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A South Korean Company that Operates in China

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A South Korean Company that Operates in China

This report address’s the requirements at hand to select a South Korean

company that has operations in China

Executive Summary:

In 1992, Samsung Electronics adopted the form of a wholly owned

subsidiary as the entry mode into China. It’s entry into China was in

order to maintain growth due to the tough competition in Korea. China

was selected in order to take advantage of its low wages for the mass

production of low to medium priced products. The initial

manufacturing ground was at Tianjin due to its costal location hence

making it easy to export abroad and to major locations in China. The

original focus of producing low cost products resulted in a cheap

image of Samsung in China and led to a loss of US$210,000 in 1998 for

its Suzhou division. The 1997 Asian economic crisis led to Samsung

shifting its focus towards higher quality products. Samsung realised

they could not compete with the Chinese manufacturers in terms of low

priced products. In order to remain competitive in China, Samsung

shifted its marketing strategy to one based on “selection and

concentration”. After 1997, the focus was on the 10 major cities in

China including Beijing, Tianjin, Suzhou, Shanghai and Guangzhou.

Samsung came up with the “5% strategy”, targeting their products at

the top 5% earners in China. The intensity of their Research &

Development (R&D) in China grew with the expansion of their plant at

Suzhou. Recently, there appears to be a shift in their operations from

the Pearl River Delta to the Yangtze River Delta. This allows Samsung

to take advantage of the better skilled personnel and infrastructure

available for R&D. Samsung also set up a second Headquarters in

Beijing which is responsible for marketing, personnel recruitment and

for shaping of Samsung’s long term ambitions in China.

Introduction:

The Samsung group has 116 subsidiaries in 67 countries and received

sales revenue from local subsidiaries of US$29billion. Over the last 5

years sales and net income have increased 1.6 times and 45 times,

respectively. Sales in 2010 are anticipated to be 1.9 times that of

2002, with pre-tax profits expected to increase 2.1 times.

Samsung is a heavily diversified company, and in order to best

demonstrate its market entry to China, the report will look at the

electronics arm to demonstr...

... middle of paper ...

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· New York Times, 1991, (cited 9 May 2005) ‘Korean Companies in China’,

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· Christian Science Monitor, 1992, (cited 9 May 2005) ‘High-Tech Giant

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Report); Back From the Brink: Samsung Electronics got into trouble by

being like many Asian firms; It survived by being different’, Wall

Street Journal (Eastern Edition), New York, Sep. 22, pg. R.5

· Lee, B. J., 2004, (cited 9 May 2005) ‘Gotta Be Chinese’, Newsweek

New York: Jun 28, Vol. 143, Iss. 26, pg. E8
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