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SAMSUNG MANAGEMENT CASE STUDY

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SAMSUNG MANAGEMENT
Case Study

MARCH 19, 2020

AHMED GADALLA
a.a.jadallah@gmail.com
Table of Contents
1.0 Introduction .......................................................................................................................... 2

2.0 Functions of management .................................................................................................... 4

2.1 Planning............................................................................................................................ 4

2.2 Organizing ........................................................................................................................ 6

2.3 Leading ............................................................................................................................. 7

2.4 Controlling ....................................................................................................................... 8

3.0 Problems that Samsung had faced ..................................................................................... 10

3.1 The complete withdrawal of Note 7 ............................................................................... 10

3.1 The withdrawal of washing machines ............................................................................ 11

4.0 Recommendations .............................................................................................................. 13

4.1 Suggestions for problems 3.1 and 3.2 ............................................................................ 13

5.0 Conclusion ......................................................................................................................... 15

6.0 References .......................................................................................................................... 16

Table of Figures
Figure 1 Functions of management..................................................................................... 4

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1.0 Introduction

Samsung is one of the world’s largest companies in the field of electronics and
advanced technology. The company specializes in producing and manufacturing a many
different consumers and industries, such as, digital media devices, electronics, memory
chips, semiconductors and integrated systems. The company also involved in the
construction work as well as the army gadgets. The company became one of the most
recognized brands in the technology field and it produces around fifth the total exports of
South Korea.

Samsung was founded on 1st of March 1938, as a trading store for groceries, by Lee
Byung-Chull. Chull started the business in Taegu city in Korea by trading simple goods
which were produced in the city and around it and exporting them to China. Later on, after
the Korean war, Chill expanded the business and started making textiles, and later became
the largest textiles maker in Korea. Chull’s goal was to support the country and help with
its development after the war, by focusing heavily on the industrialization field, and that
gave him and his company the support of the Korean government.

By the 1970s, Samsung was able to expend and started the production of the raw
materials of the textiles until the end products which made it one of the biggest competitors
in the textiles industry. Furthermore, in the same period, Samsung was able to establish
new industries such as, shipbuilding, chemical, petrochemical and Samsung Precision
Company which helped Samsung to start grow in a promising way. Around the same time,
Samsung also entered the electronics field by starting the production of the black and white
TVs, and that was the start of the company to start producing home electronics and export
them to other countries around the world. By the early 1980s, Samsung witnessed a huge
and fast expansion in its technology field. Aerospace division was created, and separate
electronics and semiconductors branches were established. Moreover, the company needed
to create a system to help it on growing, which helped Samsung to become the leading
company in the services of the information technologies. Later on, the company started its
own research and development institute which was behind many innovations in many fields

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like the electronics, chemicals, semiconductors, genetic engineering, telecommunication,
nanotechnology and aerospace.

In the 1990s, the company enhanced its products quality and started the production
of the computers monitors and LCD screens which gave the company its place between the
top five companies in the global market. Later by the 2000s, Samsung started the
production of its smartphone Galaxy series, which became later on the company’s best
product and also claimed its place between the best-selling smartphones in the global
market. From there, the company continued on expanding the smartphones series to the
computers and tablets, and became the world’s biggest manufacturer for the screens in its
different shapes, types and uses.

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2.0 Functions of management

Planning Organizing

Functions of
Management

Controlling Leading

Figure 1 Functions of management

2.1 Planning

In the planning stage, the management makes organizational goals and creates the
list of actions to achieve. In the planning stage, the management can discuss the different
ways to reach the objectives before deciding the best way to do it. During planning,
management will do a deep analysis of the organization’s mission, vision and the way to
use the resources to meet the objectives.

Strategic planning is often done by the top management in an organization, which

mostly make the goals to be achieved for the whole organization. While doing the strategic
planning, the top management will analyze the threats which might be faced by the
organization, consider the strengths and weaknesses of the organization and then create a
plan of the best way to compete in such environment, which mostly will be a long-term
plan. (Lager, T., 2016).

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 At Samsung, the strategic planning and formulation stage is one of the most
important stages since it points out the best ways to reach the organization’s mission.
Samsung adopts this face in terms of creating a superior product which could compete in
the global market successfully. Since Samsung is one of the leading organizations in the
electronics field, it has been focusing on the best ways to create positive results. At this
time, technologies and innovations are being developing and improving too fast, which
requires a serious consideration on the making process of products to make them superior
in quality and appliances to be able to successfully compete in the global market.
Samsung’s Research and Development (R&D) department applies many strategies and
procedures which depend on the changing of the needs of the consumers all around the
world. (Lee, et al., 2016). Many factors play a rule on shaping the strategies of
organizations such as, the market, the consumers, the demand, profitability, opportunities,
etc. Seeking the opportunities in the global market is something to be carefully considered
and analyzed. (Cirjevskis, 2016). The experience gained over the years by Samsung made
it easier for them in term of designing the best business strategy which made them the best
electronics company worldwide alongside a wide margin.

Samsung was able to reach the top of almost every consumers list of best products
category when it comes to electronics, which was achieved by their plan of creating new
innovative products that suites different lifestyles and needs. Samsung’s management did
set a goal to become the biggest consumer electronics company, which they succeeded to
achieve this goal in less than two decades. The company was able to break through markets
with creating innovative technologies and designs to be on top of the marketplace and to
attract the consumers to get their products and even to keep looking out for their new ones.
Besides that, Samsung has a verity of products categories which makes it unlikely for the
company to be affected by any downturns in any of those categories. When a company
keeps its focus and efforts all in one field, then, it will more likely be having problems in
case the market started to slow down or by the competition of the market. Therefore, by
having multiple production lines, mostly the cost of production will decrease by investing
in the knowledge and sharing it between the different divisions, resources and experience
whenever there are similar parts needed for different products. Other than that, products

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 diversity could create opportunities for the company to grow and expend. It is more
difficult to be the best in all the categories than being the best in one, but in Samsung, its
R&D department allowed the company to overcome this challenge. Samsung’s current and
future strategy is focused on creating new innovative products which serves people’s needs
and change their lives to be better and easier.

Moreover, it is not hard for Samsung to keep up with the market needs specially
with their verity of products during the time of the Internet of Things (IoT), where they can
create their own combination of products and integrates them together to make the
consumers life easier and better, as they have been improving their personal assistants and
AI’s abilities to make their products understand the users needs and give them the best
experience possible.

2.2 Organizing

Organizing need a formal and clear structure of authority besides the flow of the
authority through the subdivisions aligned and coordinated so that all will be united and
working together to reach the objectives prescribed by the higher management.

Samsung’s structure is a manifestation of the quick evolution of the business from

being a small trading to a global enterprise which invent and creates new technologies.
With the involvement of its organizational structure in many different operations, the
company uses many operation management strategies for different markets and fields.
Effective penetration and development strategies for the market are happening through the
company’s corporate structure, which as well gives it an advantage in the competition of
the market.

Samsung has what is called a product-type division organizational structure. This

type of structure utilizes products categorization as the defining block to determine which
resources and operation belongs to a specific part or division of the company, like

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 Samsung’s Device Solution division. The whole operational structure is unified by
Samsung’s head quarter, which is located in Seoul. Moreover, the direction of the strategic
management from the company’s headquarter is implemented by strategic objectives
specified for the structural divisions field.

Furthermore, Samsung’s organizational structures for product type divisions are,

consumer electronics, device solutions and information technology and mobile
communications. Samsung’s headquarter is the notable appearance of this pyramid, and
that is a part of the organizational design to ensure that, these massive operations are unified
and working together towards the growth and operational effectiveness. Such a structure
involves centralization of the strategic planning, besides vertical lines of command and
authority which relay strategic directions from the headquarter till it reaches the daily
operations in the consumer electronics, device solution and information technology and
communications divisions. Alongside that, Samsung uses geographical grouping as a
minor characteristic of its operational structure.

2.3 Leading

Leading is about influencing employees’ behaviors and motivating them to achieve

the objectives of the organization. Leading consists of managing people, such as teams,
groups and even individuals instead of tasks. Even though, the managers could direct
individuals in a team by giving them orders and direct them, but successful managers are
also good leaders who connects with their employees by utilizing their interpersonal skills
to motivate, inspire and encourage team members to give their best and improve their
abilities. Managers can create a positive environment at the workplace by differentiating
the moments when workers need directions or encouragement and using positive support
to give a trophy or a praise when workers have done their jobs in a good way. (Xie, Y., et
al., 2018).

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 In Samsung, the management and leadership team took a step by recruiting new
engineers and managers who have a considerable experience in developing, which allowed
the company to start developing their own innovative products. The company applies a
what is called a merit-based system, which is about the employees feeling more open to
say and express their ideas to help on making the company reach its goals and for which
they will be rewarded for. Moreover, this change helped Samsung to have a better
relationship with its workers and build a new system to make them feel more open and
welcomed to express their creativity.

Furthermore, Samsung leadership made a decision to change their way of

marketing by moving away from 55 different marketing agencies all around the world to a
single one. The reason behind this change was to make a consistent brand image globally
for Samsung’s products. Therefore, Samsung’s products were taken out of the discount
chains and placed into more upscaled specialty stores and premium products. Furthermore,
the leadership of Samsung has reconstructed its firms bureaucratic in order to reduce the
time and process needed to get an approval of production and funding for a new product,
which motivated the employees to be more innovative and allowed the company to seize
more opportunities.

2.4 Controlling

Controlling is the process of doing the execution of plans and adjusting them to
make sure of achieving the organization’s goals. In this stage, managers do tasks like
training employees if needed and manage deadlines. Managers monitor the workers and
increases the quality of their work. Managers as well do performance appraisals to give the
employees a feedback on their performance and give them as well a positive remark on the
thigs they have executed in a good way and on what they need to work on more and
improve. Managers could as well offer a salary raise to the well performing employees.
(Lloyd, R. & Aho, W., 2020.).

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 Moreover, managers might need to do some adjustments sometimes such as, budget
and staff adjustments. Managers should keep an eye on the resources and budgets to make
sure they are not going over the budget and to stay within the budget range. Managers
should identify the problems which might cause going over the budget whether there is a
problem or if there is a specific department that is going over budget. After identifying the
cause of the problem, action should be taken to control the overall spending and recalculate
the budget to make sure it is rebalanced again. Furthermore, managers might have to make
hard decisions sometimes such as whether to dismiss an employee whom have been
performing a low-quality work or to reassign the employee to a different task. Managers
might as well need to assign more people to a team to make sure of meeting the company’s
goals if the team was identified as understaffed. (Conkright, T.A., 2015).

Samsung have a history of being one of the best at managing tough situations.
Samsung’s management team was able to pass financial crises by reading situations the
right way and taking the right actions to solve them. Samsung management team once took
an action to layoff many of their employees to cutoff their cost in term of getting out of
their debts. The management as well decided to close down multiple factories for a period
of time to be able to get rid of the excessive inventory which wasn’t being sold. They also
had to sell businesses such as pagers and electric coffeemakers which impacted positively
on the company’s future, since it allowed them to start developing their own products rather
than copying product which have been developed by other firms. Samsung also took a step
to recruit new managers and engineers to help their teams on innovating and creating new
products.

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3.0 Problems that Samsung had faced

3.1 The complete withdrawal of Note 7

On the second of September 2016, Samsung stopped the sales of Galaxy Note 7
after the product designing team found a problem in the product which could cause the Li-
Ion batteries to explode. That required Samsung to recall aa total of 2.5 million Note 7
phones from all around the world. After the lunch of the phone, a guy was unloading
groceries out of his car while his brand-new Note 7 was inside the car, the guy looked at
his car to see it in flames. After investigating for the reason of the fire, it turned out that
the battery of the brand-new Note 7 had heated up and exploded. After two weeks from the
lunch of the phone, the Consumer Product Safety Commission in the U.S. announced the
recall of all the Note 7 phones in the U.S. where Samsung had to change the defected
phones’ batteries from a different supplier, but that also didn’t solve their problem. On the
sixth of October 2016, an incident of a Note 7 phone battery exploded in its owner pocket
and burned his clothes before he pulled it out of his pocket and throw it in the ground while
was taking a flight. After all the reports of property damages, over heating phones and
exploding ones, Samsung finally came to a decision to completely stop the production of
the Note 7 phones, and announced a final recall, exchange and refund program on 13th of
October 2016. (Green, B. & Passenger., 2017).

After the decision of Samsung to recall the 2.5 million Note 7 phones, the company
socialized the statement through its website, which were asking the customers to contact
the place of purchase or to reach them on their call center to request for the replacement of
the phone. The company also posted the message through all of its social media platforms
as well as sending an update to the active phones to manage the battery performance and
prevent it from overheating until it gets replaced. The customers and fans of the company
were angry at Samsung for its ineffective way of handling the issue, and for allowing it to
happen at first by ignoring the safety and quality measures and hurrying to push the product
out for production, which had put people’s life in danger. After the recall of the replacement
phones, Samsung posted a statement to all the Note 7 owners to switch it off and contact

10
 the retail points for a refund. (Green, B. & Passenger., 2017).

The decision which Samsung took to stop the production of the Note 7 had cost
them an estimated $6.2 billion. (Green, B. & Passenger., 2017). The shares of the company
at the stock market had dropped even before the announcement of stopping the production
of the Note 7, which was the biggest drop to face the company since 2008. (Green, B. &
Passenger., 2017). Samsung had suffered from many losses other than the money like the
public trust of their products, other than the media coverage of the incident and the other
companies taking the chance to convince Samsung’s customers to switch to their products.
Moreover, signs which instructed that the Note 7 phones are not allowed in any public
transportation, hotels or airports were hanged and posted everywhere which even was a
bigger hit to the company since it made people stay away from their products.

3.1 The withdrawal of washing machines

Not long after the Note 7 incident, Samsung and the U.S. product safety regulator
have announced the recall of a total 2.8 million washing machines. Based on the safety
commission, the mentioned that, the affected laundry machines from Samsung’s best
leading machines might have the possibility of interior components detaching from the
chassis of the washing machine while in use, which might cause injuries. The company
stated that, the cause behind this issue might be because the users use the machine in a
high-speed spinning cycle for heavy items such as beddings. The U.S. safety commission
mentioned that, Samsung had received 733 reports related to the issue of machines having
strong and unusual vibration which in some cases might cause for the top of the machine
to detach. Moreover, nine injuries reports had been filed which included injuries such as
broken jaw and injured shoulder. (Chen. Brian X., 2016).

Furthermore, Samsung has offered the consumers an option to have the machine
fixed at their homes by reinforcing the top of the machine or to have a discount voucher to
buy another washing machine from Samsung. The company made its refund option to be

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only for the customers who have bought a recalled machine. (Chen. Brian X., 2016).

In Australia, similar scenario happened where 144 thousand washing machines

from Samsung were recalled to the possibility of causing fire. The customers were unhappy
of the solution which Samsung offered which is fixing the machines, but what the
customers were mad about is the fixing process was inefficient and ineffective since it
involved covering some connectors with plastic bags. (Chen. Brian X., 2016).

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4.0 Recommendations

4.1 Suggestions for problems 3.1 and 3.2

Designing a new product in a company is an important process. There are quality

measures and products must meet them at all stages. The quality check process is much
more important in technology field than other industries. Technology companies are
always trying to create a totally new product or to make a better and enhanced version of
an existed one. Therefore, they might be facing different risks compared to other industries.
In many cases, the design group gets overruled to meet the deadline. The reason behind
that is, in a competitive market, whoever comes up with a product first gets to be ahead of
the competition.

When a company hires creative and smart designers do build new products, they
must listen to them to make sure of that, the management of the product life cycle steps are
not neglected or ignored because someone at a higher position is forcing the release of the
product sooner than it needs to be ready.

During the development process of the batteries of the Note 7 devices and the
washing machines components, the designers were overruled to meet the lunch date of the
products before finishing the development process. Moreover, the manufacturing process
should always be a part of the product development to make sure of that, any concern about
the product should be heard and fixed before the product reaches the full production
process and get sent to the customers.

The quality department plays an important rule in the manufacturing process, since
they should be the department to make sure the products are ready for the market and meets
all the safety measures and regulations after testing the products and before the products
are being shipped to the customers. Moreover, there should have been an investigation
within Samsung’s quality department to determine why they didn’t point out the battery

13
issue for the Note 7 and the possibility of the moisture getting into the electrical
components of some of the washing machines or the heavy vibration on the other types
before sending the products to the market. One of the usual measures of quality and safety
for companies to do is to pick random samples of the products batches to make sure of that,
the products meet all the safety and quality measures. Mostly as it appeared, the quality
team at Samsung may have been overruled by the higher management to push the products
to the market before it was ready. For that, the company should wait for the confirmation
of the quality team for the products before starting the production and releasing it.

Nevertheless, Samsung’s power structure is influenced by the Asian culture, where

giving bad news or an issue to the higher management is mostly considered wrong. One of
the possibilities which caused this problem might be the company culture. That might have
led to some members of the production line left alone to figure out a solution for the
problem without notifying the higher management that there was a problem with the
product’s battery in the case of the Note 7 or the possibility of catching fire or vibrating
heavily for the washing machines. That could be considered as a failure of the leadership,
since the leadership could have taken the decision of stopping the production of the
products or delay them till it was completely approved to be suitable for the market after
the safety and quality check. For that, a change in the company culture might prevent it
from facing similar cases in the future.

Moreover, for the note 7 case, the company has outsourced their batteries to only
one other factory. More to that, it is a wrong decision to give most of the production of
such an important component to only one source, since that way if something went wrong
the impact on the company will be much bigger than if they have dealt with multiple
factories. For that, the company should have dealt with multiple manufacturers to supply
them with the batteries instead of just one.

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5.0 Conclusion

In conclusion, Samsung is a huge and a powerful empire that covers many sectors.
Such a big company should have a really good strategy and management structure to
manage the different sectors of the company. Samsung has made it a culture to invent new
products and seek the new opportunities. That has given it the advantage on its competitors
on the process of implementing new ideas before anyone else, and that also explains the
verity of Samsung’s products in the market. The company believes that time is money and
use that to be the first in innovations unlike the competitors who focuses on making their
products on the pre existed technologies. That have given Samsung the trust of the
customers and they always expects new things from Samsung and look forward for their
new products. Despite that, as any other company, obstacles and problems is an inevitable
thing, and every company should manage their way to overcome those problems. Samsung
had multiple cases of defected products which considered to be dangerous for the
customers who bought them. The cause of such an incident could be coming from different
factors, such as, the production line being overruled to get the product in the market before
the deadline, the ignorance of the safety and quality department concerns of the products
and could be as well the culture of the management structure of the company. For that, it
could be suggested to the company to always take the concerns of its quality team seriously
and not to push the production of the products before it is confirmed to be ready in every
way.

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 6.0 References

Burris, M., 2018. The history of Samsung (1938-present). Retrieved (August 05, 2018).

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mechanisms for fostering interpersonal trust. Advances in business research, 5(1), pp.50-62.

Haizar, N.F.B.M., Kee, D.M.H., Chong, L.M. and Chong, J.H., 2020. The impact of innovation
strategy on organizational success: A study of Samsung. Asia Pacific Journal of Management
and Education, 3(2), pp.93-104.

Lager, T., 2016. Managing Innovation & Technology in the Process Industries: Current practices
and future perspectives. Procedia Engineering, 138, pp.459-471.

Hadjikhani, A., Lee, J.W. and Park, S., 2016. Corporate social responsibility as a marketing
strategy in foreign markets. International Marketing Review, 33(4), pp.530-554.

Čirjevskis, A., 2016. Designing dynamically “signature business model” that support durable
competitive advantage. Journal of Open Innovation: Technology, Market, and Complexity, 2(1),
pp.1-21.

Xie, Y., Xue, W., Li, L., Wang, A., Chen, Y., Zheng, Q., Wang, Y. and Li, X., 2018. Leadership
style and innovation atmosphere in enterprises: An empirical study. Technological Forecasting
and Social Change, 135, pp.257-265.

Conkright, T.A., 2015. Using the four functions of management for sustainable employee
engagement. Performance Improvement, 54(8), pp.15-21.

Lloyd, R. and Aho, W., 2020. The Four Functions of Management-An essential guide to
Management Principles.

Green, B. and Passenger, S.A.F., 2017. Samsung Electronics Company, Ltd.: Galaxy Note 7
Crisis.

Chen. Brian X. (2016). Samsung, Stung by Galaxy Note Failure, Recalls Washing Machines
. Journal, [online] p. 3. Available at: https://www.nytimes.com/2016/11/05/technology/samsung-
recalls-washing-machines-galaxy-note-
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14/3/2021].

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