Samsung Group chairman Lee Kun-hee brought a group of executives to Los Angeles and Tokyo in 1993 to show them how their products were treated in electronics stores in the cities. They felt embarrassed when they saw a few home appliances manufactured by Samsung put in an out-of-the-way corner of the shops they visited.
In the two decades since then, Samsung Electronics Co. has grown into the world’s top maker of smartphones, computer memory chips and flat-panel TVs. The company announced this week it sold a record 1.15 million TVs in the U.S. market in October, a year after breaking the 1-million mark. Its smartphone sales more than doubled from a year earlier in the third quarter, solidifying its top position in the segment.
For the July-September period, the company reaped a record-breaking net profit of 6.56 trillion won ($6.01 billion), with revenues amounting to 52.1 trillion won.
This record performance is in stark contrast with the poor performance of Japan’s major electronics makers, which are being driven to the wall in the wake of past strategic mistakes.
The presidents of Sharp and Panasonic took deep bows in earnings presentations last week. The two companies together forecast $15.2 billion of net losses for the year ― $5.6 billion for Sharp and $9.6 billion for Panasonic.
Following the release of their earnings reports, Standard & Poor’s downgraded its credit rating for Panasonic’s long-term debt by two levels from “A-” to “BBB,” while Fitch slashed Sharp’s credit rating to “B-.” Sony kept its forecast of a narrow profit of $24.9 million for the financial year to March in spite of an $18.7 million net loss in the third quarter. While downsizing its TV-making business, the company seeks to focus on imaging technology, video games and smartphones. Some analysts see a possibility of a vicious circle in the company’s product strategy.
The degradation of Japan’s consumer electronics giants, which once dominated the global market, should not make their Korean competitors complacent with what they have achieved. It should rather teach them that they could face the same fate without accelerating innovation and making the right strategic choices.
Speaking at a recent ceremony commemorating the 43rd anniversary of its founding, a top Samsung executive warned that the company would collapse in a moment if it remains complacent with its present accomplishments and unprepared to enhance future competitiveness. His warning indicates the kind of thinking that all other executives in electronics and other high-tech industries should share.
Catching up with their Japanese rivals, Korea’s major electronics companies ― Samsung and LG Electronics Inc. ― need a new outlook that befits a trendsetter rather than a follower.
They need to look into the reasons for the current predicament of Japan’s home appliances manufacturers. It is paradoxical that the success of the Japanese companies has resulted in their failure. In the decades to the 1990s, they took the lead in developing innovative products such as the Walkman, DRAM, DVD and LCD and creating markets for them. They became overconfident that their No. 1 status based on technological prowess would be kept forever, neglecting to turn to new fields of innovation and pay heed to changes in the global market. They have often made heavy investments in the wrong areas.
Such strategic mistakes and self-debilitating compliance have forced the presidents of Sharp and Panasonic to apologize for poor earnings and admit that their companies had become losers.
The cases of the Japanese companies suggest that only a few missteps would also send Korean electronics makers tumbling off a cliff. Furthermore, checks against the rising shares of Korean companies in global markets have been increasingly toughened ― both in visible and invisible forms.
In these circumstances, it is encouraging and natural that Samsung and LG are tightening up their posture and accelerating innovative efforts. Japanese electronics giants’ struggle for survival may remind us there are no perennial winners in the business battlefield, but can be used by their Korean rivals as impetus for achieving that elusive goal.
