Korean Samsung setting the example for China?
The article Asia’s new model company explains Samsung’s progress from small Korean transistor radio company to elaborate chaebol(conglomerate) over the past seven decades. Speed of expansion and effective market forecasts seem to be the force behind Samsung’s success. Their managers “care more about long-term growth than short-term profits”1 because of deep-run family values (the late founder Lee Byung-chull’s family controls operations). Samsung also “spots markets that are about to take off and places huge bets on them”1; for example, an investment in new DRAM chips resulted in a chunky profit for the company.
China could use Samsung’s patient, expansive ways to reap the same rewards. However, there are limitations: Korea’s democratic government and China’s communist party may not approve the same operations. Overexpansion could also be an issue: I think it’s beneficial to expand to different sectors, but full commitment and a substantial framework of the new sectors are required to sustain the expansion. This was proven for the chaebol during the Asian financial crisis of 1997-98, where “half of the top 30…went bust because they had expanded recklessly”1. I also don’t think China can afford to operate under Samsung’s patience because of the exponentially higher competition that lies in its booming economy—firms would simply drown under the success of more advanced companies.
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References
1. “Samsung and Its Attractions: Asia’s New Model Company.” The Economist – World News, Politics, Economics, Business & Finance. The Economist Newspaper LImited, 1 Oct. 2011. Web. 05 Oct. 2011. <http://www.economist.com/node/21530984>.