A synthesis of interviews with executives of Samsung Electronics.

• Author: Chen, Roger
• Position: Company overview

Samsung Electronics is a great success story in Asia and many parts of the world. To understand the company's history, its development, and its success secrets, we wrote this report based on interviews with the managers and former executives of Samsung Electronics.

REASONS FOR DIVERSIFICATIONS AND MANAGING DIVERSIFIED BUSINESS

Samsung Electronics has very diversified product lines. The company's products include HDTV, home appliances, computers, printers, cell phones, network products, mobile music devices, semiconductor etc. Some of these businesses are vastly different from each other and are not very related. Such a broad product portfolio sharply contrasts with the mainstream view on diversifications in the West, which favors focus and specialization. More and more western companies divest their unrelated businesses and focus on a few core areas.

There are several reasons why Samsung Electronics has taken its diversified business approach. Historically, Korea had a small domestic market and the sizes of different product markets were limited. As a result, companies faced limited growth potentials in various markets. This forced companies to branch out their existing sectors to seek new growth opportunities. This is an important reason for Samsung electronics and even Samsung Group to enter a broad range of business areas. The same is true for some Japanese companies several decades ago. During then, many Japanese conglomerates entered a wide variety of markets because of limited domestic markets in many sectors.

Samsung electronics sees advantages and benefits of having diversified product lines. One obvious benefit is diversifying business risk. Because the company's products spread out in many areas, it is better able to cope with the ups and downs in certain product markets and thus helps the company to generate steady and stable earnings. The other benefit is the cross product sharing and support. The cross product support is especially important when different products are converging onto a few product platforms such as cell phones, computers etc. Because convergence requires cooperation and coordination among different products or technological areas, having broad product lines makes it easier for Samsung Electronics to engage in such cross product cooperation within the company. Furthermore, there are a lot of innovations in some of the markets where Samsung Electronics competes, and many of these innovations depend upon or...