Samsung Affiliates Asked to Find Future Growth Engines

Samsung Group has instructed its affiliates to find new growth engines that will enable the Group to increase its profits in the next five to ten years. At present, Samsung’s affiliates are virtually on emergency footing.

Samsung Group recently informed each of its affiliates of the “Measures to Boost Competitiveness,” an official of the group said on Wednesday. The measures include the review of investment priorities, the removal of non-economic factors, and the establishment of new-growth engine task forces and a global outsourcing system.

In response to this, each affiliate has started to launch their own task forces which will seek out and identify future growth engines.

Affiliates will, however, be able to draw up their own timetable in accordance with their given situations. Samsung Group did not specify the deadline, according to the official.

Samsung Group’s affiliates have also been reorganizing human resources and investments according to the priority of each major project.

“Affiliates will increase investment and human resources in key businesses and reduce them in areas which are deemed to be less important, at their discretion,” a senior official of Samsung said. “However, the total amount of investment will not be decreased compared to last year.”

The group will also review its global sourcing system, including R&D, production and marketing, in consideration of the characteristics of each product. For instance, it will carry out a comprehensive checkup on the ideal location to manufacture low-end handsets for the Indian market or whether to relocate the R&D center of Cheil Industries to another country, in an attempt to strengthen its offshore production, R&D and marketing systems.

In addition, Samsung Group ordered its affiliates to discontinue their superfluous spending by selling golf club memberships and refraining from unnecessary overseas business trips and golf games among board members.

“The group drew up the measures to boost competitiveness because as well as chairman Lee Kun-hee reiterated the importance of crisis awareness this year, the business environment has been rapidly changing. For instance, oil prices have been soaring, whereas the value of the Japanese yen has decreased,” a Samsung official said. “The group suggested only the guidelines. Each affiliate will have the freedom to draw up their own specific action plans.”

“Although personnel or business restructuring may follow in the process of establishing and implementing plans, rumors such as “laying off 20 percent of company executives,” are groundless,” the official added.

higgledy@donga.com