Management Issues in Global Family Businesses: Samsung - Case Study Example

Management issues in global family businesses: Samsung Management issues in Globally Family Businesses: Samsung Executive Summary The objective of Samsung is to take the world of imaginative new directions in pursuit of competitive advantage. In order to achieve this goal, Samsung focuses on the utilisation of innovative, reliable products and services. It prides in having a talented workforce. It adopts a responsible approach to business and global citizenship that enhances collaboration with partners. The report uses the 12S model with the intention of understanding the operations of Samsung. It integrates what is working well for the company, what requires a change in relation to strategy, and what now needs to go from the strategy because of ineffectiveness and inefficiency in pursuit of competitive advantage in the market and industry of transaction. That is through increased focus on the organisational structure, strategy, governance structure, succession, shareholders, leadership and stewardship in the course of understanding the operations and performance of Samsung in the market and industry of operation. Introduction For more than seven decades, Samsung has focused on the generation or creation of a better world through integration of diverse businesses with the ability to span advanced technology, fashion, finance, hotels, and so on. The flagship company of this institution is Samsung Electronics, which concentrates on leading the global market in high-tech electronics manufacturing, as well as digital media. The objective of Samsung is to take the world to imaginative new directions in pursuit of competitive advantage. The objective of this research is to present an elaborate report in relation to the performance of Samsung Company. The report will integrate what is working well for the company, what requires a change in relation to strategy, and what now needs to go from the strategy because of ineffectiveness and inefficiency in pursuit of competitive advantage in the market and industry of transaction. 12S Model of Strategic Fit This model focuses on an assessment of diverse aspects in relation to the operation of family businesses. The elements of the model include i. Strategy and Shared Values of the Family ii. Strategy of the Enterprise iii. Strategy of the Individual iv. Shareholder Structure v. Organisational Structure and Systems vi. Structure for Governance of the Family-Business Relationship vii. Stewardship and Family Leadership viii. Shareholder Wealth Management and Information ix. Service and Philanthropy x. Succession: Process and Plan xi. Staff xii. Skills and Social Capital From the above illustration, it is essential to note that the model has four major components: Strategy (strategy & shared values, strategy individuals, and strategy: enterprise), structure (shareholder, governance, and organisation/systems), succession & social plan (succession, skills/social capital, staff: family/non-family), and shareholder (shareholder wealth management, service/philanthropy, and stewardship/family leadership). The study focuses on the assessment of organisational strategy with the objective of reviewing the current strategy of Samsung and family members while identifying gaps and making diverse recommendations. The study will also consider reviewing organisational structure while reviewing the shareholder structure and family-business relationship governance structure while identifying any potential gaps in the structures. In the third aspect, the report will examine shareholders while assessing plan for shareholder wealth management, stewardship, and family leadership of the firm. Similarly, the report assesses succession while examining the current succession, staff, skills, and social capital of the firm with the intention of identifying effectiveness and efficiency of such elements in the achievement of goals and targets. Organisational Strategy The report assesses the current strategy for the firm and for the family members while identifying the gaps prior to the integration of appropriate recommendations. In order to compete globally, business entities need to adopt innovative strategies while executing open management with the ability and potentiality of removing all restrictive and discriminatory institutions, as well as practices. In addition, human resources, technology, marketing manufacturing, and design departments are becoming more and more essential as competitive resources in comparison to the previous contexts. In the current state, it is essential to note that Samsung has focused on effective and efficient uses or utilisation of these resources and core competency factors with the intention of becoming a successful case of the leading global entity (Song & Lee, 2014). Samsung has focused on adoption and implementation of an open management in the era of personnel management, which refers to the autonomy and creativity of the employees while eliminating obstacles with reference to systems and practices. The approach contributes to the achievement of effectiveness, efficiency, and competitiveness while enabling Samsung to promote transparent management to grow in harmony with diverse customers or consumers. The objective of the Open HR approach is to develop a human resource management practice with the potentiality of promoting equal opportunity while exploiting skills towards realisation of human capital and potential (Bharadwaj, El Sawy, Pavlou, & Venkatraman, 2013). The strategy is essential to maintaining opportunities, which should be available to all without discrimination, as well as restrictions. The strategy is also vital to differentiate compensation and promotion. Samsung focuses on upholding the belief of shared responsibility to the people, planet, and society. The organisation focuses on the promotion of the highest standards with the intention of contributing to the achievement of a better world. In the course of recruiting diverse employees, the organisation focuses on incorporating diversified workforce with the intention of enhancing the image and reputation of the business entity through effective operations of the diverse teams. Furthermore, marketing and branding strategies of Samsung continues to play a critical in the achievement of success. In the course of understanding why the family business has been so successful in the achievement of the goals and targets, it is ideal to evaluate the brand and its marketing strategies in terms of the diverse marketing imperatives (Song & Lee, 2014). Samsung has focused on the development and implementation of a strong customer-focus approach, which is essential in emphasizing on understanding the needs, as well as wants of the customers and substantial future needs. In addition, the organisation focuses on promoting the power of well-designed products and services through the provision of functional and emotional benefits. The company concentrates on the utilisation of a strong design philosophy, which tends to be simple and intuitive, adaptive, and efficient in the achievement of the goals and targets at the fiscal period. Samsung also focuses integrating quality-based management. The approach concentrates on technology resources, which is vital in the formulation of the best corporate quality. The organisation concentrates on the utilisation of the hybrid management system in relation to its HR systems and techniques with the intention to handling the demands and expectations of the business entities within the market and industry of operation. The organisation has focused on the utilisation of sporting activities and engagement in the CSR programs to facilitate the improvement of the image and reputation in the market and industry of operation. However, it is ideal to Samsung to continue utilisation of the design and development programs in relation to the core competencies and skills with reference to pursuing competitive advantage in the market and industry of operation (Gochhait, Tripathy, & Almeida, 2014). Similarly, the institution should focus on increasing engagement in CSR and sponsorship of sporting activities with the objective of enhancing its global coverage and market share. The approach will also be vital to increasing the global sales of Samsung, which continues to depend on diversification of the products and services in accordance with the expectations of the consumers. Organisational Structure Shareholders tend to be important elements or aspects of success in relation to the operations and transactions of Samsung in pursuit of its goals and targets. By the end of 2014, the organisation has the following individuals, as the shareholders with reference to transactions of the organisation. Name Relationship Class of Stock Kun-Hee Lee Major Shareholder Common Stock Kun-Hee Lee Major Shareholder Preferred Stock Samsung Corporation Affiliate Common Stock Samsung Welfare Foundation Affiliate Common Stock Samsung Foundation of Culture Affiliate Common Stock Ra-Hee Hong Family member Common Stock Jae-Yong Lee Family member Common Stock Samsung Life Insurance Affiliate Common Stock Samsung Life Insurance Affiliate Preferred Stock Samsung Fire & Marine Insurance Affiliate Common Stock Sang-Hoon Lee BOD member Common Stock Oh-Hyun Kwon BOD member Common Stock Organisational structure refers to the arrangement of responsibilities, authorities, and relationships among people. Samsung’s organisational structure is a hierarchical concept of subordination of entities, which tend to collaborate and contribute towards the achievement of competitive advantage in the market and industry of operation. The approach focuses on the achievement of effectiveness and efficiency in relation to the goals and objectives in the market and industry of operation (Sharma, 2004). The approach is also vital to ensuring an effective decision-making, as well as development and implementation of the strategies in accordance with the demands and expectations of the business entities. On the other hand, the organisation uses the approach to achieve competitive advantage while concentrating on globalisation of the processes and procedures, as well as addressing the demands and expectations of the customers within the market and industry of operation at the end of the fiscal period (Eddleston & Kellermanns, 2007). Governance is the uppermost element in the operations of an organisation. Regardless of the size of the family enterprise, mix of personal family dynamics, business strategy, and ownership criteria are essential to the creation of appropriate environment facilitating effective and efficient decision-making. It is ideal to note that succession and power issues across the expanding family business can create diverse problems affecting the operations of the organisation. Samsung focuses on implementing a little structure, which is vital to the discussion of diverse issues. Some of these issues include ownership shares, rights, responsibilities, and competence of the family-member managers in relation to agreement on the strategies in pursuing competitive advantage and increased market share (Kim, 2014). The family-business governance structure focuses on exploitation of the clear vision and effective communication among the members and managers in the course of handling the demands and expectations of the business entities in pursuit of effectiveness and efficiency in delivery of products and services by Samsung. Effective family and business governance relate to the achievement of sustained benefits or advantages in the case of Samsung, thus effective and efficient reputation in the market and industry of operation. The organisational structure is ideal in the achievement of the goals and targets at the end of the fiscal period while reducing the costs of operation within the market and industry of operation. It is ideal for the organisations to adopt and incorporate lean family-business governance structures for effective and efficient decision-making. It is also critical for the business entities to focus on the evaluation of the business entities’ core competencies and resources in the course of incorporating appropriate structures in accordance with the demands and expectations of the shareholders, as well as customers. The ownership structure of the organisation is complex in association with the circular elements or facets in handling the demands and expectations of the business entities. The key family holding companies own major stakes in other affiliates, which again hold stakes to Everland. There is a substantial need for Samsung group to consider the transformation of the operations into a holding company, thus clearance of the circular ownerships under the influence of the local regulations. Shareholders In this context, the report focuses on evaluation or assessment of the current plan for shareholder wealth management, stewardship and family leadership, as well as identification of the gaps while making appropriate recommendations on the growth and development such approaches. The approach is ideal for understanding the role and influence of the strategies in pursuit of competitive advantage in the case of Samsung. Samsung focuses on the utilisation of the ‘shareholder wealth maximisation’ theory. According to this theory, it is necessary for an organisation to adopt and implement a single-minded approach for the entities in the course of focusing on the ‘maximisation of the return on equity capital’. The approach’s key objective is to enhance growth and longevity of an organisation. Application of this theory in the case of Samsung ensures that managers are unadvised because of the indirectness of the decision-making to the relevant shareholder wealth (Nagarajan et al., 2012). Moreover, there is substantial for the organisation to set localised realistic objectives n accordance with the demands and expectations of the managers while enhancing motivation among employees. The current growth of Samsung epitomises how individual factors can have great implications on the shareholder value. In the management of the shareholder wealth, Samsung concentrates on increased investment on the R&D with the intention of offering innovation and differentiation in the market and industry of operation. The approach is vital in enabling the organisation to set objectives in accordance with the market requirements while understanding consumer needs for all markets and functionality of the customer requirements for the new products. The organisation focuses on the integration of Everland institution and management of the shareholder wealth. According to these new developments, the wealth transfer from chairperson to the families with reference to son and daughters would result in the segmentation of the groups into three critical parts. The approach is vital in effectiveness and efficiency in the management of the operations, as well as shareholder wealth. Samsung focuses on the usage of a holding company with reference to the management of the wealth of the shareholders, thus the perfect platform for the achievement of the goals and targets in the market and industry of operation. Lee Kun-Hee is the steward of the family business with reference to the case of Samsung. He is aware of the responsibility with reference to the provision of quality leadership and management skills in facilitating effective and efficient decision-making concerning the image and reputation of the firm (Miller & Breton‐Miller, 2006). The stewardship and leadership of Samsung focuses on the usage of the position to manage the resources effectively and efficiently while concentrating on the utilisation of the core competencies and knowledge, as well as substantial information in accordance with the expectations and demands of the consumers. The organisation should consider adoption and implementation of appropriate approach in the course of exploiting transformational leadership techniques and expertise in the market and industry of operation. Succession It is essential to note that investors are getting a bit nervous in relation to the issue of transition of power at the South Korean conglomerate. This follows the action by Lee Kun-Hee, chairperson of Samsung, to promote his son Lee Jae-Yong to the vice-chairperson of Samsung Electronics. The approach has been ideal in understanding the increased anticipation of a succession on the top of the biggest of IT Company in accordance with the revenue analysis. According to economic and business analysts, Samsung’s technology branch, the jewel of the South Korean chaebol, would be under the management or leadership of the 45-year-old Jae-Yong. The imminent handover will be ideal for generating market scrutiny in relation to the credentials of the incoming chairperson. Jay-Yong has been rising through the ranks of the family business. The development has been essential in understanding his grasping of the aptitude for relationship management, a crucial skill for leading Samsung’s move from exportation of the cheap electronics, thus management of the complex of international web of customers, partners, and suppliers (Kim, 2014). It is critical to illustrate that Lee Kun-Hee had already faced substantial conviction for the complicity with reference to the illegal sale of bonds to his son of another Samsung subsidiary in 2009. In this context, the chairperson focused on realizing a smooth succession in pursuit of competitive advantage within the market and industry of operation. Conclusion Conclusively, the objective of Samsung is to take the world of imaginative new directions in pursuit of competitive advantage. In order to achieve this goal, Samsung focuses on the utilisation of innovative, reliable service provision, having and keeping a talented workforce, adopting a responsible approach to business and global citizenship, and collaboration with partners, as well as customers. The organisation concentrates on the utilisation of a lean management process and governance structure for the achievement of effectiveness and efficiency in the decision-making. The approach is vital in enhancing maximisation of the profits and revenues at the end of the fiscal period. Recommendations Samsung should consider integration of the following recommendations: i. Exploitation of modern and flexible HRM practices and processes for increased motivation of the employees ii. Integration of clear leadership and stewardship, as well as succession approach to limit potential issues emanating from these elements or aspects iii. Continuous exploitation and utilisation of the core competencies, innovation, and R&D investment for increased effectiveness and efficiency in handling the demands and expectations of the business entities in the market and industry of transaction Bibliography Miller, D., & Breton‐Miller, L 2006, Family governance and firm performance: Agency, stewardship, and capabilities, Family Business Review, 19, 1, pp.73-87. Eddleston, K. A., & Kellermanns, F. W 2007, Destructive and productive family relationships: A stewardship theory perspective, Journal of Business Venturing, 22, 4, pp.545-565. Sharma, P. 2004. An overview of the field of family business studies: Current status and directions for the future. Family Business Review, 17(1), 1-36. Bharadwaj, A., El Sawy, O. A., Pavlou, P. A., & Venkatraman, N. 2013. Digital business strategy: toward a next generation of insights, MIS Quarterly, 37, 2, pp. 471-482. Song, J., & Lee, K. 2014, The Samsung Way: Transformational Management Strategies from the World Leader in Innovation and Design, McGraw-Hill Education. Gochhait, S., Tripathy, P. C., & Almeida, F. M. D 2014,The role of innovation and knowledge management impact on the organisational performance in a free trade economy, World Review of Science, Technology and Sustainable Development, 11, 3, pp.282-293. Nagarajan, S., Ganesh, K., Resmi, A. T., Anbuudayasankar, S. P., & Hemachitra, R 2012, Organization structure, reward and communication design for implementation of knowledge management solution, International Journal of Productivity and Quality Management, 10, 1, pp.40-68. Kim, H. J 2014, Concentrated Ownership and Corporate Control: Wallenberg Sphere and Samsung Group, University of Michigan Law & Econ Research Paper, pp.14-015. Read More