Samsung market cap has
fallen by over US$ 6 billion recently as the company struggles to innovate new
products which the company had been doing successfully for past many years. Samsung Electronics' chairman, Lee Kun-hee decades ago called Samsung management to
"change everything except for your wife and children” which led to company
not exactly innovating but copying
and then tweaking the innovations of others, producing
alternatives in the market and add-ons for software rather than developing useful,
original features for consumers itself. Its
strengths lie in its ability to quickly and cheaply research, develop, and
manufacture hardware in an amazing broad range of product categories, but
company has trouble in software development for its hardware. Despite the enormous amounts of money Samsung spends each
year on research and development, Samsung is struggling to innovate which is
having a significant effect on company’s revenues and brand image. Lee said Samsung must "get rid of business models
and strategies from five, ten years ago and hardware-focused ways and wants the company's massive research and development centers to
"work around the clock, non-stop." A report released by leading global consulting firm Booz
and Company highlighted the fact despite Samsung spending US$10.4 billion on R&D in the fiscal year ended June
2013, that included spend of all business divisions including mobile. Forecast
for current year is to surpass $11 billion, and around $10 million or so is
said to have been spent on developing Samsung’s flagship smartphone model.
Despite
the heavy spending, Samsung ranks third as the world’s most innovative
companies, following Apple and Google with Apple being major competitor in
smartphones and Google a big software partner as Android is owned by Google and
it is operating system for most of the Samsung mobiles. Samsung companies had successfully changed their strategy earlier as
they made transition from volume focus to quality focus in the past two decades
and they must now transition to upgrade the value and "class" of the
products and services they provide to consumers. Samsung chairman pointed out that greater opportunities
exist when companies and economies slow down and the conglomerate needs to look
beyond competition and innovate new technologies and enter new markets which
can only be achieved through convergence of industries and technologies. "There
is a great need to build up competitiveness that cannot be copied by rivals.
Old strategies, hardware-oriented processes and corporate cultures should be
boldly thrown away," the chairman emphasized. Samsung can only overcome
uncertainties only through initiatives that will lead to market and
technological breakthroughs. Samsung also needs to complete the setting up of a
global management system that can fuel change and innovation, he said. Samsung is the world's largest mobile
device, television and semiconductor producer, but developing software is critical for the company to compete with
firms such as Apple and Google -- both of which have made a number of
acquisitions to improve the software they offer. Samsung CFO Lee Sang Hoon said in November, 2013 that the
company will aggressively search to secure valuable startups and SMBs that
could improve its own products.
