Supplier Partnership Strategy and Global Competitiveness: A Case of Samsung Electronics

Abstract

Samsung Group has accelerated its management innovation process, following the announcement of „New Management‟ by the CEO Lee Kun-Hee. Particular attention must be paid to the smart-phone business of Samsung Electronics, which is the core company of the Samsung Group. In 2009, as Apple entered into the Korean market, the domestic smart-phone market faced the so called „Apple Shock‟ due to its choice of a monopolistic and closed operating system. In response, Samsung Electronics introduced the innovative Galaxy series, replacing the old model of Omnia series. This move reaped dramatic success by dominating the world smart-phone market. Samsung Electronics ranked first in the 2012 world smart-phone market, and in 2013 it sold over 300 million devices for the first time in history, thereby solidifying the number one spot with a market share of 32.3%. Samsung Electronics‟ achievement in its management innovation process was successful, due to its internal innovation and its partnership with sub-suppliers. Samsung Electronics strengthened its supplier partnership strategy, which in turn, led to an internalization of subparts assembly and process technology. By conducting the final assembly process on its own, it established the global supply chain that accompanies a high level of efficiency and operational elasticity. Samsung Electronics successfully systemized several hundred suppliers into an effective partnership and created an eco system where cooperation and competition can co-exist in its supply chain network. In sum, Samsung Electronics has successfully created the Samsung Production System that brings an economy of scale and allows prompt response. On the other hand, Apple did not get involved with subparts production, besides design and product design. This research identifies the effectiveness of Samsung Electronics‟ supplier partnerships in its global competitiveness by examining characteristics of supplier partnership strategy and its evolution process of strategy, which plays a vital role in the Samsung Production System. For this purpose, the paper evaluates the importance of supplier partnership strategy of Samsung Electronics in the Samsung Group‟s management innovation process, since the announcement of New Management in 1993. Furthermore, it evaluates how supplier partnership strategy is affected by the CEO‟s ideology and external environments. It discusses the strategic implication of Samsung Electronics for ensuring its continuous global competitiveness.