The Path to Development and Macroeconomic Stability in Korea
Chapter 11: Samsung, created in Korea and replicated overseas
Chapter 11 explains the success by Korean business groups in the Chinese market, despite their late entry. It uses the concept called “project execution capability” of diversified business groups, which has led to another strategic capability of “vertical integration” (VI) among affiliates. It examines Samsung’s electronics businesses in China as an excellent case of resource sharing and coordination among affiliates in the execution of a project despite late entry into a new market. The chapter finds that the VI network was first created in the early 1970s in Korea and has since been replicated in many parts of the world such as Mexico, Malaysia, and, most recently, China. The VI network has three tiers consisting of Samsung Electronics at the top as the final assembler, Samsung Electro-Mechanics and Samsung SDI in the middle, and finally, Samsung Corning at the bottom. In the rapidly changing display market, Samsung’s stable component sourcing among affiliates has played a critical role in developing new products at lower costs to meet changing market needs. This case shows that business groups can upgrade their capabilities rather than simply lose their advantages with the maturing of market mechanisms.
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