm’s peers

●Differentiation

oCreate products and/or services that are unique and valued

●Focus strategy

oNarrow product lines, buyer segments, or targeted geographic markets

Generic strategies are plotted on two dimensions: competitive advantage and strategic target. The

Up until the mid 1990s, Samsung’s strategy was to be the overall cost leader in its industry. With

an overall cost leadership strategy, a firm will dissect each component of the value chain in an

By using technology already developed and mimicking the designs of its rivals, Samsung

developed cheaper and faster ways to manufacture its products. With the low cost of

This strategy of overall cost leader was failing by the mid 1990s, however, and when Yun took

over he set a new corporate strategy for Samsung, one of differentiation. A firm can achieve

Samsung spent more than any other firm in its industry on research and development. Yun pulled

Samsung products from discount stores and reinvented the brand as one of style and innovation.

Samsung set out to produce the best-designed and most stylish appliances and electronics with

Referencing Chapter 8: Entrepreneurial Strategy and Competitive Dynamics

Samsung was trying to grow by identifying entrepreneurial opportunities. When formulating

For an entrepreneurial venture to create new value, three factors must be present – an

entrepreneurial opportunity, the resources to pursue the opportunity, and an entrepreneur or

entrepreneurial team willing and able to undertake the opportunity. Entrepreneurs must go

Entrepreneurs need to understand the concept of opportunity recognition: the process of

discovering and evaluating changes in the business environment, such as a new technology, socio

cultural trends, or shifts in consumer demand, that can be exploited. Changes in the external

Resources are an essential component of a successful entrepreneurial launch. The most

Important resource is usually money, but human resources, strong and skilled management, is

also an essential asset. Social capital, or entrepreneurs who have extensive social networks or

Samsung’s Jong Yung Yun saw the opportunity of new technology, and understood the

importance of taking advantage of this window of opportunity to develop products that were

attractive to the marketplace. By encouraging his managers and engineers to cut bureaucracy and