A South Korean Company That Operates In China

2258 words - 9 pages

A South Korean Company that Operates in China

This report address’s the requirements at hand to select a South Korean
company that has operations in China

Executive Summary:

In 1992, Samsung Electronics adopted the form of a wholly owned
subsidiary as the entry mode into China. It’s entry into China was in
order to maintain growth due to the tough competition in Korea. China
was selected in order to take advantage of its low wages for the mass
production of low to medium priced products. The initial
manufacturing ground was at Tianjin due to its costal location hence
making it easy to export abroad and to major locations in China. The
original focus of producing low cost products resulted in a cheap
image of Samsung in China and led to a loss of US$210,000 in 1998 for
its Suzhou division. The 1997 Asian economic crisis led to Samsung
shifting its focus towards higher quality products. Samsung realised
they could not compete with the Chinese manufacturers in terms of low
priced products. In order to remain competitive in China, Samsung
shifted its marketing strategy to one based on “selection and
concentration”. After 1997, the focus was on the 10 major cities in
China including Beijing, Tianjin, Suzhou, Shanghai and Guangzhou.
Samsung came up with the “5% strategy”, targeting their products at
the top 5% earners in China. The intensity of their Research &
Development (R&D) in China grew with the expansion of their plant at
Suzhou. Recently, there appears to be a shift in their operations from
the Pearl River Delta to the Yangtze River Delta. This allows Samsung
to take advantage of the better skilled personnel and infrastructure
available for R&D. Samsung also set up a second Headquarters in
Beijing which is responsible for marketing, personnel recruitment and
for shaping of Samsung’s long term ambitions in China.

Introduction:

The Samsung group has 116 subsidiaries in 67 countries and received
sales revenue from local subsidiaries of US$29billion. Over the last 5
years sales and net income have increased 1.6 times and 45 times,
respectively. Sales in 2010 are anticipated to be 1.9 times that of
2002, with pre-tax profits expected to increase 2.1 times.

Samsung is a heavily diversified company, and in order to best
demonstrate its market entry to China, the report will look at the
electronics arm to demonstrate the strategic decisions made, and the
implications and considerations, and the impact of these, as well as
the results of external forces that Samsung has had to manage.

After a decade of rapid economic growth, in 1997 many South-East Asian
countries were subject to a catastrophic economic crisis. The problems
endured involved both immediate crisis management in unstable
financial markets and the medium-term restructuring and repositioning
of their economies in the face of intensified export competition.
South Korea had a large current account deficit and the maintenance of
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