'Samsung globalization' lesson

Yoichi Funabashi, The Asahi Shimbun, Tokyo

Yun Jong-yong, CEO and vice chairman of the Seoul-based Samsung Electronics Co., recently flew to Awaji Island in Hyogo Prefecture to deliver a keynote speech to a crowd attending the Asia Pacific Forum Awaji Conference Japan. Satoshi Iue, chairman and CEO of Sanyo Electric Co., served as the conference's representative director.

The conference hall was packed with Kansai businesspeople who had gathered to hear the views of a top manager of the Samsung Group, a symbol of South Korea's remarkable economic advancement.

Last year, Samsung's sales, centered around semiconductors and cellphones, topped 4 trillion yen and the company recorded a net profit of more than 700 billion yen. It is a global company that epitomizes South Korea's robust economy.

Nevertheless, the company was seriously shaken by huge losses that ate up profits during the Asian financial crisis of 1997- 1998.

Under the banner of "innovation," Yun and other Samsung executives aggressively slashed 257 projects and implemented drastic personnel cuts: 33 percent at home and 36 percent abroad.

According to Yun, innovation must be implemented as follows:

First, the company must firmly refuse to yield to the resistance of vested interests. The more organizations boast of successful records, the more they tend to protect vested interests.

Second, innovation must be advanced step by step, beginning with "dots" that connect into lines and planes. It is important for employees to gain the confidence to do this.

Third, after presenting a clear vision and targets, managers must delegate authority to competent supervisors to the greatest extent possible. The question is, can a company instill and maintain a sense of crisis?

"In this regard, Toyota always has a sense of crisis in both good times and bad. We have a lot to learn from it," Yun said.

Two-thirds of the approximately 1,000 directors in the Samsung Group are in their 40s or younger. The group has 1,700 employees with PhDs and 350 with MBAs. Most of them received their training in the United States or Europe and earned their degrees overseas. At Samsung, innovation has meant "growth through globalization to achieve Samsung globalization."

At the end of the speech, Yun expressed his gratitude to Iue. "Without Sanyo's cooperation, Samsung could not have become what it is today," he said.

About 30 years ago, Yun trained for a year as a manufacturing engineer at a Sanyo factory in Gunma Prefecture thanks to a Sanyo technical transfer program. Around the same time, Iue was also making business trips to South Korea nearly every week as the Japanese representative of a Seoul-based Sanyo-Samsung joint venture. The experience taught him to work together with South Koreans, overcoming the cultural barrier that separates them. Although the joint venture was later canceled, the two companies agreed last year to promote joint development of next-generation technology such as fuel-cell technology.

A while ago, when Iue met with Samsung Group Chairman Lee Kun- hee, Lee told him: "Since Japanese tableware is earthenware, it breaks when dropped. That is why Japanese people treat things with care. But South Koreans lack the spirit to handle things with care because they use metal tableware, which doesn't break when they drop it. Japan has a valuable asset."

Iue said Lee's words awakened him to the importance of Japanese methods of manufacturing. Lee studied at a Japanese university and did his postgraduate studies in the U.S. He is also a manager who knows both the U.S. and Japan inside and out.

Both Sanyo and Samsung have been pressed to rediscover and redefine their own "assets" or values as they have experienced fierce competition in the global market. The partnership is the product of the belief that if the two companies combine their respective strengths, they can give rise to new values.

It is Iue's ambition to make internationally competitive Sanyo home electronics products a world standard in terms of not only hardware but also software and systems by establishing technical cooperation with leading Chinese (Haier) and South Korean (Samsung) makers. He also wants to make good use of the strengths of the two companies in order to compete with Sanyo's rivals in the Japanese market.

Globalization is about using the best of others to bring out the best in oneself. One's best means one's originality and diversity.

"In an age of globalization, people without originality will be left behind," Iue said.

The Sanyo-Haier-Samsung triumvirate, originating in Japan, China and South Korea, enhances each company's competitiveness and hones their originality while promoting Asian regionalism. At the same time, such new business relationships give rise to new international relationships. In the Asia-Pacific region, relationships between countries have become more horizontal than vertical. In the past, Japan led other Asian countries just as a flock of wild geese take off one after another following the leader. But that traditional image is rapidly breaking away.

Never before has Asia become such an important key to Japanese "innovation." Japan is starting to learn from Asia, and with Asia. This is the wave of the future and the path to regeneration. In this sense, recent developments are completely different from the Meiji Restoration in the 19th century and the postwar situation.