Samsung Motors Case

THE TALE OF SAMSUNG MOTORS

I. INTRODUCTION

A. Case Background

Samsung was founded in 1938 as a noodle company by Lee Byong-Chull with only 30,000 Won. It is a company with a business development plan that resembled that of other chaebols. During the 1950s and 60s, the company grew tremendously, building its reputation in Korea as a corporate leader. Eventually, it led the world in the semiconductor and electronics industry.

The incumbent chairman of Samsung Group is Chairman Lee Kun-Hee. His father passed away in 1987, during which he declared Samsung Group’s “2nd founding during the companies’ 50th anniversary. Chairman Lee Kun-Hee led Samsung to be the 2nd largest corporation in Korea by 1999, having 47 companies under the diversified Samsung which includes businesses in industries in electronics, machinery, heavy industries, chemicals, financial services, hotels, department stores and a theme park. It also employs a total of 161, 000 employees with a total revenue of $93.5 billion by the end of 1999.

Being hit by an economic crisis of unprecedented scale during the late 1997 Asian financial crisis, the Korean Won depreciated substantially, increasing the cost of raw materials. The local car industry was suffering from overcapacity with the domestic demand forecast for passenger cars decreasing from 13% down to 4% during the period of 1990 up until 1995. A quantity of 2.4 million cars was being produced annually in South Korea despite the domestic demand of only 1.6 million. Because of this, expected factory utilization rate of Korean carmakers were to fall below 60% due to the increasing market saturation.

Facts on Samsung and its Chairman:

Samsung Chairman Lee Kun-Hee resigned as Samsung President on April 21, 2008 amid charges of tax evasion and breach of trust, but returned on March 24, 2010. He is a 3rd generation son of Samsung Group founder Lee Byung-Chull. Being an avid sportsman, he was...