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1. What do you think is unique about Samsung in South Korea in terms of its
history, current strategies and management practices? Explain rationale for
your answer.
Samsungs Japanese roots are strong: When the company was founded, South
Korea was a Japanese colony. Samsungs first chairman, Lees father, was educated
in Japan, and the company built its corporate muscle in industriesconsumer
electronics, memory chips, and LCD panelsthat Japan once dominated. Samsung
Group was founded in 1938 in South Korea. It had a revenue of $227.3billion with
315,000 employees worldwide. Samsung had a pathbreaking experience in South
Korea. It faced stiff competition from Japanese electronics makers, which were
setting up manufacturing plants in Southeast Asia, and rising domestic wages in
South Koreas newly liberalizing economy. In the early 1990s, Lee, the then
chairman, discovered that Japanese companies, who were leaders in analog
markets, were reluctant to adopt digital technology which consumers wanted in
cameras, audio equipment, and other electronic products. So, he thought it as an
opportunity to surpass samsungs rivals by introducing such technology in the
digital market. For this, Lee launched the New Management initiative to import
Western best practices related to strategy formulation, talent management, and
compensation into Samsungs existing business model. The aim was to markedly
improve marketing, R&D, and design while retaining core strengths in
manufacturing, continuous improvement, and plant operations. Execution of this
mix-and-match strategy took three broad forms:
Samsung rose to prominence in its home market under the Japanese model of
unrelated diversification and vertical integration in pursuit of synergies.
Diversification suited South Koreas weak external capital markets because it
allowed the company to rely on internally generated cash from one operation to
fund the others.
and fully developed banking system. These are the reasons which facilitate
the flow
of FDI from different countries in India.
Some issue face by FDI are:
Predatory pricing issue- Threat of NCs using predatory pricing
policies to wipe out competition from the market. Thus a possibility of
unfair trade war cant be wiped out.
The promise of back end sourcing within tunes of 30% might not
materialize as seen in case of IKEA- the furniture giant refusing to be
bound to source from local manufacturers over quality issues.
FDI promises to provide jobs to people but the jobs will mostly be high
end and lots of jobs lost to unskilled employees.
Recent controversy of Wal-Mart allegedly paying bribe to secure FDI in
several nations like China, India and Brazil cast shadows over the
transparency of
the whole idea of FDI.
FDI investment implementation decision is left to states but recently
Delhi and now Rajasthan with changed non-Congress regime have
decided to not implement it while first agreeing when ruled by
Congress govt. The whole unpredictability and lack of firm guidelines
make it a shoddy investment for foreign companies as it involves huge
investment to begin with.
High Entry Barriers might be erected-Issue of Hypermarkets being
promoted or MNC/ mall culture being promoted might lead discourage
small entrepreneurs from entering the market.
Some challenges are:
Resource Challenge
Equity Challenge
Political Challenge
Federal Challenge
Investment Challenges
Inadequate and region specific infrastructure
Income disparities, bureaucracy, corruption etc.
There is still an acute shortage of employable working population. Indian
economy is largely agriculture based. issue of food security, interest of small
farmers and marginal farmers need cannot be ignored for the sake of
mobilization of foreign funds for development. Thus, a balance needs to be
achieved for sustainable and all round development. India has a welldeveloped equity market but does not have a well-developed debt market.
Steps should be taken to improve the depth and liquidity of debt market as
many companies may prefer leveraged investment rather than investing
their own cash. In order to improve technological competitiveness of India,
FDI into R&D should be promoted.