Samsung electronics – burned by success
What makes Samsung a conglomerate? What type of diversification does Samsung pursue? Identify possible factors such as core competencies, economies of scale, and economies of scope that were the basis of its past success as a widely diversified conglomerate. Why is Samsung as a conglomerate struggling today?
Despite being a widely diversified conglomerate, Samsung prefers vertical integration: in-house design and development teams, manufacturing in large company-owned factories, and coordinating a sprawling global supply chain. In contrast, Apple concentrates on the design (and retail sales) of high-end mobile devices, while it outsources its production to Foxconn and others. Do you think Samsung’s high degree of vertical integration contributed to its recent problems? Why or why not? Explain.
What is a chaebol? What are some of the corporate governance challenges that chaebols such as Samsung face? What are some of the advantages and disadvantages of chaebols? What changes to a chaebol’s governance structure are American activist investors such as Elliott Management pushing for, and why?
With South Korea being rocked by the presidential scandal exposing a deep-running and long-standing nexus of bribery and chummy relationships between industry and politicians, and by the call for more transparency and governance changes in the chaebols, do you think reform and changes will happen, or will things return to business as usual? What is your opinion? Explain.