On Friday 25 August 2017, a South Korean court sentenced Lee Jae-yong, Samsung’s 49-year-old de facto leader, to five years in prison for bribing the former president of South Korea in order to strengthen his control of Samsung Electronics.1 In his absence, Samsung Electronics and most other business divisions have been led by non-family the company the contributions that his father and grandfather made to the firm since its founding 80 years ago. One of the most important contributions that the Lee family imparted to Samsung was the networks that his grandfather had built inside the halls of power in the early years. In the post WW2 period, the founder of Samsung Lee Byung-chull aligned himself with those visionaries in government who wanted to push through difficult economic changes that eventually transformed Korea from a poor nation into a prosperous country. He also married two of his children into banking families. Following the rapid growth of the country, Samsung’s second generation leader Lee Kun-hee then strengthened the family network to include more of the country’s economic elite via his own marriage to the daughter of a Chaebol founder. Above all, Lee Kun-hee contributed his beliefs in hard work, frugality and innovation to Samsung, driving the company to reach the new heights in many product lines. Samsung Founder Lee Byung-chull Educated in Japan
Lee Byung-chull founded Samsung in the late 1930’s, at a time when Korea was still under Japanese occupation. The Lee family were wealthy landowners and, like many affluent Koreans of his generation, the first-born son Lee Byung-chull travelled to a university in Japan to study. Under Japanese occupation since 1910, affluent Koreans were expected to send their heirs to Japan to study since pre-modern Korea was isolated from the rest of the world earning the nickname as the hermit kingdom.2 But before completing his studies at Waseda University in Tokyo, Lee Byung-chull returned to his native country because his father had died unexpectedly. With the family inheritance, Lee started a trucking business in the city of Daegu called Samsung Trading in 1938, shipping fish, vegetables and fruit to Manchuria and Beijing.3 The name Samsung literally means ‘three stars’,4 while the surname Lee is the second-most common in Korea, behind only Kim.5 An easy name to remember, Samsung has resonated well in Korea and internationally. Lee eventually transformed his fruit and vegetable business into the largest Chaebol in Korea, one that came to dominance following WW2 and the Korean War. By 1945, Samsung was shipping goods throughout Korea and exporting them to other countries. With the end of Japanese occupation following WW2, Lee moved his small but growing business to the nation’s capital Seoul in 1947, when he began to build a political network. Once in Seoul, Lee Byung-chull established a solid relationship with Syngman 1 https://www.wsj.com/articles/samsung-heir-lee-jae-yong-convicted-of-bribery-1503642785, accessed 25 August 2017 2 https://en.wikipedia.org/wiki/Hermit_kingdom, access 15 June 2017 3 https://en.wikipedia.org/wiki/Lee_Byung-chul, accessed 2 May 2017 4 Succession at Samsung (Korea), by Chiang Qi Long, Geng Yan, Laurence Cecile D. Vanhove, Maria Nian Sofia Skotchko, Muhammad Firdaus Bin Jamel, Student Report prepared for a course on Family Business & Wealth Management, NUS Business School, Fall Semester 2016 5 https://en.wikipedia.org/wiki/Lee_(Korean_surname), accessed 17 July 2017
Rhee, the first president of South Korea (August 1948 to April 1960). Leveraging his political connections into profitable contracts, Lee turned his enterprise into one of the 10 largest trading companies by the end of Syngman Rhee’s three-term presidency in 1960. Rapid Diversification Begins in the 1950s
At some point during the Korean War in the early 1950s, Lee discovered that selling fruit and vegetables was not as profitable as he expected, and so he decided to diversify into sugar and flour refining, a move which turned out to be hugely successful. American officials stationed in Korea who organized food relief bestowed upon Lee the nickname “Sugar BC” (Lee Byung-chull). Founded in 1953, CJ (Cheil Jedang) was Lee’s first manufacturing business. In 1955, it opened the first flour mill in South Korea and in 1962, started exporting sugar to Okinawa, Japan.6 Now a diversified conglomerate, CJ Corporation diversified into many other nutrition- and beverage-related businesses and expanded globally. Lee Kun-hee, the second generation leader, spun CJ off from Samsung in 1997, although the Lee family still occupy leadership positions in the company. While Lee and other Chaebol founders began to see the fruits of their entrepreneurial activities in the mid- to late-1950s, the rest of the country was still mired in poverty. In 1953 the South Korean national GDP per capita stood at a mere $67, while in the United States the GDP per capita for the same year stood at $2,449. 7 Koreans particularly those at the bottom
of the pyramid soon began to blame their poor state of affairs on the Chaebol founders and the government which supported them. Although Rhee will always be remembered for leading his country through the Korean War, his three-term government was beset by corruption scandals and mass demonstrations. When Rhee unsuccessfully attempted to become president of Korea for a fourth term at the age of 84, his unpopularity was so great that it led to concerns that his life would be in danger if he stayed in his home country for much longer. In the end, Rhee was secretly flown out of the country by the American CIA to Hawaii where he and his
6 https://en.wikipedia.org/wiki/CJ_Group, accessed 21 July 2017 7 The Chaebols: The rise of South Korea's mighty conglomerates, by Cho Mu-hyun, cnet, 7 April 2015
family lived in exile; he died in exile five years later. The new government that took over power in Korea in 1960 decided to place Lee and other Chaebol leaders on a black list for possible corruption. But that democratically elected government did not last very long.
Korean Chaebol Are Inheritors of Japanese Zaibatsu
The Chaebol in Korea are family-owned conglomerates that were founded or came into their heyday from the early 1960s. The four biggest Chaebol are Samsung, Hyundai, LG and SK, which have been estimated to account for about more than a third of Korea’s GDP. Chaebol can trace their origins back to the period of Japanese occupation of Korea, which lasted from 1910 to 1945. The family-controlled conglomerates in Korea are widely believed to have been influenced by Japan’s zaibatsu system. A combination of the Chinese characters for “wealth” and “clique”, Chaebol and zaibatsu are spelled the same in Chinese.8 When the US government disbanded the Japanese zaibatsu system shortly after WW2, it was replaced by a new system called keiretsu, which refers to the interlocking business relationships and shareholdings that characterize many big Japanese multinational companies such as Toyota.9 Keiretsu is somewhat similar to the Chaebol system, except that in Korea almost all of the conglomerates have been controlled by families with interlinked ownership and trading relationships going back generations. Controlled by the Lee family, Samsung has developed numerous network and relational assets that have been critical to its success. In the 1970s, the Samsung began to invest heavily in labour- and capital-intensive industries such as petrochemicals, although many Korean and foreign economists criticized this policy as beyond their capabilities.10 They argued that Korean conglomerates lacked the needed production technology, management and marketing skills to earn an acceptable return on their investment. 20 years later, however, the Chaebol proved their critics wrong. “The Chaebol have grown extremely fast since the 1950s. Samsung, for example, had an average annual sales growth rate of 35.5% between 1963 and 1992, whereas the nominal GNP growth rate over the same period was 23.7%”11 (See Figure 1 above showing Samsung’s diversification into many sectors of the Korean economy from the 1930s to the 1990s12). By the 1960s, more than half of the working population in Korea had a job at one of the Chaebols. Several including LG , Hyundai and Samsung began to establish global reputations while their hundreds of thousands of employees, often effectively hired for life, became the backbone of South Korea’s new middle class.13 The founder of Samsung, Lee Byung-chull was said to have participated personally in all hiring interviews between 1957 and 1986, which means he must have attended over 100,000 interviews in that time.14
8 https://www.cnet.com/uk/news/the-chaebols-the-rise-of-south-koreas-mighty-conglomerates/, accessed 25 April 2017 9 Toyota Motor Corp.: Heir Steers Carmaker out of Crisis, by Morten Bennedsen and Brian Henry, INSEAD business case, Ref.: 01/2016-6189 10 Samsung and Daewoo: Two Tales of One City, by Donald N. Sull, Choelsoon Park and Seong-hoon Kim, Harvard Business School, 9-804-055, 2 June 2004, p. 2 11 Divergent Capitalisms: The Social Structuring and Change of Business Systems, by Richard Whitley, Oxford University Press, 1999, p. 143 12 Samsung, Media Empire and Family: A power web, by Chunhyo Kim, Routledge, 2016, p. 35-36 13 Samsung heir’s jailing may spark reforms, ShanghaiDaily.com, 28 August 2017 14 Samsung, Media Empire and Family: A power web, by Chunhyo Kim, Routledge, 2016, p. 35-36
Lee’s domineering style in the hiring process was a reflection of the strong central control over decision-making that was required to run a highly diversified conglomerate. “The post-war Korean management system has been described as authoritarian and top-down in nature, personalistic and paternalistic, with high supervisory control and key decisions made by top managers, especially the chairman.”15 Supporting the Chaebol founders in their control over the diversified entities were structural planning offices (called control towers) that intervened extensively in the affairs of the subsidiaries, arranging for financing, hiring, planning, investments; some of these offices employed as many as 250 staff.16 Confucian Traditions in the Workforce
Diversification suited the Chaebol since it allowed the company to rely on internally generated cash from one operation to fund other operations. Nevertheless like many emerging markets in this period, Korea suffered from a scarcity of well-trained managers. With only a handful of high-quality business schools in Korea, the number of entry-level managers was far fewer than the fast-growing economy needed. Furthermore, most Chaebol founders had a strong Confucian tradition of respect for elders, which led to a hierarchal environment with a seniority-based compensation and promotion system.17 Having a workforce with little training and low mobility worked fine in the early years, when the Chaebol competed as low-cost original equipment manufacturers. But when the second-generation leaders, such as Samsung’s Lee Kun-hee, decided to expand their footprint on the global stage in the mid-1990s, workers were trained to be more innovative and outsiders with fresh idea were brought in. By the 1980s, conglomerates had largely died out in Europe and North America. They were seen as too unwieldy, as many Western management gurus like Peter Drucker favoured decentralized organizations.18 On the other hand, research has shown that highly diversified business groups were particularly well suited to the institutional context of most developing countries.19 Research has shown that the business houses of India and the grupos of Latin America, “can add value by imitating the functions of several institutions that are present only in advanced economies.”20 Following WW2, Chaebol came to dominate South Korea’s political, economic, cultural and social institutions (see Figure 2 showing top 10 Chaebol between 1998 and 200721). Samsung, for example, posted revenues of $304 billion in 2013, which represented nearly 25% of South
15 South Korea: Plutocratic State-Led Capitalism Reconfiguring, by Michael Witt (2014), in Michael A. Witt and Gordon Redding (Eds.), The Oxford Handbook of Asian Business Systems, 216-237. Oxford, UK: Oxford University Press, p. 218 16 Ibid. 17 The Paradox of Samsung’s Rise, by Tarun Khanna, Jaeyong Song, and Kyungmook Lee, Harvard Business Review, July-August 2011 18 https://www.inc.com/articles/2009/11/drucker.html, accessed 17 July 2017 19 Why Conglomerates Thrive (Outside the U.S.), by J. Ramachandran, K.S. Manikandan, and Anirvan Pant, Harvard Business Review, December 2013, p. 1 20 Why Focused Strategies May Be Wrong for Emerging Markets, by Tarun Khanna and Krishna Palepu, Harvard Business Review, July-August 1997 21 Samsung, Media Empire and Family: A power web, by Chunhyo Kim, Routledge, 2016, p. 3
Korea’s entire GDP in that year.22 With around 80 subsidiaries, Samsung were present in almost every sector of the Korean economy from building skyscrapers and ships to running, luxury hotels, amusement parks and golf courses.23 The Chung family which owned the Hyundai Group controlled more than 70 subsidiaries, while the Koo family which ran the LG Group owned as many as 70 subsidiaries.24
General Park Chung-hee Puts Chaebol to Work
The Samsung Chaebol came into its own under the regime of an autocratic general. In 1961, General Park Chung-hee, the head of an emerging military clique, seized power in a coup in 1961. At that time, Lee Byung-chull was temporarily living in Japan, but returned to Seoul following the coup. General Park quickly swept most of the ongoing corruption scandals arising from the Rhee government under the table on the condition that the Chaebol founders work with him toward building Korea into a major economic power. Under Park’s autocratic rule that lasted for two decades, the Korean government devised a partnership system of close ties between government and the Chaebol, although favouring certain industries. The government also provided financial credits to the Chaebol in order to import raw materials and technology at the expense of consumer goods, and directed savings and investment over consumption. As the country rapidly industrialized, Korea’s export-driven trade with other countries began to grow faster than her imports. This export-driven growth at the expense of cheap imported consumer goods came at a great sacrifice to Korean workers who also came up against strict controls over wages and laws outlawing strikes.25
22 The Chaebols: Samsung and LG’s 50-year ‘star wars’, by Cho Mu-hyun, cnet, 9 April 2015 23 Succession Planning at Samsung: The Merger Formula of Cheil Industries and Samsung C&T, by Gwen Yu and Tim Gray, Harvard Business Case, 9 December 2016, Ref: 9-117-036, p. 1 24 Samsung, Media Empire and Family: A power web, by Chunhyo Kim, Routledge, 2016, p. XIX 25 Samsung, Media Empire and Family: A power web, by Chunhyo Kim, Routledge, 2016, p. 1
Having sent approximately 320,000 South Korean troops to support American GIs during the Vietnam War during the 1960s, the general had a claim on a number of powerful politicians in Washington D.C. In return for his unwavering support to an unpopular war, Park collected billions of dollars in grants, loans, subsidies, technology transfers and preferential markets, all provided by the Johnson and Nixon administrations.26 With a near bottomless war chest, Park coaxed, wheedled, intimidated, manipulated and outright threatened the Chaebol to cooperate with him, offering financial incentives including government and foreign loans and other inducements such as relaxed environmental and governance regulations and tax cuts.27 Transforming Korea into a Modern State
Believing that home-grown corporations were necessary to transform Korea into an industrialized nation, Park promised to protect Korea’s infant industries against foreign competitors like the fast-growing American and Japanese multinationals. To this end, he carefully fostered Chaebol founders who operated in selected industries. In the 1960s, Samsung entered the paper, electronics, fertilizer, retailing and life insurance industries (see Figure 3 for a list of Samsung affiliates). In 1965, he established a newspaper call JoongAng Ilbo, which went on to become one of the three biggest newspapers in South Korea. Today, the paper publishes an English edition, Korea JoongAng Daily, in alliance with the International New York Times.28
In the 1970s and early 1980s, Samsung diversified into petrochemicals, hotels, shipbuilding and construction. (In 1978, Lee Byung-chull established a museum in which he donated his
26 https://en.wikipedia.org/wiki/Park_Chung-hee, accessed 24 May 2017 27 The Chaebols: The rise of South Korea’s mighty conglomerates, by Cho Mu-hyun, cnet, 7 April 2015 28 https://en.wikipedia.org/wiki/JoongAng_Ilbo, accessed 21 July 2017
growing collection of art, a centre which was eventually managed by Hong Ra-hee, the wife of the second-generation leader.) By 1980, Samsung posted revenues of $3 billion.29 The Lee family continued to maintain strong political relationships with all successive Korean governments following the assassination of Park on 26 October 1979. During his leadership of Samsung lasting 50 years, Lee Byung-chul developed a corporate philosophy to legitimate his family’s control over his growing empire. Like all Chaebol leaders, the founder was influenced by Confucian values of patriarchal authority, filial piety, loyalty and the need for social relations among the extended family.30 But he developed his
own set of principles called Samsungism, based on three major tenets:
• Business
for national
interests (saupbokuk) which emphasizes the organic relationship between national development and Samsung businesses;
• Support for
talented people
first (injaejeil) who show loyalty to the Lee family and produce outstanding results for the company;
• The pursuit
of rationalism (haprichuku) based on long-term profits.31 Lee Kun-hee
Turns Samsung
Around
29 Transforming Human Resource Management in a Korean Chaebol: A Case Study of Samsung, by Vladimir Pucik and Jun-Cheol Lim, 30 Samsung, Media Empire and Family: A power web, by Chunhyo Kim, Routledge, 2016, p. 5 31 Samsung, Media Empire and Family: A power web, by Chunhyo Kim, Routledge, 2016, p. 37
When Lee Byung-chull died in 1987, it was his third son Lee Kun-hee who became his successor according to his father’s wishes. Born in 1942, Lee Kun-hee joined the Samsung Group in 1968 at the age of 26. He majored in economics at Waseda University, the same Japanese school that his father attended; but he also went on to earn an MBA from George Washington University, Washington, D.C. (see Figure 4 for the Lee family tree32).33 He married Hong Ra-hee, the first daughter of the wealthy Hong family, which controls two Chaebol, JoongAng Ilbo Group and the Bokwang Group (see Figure 5 for the Hong Chaebol34).35 The relationships between the Hong family and the Lee family had already been closely intertwined by the time Lee Kun-hee married Hong Ra-hee, which deepened both families’ complex network of interlinked ownership. Her father was the former chairman of JoongAng Ilbo, while her brother was the largest shareholder of Samsung Everland. Lee Kun-hee and his brothers and sisters owned the largest stake in JoongAng Ilbo, having inherited their father’s shares. In 1999, the two families decided to swap out the ownership of Samsung Everland and JoongAng Ilbo through an exchange of shares, giving the Lee family control over Everland and the Hong family control over JoongAng Ilbo. In 2015, the third-generation heir Lee Jae-yong turned Everland into the de facto holding company of the Samsung Group (see Case
B).36 About five years before his death, Lee Byung-chull dismissed his first- and second-born sons as potential heirs to the chairmanship of the Group. However this did not prevent these two sons and the founder’s other children from moving up into the executive ranks of the Group. Many of the founder’s 11 children including seven women—the founder had two wives—were offered executive positions in the various Samsung affiliates as a way to keep family control over the sprawling enterprise. Having succeeded his father as chairman of Samsung Group in 1987, Lee Kun-hee turned out to be one of the most innovative family-business leaders in the annals of Chaebol history. Nothing was old-fashioned about this world-class
32 Succession at Samsung, by Bachelor degree students taking a course in Family Business & Wealth Management, NUS Business School, Fall Semester 2016 33 https://global.britannica.com/biography/Lee-Kun-Hee, accessed 3 May 2017 34 Samsung, Media Empire and Family: A power web, by Chunhyo Kim, Routledge, 2016, p. 108 35 This section is based on Samsung, Media Empire and Family: A power web, by Chunhyo Kim, Routledge, 2016 36 ibid
visionary who inaugurated the ‘New Samsung’ era soon after the Asian financial crisis of the mid-1990s, which almost drove a number of Chaebol into bankruptcy. Taking Quality to the Next Level
To prevent Samsung from going belly up, Lee Kun-hee ordered his company executives across the 80 affiliates to cut costs. In this period, 29,000 workers were laid off and $2 billion worth of corporate assets were sold. He was also determined to create synergies through the Group’s diversified network of companies.
Samsung Electronics is one of the few companies in the world that handles components,
digital products, home electronics, and communications businesses under one roof. These
divisions cooperate with and support each other.
-Chairman Kun-Hee Lee37 In the 1990s, Kun-Hee Lee transformed Samsung’s business strategy from one driven by exports to one led by foreign direct investment (FDI) and joint ventures. In this period, Samsung entered into joint ventures with appropriate partners abroad to manufacture televisions, refrigerators and video equipment. It also used FDI to establish regional headquarters in China, Europe, Singapore and North America. In addition, he set up factories in China and other countries to manufacture consumer electronics and appliances. By 2005, Samsung had established 64 manufacturing and sales subsidiaries and 13 R&D centres around the world. To make this transformation sustainable, Kun-Hee Lee had to change the business culture at home. He aggressively pushed for quality over quantity, calling product defects ‘cancers.’
One of the most memorable events from this epoch took place in 1995 when, before weeping Samsung employees, he personally burned 150,000 cell phones that were considered defective. He rebranded Samsung from a vendor of cheap goods into an innovative brand selling high-quality products. Sometimes his focus on change management extended too far. He once demanded that his
37 As cited in Dynamic Capabilities at Samsung: Optimizing Internal Co-opetition, by Jaeyong Song, Kyungmook Lee and Tarun Knanna, California Management Review 58, no. 4 (Summer 2016): 118–140.Chairman Kun-Hee Lee in an interview with Korea Economic Daily in 2002
employees “change everything except your wife and children”.38 In the end however, Lee Kun-hee successfully turned Samsung into the biggest Chaebol in Korea and one of the largest electronics manufacturing companies in the world. In the period just before the beginning of a new millennium, Lee Kun-hee initiated a major restructuring programme, reducing Samsung’s debt of $15 billion in 1997 to $4.6 billion by 2002; net margins rose from a negative 3% to 13% in the same time frame. Samsung recorded net profits of $5.9 billion on sales of $44.6 billion in 2002, compared with $2.8 billion in profits and $28 billion in sales in 1999. Not bad for a company that almost disappeared four years earlier. As part of the reorganization, Lee Kun-hee introduced into its seniority-based pay structure a merit-based compensation system modelled after the best practices of Western companies. He also allowed high performers to advance more rapidly through its seniority-based promotion system. To make sure these changes went forward, Lee Kun-hee hired outsiders to join the firm and those that succeeded often took care to fit into the Korean culture.39 Under his chairmanship, the Samsung Group grew into a business empire with about 80 affiliates. It had annual revenues of 400 trillion won ($387 billion), employed 369,000 people worldwide and sold products spanning across all aspects of life from washing machines, resorts, life insurance, nuclear plants and construction. Driven by its culture of continuous innovation, superior knowledge and intangible skills, the company dominated the global market for memory chips, flat-panel televisions and smartphones. Many of its inventions were relatively unique in the consumer electronics industry, giving its brand image a certain allure. For the Lee family, Lee Kun-hee created a complex network of ownership that enabled him to control the operations of all the affiliates from his base in a holding company in which the family had a majority stake (see Figure 6 for the ownership structure of the Samsung Group40).41 Power of Networks
Marriage and social networks in business have always played a major part in Korean history. The unifier of Korea Tae-jo Wang-gu (877) married no less than 29 times to build ties with many local dynasties. Chaebol families continue to see marriage as a means to build powerful business networks. A study in the mid-1970s of the largest 100 Chaebol found that 13.5% of their top executives were related to the founder by blood or marriage and occupied 21% of the
38 As cited in The Economist at http://www.economist.com/news/business/21620195-succession-looms-korean-conglomerate-much-has-change-waiting-wings, accessed 3 May 2017 39 The Paradox of Samsung’s Rise, by Tarun Khanna, Jaeyong Song, and Kyungmook Lee, Harvard Business Review, July-August 2011 40 40 Succession at Samsung: The Lee Family, by Chua Bee Hwee, Park Ji Yeon, Poon Jun Boon, Sean Ling Wei Tsi, Tan Fang Jie, a report for a course in Family Business & Wealth Management, NUS Business School, Fall Semester 2016 41 The Family Business Map, Assets and Roadblocks in long-term Planning, Morten Bennedsen and Joseph P.H. Fan, Palgrave Macmillan, 2014, p. 118
top managerial posts.42 Samsung and LG have been connected by family to many politicians and other influential people in Korean society.43 Lee Byung-chull’s first and second sons were married into Korean political families, while another son and one of his daughters married into Korean banking families. Lee Kun-hee’s second daughter was married to the third son of the founder of the LG, Koo In-hwoi, who went to work at Samsung. Together, the couple launched Tongyang Broadcasting, a joint venture between LG and Samsung that enjoyed considerable success until it was merged with the Korean Broadcasting System in 1980.44 The former CEO of LG, Koo In-hee, has been called the king of Chaebol marriages because of his extensive family network that reached out to almost all other Chaebol families. Fathering six sons and two daughters, Koo In-hee thought that marriage was as much a business as it was a family. Koreans used to say, “All roads lead to Rome, all people lead to the LG family network.”45 Chaebol family members have also played a significant role in the politics. In 1988, Chung Mong-joon, one of the sons of the founder of Hyundai, became an elected member of the National Assembly of South Korea. In 1992, his father, the founder of the Chaebol Chung Ju-yung, ran as a presidential candidate for 1992 Korea presidential election. He ran on a peace ticket to normalize relations between the two Koreas. In 1998, at the age of 82, he worked with the South Korean government to provide economic assistance to the North.46 Credited with successfully lobbying for South Korea to host the 1988 Summer Olympics, Chung ran Hyundai until his death from natural causes at the age of 85 in 2001. In order to extend their political networks, the Lee family used the prospect of getting a job at the company as a calling card. Being hired was seen as a particular perk for retired government employees. In a study of post-retirement jobs of 1,866 high-ranking government officials, it was found that 186 officials were offered positions in various parts of the Samsung empire. Many of them were from the Ministry of Defence, National Police Agency, Supreme Prosecutor’s Office, National Tax Office and the Financial Services Commission. In return for their jobs, the retired executives agreed to influence political decisions through their connections and rank. This political network provided Samsung with an advantage in acquiring information regarding government actions or policies.47 Conclusion
42 Divergent Capitalisms: The Social Structuring and Change of Business Systems, by Richard Whitley, Oxford University Press, 1999, p. 142 43 The Family Business Map, Assets and Roadblocks in long-term Planning, Morten Bennedsen and Joseph P.H. Fan, Palgrave Macmillan, 2014, p.42; also cited in The family assets and roadblocks of Korean Chaebols:
Marriage & Political network, by Yeongsu Kim, INSEAD MBA, p. 2, 44 https://en.wikipedia.org/wiki/Tongyang_Broadcasting_Company, accessed 2 May 2017 45 Cited in The family assets and roadblocks of Korean Chaebols: Marriage & Political network, by Yeongsu Kim, INSEAD MBA, p. 2 46 https://en.wikipedia.org/wiki/Chung_Ju-yung, access 1 June 2017. 47 Succession at Samsung: The Lee Family, by Chua Bee Hwee, Park Ji Yeon, Poon Jun Boon, Sean Ling Wei Tsi, Tan Fang Jie, Report prepared for a course in Family Business & Wealth Management, NUS Business School, Fall Semester 2016
Ever since Samsung was founded in 1938, the Lee family has nurtured its networks of interlocking business relationships in Korea and across the world. These economically beneficial relationships with other business entities, such as manufacturers, distributors, suppliers, retailers, consultants, banks, transportation suppliers, and governments have fostered organizational learning across the entire Group including the dozens of Samsung business units under the family’s control. The core values that the Lee family specifically contributed to the firm have been continuous innovation and superior knowledge. With these intangible skills, the family has provided Samsung with advantages that it has used to dominate world markets in such products as LCD panels and smart phones. By exploiting the legacy of the firm in its business strategy, the current de facto leader Lee Jae-yong has continued to propel Samsung onto the world stage. Thanks to the enduring legacy of his father and grandfather, the third generation heir was able to carry on in his leadership role despite being in prison for most of 2017. In fact, the brand image of Samsung has not been tarnished. Samsung Electronics was ranked No. 6 on Interbrand’s Best Global Brands 2017 list with a brand value of $56.2 billion, one position up and a 9% increase from last year. In addition, Interbrand, the global brand consultancy, ranked Samsung as one of the top 10 brands from 2012 to 2017. In Part B of this three-part Samsung case, the Lee family’s succession planning is discussed.
1. Why did Samsung become so successful over time? 2. What are the specific contributions that the Lee family contributed to the growth of
Samsung? 3. Are these family contributions still important for Samsung today and in the future? 4. What can other families learn from the history of the Lee family in growing their
