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The capability of the Samsung group in project execution and vertical integration: Created in Korea, replicated in China

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Abstract

To explain Korean business groups’ rapid success despite their late entry in China, this paper uses the concept of ‘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 paper finds that the VI network was first created in the early 1970s in Korea and has since been replicated elsewhere, such as Mexico, Malaysia and, most recently, China. The VI network has three tiers – Samsung Electronics at the top as final assembler, Samsung Electro-Mechanics and Samsung SDI in the middle and Samsung Corning at the bottom. In the rapidly changing display market, Samsung's stable component sourcing among affiliates has been critical in developing new products at lower costs to meet changing market needs. This case shows that business groups, rather than simply losing advantages with the maturing of market mechanisms, can upgrade capabilities.

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Notes

  1. Information about VIs in North and South China can be found in the documents of the overseas affiliates of Samsung, such as Samsung Corning SSG (2004); SEM (Samsung Electro Mechanics) STEM (2004) and Samsung Electronics TSED (2004), unless otherwise noted, in addition to the documents of their parent companies introduced above.

  2. Their model names are ‘technological 700NF and 900NF’, ‘professional 700IFT’, ‘economical 700DF and 753DF’. See He (2003) for details.

  3. Neck is the link part between the monitor screen and seat (or foot). A short neck can save space and stabilize the monitor and thus is an important feature in monitor technology.

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Acknowledgements

Earlier versions of this paper have been presented on various occasions, including the 2007 Cicalics Workshop at Tsinghua University, Beijing, China. The authors thank the two anonymous referees, Mike Peng, John Mathews, Shulin Gu and others for their useful comments.

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Authors and Affiliations

  1. Department of Economics, Seoul National University, Seoul, 151–746, Korea

    Keun Lee

  2. School of Economics, Fudan University, Shanghai, China

    Xiyou He

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  1. Keun Lee
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  2. Xiyou He
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Correspondence to Keun Lee.

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Lee, K., He, X. The capability of the Samsung group in project execution and vertical integration: Created in Korea, replicated in China. Asian Bus Manage 8, 277–299 (2009). https://doi.org/10.1057/abm.2009.9

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