Entrepreneurship and Innovation: Samsung Electronics - Case Study Example

Entrepreneurship and Innovation Introduction The context of the paper will critically evaluate and analyze the initiatives undertaken by a high technology company of Korea, (named Samsung) in the process of its transition, through which it has turned out to be an “innovator” instead of an “imitator’ in the market. The context of the paper will analyze the techniques and processes of innovation used by the Korean company (Samsung) and would also judge the ways through which it can still improve on this line. Finally the paper will recommend some strategic implications through which organizations in Oman can act as an “innovator” in the market instead of being an “imitator” (Goldstein and Pusterla, 2010). Techniques and Process of Innovation Assessment and Reflection The case company on basis of whom the techniques and process of innovation will be analyzed is Samsung Electronics. The company has achieved significant success in its semiconductor, TFT-LCD and Mobile phone trading in a very short period of time. However, the article claims that such prosperity could be achieved by the company through its catching up strategy in business that could be implemented only with the essence of new innovations. It has been found that the company has implemented several techniques and processes through which its business could entertain high degree of innovation. It is highly rational to analyze such techniques and process, because these can be used as generalized rules through which any company in a developing nation can gain competency through innovation (Sauvant, 2005). Through detailed research, the article claimed that technology development in Samsung took place through few steps as: External Learning Internal learning and generation Dependent external performance Independent external performance Figure 1: Samsung Transition Process from Imitation to Innovation (Source: Kima, Shib and Gregoryc, 2004) The above table explains the process of transition that went through Samsung when it became an innovator in the market, instead of being an imitator. External Learning: this is a step through which a company acquires a process or product based technology from the external world. Under the regime of this step of transition the company of Samsung introduced new strategies in business through which designing and assigning of special research and development products were implemented. However, at this time the company did not possess the expertise to know about the required productive technologies in business. The concepts regarding feasibility and difficultly that could be experienced by the company at the time of technological development were also not developed. New forms of technology were used by the company through transferring, licensing and acquisition processes. The company was also not capable of designing new product development process and failed to understand the value of organizational learning during this point of time. The limited technology that was developed in the firm was based on tacit knowledge. Internal learning and generation: this is a process by virtue of which a firm invents new technology and concepts of development in business. Such generation or internal learning is created with the assistance of previously acquired external learning of a firm. It helps to enhance the internal capabilities and productivity of a business organization. The company of Samsung understood the importance of transforming its organizational structure during this phase. Some preliminary attempts were also undertaken for organizational designing. The firm however started investing large amount of money for the purpose of research and development during this period of time. The firm started to conduct some collaborative projects during this period of time by virtue of which it could easily build and enhance innovative knowledge within its business. Both the steps of external learning and internal learning as well as generation help to enhance the pool of product as well as knowledge based technologies of a firm. However, it should be noted that through the accomplishment of these two steps, the firm still remains a simple imitator in the market. Dependent external performance: this is the third process by virtue of which an imitator in the market acts as innovator; however such attempt is only made by the firm through dependent external performance. Under this step of transition, the company started to act as an innovator in the industry. The primary strategies that were formulated by the firm during this period of time were dedicated towards market research, through which the company could assess the activities undertaken by its rivals in the industry. It started to implemented several research and development projects that it had planned in the early stages of the transition. After inventing some new technologies by virtue of these projects, the company stated to own new patents based on these newly invested technologies. The company introduced a parallel development process in its business during this stage of transition. However, any sort of external technical support that the company was utilizing in the previous stages of transition was eliminated at this stage. The value and worth of productive manufacturing process in business was realized and numerous projects were introduced in the course of operations of the firm. The company has improved the level and scope of innovation in its resource and product based technologies on the basis of five major categories. These are: (a) Research and Development Activities (b) Organizational configuration: under the regime of this category the (c) NPD Process (d) Manufacturing Process (e) Strategies The various initiatives that were undertaken by the company of Samsung in the three above stages helped it become an innovator from imitator (Lin, Cook and Burt, 2001). Independent external performance: this is the stage in which the most conductive circumstances of innovations are introduced in a business. At this phase the concerned company is claimed as a complete innovator in the market. Samsung Electronics is at present in the independent external performance storage of transition process (from imitator to innovator). The NPD services based on the concurrent technologies were also introduced by the company at present under the regime of this stage. However, the company at present uses the parallel development strategy in business by virtue of which technology and production development process of the firm is tacked together. It also runs multiple organizational structures in its business. Samsung has significantly expanded the scope of its business internationalization with the help of its new business innovations. In 2014, the company has introduced a new form of Dynamic Pricing Electronic Label. The company is helping in the formation of few new Smart Schools, where students are taught with its superior technological gadgets. Innovation Management Strategy Analysis The Korean company of Samsung Electronics has travelled at the end of transition process through which it has become an innovator in the market from an imitator. It can be analyzed that the company is in the independent external performance stage in its business. It implements the parallel development strategy in its business (Kor and Mahoney, 2004). Figure 2: Parallel Development Strategy (Source: Kima, Shib and Gregoryc, 2004) The above figure shows the core development strategy used by the firm, that is a mixture of product and process based technology development strategy. However, it should be analyzed that the parallel process of development of the firm is tackled through four main activities. There are: Research and Development Organizational Structure NPD Process Manufacturing Process If, analyzed it details it can be found that this strategy has significantly helped the company gain competencies in business. The lead times for the projects formulated by the company are reduced through such developments. The company is able to launch new attractive products in the market. It gains special technical support by virtue of which new process based technologies are introduced. The technological gap that existed between the product and process based technologies of the firm is also reduced substantially. All such advantages can be experienced by the company of Samsung with the essence of its superior research and development activities conducted under the regime of its innovation management. Along with its extensive research and development activities, the company has also revised its organizational structure that has helped it introduce new ways through which impending problems can be resolved easily in business. The efficient organizational structure of the firm helps it understand the interactions between product and resource based technologies in a more efficient pattern. Rather the firm easily breaks the technological gap between product and resource based technologies with the assistance of its organizational structure. The company at present is able to launch new products in very short span of time with the essence of its NPD services. Through its modern product manufacturing process, the firm becomes successful in increasing its product yield ration every year. At the same time with the essence of new manufacturing technologies, the firm has become successful in reducing its cost of manufacturing over time (McNally, 1995). Thus, from the above context it can be analyzed that the parallel development strategy of the firm has been successfully maintained by it only with the benefits of its improved research and development organizational structure NPD process manufacturing process. As, increased activities introduced by the firm on the basis of these four dimensions have helped gain certain competences in business by virtue of which it has become successful in maintaining the parallel development strategy in business. This strategy is used and implemented in the firm for the purpose of its innovation management (Gonzalez-Alvarez and Solis-Rodriguez, 2011). The company of Samsung has developed new innovative technologies with the assistance of its innovation management that have helped it gain special competitive advantages in business that cannot be easily understood or imitated by its rivals. Though the company arrived in the industry much later but still it has been successful to render strong competition to the others established potential rivals, only with the help of its innovation management. However, the company at present is facing some problems while making some improvements in its manufacturing process. It firm has found that enhancing its vast production capacity is a very long term and costly investment process. With its increased scope of business internationalization, the requisites for new technologies for the company have also increased. This has increased the demand for investable funds for the firm. Moreover, the company constantly fears that its new invented patented technologies would be imitated by some of its rivals through the process of reverse engineering. Such circumstances would significantly lower the competency of the firm in the market (Madsen, Neergaard and Ulhøi, 2008). Innovation Management Improvement Recommendations From the above context it would be correct to conclude that the company of Samsung has significantly improved its overseas business, by becoming an innovator in the market instead of being a simple imitator. However, company needs to develop some new technologies still now by virtue of which it can enhance its manufacturing process. The company experiences high costs for manufacturing its TFT LCD panels, with the essence of new manufacturing technologies such costs can be successfully lowered by the firm (Guo, Zhao and Tang, 2013). It is often noted that in the high tech industry the technologies that are newly used by the firms are often does not protected through patents and licenses. Under such circumstances, the competitors of a firm can easily copy such rarely used technologies through the process of reverse engineering. Thus, Samsung needs to develop new technologies through which it can fiercely protect its newly invested technologies from being imitated by any of its rivals. Rather on the basis of the theory of Transaction Cost Economics (recourse based view), it can be stated that the company should try to acquire more unique and rare resources in its business that cannot be easily imitated by any of rivals in the industry (Hakim, 2010). Increased market seeking activities must also be encouraged by the firm, with the essence of which it would be able to sale its products in some new emerging markets. By increasing its aggregate sales, the company would be able to enjoy the benefits of economies of scale in production and hence lower its production costs. The firm should encourage resource seeking investments in its business through which it would be able to increase the expenditures made on productive business growth. With the help of the above strategic changes and alterations the innovation management of the company would surely improve in the long run (Gummesson, 2010). Innovative Environment Innovation in process or production system of a firm relates to creation of new ideas in the specific fields of business. If the company of Samsung desires to expand its business and brand value in the market in long run, then it should create an innovative environment in its workplace. The management of the firm should be open minded in nature and should encourage new creative ideas in its business operations. Generating new innovations in business of Samsung should be primarily tackled by its research and development segment. The labor, capital and technology resources available in this segment of the firm must be capable enough to create new productive ideas and technologies in business. However, the managers of the company needs to realize that innovation is not domain specific in nature and thus it is highly rational to first focus on the exact business areas where innovation can be introduced feasibly. The extent of innovation encouragement in a business firm also substantially depends on its quality of leadership. The leaders of Samsung should govern the affairs of the company through the norms of strategic entrepreneurship. The senior officials of the firm should be transformational leaders, who would rule and tackle the affairs of the firm through norms of “Four I’s” (Glover, 2013). The four major characteristic features of these leaders would be idealized influence, inspirational motivation, intellectual stimulation and individualized consideration. Thus the senior professionals of the company should be entrepreneurial capitalists who would constantly encourage and introduce new ideas and opportunities in business. It should also be noted that all the workers in the organization should be well motivated at work. Motivation provided to the employees would help in bridging the gap between the workers ability and willingness to work. The scope and scale of new innovations in business would only increase with the essence of efficient work done by motivated employees. The company should practice open innovation in its business. Under the regime of open innovation practices, the company can make use of productive external ideas from the market, for formulating growth and innovation in business (Northouse, 2001). The company should realize that innovation in the current era can be effectively introduced in business through an organization-wide effort (Flint, Woodruff and Gardial, 2007). Thus, both reward and expect innovation should be introduced from all the segments of the firm, apart from the research and development segment. The professionals of the company should not treat innovation as a process of using scare resources in business for attaining uncertain outcomes. Rather they should treat it as a simple mechanism by virtue of which they would be able to create competitive advantage and new knowledge in business. Apart from motivation of the workers, appropriate knowledge sharing and training sessions can also make the employees of an organization more creative in workplaces. However, the officials of the firm should not confuse between mainstream and innovation factors in business, this is because ways to maximize profit in business at present might not represent the best opportunities of the firm in future. The innovation process of the firm should be according to the views of Simic, who stated that “the creative process works well when it is not too structured but, in the long run, it must be tamed, harnessed, and hitched to the wagon of mankind’s needs” (Simic, 1998). Thus, with the help of the above few steps the company of Samsung or any other firm would be able to introduce an innovation environment within its organizational structure (Clark and Mathur, 2011). Learning for Organizations in Oman The economy of Oman significantly depends on oil resources. It is a middle income nation and the government of the country imposes very less restrictions on the operations of the domestic companies of its economy (CIA, 2014). At present, the country is a labor surplus economy and its financial reserves are significantly falling in the recent years. The degree of domestic commercial competition has significantly increased in the nation as its economy at present aims to reduce its dependence on oil sector (thus heading towards greater industrialization and diversification). Considering the business environment of Oman, on the basis of the context of the essay, it can be claimed that the companies of Oman must try to encourage an innovative environment within its workplaces, in order to lead or sustain in the strong competitive environment of the nation. This can be accomplished by the firms of the country with the active contribution of an efficient innovation management system, that would enhance its product and process based technologies in business. Only with the essence of better technologies, the companies would be able to reduce cost of business operations and gain competitive advantage in business. At the same time the companies of the country should be governed by strategic entrepreneurial capabilities that would help to enhance the market and resource seeking activities of the firms. Innovation is the primary key of success for all the firms in Oman. However, it should be noted that the companies should innovate new technologies in business instead of just imitating them from other firms (Ernst & Young, 2011). Conclusion Since the emergence of liberalization and globalization, the scope and magnitude of commercial activities between the developing and developed nations have significantly increased. However, since the implementation of strict open door policies, many companies of the developing nations are finding difficulties to compete with their potential rivals in the international markets. At this juncture, according to the views of Woojae Kima, Yongjiang Shib, and Mike Gregory, these firms in the developing nations must adopt the policy of innovation instead of imitation, to gain higher competencies in the industry. The case study of Samsung Electronics shows that effective innovation management in business can help a firm expend its business internationalization scales and hence generate growth of its native nation. The parallel development strategy of Samsung is rational as it has helped the firm enhance both process and product based technologies by virtue of which they have gained substantial competitive advantages in business. It would be correct to conclude that like Samsung, a technological transition process (from an imitator to an innovator) can help any firm grow in the long run (Bajaj, 2001). Reference List Bajaj, C., 2001. Foreign Collaborations: An innovative option. IIMB Management Review, 6(3), pp.142-145. CIA, 2014. The world fact book. [online] Available at: < https://www.cia.gov/library/publications/the-world-factbook/geos/mu.html> [Accessed 11 March 2014]. Clark, T. and Mathur, L. L., 2011. Global myopia: Globalization theory in international business. Journal of International Management, 2(4), pp. 361–372. Ernst & Young, 2011. Doing business in Oman. [pdf] Ernst & Young. Available at: < http://vae.ahk.de/fileadmin/ahk_vae/Startseite_Oman/Doing_business_in_Oman__Final_.pdf> > [Accessed 11 March 2014]. Flint, D. J., Woodruff, R. B. and Gardial, S. F., 2007. Customer value change in industrial marketing relationships: A call for new strategies and research. Industrial Marketing Management, 26(2), pp. 163–176. Glover, J. L., 2013. Capital usage in family farm businesses. Journal of Family Business Management, 3(2), pp.136 – 162. Goldstein, A and Pusterla, F., 2010. Emerging economies multinationals. International Journal for Emerging Markets, 5(3), pp. 289-306. Gonzalez-Alvarez, N. and Solis-Rodriguez, V., 2011. Discovery of entrepreneurial opportunities: a gender perspective. Industrial Management & Data Systems, 111(5), pp.755 – 775. Gummesson, E., 2010. Implementation requires a relationship marketing paradigm. Journal of the Academy of Marketing Science, 2(6), pp. 242 – 249. Guo, H., Zhao, J. and Tang, J., 2013. The role of top managers human and social capital in business model innovation. Chinese Management Studies, 7(3), pp.447 – 469. Hakim, C., 2010. Research design: Strategies and choices in the design of social research. Investment Management Journal, 7(1), pp. 61 – 75. Kima, W., Shib, Y. and Gregoryc, M., 2004. Transition from imitation to innovation: lessons from a Korean multinational corporation. International Journal of Business, 9(4), pp. 1083-4346. Kor, Yasemin Y. and Mahoney, Joseph T., 2004. Edith Penrose’s (1959) contributions to the resource-based view of strategic management. Journal of Management Studies, 41(1), pp. 22- 2380. Lin, N., Cook, K. S. and Burt, R. S., 2001. Social Capital: Theory and Research. New Jersey: Transaction Publishers. Madsen, H., Neergaard, H. and Ulhøi, J. P., 2008. Factors influencing the establishment of knowledge-intensive ventures. International Journal of Entrepreneurial Behaviour & Research, 14(2), pp.70 – 84. McNally, K., 1995. Corporate venture capital: the financing of technology businesses. International Journal of Entrepreneurial Behaviour & Research, 1(3), pp.9 – 43. Northouse, P. G., 2001. Leadership theory and practice. California: Sage Publications, Inc. Samsung Village, 2014. Samsung Villange. [online] Available at: < http://www.samsungvillage.com/blog/2014/02/samsungblog-samsung-electro-mechanics-introduces-dynamic-pricing-electronic-label.html> [Accessed 11 March 2014]. Sauvant, K. P., 2005. New sources of FDI: the BRICs. The Journal of World Investment andTrade, 6(5), pp. 639-711. Simic, I., 1998. Transformational leadership-the key to successful management of transformational organizational changes. The Scientific Journal, 1(6), pp. 49-55. Read More