Samsung Case Study
Samsung Case Study
Samsung Case Study
www.icmrindia.org
BSTR/228
INTRODUCTION
In the 2006 IDEA (Industrial Design Excellence Awards)4 competition, Korea-based Samsung
Electronics Co. Ltd. (Samsung) won a gold (for a touch messenger 5) and two silver (for a portable
digital projector and a digital presenter) awards. With these wins, Samsung held on to its number
one position as the company that had won the most IDEAs in the last five years.
Samsung had made the decision to adopt design as a source of competitive advantage in the 1990s.
Earlier, the companys products had been uninspiring and undifferentiated. In the early 1990s, the
Group chairman, Kun-Hee Lee (Lee), initiated Samsungs transformation from a low-end OEM6
into a world-class electronics company. Sharpening the companys design skills was a significant
part of the initiative. However, this required major changes in culture, processes, and systems
within the company.
The decade-long initiative proved to be successful and Samsung came to be perceived as a
company with an exciting product portfolio. The IDEAs and numerous other awards that Samsung
won in the 2000s reaffirmed the companys newly-acquired design prowess. With stylish products
in its portfolio, the company was able to record higher sales and higher profits. Interbrand 7, a
leading branding consultancy firm, named Samsung as one of the fastest growing brands in its
2005 brand survey. The top management attributed the companys success to a great extent to its
new design capabilities.
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However, as of 2006, several small and big companies were following in Samsungs footsteps, and
hiring design houses and consultancies to improve their product designs. It seemed that in the
future, design itself was in danger of being commoditized.
BACKGROUND NOTE
The Samsung Group was founded by Byung-Chull Lee (Byung) in 1938, in Taegu, Korea, as an
exporter of dried fish, vegetables, and fruits. Byung later established flour mills under the
Samsung name (Korean for three stars). He also produced confectionery machines in this period
(Refer Exhibit I for the companies under the Samsung Group as of 2006).
In 1951, Samsung Moolsan, a holding company, was established, which later became Samsung
Corp. In 1953, Cheil Sugar Manufacturing Co. was set up, which later became an independent
company. In 1958, Samsung acquired Ankuk Fire and Marine Insurance (later renamed Samsung
Fire and Marine Insurance) and DongBang Life Insurance in 1963 (later renamed Samsung Life
Insurance). In 1966, the Group founded Joong-Ang Development, an entertainment (theme parks)
and services company, which was later renamed Samsung Everland.
In 1969, Samsung Electronics Manufacturing Co. (SEMC) was incorporated. In the 1970s, the
Samsung Group forayed into the shipbuilding, chemical, and petrochemical industries. In 1974, the
Group8 acquired a 50% stake in Korea Semiconductor Co., a joint venture between Korea
Engineering & Manufacturing Co. and Integrated Circuit International. SEMC started exporting its
products in the 1970s. In 1978, the Groups electronics exports crossed the 100 billion won mark.
In February 1984, SEMC was renamed as Samsung Electronics. In the mid-1980s, the Samsung
Group began to concentrate on R&D activities. In 1986, the Samsung Economic Research Institute
(SERI) (which later became an independent entity) was set up, while the Samsung Advanced
Institute of Technology (SAIT) was set up in 1987. The SAIT R&D center helped the Group enter
other technology-intensive industries in later years.
Byung passed away on November 19, 1987, after having managed the Group for almost fifty
years. After Byungs death, his son Kun-Hee Lee (Lee) became chairman of the Group. In 1988,
on the 50th anniversary of the Groups founding, Lee announced the Second Foundation of the
company, with the aim of directing the Group toward becoming a modern world-class corporation.
The 1990s saw a series of technological innovations at Samsung. The company developed the
worlds first 16M DRAM9 in 1990, a 10.4 inch TFT-LCD10 panel in 1992, the worlds first 64M
DRAM in 1992, an ultra-light 100g mobile phone, a digital video recorder (DVD-R), the worlds
first 8mm VCR in 1993, and the worlds first 4X (four power) zoom camera in 1994. In 1995, it
developed real-time MPEG-III technology and a 22-inch TFT-LCD panel. In 1996, it developed a
1 GB DRAM and in 1999, a 1 Gigabit flash memory prototype and a 24-inch TFT-LCD panel.
Samsungs technological innovations continued in the 2000s as well.
By 2006, Samsung had grown to become a leading player in the semiconductor,
telecommunication, digital media, and digital convergence technologies. The company earned
revenues of US$ 56.7 billion and a net income of US$ 7.5 billion (in 2005). It employed 113,600
people in 90 offices in 48 countries. It was estimated to be the largest manufacturer of memory
chips, TFT-LCDs, color TVs, and color monitors in the world.
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Unlike most other industrial conglomerates, the Samsung Group does not have a holding company and is more like
a web of companies, subsidiaries, and affiliates, where each entity owns shares in other companies in the Group. In
2006, the Korean Fair Trade Commission, Koreas top trade regulator, criticized Samsung for its corporate structure
and asked it to create a holding company.
DRAM or Dynamic Random Access Memory is a type of RAM (the primary storage in a computer) that stores each
bit of data in a separate capacitor.
Thin-Film Transistor LCDs are a variant of Liquid Crystal Displays (LCD). They are believed to be an
improvement over ordinary LCDs.
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Les Echos, Samsung challenges Sonys stronghold, www.samsung.com, March 12, 2002.
The ACCD was established in 1930 in Los Angeles by Edward A. Adams. It offers undergraduate programs in
advertising, environmental design, film, fine art media, graphic design, illustration, photography and imaging,
product design, and transportation design, and graduate programs in film, art and industrial design.
Frank Rose, Seoul machine, www.wired.com, May, 2005.
Reason and feeling are opposites, but they are essential to each other. In design terms, reason is
rational, sharp-edged, and very geometric. Feeling is soft and organic it makes an emotional
connection with the user. Taken together, reason and feeling give us a way to frame our design
identity, which is always evolving,14 said Sangyeon Lee, head of Samsungs San Francisco design
studio.
The Reason and Feeling approach was to have six guiding principles such as to balance
consistency with variety, harmonize with the environment, design for experience, etc. Every
Samsung product was to have consistent characteristics and a common design language which
were to provide real as well as emotional benefits to customers. All products were required to have
outstanding features and high levels of convenience.
DESIGN STRATEGY
Samsungs design strategy involved several initiatives. To begin with, the company decided to
create a global brand identity. Therefore, in 1993, the Samsung wordmark 15 was launched16 (See
Exhibit III for the Samsung wordmark), and later in 1999, Samsung began implementing a global
brand communication strategy.
In an effort to communicate the importance of design, Lee declared 1996 as the Year of Design
Revolution for the Samsung Group. The same year, Samsung engaged Tom Hardy 17 as the
Corporate Design Advisor to guide its efforts in improving its design capabilities.
In order to maintain high levels of creativity, Samsung began sending its more experienced
designers to work abroad in diverse industries such as furniture, cosmetics, and fashion for periods
ranging from six months to two years. This enabled the designers to think out-of-the-box. On their
return, they were encouraged to share their experiences with other designers so that the knowledge
could spread across the company. Around 20 designers were sent on such programs every year.
In 2001, Samsung inaugurated the new Design Management Center at Seoul. In 2003, Samsung
opened a usability lab in Seoul where engineers, designers, specialists from the social sciences,
and consumers tested everything right from taking the products out of their boxes to the icons and
menus on screens. Findings from such observational research were used to help the designers
improve their designs.
Samsung created world-class design infrastructure, including design labs and research centers, to
improve its design capabilities. In an effort to get a global perspective and secure talent from
different cultural backgrounds, it established design centers in the US (San Francisco, Los
Angeles), the UK (London), Italy (Milan), Japan (Tokyo), and China (Shanghai). In addition, it
improved its facilities at the Corporate Design Center in its home country.
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Consequently, when Lee communicated his design vision to his managers, most of them were
clueless as to what their chairman meant. Most of us didnt understand what he was talking
about,19 said Kook-hyun Chung, senior vice president, Corporate Design Center, Samsung.
Therefore, efforts were made to first create a design-friendly culture at Samsung. The IDS was to
be a major part of that effort.
Initially, the ACCD curriculum was to be used at the IDS. However, Bruce and Miho, who were
brought in to develop Samsungs design capabilities, soon realized that the curriculum just did not
suit the culture at Samsung.
Bruce and Miho found that they were up against deeply held cultural beliefs. South Korea, despite
its capitalistic economy, was essentially an oriental culture and employees at Samsung held strong
Confucian beliefs20. Fostering creativity required breaking away from some of the traditions and
behavior patterns. For example, South Koreans, like people belonging to other oriental cultures,
respected their elders and teachers and dared not question them. However, at the IDS, designers
were encouraged to question their superiors and express their opinions. All employees were
encouraged to speak their mind, irrespective of their age or position. Bruce said, In the beginning
of the program, designers cared a lot about their positions (like assistant designer, designer, senior
designer, or principal designer) and were unable to discuss their ideas with those in other positions.
However, as they went through the IDS program, they opened their minds to others and changed
their attitudes.21 Also, in another departure from convention, there was no dress code at the IDS.
The trainees were also paid their usual salary while they attended full-time classes six days a week
on subjects as varied as engineering, marketing, and design.
The consultants also noted that though the designers were expected to design products for
international markets, most of them had never traveled outside Korea. To understand who you
are, you need to get out of your environment,22 pointed out Bruce. Therefore, Bruce and Miho
took the designers on a worldwide tour in an effort to expose them to various cultures and thus
expand their horizons. The team visited Egypt, India, Italy, Greece, USA, and the UK.
From the fourth year onward, marketers and engineers also started attending one-year programs at
the IDS along with designers, so that communication and understanding between the different
functional groups would improve.
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Samsung also began holding design meetings on a regular basis where the heads of all business
units assessed new products and evaluated their designs. In 2004, the company created a new
position
Chief Design Officer. This was done to give greater voice to the design department and
to ensure that the senior management had closer ties to design.
From 2000, Samsung increased its design budget by 20 to 30 percent annually. It also doubled the
number of its design staff from 230 in 2000 to 470 in 2006, adding 120 designers in 2005-06
alone.
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DLP technology was originally developed at Texas Instruments in 1987. In this technology, the image is created by
microscopically small mirrors placed in a matrix on a semiconductor chip. Each mirror represents one pixel.
Digital convergence refers to the merging of technologies of three industries Computer (hardware & software),
Electronics, and Telecommunications.
According to www.samsung.com.
Samsung launched 5 mega pixel and 7 mega pixel camera phones in 2005, followed by a 10 mega
pixel camera in 2006. These models combined a full-feature digital camera with a mobile phone. It
also launched the i730, a mobile phone that could be used to read and send e-mail and browse the
Internet. In mid-2006, Samsung launched the SGH-i310, a mobile phone with 8 GB of storage
capacity
enough to store around 2,000 MP3 files. The Samsung Extiva, a DVD player that
could also play video games, the X series notebook computers that doubled as mobile TVs and yet
were thin and light enough to be carried around in a handbag, and Zipel, a refrigerator that had a
digital photo album and a TV receiver, were some of the other innovative products developed by
Samsung.
CRITICISM
Some critics commented that even if Samsungs design capabilities had improved greatly, the
company still lacked a coherent design. Samsung has improved, but I dont see an identity in their
design that really speaks to consumers,26 said Jim Wicks, vice-president (in charge of designing
cell phones), Motorola Inc. According to some other critics, the company still did not have the
design culture of Apple Computer Corp., or the breadth and depth in design that Sony possessed.
In spite of the improvements in the design process, the design of some of the products that
Samsung introduced was still poor. For example, the Samsung Q1, a tablet PC launched in 2006,
was panned by critics for its lack of features, small screen, and high price. One critic had this to
say: With no DVD drive, keyboard, or decent sized screen, and just over two hours battery life,
one wonders what applications the Samsung Q1 hopes to address that arent already being
handled. Reading online newspapers perhaps? I doubt whether being able to download newspapers
and read them on a seven inch screen will do it for people who are being asked to shell out
$1100.27
Another recurring criticism was that some of the high-design products were unrealistically priced.
Critics said that the company was trying to exact prices that were more than the designs deserved.
For instance, the 102 plasma TV launched in 2006 was priced at US$ 80,000 (Refer Exhibit VIII
for a photograph of the worlds largest28 plasma TV).
Some of Samsungs products were also criticized for their poor user interface. However in 2004,
Samsung had announced that it would pay greater attention to this aspect in its designs. Choi said,
In the past, physical design was our focal point. In the future, the user interface will be
emphasized more.29
In May 2006, Samsung was faced with an embarrassing situation when two of its mobile phone
models in the Skin series, the SPH-V8900 and the SCH-V890, were found to have icons similar to
that of Apple and Microsoft products. Samsung quickly withdrew the models from the market.
There were a few mistakes while we were developing the new product. We have already fixed the
designs and I believe that the old models are not being sold in the market any more,30 explained
the chief of Corporate Design Center, Samsung. Although the withdrawal was swift, the incident
showed that Samsung had much ground to cover before it can be called a design icon.
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David Rocks and Moon Ihlwan, Samsung design, www.businessweek.com, November 29, 2004.
Stan Beer, Samsung misses the mark with Q1 Origami, www.itwire.com, May 07, 2006.
In 2006, Matsushita Electronics claimed that it produced a larger plasma screen (103 inches).
David Rocks and Moon Ihlwan, Samsung design, www.businessweek.com, November 29, 2004.
Simon Burns, Samsung admits to copying handset icons, www.vnunet.com, May 08, 2006.
OUTLOOK
In September 2006, Samsung unveiled the Syncmaster 971P, an LCD monitor. The product was
unique in the sense that it had a geometric shaped stand, unlike conventional LCD monitors (See
Exhibit XI for a photograph of the Syncmaster 971P). The company claimed that the S-Shaped
stand gave the monitor additional stability. The model came with a high glossy finish, with all the
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cables and buttons hidden from sight. We focused on creating artistic value from the design of the
new monitor, as well as maximizing functionality and user convenience. Samsung wants to go
beyond design and sensitivity to realize artistic value, high-functionality, and maximum
convenience in our products, to become the design icon in the global monitor market, 36 said Yoon
Ho Ha, senior vice president, Visual Display Division, Samsung.
At IFA 2006, Samsung partnered with European furniture and interior design companies Fritz
Hansen (Denmark), Poliform and Gervasoni (both from Italy) and Tillberg Design (Sweden), to
showcase its range of audio, video, and mobile products. The idea was to emphasize the design
excellence of Samsung brand products. The project involved placing Samsung products in four
different kinds of interiors Scandinavian, Mediterranean, Contemporary European, and Oriental.
Samsung believed that to stay ahead of the competition, it had to not only introduce new designs
but also continuously launch new products. For this, Samsung put together an elite CNB (Creating
New Businesses) Group to identify long-term social and technological trends that could provide
inputs for developing new product lines. The CNB Group consisted of a team of designers from
different business units. The Group came up with animated what-if films and 3-D mockups
which were shown to top executives for discussion and approval. It is not about what is
happening now. It is about imagining what our living environment will be like five or ten years
down the road,37 said Ki-seol Koo, head of the CNB group.
In October 2006, Samsung reported net profits of 2.16 trillion won on sales of 15.22 trillion won
for the third quarter of 2006-07 (Refer Exhibit XII for Samsungs financials between 2000 and
2005).
In November 2006, Samsung announced that it would launch a mobile convergence device that
had the potential to take the place of notebook PCs. The SPH-P9000, as it would be named when
launched in February 2007, was a PDA-based device that would use mobile WiMax technology
for wireless Internet access. The device would be able to play MP3s and video-on-demand and
would have features like a camera, a 5-inch LCD, a foldout keyboard, and a 30 GB hard drive.
Despite its emergence as a company with enviable design capabilities, some analysts wondered
whether Samsung had staying power as far as launching high-design products was concerned.
Nonetheless, Samsungs newly acquired design skills had caught the attention of industry experts,
the business press, and customers in developed as well as in developing countries.
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Samsung releases premium LCD monitor with iconic design, www.samsung.com, September 01, 2006.
Frank Rose, Seoul machine, www.wired.com, May, 2005.
Exhibit I
Samsung Group of Companies
S No
1
2
3
4
5
9
10
11
12
13
14
15
16
17
18
Company
Samsung SDI Co. Ltd.
Business
Plasma display panels, cathode ray tubes, LCDs,
rechargeable batteries, organic electro-luminescent
displays, visual fluorescent displays, and touch panels.
Samsung
Electro- Chips, circuit boards, digital tuners, network modules,
mechanics Co. Ltd.
camera modules, LED, and optical modules.
Samsung Corning Co. Ltd. Glass (for picture tubes of TVs and monitors), ITO-coated
glass (for LCDs), rotary transformers, cerio nano powder,
and PDP filter.
Samsung Corning Precision Substrate for TFT-LCDs.
Glass Inc.
Samsung SDS Co. Ltd.
Internet systems integration, outsourcing, e-biz
consulting/IT training, ASP, business recovery service,
hosting service, marketplace portal service, solution
providing, venture incubation, etc.
Samsung Networks
Optical networks, Internet telephony, business telephony,
IP contact center, SMS/MMS, digital conferencing
service, web biz, home networking, etc.
Samsung Heavy Industries Commercial ships, industrial ships & off-shore facilities,
cruiser and ferries integrated navigation systems, material
handling equipments, steel structure and bridges, and
engineering & construction.
Samsung Techwin
Gas turbines, turbo machinery, aircraft engines, optoelectronic devices, military hardware, helicopter shuttle
service, semiconductor lead frames.
Samsung Total
Ethylene,
propylene,
butadiene,
C4
raffinates,
Petrochemicals Co. Ltd.
compounding resins, etc.
Samsung Petrochemical
Purified terephthalic acid
Co. Ltd.
Samsung Fine Chemicals
Tetramethylammonium chloride, Barium titanate powder,
Co. Ltd.
dimethyl formamide (DMF), etc.
Samsung BP Chemicals
Acetic acid, vinyl acetate monomer, hydrogen
Co. Ltd.
Samsung Life Insurance
Life insurance and real estate
Co. Ltd.
Samsung Fire & Marine
Automobile insurance, fire and marine insurance,
Insurance Co. Ltd.
overseas travelers insurance, etc.
Samsung Card Co. Ltd.
Credit card (issue and management), mail-order and online sales, insurance agent services, equipment lease,
credit loans, security loans, discounting bills, and
financing new technology business
Samsung Securities
Stock and bond brokerage, commercial paper, etc.
Samsung Investment Trust Mutual fund, Investment trust, investment advisory
Management
services
Samsung Venture
Investment in venture firms (infocomm, Internet,
Investment
entertainment, etc)
Source: www.samsung.com.
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Exhibit II
Samsungs Design Approach
Exhibit III
The Samsung Wordmark
[
Source: www.samsung.com.
Exhibit IV
Samsung DLP TV
Source: www.tv.about.com.
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Exhibit V
Idea Winners between 2001 and 2005
Corporate
Samsung
Apple
IBM
Nike
HP
Philips
2001
3
3
5
4
2
2
2002
5
5
3
1
1
0
2003
3
2
3
2
3
1
2004
5
4
2
2
2
3
Source: www.businessweek.com.
Exhibit VI
Design Awards
SNO PRODUCT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Touch Messenger
Portable Digital Projector
Pocket Imager (SP-P300MK)
Digital Presenter
(Techwin UF 80)
Laptop (M40)
Miniket (SC-M110)
LCD Monitor
(Syncmaster 173P, 193P)
DLP Projection TV
(85 series)
Microwave Oven (MD 1200)
Digital Media and Interfaces (Smart
Screen)
Digital Satellite Receiver (SFT7200)
LCD Monitor
(Syncmaster 152T, 172T)
The Family Doctor
LCD Monitor
(SyncMaster 241 MP)
Portable DVD Player (PADIS DVD
L100)
Mobile Printer System
Smart Cooker
Modular TV concept
Compact mobile phone concept
Digital Camera concept (NEXCA
SDC-2001)
LCD Monitor
(SyncMaster 150/170 MP)
Digital Still Camera
(NEXCA SDC-80)
AWARD
2006 IDEA Gold
2006 IDEA Silver
2006 IDEA Silver
2005 IDEA Silver
2004 Chicago Athenaeum Good Design Award
2005 IDEA Silver
2005 IDEA Bronze
2004 IDEA Gold
2004 IDEA Silver
2004 IDEA Silver
2004 IDEA Bronze
2004 Chicago Athenaeum Good Design Award
2003 IDEA Silver
2002 IDEA Gold
2002 IDEA Silver
2002 IDEA Silver
2002 IDEA Silver
2002 IDEA Bronze
2001 IDEA Bronze
2001 IDEA Bronze
2001 IDEA Bronze
2000 IDEA Silver
2000 IDEA Silver
Source: www.idea.com.
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Exhibit VII
Convergence Products
10 Megapixel Camera Phone
Source: www.gizmodo.com.
Watch Phone*
* Yet to be launched.
Source: www.gsmarena.com.
Source: www.dvdreview.com.
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Nuon is a technology which allows additional features in a DVD player like CD-ROM readability.
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Exhibit VIII
The Worlds Largest Plasma TV
Source: www.engadget.com.
Exhibit IX
Improving Design Skills in the Electronics Industry
Consumer electronics is an industry where the competition is intense. It is also an industry
where technological changes come in rapid succession. Therefore, companies need to keep
upgrading their products to remain competitive. Apart from technology, they should look at
design as a differentiator. A company could consider the following key activities to improve its
design skills:
Ascertain how advanced design capabilities can be acquired. Generally, it would need a
substantial increase in the number of designers and an improvement in training facilities and
processes.
Evaluate the organizational structure and place design on the same level as other
development teams.
Analyze business processes and integrate them in such a way that all design activities
(mechanical, electrical, software, etc.) are grouped and sequenced to reduce cycle time.
Recognize the number of variants that can be derived from a single platform.
Evaluate regularly the infrastructure in terms of tools and machinery. Incorporate the latest
technology so as to improve productivity and capabilities.
These efforts would help a company achieve design excellence and be more responsive to
market demands.
Source: Adapted from Product Styling, The new competitive differentiator in electronics,
www.ibmconsulting.com.
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Exhibit X
Worldwide Sales (Revenue Percentage)
Q2 Rank
1
2
3
4
5
Brand
Samsung
Sony
LG
Panasonic
Philips
Others
Source: www.neasia.nikkeibp.com.
Exhibit XI
The Syncmaster 971p
Source: www.samsung.com.
Exhibit XII
Samsungs Income Statement
In Billion KRW
2000
2001
2002
2003
2004
2005
Sales
34,284
32,380
39,813
43,582
57,632
57,458
Gross Profit
12,290
7,866
13,513
14,063
20,353
17,300
Operating Profit
7,435
2,295
7,478
7,193
12,017
8,060
8,100
3,083
8,870
6,904
13,125
8,870
Net Income
6,015
2,947
7,052
5,959
10,787
7,640
Source: www.samsung.com.
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