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

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.