A COMPARATIVE STUDY OF BUSINESS STRATEGIES BETWEEN KOREA AND JAPAN: A CASE OF ELECTRONICS ITEMS BETWEEN SAMSUNG AND SONY

BUSINESS STRATEGY Sony and Samsung Electronics compete in the electronics industry, one of the most dynamic segments of the economy in the present. Advances in technology are introduced in a rapid pace and the life cycle of products is extremely short. To survive and prosper in this environment, Sony and Samsung opted for different strategies. SONY The strategy adopted by Sony to thrive in the rapid changing environment of the electronics market was to create unique products. Unlike many competitors who preferred to compete in the highly commoditized segments of the industry by rapidly introducing improvements to products, Sonys development strategy was based on the creation of new markets. The company heavily invested in research and development of new products to continue to grow. Examples of the various products introduced by the company are transistor radios, Trinitron and LCD televisions, CDs, DVDs, 8mm camcorders, digital cameras, Playstation, Walkman, LCD, CCD and other semiconductors. Instead of trying to outperform competitors by increasing features of existing product (i.e. speed, capacity), it creates unique products. As observed by Chang (2008), the companys ability to innovate and develop new products came from the founding creed of Freedom and Open-mindedness. This strategy has worked very well and maintained Sonys growth for years. Since the introduction of Walkman in the market, the company has enjoyed prestige in the mind of consumers and enjoyed rapid growth. However, over the last decade the company has not developed products that could help it maintain its dominant position in the electronics market. As observed in S onys financial reports, despite the oscillation in revenues due to currency fluctuation, the company expects a decline in revenues for its electronic segment in the fiscal year to end in 2009 (Sony, 2008). Although such decline may not happen because of the recent devaluation of Yen in relation to US dollars, that prediction demonstrates lower capacity in incisively introducing new products to the market and maintaining its dominant position. The companys growth turning point occurred when it acquired Columbia Pictures in 1989. According to Chang (2008), Sonys desire for endless innovation of new products and services to avoid the commodity trap was what motivated the company to move into the entertainment business. However, the performance of the entire organization became so bad that by 1994 Sony had to write off accumulated loss of US$ 3.5 billion. As a consequence of this expansion abroad, Sonys organizational structure increased in complexity. For the sake of management, Sony, like many other multinational companies, was organized in independent divisions. The management control systems in place, however, created conflicts between divisions. Sony implemented a company structure in which individual product divisions have separate balance sheets and income statements, and operate almost like independent companies (Chang, 2008). The headquarters took an overlooking role and refused to get involved in departmental matters. With each department pursuing its own interests which many times conflicted with the interest of other departments the organization did not promote synergy between its divisions. Because of the lack of cooperation between the divisions, the entire organization suffered. The complex organizational structure and badly designed management control system were not the only cause to the lack of innovation. In past situations, when conflicts between departments would arise, Sonys former CEOs and founders Akio Morita and Masaru Ibuka could control the problem with their charisma. However, the CEO in exercise at the time, Nobuyuki Idei, did not enjoy the same

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subservience from the employees that the founders had. As the first professional manager of the company, Idei lacked the charisma Sonys family members had. Therefore, Sonys problems do not seem to be a result of its new product creation strategy. Its problem lays on organizational process and executives leadership. As observed by Chang (2008), Sonys stagnation during the last decade may be the result of the mismatch of its strategy, leadership style, corporate culture, and organizational structure. This mismatch has caused the organization to lose creativity and, thus, to not be able to pursue its innovation strategy. In addition to the lack of capacity to innovate in the last decade, LaMoshi (2003) argues that the company is not attuned with the demands of the market and is not capable of rapidly meeting them. Sony has not developed the competency of rapidly adapting to market trends and conditions. The products developed by the company are commonly the result of independent, closed doors research and development, as opposed to conforming to the market desires and tendencies. As argued by LaMoshi (2003), Sony has always eschewed product-trend research. Its designers and managers contend that by the time a trend emerges through research, its too late to develop a product for it (at least for Sony). This lack of dynamicity and capacity to assess and rapidly adapt to market demands has also greatly contributed to Sonys stagnation over the last decade. Other more ingrained issues are also cited as causes in the decline of Sonys profitability in the last decade. One argument raised by Luh (2003) is that some Japanese traditional workplace practices such as lifetime employment may have influenced Sonys stagnation. Like Sony, Japan has had problems maintaining its growth since the beginning of the 1990s, the decade that came to be known as the lost decade. For a long time, the country unsuccessfully tried to resume its growth. Some authors mention that the rigidity of government structures and of the society appear to have influenced the countrys ability to recover. According to Alexander (1997), like in the case of Sony, the rigidity of the system created adaptability problems to the country. Many of the practices that had become synonymous with Japan lifetime employment had negative side- effects, even during the period of high-speed growth. Their persistence retarded the needed adjustments of a maturing and slower growing economy (Alexander, 2007). Even though these policies are usually associated with worker satisfaction, morale and productivity improvement, Luh (2003) argues that in times of downturn they cause rigidity to the system and slow recovery because the company retains unnecessary and unmotivated workers. SAMSUNG ELECTRONICS While Sony adopted a new product development approach to survive in the dynamic electronics industry, Samsung acknowledged commoditization and aggressively invested in process and product technology. Its strategy consisted in speedy changes in products to gain advantage over competitors before its products became commodities. Jong-yong Yun ofSamsung Electronics describes Samsungs strategy underlying assumption as follows: Speed is the key to all perishable commodities from sashimi to mobile phones. Even expensive fish becomes cheap in a day or two. For both the sashimi shop and the digital industry, inventory is detrimental and speed is everything (Chang, 2008). The emphasis on dynamicity is observed on the companys values. As observed on their web page, along with People, Excellence, Integrity, and Co-prosperity, Change is cited as one of the five values stressed by the company. By change the company means: We rapidly take the initiative in executing change & innovation with a sense of crisis: we cannot survive if we do not constantly strive to innovate (Samsung Electronics Co., Ltd., 2008). Samsungs fast and steady development resembles that of Korea. The identification and concentration of efforts, in a first moment, in key markets and sectors in which the company had or could have a comparative advantage allowed it to become stronger and able to compete in other areas (Ungson, Steers, & Park, 1997).

Additionally, centralized decision-making granted both the country and the company dynamicity and efficiency in dealing with the fast paced economic conditions and competition. That gave Samsung and Korea the ability to compete in more mature markets by developing operational excellence and outperforming competitors.
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Unlike Sony, Samsung has a very strong sense of urgency and dynamicity. The difference between involvement and initiative of top management from Sony and Samsung could be clearly seen at home and abroad. Around ten years ago, when Samsung was still struggling to expand its operations to the United States, the company did not have enough prestige in the market. Despite the fact that Samsungs technology and quality was equivalent to competitors, its products were not adequately treated in American stores. Sony televisions occupied the front of displays. Right behind were televisions from Toshiba, Panasonic, and Philips. Samsungs products were usually at the back, covered in dust. While several companies would consider large reports to deal with this problem, the CEO at the time, Kun-Hee Lee, decided to fly 100 senior managers to the United States to show how Samsungs products were treated. The trip had an impact on managers, who became aware of the need for better placement of the company in the American market (Bartlett, Ghoshal, & Beamish, 2008). The CEOs decision to immediately fly in the managers demonstrates the strong sense of urgency and dynamicity present in the company. Because of its strategy option (commoditized market), until early 1990s Samsung was regarded as a generic chip manufacturer. Its brand was not very well recognized internationally. After CEO Kun-Hee Lees visit to America, the company increased its awareness for the importance of brand value and recognition and .initiated the New Management Movement (Chang, 2008). Although Samsungs strategy has greatly contributed to its success as a late entrant into the electronics industry, the same strategy does not seem to be appropriate for the leading position. The company needed to improve its brand and invest in new products development, as opposed to following other companies.

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