case study analysis samsung

Samsung Electronics—A Detailed Case Study

Devashish Shrivastava

Samsung is a South Korean electronic gadget manufacturer in Samsung Town, Seoul. Samsung Electronics was established by Lee Byung-Chul in 1938 as an exchanging organization.

We all know this information about Samsung. Don't we? But what we don't know? Do you know how much Samsung has grown in these years? What are the Future Plans of Samsung? How much Samsung invested in its R&D? What difficulties did the company face coming all this way? What is the history behind this multinational conglomerate?

Don't worry we got you covered. We have penned down a detailed Case Study on Samsung Electronics. Let's find out in this thoroughly studied Samsung case study.

Let's start the detailed case study from here.

Samsung entered the electronics industry in the late 1960s and the development and shipbuilding ventures in the mid-1970. Following Lee's demise in 1987, Samsung was divided into five business groups - Samsung Group, Shinsegae Group, CJ Group, Hansol Group and Joongang Group.

Some of the notable Samsung industrial subsidiaries include Samsung Electronics, Samsung Heavy Industries  Samsung Engineering, and Samsung C&T (separately the world's 13th and 36th biggest development companies). Other notable subsidiaries include Samsung Life Insurance, Samsung Everland, and Cheil Worldwide.

Samsung has a powerful influence on South Korea's monetary advancement, legislative issues, media, and culture. Samsung has played a significant role behind the "Miracle on the Han River". Its subsidiary organizations produce around a fifth of South Korea's complete exports. Samsung's revenue was equivalent to 17% of South Korea's $1,082 billion GDP.

History of Samsung Electronics Samsung's Business Strategy Samsung Rides High In India Business Growth in India Future Plans of Samsung FAQ's

History of Samsung Electronics

1938 (Inception of Samsung)-

• In 1938, Lee Byung-Chul (1910–1987) of a huge landowning family in the Uiryeong region moved to nearby city Daegu and established Samsung Sanghoe.
• Samsung began as a little exchanging organization with forty representatives situated in Su-dong. It managed dried fish, privately developed staple goods and noodles. The organization succeeded and Lee moved its head office to Seoul in 1947.
• When the Korean War broke out, Lee had to leave Seoul. He began a sugar processing plant in Busan named Cheil Jedang. In 1954, Lee founded Cheil Mojik. It was the biggest woollen factory in the country.
• Samsung broadened into a wide range of territories. Lee wanted to build Samsung as a pioneer in a wide scope of enterprises.
• In 1947, Cho Hong-Jai, the Hyosung gathering's organizer, put resources into another organization called Samsung Mulsan Gongsa or the Samsung Trading Corporation with Samsung's founder Lee Byung-Chul. The exchanging firm developed into the present-day Samsung C&T Corporation .
• After few years in business, Cho and Lee got separated due to the differences in the management style. In 1980, Samsung acquired the Gumi-based Hanguk Jeonja Tongsin and entered the telecommunications market . During the initial days, it sold switchboards.

1987 (Demise of Lee Byung-Chul)-

• After Lee's demise in 1987, the Samsung Group was divided into four business gatherings—Samsung Group, Shinsegae Group, CJ Group, and the Hansol Group.
• One Hansol Group agent stated, "Just individuals uninformed of the laws overseeing the business world could think something so ridiculous," while also adding, "When Hansol got separated from the Samsung Group in 1991, it cut off all installment assurances and offer holding ties with Samsung subsidiaries."
• One Hansol Group source attested, "Hansol, Shinsegae, and CJ have been under autonomous administration since their particular divisions from the Samsung Group."
• One Shinsegae retail chain official executive stated, "Shinsegae has no installment certifications related to the Samsung Group." In 1982, it constructed a TV get-together plant in Portugal, a plant in New York in 1984, a plant in Tokyo in 1985 and an office in England in 1996.

2000 (Samsung in 20th Century)

• In 2000, Samsung opened a development center in Warsaw, Poland. It started with set-top-box technology before moving to TV and cell phones. The cell phone stage was created with accomplices and formally propelled with the first Samsung Solstice line of gadgets and different subordinates in 2008. It later emerged into the Samsung Galaxy line of gadgets that is Notes, Edge, and other models.
• In 2010, Samsung declared a ten-year development system based on five businesses. One of these organizations was to be centered around bio-pharmaceuticals in which ₩2,100 billion was invested.
• In the first quarter of 2012, Samsung Electronics turned into the world's biggest cell phone creator by unit deals, surpassing Nokia which had been the market chief since 1998.
• In 2015, Samsung was granted U.S. patents as compared to other organizations like IBM , Google , Sony, Microsoft , and Apple. Samsung got 7,679 utility licenses before 11 December 2015.
• On 2 August 2016, Samsung Electronics revealed the Galaxy Note7 smartphone, which went on sale on 19 August 2016. At the beginning of September 2016, it halted its selling of smartphones due to some problems with the smartphones. Samsung suspended the selling of the smartphones and recalled its units for inspection.
• This happened after certain units of the telephones had batteries with a deformity that made them produce extreme warmth, prompting flames and blasts. Samsung replaced the reviewed units of the telephones with a new version. It was later found that the new version of the Galaxy Note 7 also had the same battery deformity.
• Samsung recalled all Galaxy Note7 cell phones worldwide on 10 October 2016 and permanently ended its production on the same day.

Samsung's Business Strategy

Great business strategies have been applied by Samsung over the years. Not very far back, Samsung wasn't as famous as now. Samsung has now advanced so much that it is the principal contender of Apple Inc. Samsung is the biggest tech business by income and the seventh most significant brand today. The showcasing procedure it applied encouraged Samsung electronics to turn into an industry driving innovation organization.

The Samsung marketing strategy was one of the best systems at any point because it helped a cost-driven organization to change its structure and become a power producer. Due to the consistently changing tastes of purchasers in the innovation business, organizations needed to pursue the pace and offer dynamic and advancing devices to their clients. In this way, Samsung additionally needed to change to pick up the high ground available, and the new Samsung showcasing methodology was the way to advancement.

Some of the business strategies of Samsung Electronics are listed below:

Promotional Mix Of Samsung

Samsung has arrived at fantastic statures with its cell phones which helped the brand to turn into an image of value and unwavering quality for its purchasers.

Samsung Marketing Mix Pricing Strategy and Samsung Advertising Methodology are the two estimating techniques used by the organization. Other than its items, Samsung is celebrated for its customer support . However, item variety is the most dominant part of the promoting blend of Samsung.

• Skimming Price

Like Apple , Samsung uses skimming costs to pick up the high ground over its rivals. For example, Galaxy S6 and S6 Edge are the brand's new results of Samsung conveying the trademark "Next is Now" and guaranteeing that they are the best smartphone maker at any point made.

What will happen when different contenders will dispatch a cell phone with indistinguishable highlights? Straightforward. Samsung will bring down the cost and effectively steal the customers from its competitors.

• Focused Pricing

Samsung experiences issues in increasing an edge over its rivals with different items. Doubtlessly, Samsung is a credible brand. However, regarding home appliances, it can't be in any way, shape, or form outperform LG In the cameras segment and other home appliance units. Also, Samsung cannot compete with Canon and Nikon.

For Samsung to withstand this savage challenge, it's crucial to utilize aggressive valuing of its products. Moreover, Samsung is neither a newbie underway nor non-inventive. For the most part, it is often the first company to be innovative with its products and present a change among its competitors.

• Putting in Samsung Marketing Strategy

Samsung uses divert advertising strategies. Retailers who present the innovation chain will undoubtedly incorporate Samsung in their rundown on account of the firm being a world-celebrated brand. Samsung can likewise fill in as an option for the purchasers. The circulation is a convincing piece of the Samsung promoting methodology.

In specific urban communities, Samsung has an agreement with a solitary dissemination organization that circulates the items all through the city. For example, Mumbai is an incredible case where Samsung conveys its products through a solitary organization.

Samsung Rides High In India

The greatest leader by far in the smartphone business is Samsung Electronics, the world's greatest cell phone and TV producer.

Samsung is India's greatest, versatile brand. It is the developer of Reliance Jio's 4G LTE system — the greatest and busiest information system on the planet.

Discernments, advertise wars, openings, rivalry — now and then from conventional remote adversaries, from nearby upstarts, and emerging Chinese brands trouble Samsung.

Be that as it may, every time Samsung has had the option to fight off the dangers and hold its ground. It has been leading the market in the TV fragment for more than 12 years and in the versatile business for a long time after it toppled Nokia in 2012.

Riding The Smartphone Wave

As indicated by some statistical surveying firms following cell phone shipments, Chinese firm Xiaomi is creeping nearer — or has even surpassed Samsung after December 2017 quarter.

While for the entire year 2017, Samsung was No. 1 in the cell phone space, IDC information indicated Xiaomi drove the last quarter with 26.8% piece of the overall industry. Samsung was at 24.2%. Different players, for example, Vivo, Lenovo, and Oppo stayed at 6.5, 5.6, and 4.9%, separately.

Warsi, who has been working with Samsung for as far back as 12 years and has as of late been advanced as Global Vice President, is unflinching, "These difficulties offer us the chance to work more earnestly for our customers and with our accomplices.

Furthermore, shoppers love marks that emphasis on them," he says. "Samsung is India's No. 1 cell phone organization crosswise over sections — premium, mid and reasonable. That is what makes a difference."

Statistical surveying firm GfK tracks disconnected offers of handsets — which make up around 70% of the market — in which Xiaomi is attempting to make advances.

Samsung had a 42% worth piece of the overall industry in the general cell phone showcase in the nation in 2019 and 55% in the superior fragment as indicated by GfK. An industry official who would not like to be named says that India must be Samsung's greatest market by large volumes.

The thought currently is to become the cell phone business which gets more worth. As indicated by reports, Samsung India's incomes from cell phone deals in 2018-19 remained at an astounding INR 34,300 crore. That is over $5.5 billion and development of 27%. Samsung's nearest adversaries are talking about incomes of $1 billion in India, going up to $2 billion.

Samsung is the world's largest manufacturer of consumer electronics by revenue. As of 2019, Samsung Electronics is the world's second-largest technology company by revenue, and its market capitalization stood at US$301.65 billion, the 18th largest in the world.

Shopper Is At The Center

Samsung is a worldwide advancement powerhouse that leads the patterns. It profoundly put resources in India — 22 years of connections in the exchange, and tremendous interests in neighborhood R&D . It has around 10,000 architects working in research offices in India and is perhaps the greatest scout from the IITs.

"Samsung has a solid brand picture in India, as it has been available in various customer electronic portions with quality items for quite a while now. The brand is trusted because of its long history in the nation, dish India nearness, and a vigorous after deals support for buyers," says Shobhit Srivastava, explore expert at Counterpoint Research.

Indeed, even an item fizzle of the size of the Galaxy Note7 in September 2016 couldn't affect Samsung. While the organization was fast enough to get back to every one of the units that had been sold and cease the gadget totally, Samsung's activities and ensuing effective dispatches of leads like Galaxy S8, Note8, the Galaxy S9 and S9+, which were propelled in February, rescued the harm and raised the profile of the brand as a dependable organization. "They rushed to concede their error and that helped them interface with the perceiving clients of today far superior," says Koshy.

Make For India

Samsung's system 'Make for India', which resounds with the administration's ' Make in India ' activity, was conceived in the late spring of 2015. Samsung India's new President and CEO, H.C. Hong, had recently moved in from Latin America and was looked with the prompt tough assignment of fighting a firm challenge from two nearby versatile organizations that is Micromax and Intex.

Samsung's customer hardware business containing TVs, fridges, and other advanced machines were additionally confronting challenges from Sony and LG.

Around a similar time, the legislature of India propelled its 'Make in India' activity. "In this way, Mr. Hong revealed to us we have been doing Make in India effectively for two decades. What we should concentrate on widely to remain on top of things is Make for India (MFI)," says Dipesh Shah, Managing Director of Samsung R&D Institute in Bengaluru, the greatest R&D community for Samsung outside Korea.

Truth be told, the R&D focuses in India contribute intensely to the improvement of worldwide items, for example, Samsung's lead cell phones (Galaxy S9 and S9+). While different organizations focused on propelling their worldwide items in India, Samsung went about rethinking items for the nation at its R&D focuses.

India is significant for Samsung, thinking of the nation as the second biggest cell phone showcase on the planet today, and it is possibly the greatest undiscovered market for some advanced apparatuses. The entrance of iceboxes, clothes washers, microwaves, and forced air systems are appallingly low because of components like the accessibility of continuous power, social conduct, way of life, and earnings.

Business Growth in India

Samsung India crossed the INR 50,000 crore deals achievement in 2017 according to the simply distributed organization filings with the Registrar of Companies (RoC), uniting its situation as the nation's biggest unadulterated play purchaser products MNC. The Korean mammoth's all-out salary, including turnover and other pay, developed by 15.5% to INR 55,511.9 crore in FY 2017 from INR 48,053 crore in the earlier year regardless of Chinese organizations making genuine advances into the Indian cell phone advertise.

Samsung's cell phone business developed deals at 26.7% to INR 34,261 crore, while the home apparatus business developed by 12% to INR 6,395.6 crore. The organization's TV business stayed dormant at INR 4,481.2 crore even though Samsung held the market initiative.

The organization's net benefit developed at a quicker pace of 38% to INR 4,156.2 crore which industry examiners credited to more concentrate on premium models crosswise over cell phones and customer hardware having higher edges.

Samsung, in its filings, said the 'Make for India' activity, through which a large portion of the items was planned and created given the Indian customer's needs, has been an enormous achievement and a major factor behind the development.

All the units at Samsung India improved their gross productivity with the TV business dramatically increasing it and the home machine business nearly trebling it. The cell phone business was the biggest supporter of gross benefit having developed by 44% in FY17 at INR 5,005.9 crore.

Future Plans of Samsung

Samsung has arranged a new venture of around INR 2,500 crore to transform its India tasks into a center for parts business, two senior industry administrators said. The ventures could be increased further, they included. The Korean organization has set up two new parts fabricating substances in India—Samsung Display Co and Samsung SDI India—for the generation of cell phones and batteries.

Independently, Samsung's funding arm—Samsung Venture Investment Corp—has set up activities in India to support new companies in gadgets equipment and programming organizations. The segment organizations will supply items to both Samsung India and other cell phone merchants who as of now source parts from Samsung's abroad tasks.

Samsung sees a big opportunity for segment business considering the administration's push on 'Make in India' where expense on imported cell phone segments and purchaser hardware is going up, the administrators said.

Samsung is likewise pitching to the administration for fare impetuses so it can even fare segments from India. Samsung Display has just marked an update of comprehension with the Uttar Pradesh government for an INR 1,500 crore plant for assembling telephone show to be operational by one year from now April. The plant will come up in Noida, the administrators said.

Samsung SDI India has plans to set up an assembling unit in India for lithium-particle batteries after the organization was drifted a month ago, according to its administrative filings with the Registrar of Companies (RoC).

As per the administrators, Samsung SDI has plans to contribute another INR 900-1,000 crore and will settle the plans after counseling with the Center post general races. These speculations come after it introduced the world's biggest cell phone fabricating unit in India a year ago at an all-out cost of INR 4,915 crore. It is expected to be completed in 2020.

That's all for now. Share your learnings and findings. What did you learn from this article? Which information surprised or amused you the most? Feel free to reach us and share your feedback. We would love to hear from you. Do comment us in the comments section below. Happy Reading.

Who is the owner of Samsung Electronics?

Samsung Group is the owner of Samsung Electronics.

Who is the Founder of Samsung?

Samsung Electronics was established by Lee Byung-Chul (1910–1987) in 1938 as an exchanging organization.

Who is the current CEO of Samsung?

Kim, Ki Nam, Kim, Hyun Suk and Koh, Dong Jin are the current CEO of multinational conglomerate Samsung.

What does Samsung Electronics make?

Samsung Electronics produces smartphones, TV sets, laptops, solid-state drives, digital cinemas screens, etc.

Is Samsung a Chinese company?

Samsung is a South Korean electronic gadget manufacturer in Samsung Town, Seoul.

What is Samsung's strategy?

• Promotional Mix of Samsung

How large is Samsung Electronics?

Samsung is the world's largest manufacturer of consumer electronics by revenue. Samsung Electronics is the world's second-largest technology company by revenue, and its market capitalization stood at US$ 301.65 billion, the 18th largest in the world.

What are the future plans of Samsung Company?

Samsung has arranged a new venture of around INR 2,500 crore to transform its India tasks into a center for parts business, two senior industry administrators said.

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Remarkable Recovery: Samsung Crisis Management Case Study

Have you ever wondered how a global tech giant like Samsung managed to navigate a major crisis and bounce back stronger? 

In the world of corporate governance, effective crisis management can be the difference between irreparable damage to a company’s reputation and a successful recovery. 

In this blog post, we delve into a Samsung crisis management case study to learn about exploding batteries to the intricate strategies employed to restore trust.

Samsung’s journey offers valuable insights into the intricacies of crisis management in the digital age. 

Join us as we explore the key lessons learned and best practices from this high-stakes situation, shedding light on the remarkable recovery efforts that propelled Samsung forward.

Let’s learn about sailing through tough times through Samsung crisis management case study

Background of Samsung History and growth of Samsung as a global conglomerate 

Samsung, founded in 1938 by Lee Byung-chul, started as a small trading company in South Korea. Over the years, it steadily expanded into various industries, such as textiles, insurance, and retail.

In the 1960s, Samsung ventured into electronics, marking the beginning of its transformation into a global conglomerate.

With a focus on technological innovation and a commitment to quality, Samsung rapidly gained recognition for its consumer electronics products, including televisions and appliances.

Throughout the 1980s and 1990s, Samsung significantly diversified its business portfolio, entering the semiconductor, telecommunications, and shipbuilding industries.

This diversification strategy helped Samsung become a key player in multiple sectors, solidifying its position as a global leader. Notably, Samsung’s semiconductor division became one of the largest chip manufacturers in the world, supplying components to various electronic devices worldwide.

Samsung’s ascent continued in the 2000s, driven by its successful expansion into the mobile phone market. The introduction of the Galaxy series, powered by the Android operating system, catapulted Samsung to the forefront of the smartphone industry.

The company’s innovative designs, cutting-edge features, and aggressive marketing campaigns contributed to its rise as a major competitor to Apple’s iPhone.

With its global reach, Samsung has consistently ranked among the world’s largest technology companies, epitomizing South Korea’s economic prowess and technological advancements.

Samsung has also been considered one the best companies that successfully managed and implemented change initiatives.

Overview of Samsung’s position in the technology industry

In the consumer electronics segment, Samsung has established itself as a dominant force. Its diverse product lineup encompasses televisions, smartphones, tablets, wearables, home appliances, and audio devices.

The Galaxy series of smartphones, in particular, has enjoyed immense popularity and has emerged as a fierce competitor to other industry giants. Samsung’s televisions are also highly regarded for their cutting-edge display technologies, such as QLED and MicroLED.

The company’s advancements in semiconductor technology have contributed to faster computing speeds, increased storage capacities, and improved energy efficiency.

Samsung’s influence extends beyond consumer electronics and semiconductors. The company is actively involved in telecommunications infrastructure, including the development of 5G networks and the production of network equipment.

Samsung has also made notable strides in the realm of software solutions, including its own mobile operating system, Tizen, and various software platforms for smart devices.

Samsung Galaxy Note 7 Crisis

The Note 7 battery issue marked a significant crisis for Samsung, leading to a widespread recall of the flagship smartphone and causing considerable damage to the company’s reputation.

The crisis began in September 2016 when reports emerged of Note 7 devices catching fire or exploding due to faulty batteries. These incidents raised concerns about consumer safety and triggered a wave of negative publicity for Samsung.

Upon receiving initial reports of battery-related incidents, Samsung initially responded by issuing a voluntary recall of the Note 7 in September 2016. The company acknowledged the problem and expressed its commitment to addressing the issue promptly and effectively.

Samsung attributed the battery malfunctions to a manufacturing defect, specifically a flaw in the design that caused a short circuit.

To ensure customer safety, Samsung advised Note 7 owners to power down their devices and refrain from using them. The company swiftly implemented measures to exchange the affected devices, offering customers the option to either replace their Note 7 with a new unit or receive a refund.

Samsung also collaborated with mobile network operators and retail partners to facilitate the recall process.

In its initial response, Samsung took steps to communicate with customers and the public about the issue. The company published official statements expressing regret for the inconvenience caused and assuring customers of its commitment to resolving the problem. Samsung emphasized its dedication to quality and safety, promising to conduct thorough investigations and implement necessary improvements to prevent similar incidents in the future.

Media coverage and public perception during the crisis

During the Note 7 crisis, media coverage played a significant role in shaping public perception and amplifying the negative impact on Samsung’s brand.

The crisis received extensive coverage from both traditional media outlets and online platforms, leading to widespread awareness and public scrutiny. Here’s an overview of media coverage and its influence on public perception:

• News Outlets: Major news organizations across the globe reported on the Note 7 battery issue, highlighting incidents, the recall, and subsequent developments. Television news segments, newspapers, and online news articles extensively covered the crisis , emphasizing the potential safety risks and consumer concerns. The constant media attention contributed to the widespread dissemination of information and increased public awareness of the issue.
• Online Platforms and Social Media: Social media platforms played a pivotal role in the crisis, enabling the rapid spread of information and user-generated content. Users took to platforms such as Twitter, Facebook, and YouTube to share their experiences, express concerns, and criticize Samsung’s handling of the situation. Viral videos, photos, and personal accounts of Note 7 incidents gained traction, further fueling negative sentiment and influencing public perception.
• Expert Analysis and Opinions: Alongside news coverage, experts and industry analysts provided their insights and opinions on the crisis. Their assessments of Samsung’s response, the potential causes of the battery issue, and the implications for the company’s brand reputation contributed to the overall narrative. Expert opinions had the power to sway public perception and shape the understanding of the crisis.
• Consumer Forums and Discussion Platforms: Online forums and discussion boards dedicated to technology and consumer experiences became hubs for discussions surrounding the Note 7 crisis. Consumers shared their frustrations, exchanged information, and warned others about potential risks. These platforms served as gathering places for individuals affected by the crisis and amplified the negative sentiment surrounding Samsung’s brand.

Financial implications and losses incurred by Samsung

The Note 7 crisis had significant financial implications for Samsung, resulting in substantial losses for the company. Here are some of the key financial impacts experienced by Samsung as a result of the crisis:

• Recall and Replacement Costs: The recall and replacement process incurred significant costs for Samsung. The expenses involved in collecting and replacing over 2 million of Note 7 devices, including logistics, shipping, and refurbishment, were substantial. The costs also encompassed the testing and certification of replacement devices to ensure their safety. The total recall cost was estimated at $5.3 billion.
• Decline in Sales and Market Share: The crisis had a detrimental impact on Samsung’s sales and market share in the smartphone industry. As consumer confidence in the Note 7 and Samsung’s brand reputation declined, potential buyers shifted their preferences to alternative smartphone options. The decline in sales of the Note 7, coupled with the negative impact on the perception of other Samsung products, led to a loss of market share for the company.
• Stock Price Decline: The Note 7 crisis had an immediate impact on Samsung’s stock price. News of the battery issue, recalls, and subsequent negative media coverage led to a decline in Samsung’s stock value. Samsung shares fell approximately to 7 percent right after 2 months of the crisis.

Crisis Management Strategy Employed by Samsung

Following are the key aspects of Samsung Galaxy Note 7 crisis management strategy:

Immediate actions taken by Samsung to address the crisis

In the face of the Note 7 crisis, Samsung swiftly implemented a range of immediate actions to address the situation and mitigate the impact on consumers and the company’s brand reputation. Here are some of the key actions taken by Samsung:

• Voluntary Recall: As soon as reports of battery issues emerged, Samsung initiated a voluntary recall of the Note 7. This proactive step demonstrated the company’s commitment to consumer safety and willingness to take responsibility for the problem.
• Temporary Production Halt: To address the root cause of the battery issue, Samsung temporarily halted production of the Note 7. This decision aimed to prevent further distribution of potentially defective devices and allow for thorough investigations and corrective measures.
• Transparent Communication: Samsung made efforts to communicate openly and transparently about the crisis. The company issued official statements and press releases acknowledging the problem, expressing regret for the inconvenience caused, and reassuring customers of its commitment to resolving the issue. Transparent communication was crucial in maintaining trust and providing timely updates to affected consumers.
• Collaboration with Authorities: Samsung collaborated closely with regulatory authorities and industry experts to investigate the battery issue comprehensively. By engaging external expertise, the company aimed to identify the root cause and develop effective solutions. This collaboration demonstrated Samsung’s commitment to finding the best possible resolution.
• Customer Support and Safety Guidelines: Samsung provided clear instructions to consumers regarding the use of Note 7 devices, emphasizing the importance of safety. The company advised customers to power down their devices, participate in the recall, and utilize alternative devices in the interim. This approach prioritized customer safety and aimed to prevent further incidents.
• Increased Battery Testing and Safety Measures: Samsung implemented enhanced battery testing procedures and stringent safety measures to prevent similar incidents in the future. The company adopted more rigorous quality control processes, including additional safety certifications and testing standards, to ensure the highest levels of product safety.

Communication strategies employed by Samsung

Samsung employed various communication strategies to address the Note 7 crisis and manage the impact on its brand reputation. Effective communication was crucial in maintaining transparency, addressing consumer concerns, and rebuilding trust. Here are some of the communication strategies employed by Samsung:

• Official Statements and Press Releases: Samsung issued official statements and press releases to provide updates on the progress of the recall, investigations, and corrective actions. These statements expressed remorse for the inconvenience caused and reiterated the company’s commitment to customer safety. Clear and concise communication helped keep customers informed and reassured them that Samsung was actively working to resolve the issue.
• Direct Customer Communication: Samsung directly communicated with customers to provide instructions and updates on the recall process. The company utilized various channels such as email, SMS messages, and notifications through its official website and smartphone apps. This direct communication ensured that customers received important information and guidance regarding the recall and replacement program.
• Social Media Engagement: Samsung actively engaged with customers and the public on social media platforms, including Twitter, Facebook, and YouTube. The company responded to customer queries, addressed concerns, and provided updates on the progress of the recall. By engaging in two-way communication, Samsung demonstrated its willingness to listen, respond, and provide assistance to affected customers.
• Collaboration with Industry Experts: Samsung collaborated with industry experts, battery manufacturers, and regulatory authorities to investigate the root cause of the battery issue. This collaboration was communicated to the public, showcasing Samsung’s commitment to finding solutions and ensuring that the necessary expertise was involved in resolving the crisis.
• Advertisements and Marketing Campaigns: Samsung launched advertising and marketing campaigns focused on rebuilding trust and emphasizing its commitment to quality and safety. These campaigns highlighted Samsung’s dedication to addressing the issue and regaining consumer confidence. Advertisements often emphasized the company’s rigorous testing procedures and quality control measures to assure customers of the safety of its products.
• CEO Apology: Samsung’s CEO issued a public apology, taking personal responsibility for the crisis and expressing regret for the inconvenience and concern caused to customers. The CEO’s apology aimed to convey sincerity, empathy, and a commitment to rectifying the situation, while also reinforcing the company’s accountability and determination to regain trust. The apology was published on a full page in 03 major US newspapers – the Wall Street Journal, The Washington Post and The New York Times.

Collaborations with regulatory authorities and industry experts

Samsung worked closely with government agencies and regulatory bodies in various countries where incidents related to the Note 7 were reported. The company shared information, conducted investigations, and cooperated with authorities to ensure compliance with safety regulations and guidelines. Collaboration with government agencies helped align efforts to address the crisis and establish industry-wide safety standards.

In the United States, Samsung collaborated with the CPSC, an independent federal agency responsible for ensuring the safety of consumer products. Samsung worked together with the CPSC to investigate the battery issue and coordinate the recall process. This collaboration ensured that the recall efforts followed established safety protocols and provided consumers with accurate information.

Samsung collaborated with battery manufacturers to investigate the specific manufacturing defects that caused the battery issue. The company worked closely with these partners to analyze the battery designs, manufacturing processes, and quality control measures. By involving battery manufacturers in the investigation, Samsung aimed to identify the root cause and implement corrective actions to prevent similar issues in the future.

Samsung engaged independent testing labs to conduct thorough assessments of the Note 7 batteries and verify the effectiveness of corrective measures. These labs specialized in battery testing and certification, providing expertise and unbiased evaluation of the battery performance and safety. Collaboration with independent testing labs helped validate Samsung’s efforts to address the battery issue and instill confidence in the effectiveness of the solutions.

Post-Crisis Recovery and Rebuilding 

Samsung implemented more stringent quality control measures across its product development and manufacturing processes. This included enhanced battery testing protocols, increased inspections, and stricter quality assurance standards. By demonstrating a commitment to producing reliable and safe products, Samsung aimed to rebuild customer trust.

Extended Warranty and Customer Support: Samsung extended warranty periods for existing and new devices, including the Note 7, to provide customers with added assurance. The company also enhanced its customer support services, ensuring that customers could easily access assistance, product information, and technical support. These initiatives aimed to demonstrate Samsung’s commitment to customer satisfaction and support.

  Launch of subsequent product lines and their impact on brand perception

Following the Note 7 crisis, Samsung launched subsequent product lines, including flagship smartphones like the Galaxy S8 and subsequent iterations. These launches played a crucial role in shaping brand perception and rebuilding trust. Key factors that influenced brand perception and the recovery process include:

• Emphasis on Safety and Quality: Samsung placed a strong emphasis on safety and quality in its subsequent product launches. The company implemented rigorous testing procedures and introduced new safety features to ensure the reliability and safety of its devices. By highlighting these improvements, Samsung aimed to regain customer trust and reassure them of its commitment to producing high-quality products.
• Positive User Experience: Samsung focused on delivering positive user experiences with its new product lines. This included improvements in design, performance, and functionality to enhance customer satisfaction. By providing users with exceptional products, Samsung aimed to rebuild its reputation and generate positive word-of-mouth, contributing to brand recovery.
• Brand Messaging and Marketing: Samsung’s marketing efforts during subsequent product launches were carefully crafted to reinforce positive brand associations and regain customer trust. The company emphasized innovation, customer-centricity, and the commitment to quality and safety. Marketing campaigns highlighted features, benefits, and technological advancements to create a positive brand image and overcome the negative perceptions associated with the Note 7 crisis.

Final Words 

Samsung’s handling of the Note 7 crisis serves as a case study in crisis management. Despite the significant financial and reputational setbacks, the company took proactive steps to address the crisis, regain customer trust, and prevent similar incidents in the future.

The Samsung crisis management case study highlights the importance of swift and transparent communication, customer-centric actions, and continuous improvement in product safety and quality. By effectively addressing the crisis, Samsung was able to navigate the challenging situation and rebuild its brand, reaffirming its position as a leading global technology company.

Overall, the Samsung crisis management case study provides valuable insights into how a company can recover from a major setback, restore customer trust, and strengthen its position in the market through strategic actions and a relentless commitment to customer satisfaction and product excellence.

About The Author

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How Samsung Became a Design Powerhouse

• Youngjin Yoo
• Kyungmook Kim

Until 20 years ago, South Korea’s Samsung Electronics manufactured inexpensive, imitative electronics for other companies. Its leaders valued speed, scale, and reliability above all. The few designers working for the company were dispersed in engineering and new-product units, and they had little status in an organization that emphasized efficiency and engineering rigor.

Then, in 1996, Lee Kun-Hee, the chair of Samsung Group, grew frustrated by the company’s lack of innovation and concluded that in order to become a top brand, Samsung needed expertise in design, which he believed would become “the ultimate battleground for global competition in the 21st century.” He set out to create a design-focused culture that would support world-class innovation. But shifting to an innovation-focused culture without losing an engineering edge is not a simple matter. It involves managing a number of very real tensions.

Samsung’s success in making this shift stems from a single early decision—to build design competency in-house rather than import it. The authors describe how the company created a committed, resourceful corps of designers who overcame internal resistance by deploying the same tools they use in pursuing innovation: empathy, visualization, and experimentation in the marketplace.

HBR Reprint R1509E

The electronics manufacturer now emphasizes design over efficiency.

Idea in Brief

The challenge.

Samsung Electronics knew that in order to become a top brand, it needed a design-focused culture that would support world-class innovation.

The Problem

Designers faced constant challenges stemming from the company’s efficiency-focused management practices, which were deep-rooted. Managers who were invested in the status quo had to be persuaded to buy in to idealized visions of the future.

The Solution

The company built a corps of designers with a capacity for strategic thinking and the tenacity that enabled them to overcome resistance by deploying the same tools—empathy, visualization, and market experimentation—that they use in pursuing innovation.

Until 20 years ago, South Korea’s Samsung Electronics manufactured inexpensive, imitative electronics for other companies. Its leaders valued speed, scale, and reliability above all. Its marketers set prices and introduced features according to what original-equipment manufacturers wanted. Its engineers built products to meet prescribed price and performance requirements. At the end of the process designers would “skin” the product—make it look nice. The few designers working for the company were dispersed in engineering and new-product units, and individual designers followed the methods they preferred. In a company that emphasized efficiency and engineering rigor, the designers had little status or influence.

• YY Youngjin Yoo is the Harry A. Cochran Professor in Management Information Systems and the founding director of the Center for Design+Innovation at Temple University. He is also an overseas advisory fellow of the Samsung Economic Research Institute and consults for Samsung Electronics.
• Kyungmook Kim is a principal designer at Samsung Electronics’ Corporate Design Center.

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Samsung’s Generic Competitive Strategy & Growth Strategies

Samsung’s generic competitive strategy and intensive growth strategies set business goals for technological innovation as a critical factor in developing competitive advantages. Headquartered in Korea, the conglomerate competes with technology-intensive firms, such as Apple , Google (Alphabet) , Microsoft , Sony , and Intel , which create strong competitive forces, as determined through a Five Forces analysis of Samsung. The industry environment imposes aggressive competitive behavior that typically involves rapid technological innovation for product differentiation, as seen in the evolution of smartphones available in the global market. To effectively compete, Samsung’s generic competitive strategy and growth strategies must involve investment in technological innovation. The resulting competitive advantages enable the company to keep its competitive position as one of the best performers in the semiconductors, consumer electronics, and home appliances industries. Samsung’s generic competitive strategy and intensive strategies for growth are suited to the current business environment and the strategic positioning of the multinational organization’s operations.

The generic competitive strategy and intensive growth strategies of Samsung Group permeate its entire organization, influencing the strategic choices and implementations of its divisions and subsidiaries. The Group’s unitary leadership is responsible for the corporate strategic direction and competitive advantages of the conglomerate and its technology-focused subsidiaries. Samsung’s generic competitive strategy and intensive growth strategies are observable in product design, marketing strategies, and the business organizational development direction of subsidiaries.

Samsung’s Generic Competitive Strategy (Porter Model)

Samsung applies broad differentiation as its generic competitive strategy. Based on Michael E. Porter’s competitive strategy model, the strategic objective of broad differentiation is to maintain competitive advantage by providing unique (or differentiated) products targeting a wide market, which in this case is industry-wide, involving practically every person or group that buys smartphones, laptops, and other equipment. To achieve Samsung’s strategic plans for growth and expansion in the global market, this generic competitive strategy requires the application of product development as a main intensive growth strategy to compete with other technology firms.

Samsung’s investments in product development are a strategic implication of differentiation as its generic competitive strategy. For example, the company invests in technological innovation to support the competitive advantage of its products in the consumer electronics market. Another implication of this generic competitive strategy is Samsung’s marketing mix (4Ps) and related strategies that promote products as unique or different alternatives to the majority of competitors. This marketing approach and technological innovation sustain the corporation’s competitive advantages and value chain effectiveness in satisfying customers’ needs in consumer electronics, computing technology, and home appliances.

Other generic competitive strategies, such as cost leadership, differentiation focus, and cost focus, are also applied in Samsung’s operations, but to a limited extent. Cost focus leads to the company’s being the best-cost provider in some segments of the semiconductor and electronic components markets. The limited application of cost focus still comes with innovation standards that reflect Samsung’s main generic competitive strategy of broad differentiation. These generic strategies align with the company’s intensive growth strategies to succeed in sustaining the technology firm’s competitive advantages.

Samsung’s Intensive Growth Strategies (Ansoff Matrix)

Market Penetration (Primary) . Samsung’s revenue growth depends on market penetration as the primary intensive strategy. In Igor Ansoff’s matrix, the strategic objective of market penetration is to grow the technology business by increasing its revenues from the sale of current products in current markets, such as the European Union’s consumer electronics market, where the corporation already has operations. Competitive advantages and business strengths identified in the SWOT analysis of Samsung combat negative forces from competition in these markets. As an intensive growth strategy, market penetration depends on the effectiveness of the generic competitive strategy of broad differentiation, in terms of how the company creates technologically innovative products that are differentiated enough to attract target customers in current or existing markets.

Product Development (Secondary) . Considering the emphasis of product superiority in Samsung’s corporate mission and vision statements , product development is a major intensive growth strategy of the enterprise. A strategic objective of product development in this case is to grow the business through new products, such as new electronic gadgets. Also, this intensive strategy grows Samsung’s operations through iterative innovation, which leads to improved versions or variants of existing products. For example, the company regularly rolls out new smartphone models, similar to what competitors are doing in their product development strategy. The implementation of product development as an intensive growth strategy is based on Samsung’s generic competitive strategy of differentiation, which requires product development for uniqueness that differentiates the business from the competition. Economies of scope based on the conglomerate’s various subsidiaries support product development and competitive advantage by providing technological expertise and material inputs from the subsidiaries. Samsung’s organizational culture (work culture) affects human-resource support for operational effectiveness, value chain efficiencies, supply chain management, and other business activities that fulfill the strategic objectives of product development.

Market Development . The global scale of Samsung’s operations makes market development a minor intensive strategy for business growth. Market development’s strategic objective is to enter new markets using the company’s existing products, such as introducing new Galaxy tablets in Latin American markets after these products’ introduction in the United States. As an intensive growth strategy, market development’s success depends on product value and competitive advantage, which in this case comes with Samsung’s generic strategy of differentiation via technological innovation. For example, effective innovation for cutting-edge technological design makes the corporation’s products more competitive when rolled out in target markets. With this intensive growth strategy, introducing products to new markets may come with changes in the geographical units of Samsung’s organizational structure (company structure) .

Diversification . Samsung’s diversified business operations maintain multiple revenue channels and spread risk across industries and markets. This intensive growth strategy’s implementation is infrequent in the technology conglomerate, considering regulatory hurdles and other barriers. With the strategic objective of establishing new profitable businesses, the diversification strategy grows Samsung typically through acquisitions of smaller firms, such as Harman International Industries. The minor role designation of this intensive growth strategy limits the risks of establishing new business operations. In implementing diversification, the generic competitive strategy of differentiation is also applied for competitiveness and strategic alignment among Samsung subsidiaries’ business operations.

Some Considerations – Samsung’s Generic Competitive Strategy & Intensive Growth Strategies

Samsung’s generic competitive strategy and intensive growth strategies direct the organization’s growth and development. Differentiation plays a major role in building the company’s competitive advantage, although other generic competitive strategies, such as cost leadership and focus strategies, also support the technology enterprise and its competitiveness. Samsung’s operations management strategies and administration must align with the differentiation generic competitive strategy and the intensive growth strategies to support business growth while competing with aggressive multinational companies.

• López, D., & Oliver, M. (2023). Integrating innovation into business strategy: Perspectives from innovation managers. Sustainability, 15 (8), 6503.
• Samsung – Brand Identity .
• Samsung R&D Center .
• Samsung Catalyst Fund .
• Taherdoost, H. (2023). An overview of trends in information systems: Emerging technologies that transform the information technology industry. Cloud Computing and Data Science , 1-16.
• U.S. Department of Commerce – International Trade Administration – Software and Information Technology Industry .
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• Open access
• Published: 21 October 2019

Planting and harvesting innovation - an analysis of Samsung Electronics

• Seung Hoon Jang   ORCID: orcid.org/0000-0001-7984-7383 1 ,
• Sang M. Lee 2 ,
• Taewan Kim 3 &
• Donghyun Choi 4  

International Journal of Quality Innovation volume  5 , Article number:  7 ( 2019 ) Cite this article

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This study explores how firms manage the entire life cycle of innovation projects based on the framework of harvesting and planting innovation. While harvesting innovation seeks new products in the expectation of financial performance in the short term, planting innovation pursues creating value over a long time period. Without proper management of the process of planting and harvesting innovation, firms with limited resources may not be successful in launching innovative new products to seize a momentum in high tech industries. To examine this issue, the case of Samsung Electronics (SE), now an electronics giant originated from a former developing country, is analyzed. SE has shown to effectively utilize co-innovation to maintain numerous planting and harvesting innovation projects. Both researchers and practitioners would be interested in learning about how SE shared risks of innovation investment with external partners at the early stage of innovation cycles.

Introduction

Globalization and advances in technologies have made the global market extremely dynamic and competitive. While companies like Apple have created new customer value by introducing such products as iMac computer and iPhone, many other firms have failed to adapt to the fast-changing environment. Kodak, the creator of the film camera, became history since it failed to adapt to the digital era in a timely fashion. To compete successfully in the dynamic global market, organizations must continuously innovate ways to create value [ 1 ]. Thus, innovation has been an important topic to both management researchers and practitioners [ 2 ]. Many studies have explored the relationship between innovative activities and organizational performance [ 3 , 4 ]. The firm’s ability of managing innovative projects has been considered as a key dynamic capability, resulting in new product development [ 5 ]. Innovative activities of the firm have generally shown to positively impact organizational outcome.

Although a number of studies in this research stream have introduced various types of innovation based on learning styles [ 6 , 7 ] or objects [ 3 ], few have paid attention to the timing of financial return from innovation. Given the importance of financial payoff from innovation for firm survival and sustained competitive advantage, research on how a real business should manage both innovation and cash flow is critical. Thus, in this study, we intend to answer the following two research questions.

RQ1: Which classification of innovation can best explain the heterogeneous timing of financial payoff realization?

To answer this question, we applied a classification scheme of planting and harvesting innovation [ 8 , 9 ]. Planting innovation involves pursuing potential sources of competitive advantage, including original technology, which may create value in a long term perspective. In contrast, harvesting innovation aims to develop new ways to monetize planted innovation, including new products for market launching, in the expectation of commercial success in a relatively short term. The aim of this research stream is to determine how to implement planting and harvesting innovation and measure the results of ensuing innovative activities. From this perspective, this study examines how a real global firm manages both types of innovation.

RQ2: How are planting and harvesting activities of innovation actually implemented in a successful global business firm?

To answer this question, we focus on Samsung Electronics (SE) which has become the world’s largest electronics firm through successful planting and harvesting of innovation. While SE has developed many innovative new commercial products, it has focused on fundamental breakthrough technologies as the source of future growth momentum. This case may provide valuable implications for firms from developing economies. To compete in high tech industries, these businesses need to invest a large amount of capital to risky innovation projects. Otherwise, they may remain low value added entities, like assemblers or fast followers. The case of SE, like many other success stories, exhibits a possibility that multinationals originated from developing countries can become leading global firms based on their efforts and vision for breakthrough innovations.

Given the current turbulent global business environment, as observed by trade disputes between the USA and China and the recently disrupted supply of critical input resources from Japan to Korea, it is imperative for firms to develop core competences based on innovation. In the digital age, businesses must rely on innovation to enhance their dynamic capabilities [ 10 ] to enhance agility, flexibility, and resilience for value creation [ 1 ]. Thus, this study which focuses on the effective management of planting and harvesting innovation is expected to make important contributions to the literature.

This study examines how firms can implement innovation projects for both short- and long-term perspectives. For this purpose, we first reviewed the literature for major research streams of innovation. Then, a case method is used to examine how planting and harvesting of innovation have helped SE became a dominant global electronics firm, around 2012. In addition to secondary data, executive interviews reported in media also describe how SE employees implemented planting and harvesting innovation. The results of qualitative analyses are presented and articulated. Finally, the implications and limitations of this research are presented. The framework of planting and harvesting innovation provides a theoretical background on how firms can strive for both short-term cash flow and a long-term momentum despite their limited resources. Furthermore, the study results provide insights to practitioners through the case study of SE which struggled initially to save the cost of innovation by collaborating with external partners for planting and harvesting innovation.

Innovation under resource constraints

Planting versus harvesting innovation.

Researchers in various fields, including economics, sociology, and technology management, have been interested in innovation [ 11 ]. The characteristics of innovative outcomes have been investigated as a major research agenda [ 12 , 13 ]. As Damanpour and colleagues [ 14 ] suggested, the introduction of novel ideas or technologies is the core of innovation. According to Van de Ven [ 15 ], innovation can be described as “the development and implementation of new ideas by people who over time engage in transactions with others within an institutional order ([ 15 ], p590).” Several definitions of innovation have focused on how to apply creativity to business operations and processes [ 15 , 16 ]. These studies imply that the main focus of innovation research has been on whether the firm creates new tangible or intangible values.

However, innovation has shown to lead to varied results. The meta-analysis by Rosenbusch et al. [ 17 ] reported that different contexts explain heterogeneous outcomes resulting from innovation. Even if firms implement similar innovation projects, the result can be different due to environmental factors. In addition, innovation sometimes improves the value of marketing skills rather than creating new technical capabilities [ 18 , 19 ]. What these results imply is that characteristics of innovative activities are complex. Since a single concept cannot explain the nature and outcome of innovation, researchers need to consider diverse classifications to explain the phenomena of innovation. Given the importance of cash flow in business, a greater focus is required on the influence of innovation on the survival and prosperity of the firm. Even when firms obtain breakthrough technologies, they may not survive when they fail to create new products/services and resulting cash flow as discussed by Jang [ 8 ] and Jang and Grandzol [ 9 ]. Furthermore, the large amount of investment needed for innovative activities requires firms to prioritize and manage their projects based on the commercial potential. Thus, there is a need to search for a new framework that can provide better explanations on innovation with respect to this issue. The most existing classifications of innovation are not based on the timing of financial outcomes of innovative activities.

One of the typologies regarding this topic is the categorization of radical and incremental innovation based on the sharpness of change in innovative practices [ 20 ]. A more drastic transformation can be expected from radical innovation projects while a relatively slight newness can be added to existing technologies during the incremental innovation process. Since radical innovation can pursue both drastic breakthrough and immediate commercialization, there exists the disparity between the distinction of radical and incremental innovation, the main focus of this paper. Space shuttle can be considered as an example of radical innovation as the realization of reusable spacecraft but it is generally considered as a product for immediate use rather than a long-term growth momentum. Such discrepancy leads researchers to develop a new categorization of innovation based on the expected timing of financial outcome.

The Code-Division Multiple Access (CDMA) wireless technology is an interesting case for this point. The CDMA technology was developed by Qualcomm ( www.qualcomm.com ), but the commercial CDMA phones were first created and produced by Korean manufacturers, including SE and LG. While Qualcomm was interested in developing CDMA as planting innovation, SE and LG focused on commercializing the technology for harvesting that innovation. Qualcomm could benefit from licensing fees in the long term with the success of commercial products based on CDMA. In contrast, the short-term cash flow was derived by SE and LG as they sold more CDMA phones to individual consumers.

From this perspective, innovation can be categorized based on its relatedness to the firm’s performance in the short or long term [ 8 , 9 ]. While certain types of innovative activities may result in an increase of the firm resources engaged in the current competition, others can create value that has long-term potential. This approach modifies the definition of innovations by Gumusluoglu and Ilsev [ 21 ] as described in Jang [ 8 ] and Jang and Grandzol [ 9 ]. First, harvesting innovation can be described as the development of a new resource that can help launch new products/services in the short term. New products, such as Toyota Prius, would be a good example of this type of innovation. Planting innovation refers to the creation of potential firm resources that are based on the state-of-the-art innovation in the expectation of long-term financial benefits. For instance, the invention of hybrid engine technology “plants” potential for future value while the creation of a hybrid car like Prius “harvests” the results of the planting of that innovation.

There are several reasons why planting innovation may not result in new commercial products/services in the short term. First, there may be social constraints that would not allow the use of innovative technology, resulting in no market for new products/services. The commercial use of human stem cell research in the USA has been prohibited by the Food and Drug Administration [ 22 ]. Firms initiating planting innovation in this area cannot expect commercial success due to this regulation, except perhaps in other countries. Second, firms may need to wait for the advent of other complementing technologies for the commercialization process. Thus, firms face a high degree of uncertainty about the financial outcome of planting innovation in the long term, especially in the biotech industry. The development of a new technology usually has a high probability of failure. Therefore, planting innovation may not lead to financial gains in the short term even if firms succeed in developing a technology.

The characteristic of planting innovation makes it distinct from invention. Innovation requires entrepreneurial utilization of technological newness by definition, while invention includes scientific and/or technological breakthrough for discovery purposes [ 23 ]. Firms invest in planting innovation projects in the expectation of long-term profits. Although the result of planting innovation may directly create cash flows in the form of patent fee, firms usually wait until finding out how to apply the result of planting innovation. In contrast, harvesting innovation pursues short-term profits by launching new products or services. In the 1970s, the Palo Alto Research Center (PARC) at Xerox initiated the development of innovative technologies such as Ethernet (or LAN technology) and copper wire-based Ethernet communication [ 24 ]. Due to the lack of commercial intention of Xerox both short and long term, these developments can be classified as examples of invention rather than planting innovation.

Given the heterogeneous characteristics of planting and harvesting innovation, ambidexterity can be important in balancing such innovative activities. Studies on exploitative and explorative innovations have examined this issue [ 6 , 7 , 25 ]. Since pioneering efforts for new processes or technology involve much risk, firms need to optimize the return of their investment in both types of innovation. One possible approach is to utilize external capabilities through M&A, alliances, or industry-academia collaborations through open innovation. Such arrangements would allow firms to share the risk of innovation with other participants [ 1 ].

In addition, convergence has played a major role in explaining value added activities in modern firms [ 1 , 26 ]. Globalization has encouraged the convergence revolution which allows value creation from the synergy of diverse disciplines, industries including IT, biotechnology, and nanotechnology [ 26 ]. The co-innovation platform helps converge diverse types of innovations for value creation [ 1 ]. Multinationals participating in co-innovation are expected to collaborate with stakeholders, including suppliers, customers, partners, and outsiders. Therefore, outside stakeholders can be active partners who co-create shared goals.

Overall, the classification of innovation can contribute to research by providing clearer guidelines related to the timing of financial outcome of innovation. While planting innovation can result in potential resources for long-term value creation, harvesting innovation is intended to generate continuous cash flows to those engaged in the current market. Following the case of exploitative and explorative innovation, researchers in this field should also consider ambidexterity of the organization. By doing so, firms under resource constraints can be prepared for an optimal portfolio of innovation projects, resulting in better organizational performance in the long term.

• Case analysis

In this study, the case of Samsung Electronics (SE), now the largest electronic firm in the world from a former emerging economy, is examined to unveil the processes of harvesting and planting innovation and their results. Innovative activities have been the core strength of SE and are expected to continue creating value for SE. The Mission 2020 of Samsung ( http://www.samsung.com ) states that it will “inspire the world, create the world” through creative and innovative solutions. This implies that the firm intends to pursue innovation over time beyond the development of commercial products for short-term returns.

Several qualitative techniques are employed to investigate the SE case. First, we collected articles including executive interviews from 2000 to 2012. The articles were manually coded into planting and harvesting innovation frameworks after a careful review of contents. News reports were analyzed via local portal sites, including Lexis-Nexis ( http://www.lexisnexis.com ) and Naver ( www.naver.com ). Particularly, we searched Naver, the major Korean portal website, to collect news articles concerning SE research topics from 2002 to 2012. We chose this period, 2002 and 2012, to collect data for this study as this is when SE made the significant transformation to become a dominant global IT leader. The search keywords used were “Samsung Electronics” and “Innovation.” The search using the keywords assured the study to verify that all related articles are captured. After removing duplicates, we investigated the contents of 183 related news articles. Based on the analysis, all the key interviews of executives and managers at SE were collected and examined. In addition, the other secondary data sources like the websites of companies, universities, and local governments were examined.

Samsung Electronics

SE has been a major global player in electronics and related industries for over three decades. Hoovers ( www.hoovers.com ), a leading corporate information provider on large businesses, describes the overall state of this firm as the new “Electronics Samson.” In year 2015, it reported $171 billion revenue and $16 billion net profit. Its major products include digital electronics, semiconductors, and DVD players. Financial Times ranked Samsung Electronics as 19th in their 2015 FT Global 500 ( www.ft.com/ft500 ). It is beyond doubt that this firm has been successful in creating value for its customers.

The webpage of Samsung Electronics ( www.samsung.com ) and Samsung C&T ( www.samsungcnt.co.kr ) describes the history of Samsung Group and Electronics as follows. Samsung group was founded in 1938 as a small retail firm in Daegu, Korea. The founding chairman, Lee Byung-Chull, established Samsung-Sanyo Electronics to diversify the business in 1969. As the name implies, the firm collaborated with Japan’s electronics giant Sanyo. It began production of black-and-white TV sets for the first time in 1970, as an outsource manufacturer. After changing its name to Samsung Electronics, the firm began to produce color TV sets, video recorders, microwaves, and personal computers. It has rapidly developed as a global firm since it entered the semiconductor industry in the early 1980s. Since South Korea has recently been accepted as a developed economy [ 27 ], it can be said that SE began as an emerging market firm.

Given the fact that SE was founded only about five decades ago, the current performance and growth are astonishing. Despite the current status, the firm used to be considered as a fast follower [ 28 ]. SE had focused on producing existing products with better quality at lower prices than other global firms. It is an interesting research topic to examine how and why SE has evolved into a global giant in the electronics industry.

To provide an explanation on this issue, we investigated how SE has implemented innovation to achieve strategic objectives. In 2001, President of Booz Allen and Hamilton Korea stated that Korean firms need to pursue breakthrough innovations to adapt to new market environments [ 29 ]. In other words, SE as well as other major Korean manufacturers began to pursue innovation rather than continue to follow market leaders to survive in the dynamic global marketplace.

Harvesting innovation at Samsung Electronics

SE has engaged in various innovation activities to gain global competitive advantage. By doing so, the firm has been able to create value and benefit from new markets with expectations of stable cash inflows. For instance, SE developed new products like Rambus DRAM and Nand flash memory rather than increasing the accumulation rate of semiconductors [ 28 ]. Since these new products reflect the needs of customers, including PC or smartphone manufacturers, the innovation brought a large amount of profit in the short term. Given the astonishing results that SE has accomplished, its process of harvesting innovation has drawn much attention.

SE has continued implementing innovative activities steadily. The Value Innovation Program (VIP) Centre, setup in 1998, has played a key role in developing innovative new products at SE [ 28 , 30 , 31 ]. This Centre has shown to nurture creativity and broaden the ideas of R&D staff. As the chief researcher at SE stated, the introduction of value innovation methods has contributed to the creation of many new ideas [ 28 ]. Through this system, all participants were expected to overcome the trap of past success syndrome, leading to what is possible.

Blue Ocean Strategy (BOS) [ 32 ] has been the backbone of the harvesting innovation process at SE [ 30 ]. SE invited W. Kim, the main author of BOS, to train its executives. Senior executives have encouraged the dissemination of value innovation at SE based on the BOS approach [ 33 ]. SE strives to create value which its customers never even expected through value innovation for new products. SE’s value innovation includes value management and value creation [ 33 ]. While the former focuses on cost reduction and efficiency improvement, the latter aims to generate added value. Therefore, the firm searches for creative ideas rather than implementing traditional continuous improvement type programs.

SE has found practical tools to implement harvesting innovation based on BOS [ 31 ]. First, the VIP Centre has utilized the strategy canvas, a framework of implementing BOS [ 32 , 34 ]. In the Centre, managerial decisions on important projects have been made based on the value curve of each unit against competitors, resulting in new products like 40-inch LCD TV. In addition, the “7 Tools Method” practiced in Japan, which enables firms to empirically recognize value factors of their customers, was introduced [ 35 ]. For instance, a survey of 226 Japanese employees triggered the production of a laptop that works well even in a bad wireless environment. These types of techniques have helped SE create new products successfully by reflecting innate needs and requirements of individual and business customers.

It has been reported that all of the creative ideas from the VIP Centre have been reflected in the design and development of new products of SE [ 36 ]. As a result, innovativeness of the firm’s new products has been globally recognized as the numerous Innovation Awards of the Consumer Electronics Association (CEA) attest (see Table 1 ). These achievements prove that the innovative results of SE have been widely recognized by professionals in the field as well as ordinary customers. SE has succeeded in developing new products through harvesting innovation activities.

Planting innovation at Samsung Electronics

SE has also focused on the creation of innovative ideas which may not realize any meaningful revenue in the short term. The major results of planting innovation are original technologies which can result in competitive advantage and lead to future business success. The CEO of SE stressed the importance of “technology preparation management,” pursuing core technologies in order to respond to the convergence across technologies and products [ 37 ]. This statement exhibits the strong will of top management of SE to implement the planting innovation strategy.

The Samsung Advanced Institute of Technology (SAIT) has played a critical role in developing original technologies. The website ( www.site.samsung.com ) describes the research efforts currently in place. The Future IT and Convergence domain seeks technologies across real 3D processing, communication theory and network, multicore processing, data intelligence, and medical imaging. The New Materials and Nanotechnology domain aims at developing flexible electronics, solid state lighting, film ceramic crystal composite materials, micro-system integration, oxide materials and devices, spintronics, and nanostructure and materials research. The Energy and Environment domain focuses on energy storage, energy conversion, and environment fields. The Bio and Health domain explores gene analysis and point of care testing (POCT). Indeed, SE has encouraged researchers to create a broad range of intellectual capital for the purpose of leading future technologies.

Furthermore, it seems likely that SE seeks Chesbrough’s [ 2 , 38 ] open innovation to improve efficiency and effectiveness of planting innovation. By doing so, the firm can create innovative results with less burden in time and resources. The CEO mentioned that open innovation needs to be encouraged to shorten the technology life cycle and to enable convergence in the electronics industry [ 37 ]. Thus, SE senior managers have aggressively focused on the utilization of external ideas and capabilities [ 39 ].

M&A has been a major instrument to acquire external intellectual capital. SE has acquired several firms, including SanDisk, Amica (a Polish electronics firm) in 2009, and Transchip (a non-memory semiconductor manufacturer in Israel) in 2008 [ 40 ]. SE informed the board of directors of SanDisk about its intention of collaborative innovation orientation and human resource retention in SanDisk [ 41 ]. Such M&A activities have enabled SE to obtain proven and complimentary intellectual capital and dynamic capabilities, including R&D employees.

SE has also managed a broader range of intellectual capital without much investment by sharing their proprietary technologies with partners. For example, SE and IBM, two top US patent firms, established a cross-licensing agreement which allows the participants to utilize each other’s patents for innovation in 2011 [ 42 ]. These firms can share their patents without additional investment, resulting in a more stable basis for innovative activities. This type of contract enables SE to implement planting innovation with finite capabilities. Executives of SE and IBM also announced that the objective of cross-licensing lies in sharing intellectual capital in the expectation of continuous innovative outputs. In sum, SE has implemented planting innovation through SAIT internally and has utilized external capabilities through M&A and licensing for significant financial gains in the long run. SAIT has implemented several major research projects independently as well.

Ambidexterity and co-innovation

Since SE is implementing planting and harvesting innovation simultaneously, one major task is balancing both types of innovative activities. Otherwise, the firm may suffer from lack of financial cash flows or future leadership in the industry. Despite their brand image, major manufacturers of wristwatch had to overcome the loss of sales volume in the 1970s due to the revolutionary quarts movement technology [ 43 ]. Although US electronic giants initiated the transistor technology, Japanese manufacturers like Sony harvested the lion’s share of its benefits with their transistor radios [ 44 ].

The significance of inter-organizational cooperation in attaining competitive advantage cannot be ignored [ 45 ]. Thus, any organization, however large or global it may be, cannot be competitive for long without collaboration with other world-class partners. From this perspective, the success or failure of firms today lies in managing the relationships with other value chain partners and stakeholders [ 4 ].

Beyond the conventional exploration and open innovation focusing on the use of external resources, SE has been searching for the best way to simultaneously implement planting and harvesting innovation through co-innovation with stakeholders [ 1 ] (see Fig. 1 ). The main focus of the VIP Centre has been on how to encourage collaboration among internal departments. Resulting convergence across departments has enabled the firm to recognize the diverse viewpoints other than the opinions of core engineers. The VIP Centre director stated that those firms interested in value innovation need to adopt the cross-functional team (CFC) concept with a separate space to promote inter-departmental collaboration for value innovation [ 34 ]. This process is expected to encourage formal and informal sharing of ideas, opinions, and viewpoints since participants have more opportunities to communicate with many people. For instance, the CFC team consisting of marketers, designers, and engineers developed a new slim style laptop which caught the fancy of Japanese consumers [ 35 ]. Furthermore, the members of the Centre frequently collaborate with external partners [ 35 ].

Co-innovation at Samsung Electronics. Based on the information from SAIT ( www.SAIT.samsung.com ) and Kim’s [ 35 ] study

SAIT has played a significant role in connecting SE with external entities ( http://www.sait.samsung.co.kr ), such as universities, through the Global Research Outreach (GRO) program and other collaborators via the Collaborative Open Research Expert (CORE) program. These efforts have allowed the firm to share the risks inherent in planting innovation. Thus, the firm has been able to reduce the uncertainty involved in innovative practices and maximize its value with finite organizational resources.

Another example of collaboration lies in its value-chain management beyond the use of external capabilities. An association of Samsung’s collaborating vendors, Hyup-Sung-Hoe, has played a key role in co-innovation processes [ 46 ]. SE and collaborating vendors have participated in innovation activities, including sectional committee meetings. It is evident that SE’s innovation activities cover not only its own value chain but also that of its partners. Given the fact that current business activities must include vendors, the improvement of innovation capabilities of the entire value chain is essential for gaining competitive advantage. SE also considers the creation of new ventures with excellent technologies as another outcome of its open innovation strategy [ 47 ]. The firm manages its entire value chain to compete successfully, as opposed to conducting business with partners for short-term monetary rewards. Figure 1 presents SE’s value chain convergence activities.

SE has participated in the various industry-academia collaboration projects. This partnership has enabled SE to interact with partners to utilize their tangible and intangible resources. Particularly, research universities can provide professional human resources, research expertise, and infrastructure. In 2012, SE established the Centre for Intelligent Computing (CIC) with Seoul National University [ 48 ]. While the former supports the facilities and programs, the latter provides research ideas and its faculty resource. Such projects allow SE to benefit from the results of collaborative innovation while sharing the burden of investment. Furthermore, individual participants would likely to share ideas and opinions due to their “relationships” even after the official project is completed, beyond organizational boundaries. SE has also established the Samsung Talent Program (STP) with 14 Korean universities [ 48 ]. This program is intended to nurture and develop R&D employees to fit its needs.

The use of a co-innovation mechanism has played a key role in managing planting and harvesting innovation with limited organizational resources. SE has established networks with the various innovation partners, including diverse internal departments, academia, technicians, customers, and suppliers to collaborate and co-create for shared goals. In addition to external resources, the closely interconnected relationships among participants are expected to nurture collective intelligence. Overall, co-innovation allows SE to manage both types of innovation, harvesting and planting, while coping with its fast expanding global presence.

Firm performance

The innovation investment of Samsung Electronics has shown tremendous financial return as can be seen in Fig. 2 . The financial information from Daum ( www.daum.net ), a major portal site in Korea, exhibits that SE’s sales volume has dramatically increased since the early 2000s. As SE has paid more attention to harvesting innovation, its sales volume surged from 2001 to 2004. This implies that the firm continued its growth by actively pursuing innovative activities which created much financial gain in the short term.

Annual revenue of Samsung Electronics. Based on the financial information from Daum ( www.daum.net ) and Hoovers ( www.hoovers.com ) and news articles from Naver ( www.naver.com )

The revenue of the firm diminished drastically in 2007 with the global financial crisis. This “earning shock” was due to the decrease of demands for LCDs and semiconductors [ 49 ]. The global economy was in recession for several years afterward. For example, in 2012, the Federal Reserve Bank announced that the net asset of median family in the USA decreased by 38.8% from December 2007 to June 2009 [ 50 ]. Given that the consumption of middle-class families in the USA has been the locomotive of global economy for decades, the effect of the macro-economic crisis would be challenging for many global firms.

SE executives began to search solutions for the creation of original technologies, while continuing its innovation harvesting efforts. Despite the global financial crisis, SE has continued its growth [ 50 ]. In 2017, the revenue was approximately $224 billion [ 51 ]. SE has steadily expanded its business after it introduced harvesting and planting innovation despite the hostile macro-economic environment and recent ownership succession.

Discussion and evaluation

This study investigated planting and harvesting innovation to answer the research question, “Which classification of innovation best explains the heterogeneous timing of revenue realization?” While harvesting innovation seeks commercial results in a relatively short term, planting innovation pursues the development of new ideas and technologies for a long term. For instance, a firm with the CDMA wireless technology may not succeed financially without the dispersion of CDMA phones. Given the finite amount of resources, firms need to efficiently balance planting and harvesting innovation. Otherwise, they would fail to develop both new products/services for market launching and original technologies for future market expansion while continuing their business activities.

A case analysis was employed to answer the second research question, “How are planting and harvesting activities of innovation implemented in a successful global business firm?” Samsung Electronics (SE) was chosen as a case study since it has become the largest electronics firm in the world but originated from a former emerging economy, South Korea. Despite its limitations, SE continued to grow by using innovation as a vehicle to move from an outsourcing firm to a global leader in innovation. It is a dramatic success story for a local firm in Korea which began its business in the 1970s. Since SE established innovation as the core of its business activities in its mission statement, it has implemented the dual strategy of planting and harvesting innovation.

SE has participated in various activities to develop innovative new technologies as well as products. The interviews reported were collected from news articles to analyze the stream of innovative activities of SE. Harvesting innovation has led to the initiation of a broad range of new products, allowing the firm to access global customers and also received world-renowned innovation awards. SE has also focused on planting innovation which can result in original technologies. Based on Blue Ocean Strategy, the Value Innovation Program (VIP) Centre has been primarily responsible for developing new products. The Samsung Advanced Institute of Technology (SAIT) pursues original technologies which can continuously support technological leadership in the years to come.

Co-innovation [ 1 ] has enabled SE to focus both planting and harvesting innovation activities with limited resources. External collaborators have contributed to the application of SE’s tacit knowledge for convergence that is difficult to imitate by competitors. The VIP Centre and SAIT have played a critical role in encouraging collaboration among innovation value chain partners, including academic researchers, technicians, vendors, and customers to co-create value. It has enabled the firm to pursue innovative outcomes while managing financial stability. The financial performance of SE exhibits that its innovation activities have resulted in a remarkable success.

Conclusions

The digital age is characterized by the increased complexity and uncertainty of the business environment [ 1 ]. In the environment of increasing velocity of change, business firms must develop dynamic capabilities through innovation to adapt to change with agility, flexibility, and speed [ 4 ]. There have been various innovation approaches in the literature: exploitative vs. explorative [ 7 ], disruptive [ 52 ] vs. non-disruptive [ 53 ], ambidexterity [ 54 ], and convergence innovation [ 55 ]. However, the purpose of innovation remains the same, which is to create new or added value by applying ideas or technologies in a fundamentally different way [ 1 ]. What is not widely known is that innovation is not one integrated process. Instead, there are several steps and cycles in innovation. Planting innovation involves creating new ideas, scientific breakthroughs, or new technologies. Planting seeds does not guarantee a good harvest. Many nurturing steps such as careful planning, risk taking, and entrepreneurship are needed to have a successful harvest. Thus, studying the most spectacular success transformation case of SE through its innovation process provides meaningful theoretical and practical insights and a contribution to the literature of innovation.

This study is not free from limitations. Although SE can be considered as one of global leading innovators originated from Korea, a success story from one of the poorest countries in the world to an advanced economy, the generalizability of the single case study can be limited as Tversky and Kahneman [ 56 ] suggested. Future researchers should conduct relevant studies in various contexts to overcome such limitation. In addition, the qualitative analysis tool of Gibbert et al. [ 57 ] can be used to lessen the concern on generalizability.

There are many factors that have contributed to the success of SE. In this study, we used the revenue as the reference of SE’s efforts of harvesting innovation. There could be many other factors that contributed to the performance of SE. However, we believe these factors all contributed to the combined efforts of SE in harvesting innovation.

In addition, it is also expected that future studies may apply more refined research methods to examine the process and consequences of planting and harvesting innovation. While we believe in the merits of the research method applied in this study, it is also possible that executives might have exaggerated the process and outcomes of their projects. Future researchers are expected to cross-check the results of planting and harvesting innovation by utilizing multiple research methods.

Despite the limitations, this research provides several meaningful implications. It uses a distinction of planting and harvesting innovation [ 8 , 9 ] to examine how a firm grows into a global leader despite its finite managerial and financial resources. While planting innovation aims to implement technological advancement as a potential source of long-term profits, harvesting innovation focuses on the development of new products for market expansion in the short term. The framework of planting and harvesting innovation is expected to provide a tool for managers to distribute limited funds for various types of innovation projects. It shall enable them to clarify whether the current focus of innovation investment lies in launching new innovative products or seeking competitive advantage for future profits. The case of Samsung Electronics exhibited that its innovation has focused on both short-term profits and technological innovation for the future growth momentum. Firms are recommended to follow this notion to compete successfully in high tech industries with limited financial, technological, and managerial competencies.

Collaboration is also required for firms seeking both planting and harvesting innovation. Given their shortage of resources and competencies, firms need to share the risks and the burdens of innovation projects with external partners. Following the case of Samsung, they are expected to cooperate with various entities, including research institutions, suppliers, customers, or new ventures. It enables firms to afford the cost of breakthrough innovation despite their finite resources and experiences. Collaboration helps these firms create innovation results for advanced as well as emerging economies.

This study also provides implications from methodological perspectives (Table 2 ). The use of indirect interviews from news articles allowed us to observe the opinions of SE executives over time. In addition, it can collect the opinions of executives at the time of innovative activities rather than asking current employees’ perceptions about what happened in the past. It provides future researchers with an effective method for exploratory research. The use of this underused but promising methodology can contribute to overcoming the limitations of research in the management field despite its possible limitations.

Practitioners can obtain lessons from the results of this study. They could observe how SE, a former emerging market firm, dispersed investment risks by collaborating with the various stakeholders to implement planting innovation. The convergence of internal and external ideas, from suppliers, academia, other businesses, and customers, is essential for the implementation of both types of innovation with finite resources. Furthermore, they need to nurture innovative capabilities of entire internal and external stakeholders as co-innovators. This shall allow firms to achieve the network effect of innovation.

As suggested by Lee [ 4 ], the main focus of innovation projects has been on how to benefit business activities in new ways. Lee [ 58 ] and Schniederjans and Schniederjans [ 59 ] also examined how practical operational issues like quality practices can be improved by innovation.

Availability of data and materials

The datasets used and/or analyzed during the current study are available from the corresponding author on reasonable request.

Abbreviations

Blue Ocean Strategy

Consumer Electronics Association

Cross-functional team

Centre for Intelligent Computing

Collaborative Open Research Expert

Global Research Outreach

Palo Alto Research Center

Point of care testing

Samsung Advanced Institute of Technology

Code-Division Multiple Access

Samsung Talent Program

Value Innovation Program

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Home » Business Analysis » Case Study: Samsung’s Innovation Strategy

Case Study: Samsung’s Innovation Strategy

The success of Samsung has been widely acknowledged in the last decade. Samsung, the world’s largest television producer and second largest mobile phone manufacturer, is also the largest firm of flash memory maker. Furthermore, Samsung was ranked by Fast Company Magazine to be third most innovative company in the consumer electronics. The company grew from a local industrial leader into a worldwide consumer electronics brand, with up to 261,000 employees, 14 public listed companies, 470 offices and facilities in 67 countries. Samsung was ranked as 11th world’s most innovative companies. It is one of the two Korean companies in the Top 20 companies. While Sony, the Japan’s biggest consumer electronics, was ranked as 10th, only one position above Samsung. This has brought questions among management gurus how this growing company could drive innovation to create success within a short time and remain innovative despite the difficulties of internationalization . In addition, it could overcome many well-built rivals from Japan and Europe.

Shared vision and top management commitment are the important component leading to create innovative atmosphere . In creating such organization, if leaders are not committed in their actions, innovation couldn’t be systematic in a company. Top executive’s role modelling is one of the main differences between innovative and non-innovative organizations. Moreover, employees should realize a company’s goals to align with their innovative effort. Samsung’s new management beliefs applied in the late 1990’s is “we will devote our human resources and technology to create superior products and services, thereby contributing to a better global society.” This shows the company’s strong willpower to contribute to the worldwide people’s prosperity in the 21st century. This message encourages every employee in the firm to innovate with the clear goal of being global superior producer.

Appropriate Structure

The innovative organization tends to have characteristics of organic structures with open and dynamics systems. At first, the reduction of organizational layer and downsizing are concerned as cost control . An increase in use of information technologies, such as email, internal blog, shared data repository, also leads to the need of eliminating middle management. The possible consequences for this are faster responsiveness to market, higher competitiveness, more flexibility, and reducing processes between divisions. This leads to flatter organisation that is not only the change of organisational structure but also the change of decision-making process . In order to avoid delays and support for rapid innovation, decisions should be delegated to the innovation team. The approval of top management is only needed at the checkpoints or gates of the innovation process. Furthermore, Innovation is not suitable with multi-level hierarchy as the new idea and radical innovation must pass through many approvals with high possibility of ideas being rejected. Moreover, this will discourage strong leaders, who try to overcome its cumbersome, but the slow-response organisation will eventually obstruct their abilities. For example, in 1989, Samsung had 3-7 steps for project approval. This took up 24 days for the proposal to go through 7 approvals to arrive final decision step from the president. On the contrary, proposal in 1995 needed maximum of 3 approvals decided on the same day. This change of the important process leads to speed of running business. Furthermore, the proposal form in 1995 is in English, this signified an attempt for globalization .

Key Individuals

With the goal of creating innovation in the company, Samsung needs the world-class human resources from both technical and business backgrounds. Its branding strategy is not only to create a brand that people trust and admire, but also to be a company that they desire to join. To foster this breakthrough R&D, Samsung set up worldwide objectives to catch the attention of the smartest people from around the world, and retain them. These people will be trained and implanted Korean and Samsung culture through one week of intensive Korean daily conversation class, one week of Orientation about company’s history, philosophy, and culture, and develop general management skills delivered by senior Samsung executives. The recruitment of world’s smartest innovators, inventors and designers are fundamental to the company’s success in creating the future technology.

Besides having the best people for the development of innovative capabilities, Samsung has a tool to identify the key players, such as Project leader, promoters, idea champions, or gatekeeper, in the organization. Experiential education programs that are enjoyable, innovative and effective have performed this identification task. For example in the Samsung Semiconductor unit, 90 managers were organised into groups and assigned to build up new equipment through the use of Lego blocks. The tool was just simple Lego blocks, but the equipment created in this experiment had to be functional. This activity, which required both creativity and teamwork, provided managers comprehension of the role each member played in team. Who is promoter, supporter, idea generator, and critical thinker are identified.

Effective Team-working

Currently, team-working increasingly reflects a deeper recognition that this method of working offers greater economic benefits. Cross-functional teams is an effective tool to bring in different knowledge sets needed for solving production problems, creating new businesses , or develop new strategies. Work as a team needs more participation, higher commitment, sharing knowledge and self-management . This is more organic and flexible approach that helps to initiate innovation implanting across organisational and national boundaries. For example, Automakers from USA and Japan collectively worked on the development of new car model. Committing to consumer trends, Samsung set up a group of about 30 businessmen called CNB (Create New Businesses) who had to discover long-term social and technological fashions and imagine new products, which fulfill promising demands. Samsung has harvested the fruits from its team-working and strong commitment to innovation , transforming low-quality producer to become a brand that create stylish mobile phone. In 2010, its sales of mobile phones were ranked as number one in the US market.

Long-term Commitment to Education

Invest in people is another key initiative needed to emphasize in the development of innovative organisation. Army without essential weapons cannot deliver its full potential. Those needed weapons are knowledge, which has to be developed by best practice training. Companies, such as Hewlett Packard, and Samsung, have committed in training and development programs to help spread innovation capability all over the organisation. Besides internal training programs, offering scholarship, postgraduate study opportunities and international work placement for its staff in 120 offices across 57 countries provide Samsung linkage with renowned universities, also bringing in knowledge and collaboration to the organisation. The by-product from doing so is incentives that help to attract and retain of the best and brightest inventor and businessperson from the global industry.

Extensive Communication

Communication is one of the factors causing failure in investing in ideas that go wrong since the beginning. These are those ideas that do not align with the company’s need. Communication within company about its strategy and customer demands is needed for the clear innovation pathways of researchers. Idea generated from either internal or external organisation must go through many steps of modification before adopting into a company. These steps become troubles for the huge companies. In the case of Samsung, idea management has been introduced to manage ideas from thinkers and distribute them all over the company. They will be evaluated by colleagues, supervisors, or assigned review staffs who add views, opinions and knowledge. In addition to internal communication, networking between firms is also key component in the creation of innovation . The network organisation is a group of several independent companies, which perform different tasks and contract one another. For example, one firm in the network focus on research and product design, another manufactures it, and a third does distribution. This approach gains a wide acceptance as it has strong rationale including rapid change of business environment , the cumbersome of large-size companies, importance of speed and flexibility. Moreover, partners’ collaboration helps to blend and complement different core competency in creating better innovation. Samsung has utilized this concept by building a team, called TechnoValley, undertaking only planning and marketing of product. Other partners in the network took care of technology, production, distribution, and promotion.

High Involvement in Innovation

Building a visionary company requires 1 percent vision and 99 percent alignment. In order to build a sustainable innovation culture, staffs have to practice innovation in everything they do. Practicing to tackle small challenge will make them ready for a bigger challenge. Samsung manager plays an important role in supporting this culture of practicing innovation by encouraging the innovation process and not pushing employees to short circuit the solution process.

External Forces

External forces shapes Samsung to become technology leaders. Previously, closed innovation was the model that Samsung Electronics followed. They invested in the best people and centralized their R&D unit. Today, Samsung cannot depend only on internal innovations, which may create the advanced operating system for mobile phone but not attractive one. Samsung open innovation center established to create striking design and user-friendly interface of Samsung mobile phone. It successfully engaged customers and suppliers in the innovation process at the early stage. Being based in Korea with large group of young technology-concerned consumers provides Samsung an innovative edge in consumer electronics including mobile phones. The replacement rate for mobile phones in Korea is estimated at 6-18 months, thanks to young Koreans who swiftly adapt new technology. Therefore, these trendy people have participated in testing and giving feedback, which provide significant information about customers’ desire. Korea, therefore, becomes an invaluable testing location for innovations prior to the companies unveil them on the world stage.

Creative Climate

Public reward for those who distinguish themselves as mains actor in innovation culture and who promote the value of innovation is the powerful tool to expand innovative thinking throughout the enterprise. There are many examples of escalating the visibility of innovation success, such as the company innovation award, inventor hall of fame. This illustrates the commitment a company have on its innovation and inspire employees by making them proud of their success. Idea management through the use of IT have increased the rate of product and process improvement, as contributions of ideas are traceable. It open up the communication all over the company and promote culture of sharing and creativity. Ideas are developed and talked widely not only in vertical but in horizontal fashion leading to innovative atmosphere. After the introduction of knowledge management solution in Samsung Electronics, there was a change in organizational climate. Employees have been become confident to be more suggestive, trustful, responsive to change, and eager to innovate. Forum and blog postings are the place for knowledge sharing where an automatic rewarding system is executed. The profitability of the products launched, have been chosen as the innovation performance indicators.

Learning Organization

Sharing knowledge and skill of employees brings about innovative performance. Samsung has identified two main challenges in the creation of learning organisation that are knowledge discovery and knowledge sharing. In the past, problems occurred due to lack of knowledge management, for example, lost of valuable knowledge from poor management, or repeating the same failures. To tackle such problems, organizational mechanisms and technological solutions to facilitate the innovation process in Samsung have been introduced. Firstly, Samsung Brainstorming Hours has been arranged to capture and spread ideas in any step of innovation process from idea generation to conversion and commercialization. This is not applied only in the new product development process, but also solving complex problems or business improvement. Two hours weekly meeting for cross-functional team in the room with tall windows, wireless connection, big-screen TV, snacks and drinks is designed to foster innovation process. This comfortable surroundings helps innovation workers to socialise with each other and share ideas. Secondly, company-wide simple but powerful blog has been introduced to encourage knowledge sharing and discovery. The blog helps employees understand and discuss ideas so as to extend previous knowledge continuously. Thirdly, knowledge warehouses have been built to have codifiable critical knowledge stored and accessible throughout Samsung Company. The “Lessons Learned System with Alert function” has been used to manage this knowledge and share it. For storing lesson learned, project managers has been trained about how and what knowledge to collect and given the project management manuals including many useful procedures such as how to write a closing report, how to create and store a project model, how to perform an After Action Review. In order to control overwhelming information, Alerts system notifies employees of newly stored knowledge that might be of interest and useful to their work.

Samsung has successfully transformed from local low quality manufacturer to a brand that produce admirable and stylish consumer electronics. Company performance has proven that Samsung has come to the right direction in last decade. The achievement of becoming innovative organisation started from the declaration to be the global leader in the industry in late 1990s. After the re-configuration and adopting team-working practice, Samsung organisation has been altered to be flexible and organic, leading to ability to develop innovative capability. In addition to the recruitment of the best people into the organization , Samsung has an experimental education tool to identify the key individuals, such as project leader, promoters, or gatekeeper, so as to blend different roles in creating innovation . These people are working under the well-designed knowledge management system and trustful and suggestive communication with the support of supervisors, fostering creative climate. Rewards system for innovative contributor, organisational mechanism and technological solutions has brought about the knowledge discovery and sharing throughout the company, creating learning organisation that sustains Samsung innovation competency.

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Samsung PESTEL Analysis

Before we dive deep into the PESTEL analysis, let’s get the business overview of Samsung. Samsung is a South Korean multinational conglomerate headquartered in Samsung Town, Seoul. It was founded in 1938 by Lee Byung-Chul as a trading company and has since diversified into various sectors, including electronics, heavy industries, construction, insurance, and entertainment.

Samsung has numerous subsidiaries and affiliated businesses, making it one of the world’s largest and most influential companies.

• Electronics: Samsung Electronics, a subsidiary of Samsung Group, is the world’s largest consumer electronics and semiconductors manufacturer. The company’s product portfolio includes smartphones, tablets, televisions, home appliances, and more. Samsung’s flagship smartphone series, the Galaxy line, is one of the top-selling devices globally.
• Semiconductors: Samsung Electronics is also a leading player in the semiconductor industry, particularly in memory chips (DRAM, NAND flash) and system LSI (Logic Chip). The company is a key supplier to numerous global tech giants, providing them with product components.
• Display technology: Samsung Display, another subsidiary, is a global leader in display technology, producing LCD, LED, and OLED panels for various devices, such as smartphones, TVs, and monitors.
• Heavy Industries: Samsung Heavy Industries is one of the world’s largest shipbuilders, primarily focusing on large-scale commercial vessels and offshore platforms for the oil and gas industries.
• Construction: Samsung C&T is globally involved in construction, engineering, and infrastructure projects. They have been responsible for constructing notable landmarks like the Burj Khalifa in Dubai and the Petronas Twin Towers in Malaysia.
• Finance and Insurance: Samsung operates in the financial sector through Samsung Life Insurance, Samsung Fire & Marine Insurance, and Samsung Card, providing various financial services and insurance products.
• Entertainment: The conglomerate has a presence in the entertainment industry through its subsidiary, SM Entertainment, which manages some of South Korea’s most popular K-pop artists and groups.
• Biopharmaceuticals: Samsung Biologics and Samsung Bioepis are subsidiaries focusing on developing and manufacturing biopharmaceutical products, including biosimilars and novel drugs.

Samsung’s business model is characterized by its focus on vertical integration, innovation, and a solid commitment to research and development. Despite facing challenges from competitors and geopolitical tensions, Samsung remains a dominant player in the global market.

For 2023,  Samsung reported  KRW 302.23 trillion ($231 billion) in annual revenue, a record high, and KRW 43.38 trillion ($33 billion) in operating profit.

Here is the PESTEL analysis of Samsung

A PESTEL analysis is a strategic management framework used to examine the external macro-environmental factors that can impact an organization or industry. The acronym PESTEL stands for:

• Political factors: Relate to government policies, regulations, political stability, and other political forces that may impact the business environment. 
• Economic factors: Deal with economic conditions and trends affecting an organization’s operations, profitability, and growth. 
• Sociocultural factors: Relate to social and cultural aspects that may influence consumer preferences, lifestyles, demographics, and market trends.
• Technological factors: Deal with developing and applying new technologies, innovations, and trends that can impact an industry or organization. 
• Environmental factors: Relate to ecological and environmental concerns that may affect an organization’s operations and decision-making.
• Legal factors: Refer to the laws and regulations that govern businesses and industries. 

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In this article, we will do a PESTEL Analysis of Samsung.

PESTEL Analysis Framework: Explained with Examples

• Government Policies : The policies of the governments where Samsung operates can significantly affect the company’s operations. For example, tax policies, labor laws, environmental regulations, trade restrictions and tariffs, and political stability can influence Samsung’s business strategies.
• Trade Agreements : Samsung, being a South Korean company, benefits significantly from the free trade agreements that South Korea has with other countries. These agreements can lower tariffs and make Samsung’s products more competitive internationally.
• Political Stability : Political stability in the countries where Samsung operates is crucial. Instability, such as political unrest, can disrupt Samsung’s operations and supply chain, causing uncertainty and potential losses.
• Intellectual Property Laws : Samsung’s success relies heavily on innovation and technological advancement, making intellectual property rights crucial. Political factors influence the strength and enforcement of these rights. These rights could harm Samsung’s competitiveness if they aren’t adequately protected.
• Regulatory Changes : Changes in technology standards, privacy laws, and data protection regulations can also impact Samsung. For example, changing user data and privacy regulations could affect how Samsung designs and markets its products.
• International Relations : As a multinational corporation, Samsung is affected by the international relations between South Korea and other countries. Political tensions or conflicts can lead to trade restrictions or boycotts that harm Samsung’s sales.
• Labor laws : Political decisions can impact labor laws, affecting Samsung’s workforce strategy.

• Global Economic Conditions : As a multinational corporation, Samsung is affected by the economic conditions of its countries. For instance, economic recessions or booms in these countries can influence consumer purchasing power and demand for Samsung’s products.
• Currency Exchange Rates : Since Samsung operates globally, fluctuations in currency exchange rates can impact the company’s profits. If the South Korean won strengthens against other currencies, Samsung’s products may become more expensive in international markets, potentially reducing sales.
• Inflation Rates : High inflation rates in certain countries can decrease the purchasing power of consumers, affecting the demand for Samsung products. On the other hand, low inflation may increase purchasing power and increase demand for Samsung’s products.
• Interest Rates : Interest rates can impact Samsung’s costs. For instance, if Samsung has taken loans for its operations or expansion, higher interest rates would increase the cost of those loans.
• Unemployment Rates : Higher unemployment rates typically lead to lower consumer spending, which can reduce demand for Samsung’s products. Conversely, lower unemployment rates might increase consumer spending and demand for Samsung’s products.
• Economic Policies : Government economic policies such as fiscal policy (taxation, government spending), monetary policy (interest rates, money supply), and industrial policy (subsidies, incentives for innovation) can influence Samsung’s operations and profitability.
• Economic Integration : Samsung benefits from the economic integration of different markets, such as the European Union or ASEAN, which can reduce trade barriers and increase market access.
• Consumer Confidence : The level of consumer confidence in the economy can affect their spending habits, impacting the demand for Samsung’s products.
• Samsung SWOT Analysis

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Sociocultural

• Consumer Attitudes and Behaviors : Different societies have different attitudes towards technology, its role in everyday life, and the speed at which they adopt new technologies. Understanding these attitudes is crucial for Samsung to effectively market its products and innovate.
• Lifestyle Trends : Changes in lifestyle trends can impact the demand for Samsung’s products. For example, an increasing emphasis on health and fitness may increase demand for wearable tech like Samsung’s smartwatches that offer health tracking features.
• Demographics : Demographic factors such as population, age structure, income levels, and education levels can influence the market for Samsung. For instance, younger populations might be more likely to adopt new technology products quickly.
• Cultural Differences : Different cultures have different preferences and needs, which Samsung needs to consider when designing and marketing its products. For example, color symbolism varies between cultures, which might affect Samsung’s color options in different countries.
• Social Norms and Values : The norms and values of a society can affect the acceptance and use of Samsung’s products. For instance, communities concerned about privacy may be more cautious about using smart devices.
• Education Levels : Higher education levels often correlate with higher technology adoption rates, which could increase the market for Samsung’s products.
• Environmental and Social Responsibility : Consumers are increasingly concerned about the social and environmental impact of the products they buy. Samsung’s commitment to environmental sustainability and ethical practices can influence consumers’ perceptions and purchasing decisions.
• Changing Work Patterns : With the increased remote working, there might be an increased demand for certain products like tablets, laptops, and smartphones.

Technological

• Technological Innovation : Technological innovation in the electronics industry is rapid. Samsung must continually invest in R&D to keep up with new technologies, from advancements in screen technology (like OLED and Micro-LED) to developments in artificial intelligence, 5G, IoT, etc.
• Technological Obsolescence : Given the rapid pace of technology change, products can become obsolete quickly. Samsung must manage its product lifecycle effectively to minimize losses from obsolete inventory and maintain its competitive edge.
• Adoption of New Technologies : How quickly and effectively Samsung can adopt and implement new technologies can impact its market position. This includes technologies used in its products and those used in manufacturing processes.
• Technological Infrastructure : The state of technical infrastructure in Samsung’s markets can affect its sales. For example, a region’s rollout of 5G networks can influence the demand for 5 G-capable smartphones.
• Digital Transformation : Advances in digital technologies are transforming how businesses operate. Samsung must adapt to these changes in e-commerce, digital marketing, remote working, and digital services.
• Cybersecurity : With increasing digitization and connectivity, cybersecurity threats are a significant concern. Samsung must ensure robust security features in its devices and protect its information systems from cyber threats.
• Regulatory Changes in Technology : Changes in technology-related regulations can impact Samsung. This includes regulations around data privacy, AI, digital rights, etc.
• Patents and Intellectual Property : Patents and IP rights are crucial in the tech industry. Samsung must navigate this landscape effectively to protect its innovations and avoid infringing on the rights of others.

Environmental

• Climate Change : Climate change can impact Samsung’s operations, especially its supply chain and manufacturing processes. For instance, climate-related disasters can disrupt the supply chain, and regulatory responses to climate change (like carbon pricing) could increase operational costs.
• Waste Management : Electronic waste is a significant environmental issue, and Samsung, as a major electronics manufacturer, is expected to manage this responsibly. This includes designing products for easier recycling and offering take-back programs for old devices.
• Energy Efficiency : There is increasing consumer and regulatory focus on the energy efficiency of electronic devices. Samsung must ensure its products are energy-efficient to comply with regulations and meet customer expectations.
• Resource Scarcity : Some electronic device resources are scarce or associated with environmental and social issues (like conflict minerals). Samsung must manage its resource use responsibly to ensure supply and protect its reputation.
• Pollution : Manufacturing processes in the electronics industry can contribute to pollution (like air and water pollution). Samsung must manage this to comply with environmental regulations and meet increasing consumer expectations for environmentally-friendly practices.
• Green Products : There is a growing demand for “green” products with a lower environmental impact. Samsung can tap into this demand by designing products with lower environmental impact, such as recycled materials.
• Environmental Regulations : Regulations related to environmental issues (like carbon emissions, e-waste, energy efficiency, etc.) can impact Samsung’s operations, product design, and marketability.
• Social Pressure : Consumers and society, in general, are increasingly concerned about environmental issues, and companies are expected to demonstrate their environmental responsibility. Samsung’s environmental reputation can influence its brand image and customer loyalty.

• Product Safety Regulations : Samsung must ensure that all its products meet safety regulations in every market. Failure to comply could result in product recalls, fines, and brand reputation damage.
• Intellectual Property Laws : As a tech company, Samsung must protect its innovations through patents, trademarks, and copyrights. It also needs to ensure it doesn’t infringe on the IP rights of others, which could lead to legal disputes.
• Employment Laws : Samsung must comply with labor and employment laws in its operating countries. This includes laws related to wages, working hours, health and safety, and discrimination.
• Data Protection and Privacy Laws : With many of its devices storing or processing personal data, Samsung must comply with data protection and privacy laws, such as the General Data Protection Regulation (GDPR) in the European Union.
• Environmental Laws : Samsung has to adhere to various environmental laws and regulations concerning waste disposal, recycling, energy use, and pollution. This is particularly relevant given Samsung’s role as a major electronics manufacturer.
• Anti-Trust Laws : Samsung must comply with antitrust and competition laws to prevent unfair business practices and promote fair competition.
• Trade Regulations : As a global company, Samsung is subject to various international trade regulations, including export controls, tariffs, and sanctions.
• Consumer Protection Laws : These laws protect consumers from unfair business practices. Samsung must adhere to these laws in all areas, including advertising, product safety, and customer service.

Check out the PESTEL Analysis of Global Businesses

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The Analysis of Strategic Management of Samsung Electronics Company through the Generic Value Chain Model

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yuanita handayati

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Lest anyone feel overwhelmed by the depth of detail in this Handbook, especially with respect to the sections on methodology, we would like to emphasise at the outset: this Handbook is not meant to be used or read as a comprehensive step by step process that has to be ...

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PurposeThe purpose of this paper is to describe key factors in sustaining effective business value chains for companies operating in the electronic industry and identify their potential future challenges.Design/methodology/approachThe research methodology includes the survey development, the hypothesis development, and the statistical analyses, especially the Pearson correlation. Altogether, a total of 129 firms participated in this study – 97 companies from Hong Kong/China and 32 firms from Thailand. Included in this methodology are a pre‐test of a survey, a development of the research hypotheses, and follow‐up discussions with participating executives on possible future challenges for their business value chains.FindingsAn effective business value chain essentially depends on a good internal operational system and constructive relationships with suppliers and customers. In other words, the collective efficacy depends on a manufacturer's internal operations (IO) and its supplie...

Togar Simatupang , Pairach (Champ) Piboonrungroj , Sharon Williams

The concept value chain has been promoted by Porter for more than three decades. A value chain represents a chain of activities that an organization performs to deliver a valuable product for the market. Porter’s value chain assumes that an organization is a system composed of inputs, transformation processes, and outputs. Each activity in the system involves the acquisition and consumption of resources. How the organization carries out value chain activities determines costs and profits. One enhances the competitiveness of a company by improving its value chain structure. However, little attention has been given to developing value chain thinking. This paper examines the emergence of value chain thinking and proposes new value chain thinking that involves a chain of activities linked to one another in order to sustain value. A conceptual model is presented which consists of four steps: value discovery, value design, value delivery, and value capture. A methodology is also proposed in which to operationalize the value chain thinking.

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Abstract This study aims at identifying the extent of applying value chain analysis (VCA) to achieve and sustain competitive advantage in manufacturing companies in Jordan. To achieve the study’s objectives, a questionnaire was developed and pre -tested. The population of the study consists of the (93) company which are listed in the Amman Stock Exchange of Jordan in the end of the 2012, (65) companies of them accepted to fill the questionnaires. (81.5)% of the distributed questionnaires was received. Descriptive and analytical statistical techniques such as frequencies, percentages, standard deviation, means, one sample T test and one way ANOVA were applied to test the study’s hypotheses. The study revealed the following results: manufacturing companies in Jordan apply VCA, but don’t use it to achieve and sustain competitive advantage and there is no statistically significant effect of the respondents’ demographic characteristics on their perceiving the importance of applying VCA to achieve competitive advantage. The study recommends manufacturing companies in Jordan train their employees on strategic analysis of the company's internal and external environment, exercise the value chain analysis, calculate the unit cost of production and enter them in courses for achieving and sustaining competitive advantage through cost reduction and differentiation strategies.

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Competitive advantage is a difference in relative prices or the relative costs and it results from differences in their work done. These differences may occur in two different ways, namely either the organization performs better the same types of activities, or it chooses different types of activities. To establish whether between an organization and other competitors in the same industry there are differences in terms of relative prices and relative costs, it is recommended to make use of Porter's value chain, the more so as these differences are determined by the activities of the organization. Value chain plays an important role in the diagnosis of an organization's competitive advantage because through it we can get an insight into the mode of action of costs and the influences they have on the strategy that the organization has taken. Also, through the value chain there can be identified the potential sources of differentiation of products or services offered by the org...

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Evaluating Risks and Decisions: A Samsung Case Study Essay

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Introduction

Samsung is a consumer electronics firm based in South Korea with a wide product range that includes computers and smartphones. Founded in 1938, as a grocery store, the company has since grown from a small family-owned enterprise to one of the largest in the world (Regan, 2018). This paper evaluates how the firm applies Enterprise Risk Management (ERM) in its corporate practices to manage risks and business decisions when operating internationally.

A Critical Reflection Based On ERM

The application of ERM policies depends on a myriad of factors. Three main frameworks for conducting reviews include Integrated Risk Management (IRM), IS031000, and COSO-ERM standards (Hessami, 2019). IRM standards seek to evaluate risk management processes based on four main criteria that evaluate financial, strategic, operational, and hazard risks affecting an organization (Coleman, 2018). Comparatively, IS031000 focuses on three main areas of evaluation – principles, frameworks, and processes (Rael, 2017). Comparatively, the COSO-ERM cube focuses on strategic, operational, reporting, and compliance risks as highlighted in figure 1 below.

As highlighted in figure 1 above, the COSO-ERM model highlighted above evaluates a company’s internal environment through objective setting, event identification, risk assessment, risk response, control activities, information assessment, and monitoring. In the context of Samsung’s risk management plan, the COSO-ERM framework will be used to analyze the firm’s risks and decisions.

Internal Environment

For purposes of this review, Samsung’s internal environment is evaluated based on the efficacy of its management and leadership styles. Relative to its competitiveness in the global market, the South Korean firm has adopted a combination of western and Asian leadership styles to be successful (Samsung Inc., 2021). For example, its bold risk-taking appetite stems from the assimilation of western ideals in the company’s management framework. Alternatively, its treatment of workers is based on the Asian philosophy of fairness, equity, and hard work (Regan, 2018; Biberhofer et al., 2019). Broadly, the hybrid management and leadership philosophy adopted by Samsung is responsive to its risk management objectives.

Objective Setting

A company’s objectives influence the design of its key processes and activities. Samsung’s objective is to develop superior products and services that enhance societal value (Samsung Inc., 2021). Using the COSO-ERM framework to analyze this objective, quality emerges as a core consideration for the firm’s success in achieving this goal (Ensign, Fast and Hentsch, 2016; Grunert, 2017). The company also complies with existing laws and guidelines to make sure that its business processes are consistent with the global code of conduct for conducting multinational operations.

Event Identification

There are various sources of risk in the consumer electronics industry. Top of the list is the COVID-19 pandemic, which has disrupted supply chain patterns and created shortfalls in demand for goods that were hitherto non-essential. Trade wars pitting western and Asian companies are also significant sources of risk for Samsung (Baack, Czarnecka and Baack, 2018). Therefore, the COVID-19 pandemic and ongoing trade wars between western and Asian nations emerge as significant sources of risk for Samsung Electronics.

Risk Assessment

A comprehensive assessment of Samsung’s risk profile is provided in Table 1 below.

Table 1. Samsung’s risk assessment

According to the risk events highlighted in Table 1 above, two risk categories affect Samsung’s operations – COVID-19 and trade wars. The above risks have been ranked according to the risk profile matrix highlighted in figure 2 below and trade wars is the most impactful

A company’s risk management attitude defines the kind of strategies it is likely to adopt in a risk management scenario. Relative to this statement, Samsung can initiate four major types of responses: tolerate, treat, transfer, or terminate a risk (Kumar, Rahman and Kazmi, 2016). Appropriate risk responses will be to treat and transfer the risks, respectively. Trade wars are transferable because they are initiated at an intergovernmental level and Samsung has little control over associated processes. Comparatively, risks associated with the COVID-19 pandemic should be “treated” because they can be mitigated through the deployment of robust health-based and prevention-oriented strategies (Archetti, 2021; Hutchins, 2018). Modalities for implementing these strategies are highlighted below.

Control Activities

According to the proposed strategies highlighted above, the appropriate risk response for managing risks caused by the COVID-19 pandemic is “treatment.” This is because the firm can develop health safeguards to protect its customers and employees from infections (Adhikari, 2018). Comparatively, risks associated with trade wars can be “transferred” because third-party actors, such as insurance companies, can develop products that protect the firm against this type of risk.

Information and Communication

Most companies use Information and Communication Technology (ICT) tools to carry out various functions, including risk management. Such is the case of Samsung because it uses ICT to carry out sustainable business operations by diversifying its risks across different portfolios (Samsung Securities, 2020; Makrides, Vrontis and Christofi, 2020). At the same time, the company uses ICT in risk identification and assessment because it provides a relatively accurate assessment of the same, relative to other evaluative models (Chopra, Avhad and Jaju, 2021). The risk posed by the adoption of this technology includes system breakdowns and the failure of some employees to understand how to use the company’s risk management software (Pesch et al., 2017). Nonetheless, this risk profile is low and the company has successfully used its ICT infrastructure to manage its risk management activities.

Risk Monitoring

In this paper, the main sources of risk for Samsung have been identified to be trade wars and the COVID-19 pandemic. These risks have implications on the organization if not effectively monitored (Regan, 2018). The two levels of risks should be evaluated weekly to understand their implications on the organization (Rael, 2017). The chief risk manager should collaborate with the Chief Executive Officer (CEO) to understand the implications of these risks on various aspects of the firm’s corporate and industry performance.

Role and Impact of Governance, Technology, and Resilience

Role of governance.

Companies have varied ways of managing their risk categories. Two major strategies are adopted by firms when managing risks is to (i) explain why they have not been addressed as stipulated in corporate governance reports or (ii) to comply with rules and guidelines stipulated in the corporate governance report (Rael, 2017). Samsung’s risk management approach should follow the second approach of explaining situations where corporate governance rules and policies have been followed, or not. This is because the two risk events identified in this document – COVID-19 and trade wars – change periodically, while the company’s corporate management rules are rigid (Grunert, 2017). Explaining the responses may be a useful way of navigating these changes.

Samsung’s CEO should take responsibility for the above actions by making sure that the company’s corporate management guidelines are followed. Alternatively, the firm’s Board of Directors should review the performance of the CEO by reviewing how the company’s overall risk management plan helps in the realization of its goals (Köbis, Soraperra and Shalvi, 2021). The process should be open and transparent to ensure there is sustainability of business process outcomes (Adhikari, 2018). By doing so, the process will be fair and receptive to all parties involved.

Impact of Governance

The impact of Samsung’s corporate governance policies on its risk management processes is vast because of their outreach and influence on various aspects of business performance. In the context of Samsung’s operations, corporate governance plays a critical role in moderating the relationship between managers and employees by defining the expectations and roles of each party (Haenlein et al., 2020; Köbis, Soraperra and Shalvi, 2021). From an organizational standpoint, the company’s corporate governance policies will play a critical role in standardizing operational procedures across various product divisions – especially in the way it manages risk (Rael, 2017). Apple Inc. and Huawei are Samsung’s competitors in the consumer electronics industry, which have developed and implemented similar corporate management policies with varied levels of success (Apple Inc. 2021; Adoko, 2017). From their experience, the failure to implement good corporate governance policies in managing a company’s risk events may result in increased inefficiency and unresponsiveness to the changing nature of a firm’s risk events (Adoko, 2017). Therefore, it is important to make sure that such policies are developed by consulting relevant parties.

Role of Technology

As highlighted in this document, ICT plays a critical role in determining how Samsung makes decisions regarding its risk management processes. Relative to this statement, some researchers suggest that ICT is the foundation for the development of innovation policies for use in the corporate setting (Dimic, Orlov and Äijö, 2019; Köbis, Soraperra and Shalvi, 2021). Nonetheless, given the sporadic nature of Samsung’s risk events – COVID-19 and trade wars – technology will play a critical role in formulating, implementing, and monitoring its risks (Adoko, 2017). Particularly, it will help to track risk events in real time, thereby allowing managers to be informed of their impact on organizations. Some technology tools, such as Skype and Zoom, will also be used to communicate appropriate risk management strategies to respective teams based on data collected from the above-mentioned risk tracking processes.

Impact of Technology

The use of ICT tools to undertake Samsung’s risk management processes will have financial and operational implications on the multinational. From a financial perspective, technology may lead to reductions in operational costs because of its inexpensive nature (Kumar, Rahman and Kazmi, 2016; Archetti, 2021; Hutchins, 2018). The firm may also need to automate some of its risk management processes, such as risk monitoring, to accommodate these changes (Kumar, Rahman and Kazmi, 2016; Archetti, 2021; Hutchins, 2018). Some companies have successfully adopted this strategy to manage their risks (Kemp, 2018; Palmatier and Sridhar, 2017). For example, Google and Apple have used machine-learning techniques to minimize their risk exposures because they provide an effective way of improving their overall risk management plans (Apple Inc., 2021; Kelleher, 2019). Overall, technology will have a positive impact on Samsung’s performance by improving its risk tracking and monitoring processes.

Role of Resilience

As highlighted in this document, risk events may have far-reaching implications on a company’s overall performance. Its resilience determines the effects that these events will have on its overall performance (Lewis, Ricard and Klijn, 2018). In this regard, resilience determines the ability of a company to adapt to the changing dynamics affecting its internal and external operations (Hernaus, Juras and Matic, 2021; Management Association, Information Resources, 2018). Samsung has demonstrated market resilience in the manner it manages its risk exposures (Regan, 2018). For example, by being resilient, the company has addressed its market and product challenges by recalibrating its business processes to mitigate known risks (Regan, 2018). In this regard, its resilience has played a critical role in affirming its position as a dominant company in the consumer electronics business.

Impact of Resilience

As highlighted above, Samsung’s resilience has had a positive effect on its overall business performance. For example, it has been able to address customer concerns in problematic product segments, such as the Samsung Galaxy Note, which caught fire when charging (Regan, 2018). Its resilience in the wake of such missteps has given competitors little room to exaggerate the company’s weaknesses (Bérard and Teyssier, 2018). Therefore, its resilience has helped it to maintain market dominance by countering negative information and experiences from customers and competitors. Based on the above examples, Samsung’s resilience is unmatched in the technology industry.

The insights highlighted in this paper have highlighted the role that ERM and corporate governance play in supporting Samsung’s risk management plan. Two strategies have been proposed for each risk category with the “treatment” option being associated with COVID-19 risks, while the “transfer” option is linked with risks associated with trade wars. It is proposed that the adoption of sound corporate governance policies and the implementation of a robust risk identification criterion will play a critical role in maintaining Samsung’s resilience in the competitive consumer electronics market.

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Archetti, C. (2021), ‘When public relations can heal: an embodied theory of silence for public communication’, Public Relations Inquiry , Vol. 5, No. 1, pp. 1-13.

Baack, D. W., Czarnecka, B. and Baack, D. (2018), International Marketing . London: SAGE.

Bérard, C. and Teyssier, C. (eds.). (2018), Risk Management: A Lever for SME Development and Stakeholder Value Creation . London: John Wiley and Sons.

Biberhofer, P. et al. (2019), ‘Facilitating work performance of sustainability-driven entrepreneurs through higher education: the relevance of competencies, values, worldviews, and opportunities’, The International Journal of Entrepreneurship and Innovation , Vol. 20, No. 1, pp. 21–38.

Chopra, A., Avhad, V. and Jaju, S. (2021), ‘Influencer marketing: an exploratory study to identify antecedents of consumer behavior of millennial’, Business Perspectives and Research , Vol. 9, No. 1, pp. 77–91.

Coleman, L. B. (2018), Managing Organizational Risk Using the Supplier Audit Program: An Auditor’s Guide along The International Audit Trail . London: Quality Press.

Dimic, N., Orlov, V. and Äijö, J. (2019), ‘Bond–equity yield ratio market timing in emerging markets’, Journal of Emerging Market Finance , Vol. 18, No. 1, pp. 52–79.

Ensign, P. C., Fast, J. and Hentsch, S. (2016), ‘Can a technology enterprise transition from niche to wider market appeal in the turbulent digital media industry?’, Vikalpa , Vol. 41, No. 3, pp. 247–260.

Grunert, K. G. (ed.). (2017), Consumer Trends and New Product Opportunities in the Food Sector. Wageningen: Wageningen Academic Publishers.

Haenlein, M. et al. (2020), ‘Navigating the new era of influencer marketing: how to be successful on Instagram, TikTok, and Co.’, California Management Review , Vol. 63, No. 1, pp. 5–25.

Hernaus, T., Juras, A. and Matic, I. (2021), ‘Cross-echelon managerial design competencies: relational coordination in organizational learning and growth performance’, Business Research Quarterly , Vol. 6, No. 1, pp. 445-467.

Hessami, A. G. (eds.). (2019), Perspectives on Risk, Assessment and Management Paradigms . London: Books on Demand.

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Hutchins, G. (2019), Project Risk Management . London: CERM Academy for Enterprise Risk Management.

Kelleher, J. D. (2019), Deep Learning . Massachusetts: MIT Press.

Kemp, K. (2018), Misuse of Market Power: Rationale and Reform . Cambridge, MA: Cambridge University Press.

Köbis, C., Soraperra, I. and Shalvi, S. (2021), ‘The consequences of participating in the sharing economy: a transparency-based sharing framework’, Journal of Management , Vol. 47, No. 1, pp. 317–343.

Kumar, V., Rahman, Z. and Kazmi, A. A. (2016), ‘Assessing the influence of stakeholders on sustainability marketing strategy of Indian companies’, SAGE Open , Vol. 6, No. 2, pp. 987-1109.

Lewis, J. M., Ricard, L. M. and Klijn, E. H. (2018), ‘How innovation drivers, networking and leadership shape public sector innovation capacity’, International Review of Administrative Sciences , Vol. 84, No. 2, pp. 288–307.

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IvyPanda. (2023, February 28). Evaluating Risks and Decisions: A Samsung Case Study. https://ivypanda.com/essays/evaluating-risks-and-decisions-a-samsung-case-study/

"Evaluating Risks and Decisions: A Samsung Case Study." IvyPanda , 28 Feb. 2023, ivypanda.com/essays/evaluating-risks-and-decisions-a-samsung-case-study/.

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IvyPanda . 2023. "Evaluating Risks and Decisions: A Samsung Case Study." February 28, 2023. https://ivypanda.com/essays/evaluating-risks-and-decisions-a-samsung-case-study/.

1. IvyPanda . "Evaluating Risks and Decisions: A Samsung Case Study." February 28, 2023. https://ivypanda.com/essays/evaluating-risks-and-decisions-a-samsung-case-study/.

Bibliography

IvyPanda . "Evaluating Risks and Decisions: A Samsung Case Study." February 28, 2023. https://ivypanda.com/essays/evaluating-risks-and-decisions-a-samsung-case-study/.

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Samsung Electronics

By: Jordan Siegel, James Jinho Chang

When is it possible to create a dual advantage of being both low cost and differentiated? In this case, students assess whether Samsung Electronics has been able to achieve such a dual advantage, and…

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• Publication Date: Jun 30, 2005
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When is it possible to create a dual advantage of being both low cost and differentiated? In this case, students assess whether Samsung Electronics has been able to achieve such a dual advantage, and if so, how this was possible. Moreover, Samsung Electronics' long-held competitive advantage is under renewed attack. Students also can assess how Samsung should respond to large-scale Chinese entry into its industry.

Learning Objectives

To teach advanced concepts of competitive advantage; to determine the conditions under which dual advantage is possible; and to discuss how industry incumbents should best respond to large-scale Chinese entry.

Jun 30, 2005 (Revised: Feb 27, 2009)

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Harvard Business School

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STEEPLE Analysis of Samsung

The STEEPLE analysis of the business environment of Samsung is part of the company’s strategic analysis for the medium and long term. The goal of this study is to assess the prospects of Samsung.

Samsung is a global company in the consumer appliances and gadgets market. It started as a South Korean family-owned business but has earned acceptance around the globe now. Samsung is not happy with operating in the leading markets only. The recent expansion into new markets shows that it wants to cover as many countries as possible.

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STEEP analysis provides concentrated information which covers various aspects of the external environment. Like PEST and STEEP, it creates a snapshot of current socio-political reality. It also gives a better idea of the existing trends.

The analysis below will give you an outline of Samsung’s overall situation. Samsung would consider all of these factors before taking a decision.

The key focus of this article is on the external environmental drivers. The STEEPLE analysis will focus on the following 7 factors: Social, Technological, Economic, Environmental, Political, Legal, and Ethical. The initials for these make up the acronym STEEPLE.

S for Social

As I mentioned already, Samsung is a South Korean Chaebol. This means it is a family-owned multinational. Despite its global image, the firm still operates as a Korean company from within. For this reason, they change many aspects of global operations according to the local conditions. In simpler words, global company Samsung has had to act locally in many emerging markets.

Moreover, Samsung had to change its products to match the rapidly changing consumer preferences in certain markets. Samsung operates in a market niche influenced by the consumers’ lifestyle preferences. Socio-cultural factors vary in each country. So, it has to reorient itself accordingly.

T for Technological

Samsung is among the world’s leading innovative companies. The company has an advantage in using the power of technology. It can drive innovation for sustainable business advantage. They have made this an obsessive mission to maintain leading position. The aim is to always stay ahead of the technological and innovation curve. They aim to dominate competitors by being the first to offer latest products to the market.

Yet, this has led the company to some problems. Legal and regulatory scrutiny hovered over the company when Apple accused it of imitation of product design. The incident taught Samsung that doing the basics right is still the key to success.

E for Economic

This factor is very critical for Samsung. The opening up of some developing markets meant it had to re-think the economic factor. While the company could expand its global footprint, it also had to worry about the ongoing global economic crisis. The reduced purchasing power of buyers in many markets forced to find a profitable solution.

The macroeconomic environment in which Samsung globally operates is beset with uncertainty and volatility. The company has to reorient its strategies.

It seems that the saving grace for the company is that adjusted well to the lowering the consumer disposable incomes in developed countries. Samsung did this by expanding to the emerging and to the developing markets. This is perhaps the reason Samsung started an aggressive push into the new markets. It hopes to make up for the lost business from the developed world.

E for Environmental

All businesses impact its environment. Some have a positive impact while others have a negative effect. The degree of impact varies too. Samsung must keep pollution or waste in mind. It can also have a positive impact on the environment by processing and cleaning waste. These factors will affect the company, but they will not have an immense toll on its trade and profit generation. This is because environmental factors have a direct effect on agricultural businesses only.

P for Political

In most markets, the political environment is favorable to Samsung’s operations. Still, there are minor problems in some of the foreign markets. India is an example. Overall, Samsung operates in markets with benign political factors. Recently, it faced weighty political headwinds South Korea. The reason behind this problem is tensions with North Korea.

Samsung had to consider not only political instability. It worried that war would break out in the Korean Peninsula. Samsung also faces political pressures in many Latin American and African countries. The political environment is unstable in these locations. They are prone to frequent changes in governing structures.

This is such a serious issue yet as Samsung has factored the political instability into its strategic calculations.

L for Legal

Like I mentioned earlier, Samsung had to pay heavy penalties for charges that it imitated the Apple’s iPad and iPhone. This accusation led public perceptions of the company to worsen. The consumer approval of its strategies was also hampered.

Everyone waited how the start-up would squeeze out of the legal maze. There were concerns that the event hampered Samsung’s reputation permanently. Many even concluded that the team expanded to new markets because of the range of lawsuits.

E for Ethical

The number of ethical consumers who want brands to make products in a responsible manner, both socially and environmentally, has increased. In such a situation, Samsung must be aware of the need to make products in a way which satiates the ethical consumer.

This means it has to make sure it does not compromise on the employees’ working conditions or on their wages. It must take good care of the labors that make the final product. It should also give importance to other ethical factors.

In conclusion from the above analysis, I can say that Samsung has all its tasks aligned. The company has prepared well to navigate the global consumer market. It is true that as the company prepares for expansion, the stakes are higher in a recessionary era. The extremely competitive technological market landscape adds to the difficulty.

To be in a better position than competitors like Apple, Samsung needs to consider these factors.

Image “Samsung Galaxy S4 – gap with dust” by Karlis Dambrans is licensed under CC BY 2.0

Related posts:

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• Difference between STEEP and STEEPLE Analysis
• Difference between SWOT, PEST, STEEP and STEEPLE Analysis
• Samsung product development Case study
• Samsung Case Analysis
• SWOT analysis of Samsung
• Samsung – Competitive Analysis

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Please note you do not have access to teaching notes, samsung electronics: analyzing qualitative complaint data.

Publication date: 20 January 2017

Teaching notes

“Samsung Electronics had experienced a series of quality-related problems, including the recall of one of its LCD TV models. Unfortunately for quality director Kevin Sarni, there was no single root cause behind these problems: Samsung's supply chain management, product design, and testing/quality assurance functions all played a role.

Sarni regularly worked with quantitative data from Samsung's customer complaint database, but recently he had been shown comments about Samsung products posted on the website ConsumerAffairs.com . The number and emotional tone of the website postings concerned him; he worried these kinds of complaints might touch off a social media—fueled public relations firestorm that would make his job more difficult.

He wanted to analyze this feedback, but had no experience with qualitative data. An internal Six Sigma Black Belt consultant suggested he start by creating an affinity diagram and use that to create a Pareto chart to determine which issues to address first. Once Sarni completed the unfamiliar diagrams he had still another task ahead of him: examining the results to see if they justified taking short—term action to address the quality problems raised in the complaints.”

Organize and analyze qualitative data using affinity diagrams

Identify priorities using Pareto charts

The case reinforces the importance of approaching problem solving in a methodical and data-driven manner and demonstrates the power of visual (vs. table-driven) tools.

• Business Process Improvement
• Crisis Management
• Customer Relationship Management
• Customer Service
• Manufacturing
• Operations Management
• Organizational Effectiveness
• Total Quality
• Customer Satisfaction

Boepple, J. (2017), "Samsung Electronics: Analyzing Qualitative Complaint Data", . https://doi.org/10.1108/case.kellogg.2016.000291

Kellogg School of Management

Copyright © 2013, The Kellogg School of Management at Northwestern University

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The state of AI in early 2024: Gen AI adoption spikes and starts to generate value

If 2023 was the year the world discovered generative AI (gen AI) , 2024 is the year organizations truly began using—and deriving business value from—this new technology. In the latest McKinsey Global Survey  on AI, 65 percent of respondents report that their organizations are regularly using gen AI, nearly double the percentage from our previous survey just ten months ago. Respondents’ expectations for gen AI’s impact remain as high as they were last year , with three-quarters predicting that gen AI will lead to significant or disruptive change in their industries in the years ahead.

About the authors

This article is a collaborative effort by Alex Singla , Alexander Sukharevsky , Lareina Yee , and Michael Chui , with Bryce Hall , representing views from QuantumBlack, AI by McKinsey, and McKinsey Digital.

Organizations are already seeing material benefits from gen AI use, reporting both cost decreases and revenue jumps in the business units deploying the technology. The survey also provides insights into the kinds of risks presented by gen AI—most notably, inaccuracy—as well as the emerging practices of top performers to mitigate those challenges and capture value.

AI adoption surges

Interest in generative AI has also brightened the spotlight on a broader set of AI capabilities. For the past six years, AI adoption by respondents’ organizations has hovered at about 50 percent. This year, the survey finds that adoption has jumped to 72 percent (Exhibit 1). And the interest is truly global in scope. Our 2023 survey found that AI adoption did not reach 66 percent in any region; however, this year more than two-thirds of respondents in nearly every region say their organizations are using AI. 1 Organizations based in Central and South America are the exception, with 58 percent of respondents working for organizations based in Central and South America reporting AI adoption. Looking by industry, the biggest increase in adoption can be found in professional services. 2 Includes respondents working for organizations focused on human resources, legal services, management consulting, market research, R&D, tax preparation, and training.

Also, responses suggest that companies are now using AI in more parts of the business. Half of respondents say their organizations have adopted AI in two or more business functions, up from less than a third of respondents in 2023 (Exhibit 2).

Gen AI adoption is most common in the functions where it can create the most value

Most respondents now report that their organizations—and they as individuals—are using gen AI. Sixty-five percent of respondents say their organizations are regularly using gen AI in at least one business function, up from one-third last year. The average organization using gen AI is doing so in two functions, most often in marketing and sales and in product and service development—two functions in which previous research  determined that gen AI adoption could generate the most value 3 “ The economic potential of generative AI: The next productivity frontier ,” McKinsey, June 14, 2023. —as well as in IT (Exhibit 3). The biggest increase from 2023 is found in marketing and sales, where reported adoption has more than doubled. Yet across functions, only two use cases, both within marketing and sales, are reported by 15 percent or more of respondents.

Gen AI also is weaving its way into respondents’ personal lives. Compared with 2023, respondents are much more likely to be using gen AI at work and even more likely to be using gen AI both at work and in their personal lives (Exhibit 4). The survey finds upticks in gen AI use across all regions, with the largest increases in Asia–Pacific and Greater China. Respondents at the highest seniority levels, meanwhile, show larger jumps in the use of gen Al tools for work and outside of work compared with their midlevel-management peers. Looking at specific industries, respondents working in energy and materials and in professional services report the largest increase in gen AI use.

Investments in gen AI and analytical AI are beginning to create value

The latest survey also shows how different industries are budgeting for gen AI. Responses suggest that, in many industries, organizations are about equally as likely to be investing more than 5 percent of their digital budgets in gen AI as they are in nongenerative, analytical-AI solutions (Exhibit 5). Yet in most industries, larger shares of respondents report that their organizations spend more than 20 percent on analytical AI than on gen AI. Looking ahead, most respondents—67 percent—expect their organizations to invest more in AI over the next three years.

Where are those investments paying off? For the first time, our latest survey explored the value created by gen AI use by business function. The function in which the largest share of respondents report seeing cost decreases is human resources. Respondents most commonly report meaningful revenue increases (of more than 5 percent) in supply chain and inventory management (Exhibit 6). For analytical AI, respondents most often report seeing cost benefits in service operations—in line with what we found last year —as well as meaningful revenue increases from AI use in marketing and sales.

Inaccuracy: The most recognized and experienced risk of gen AI use

As businesses begin to see the benefits of gen AI, they’re also recognizing the diverse risks associated with the technology. These can range from data management risks such as data privacy, bias, or intellectual property (IP) infringement to model management risks, which tend to focus on inaccurate output or lack of explainability. A third big risk category is security and incorrect use.

Respondents to the latest survey are more likely than they were last year to say their organizations consider inaccuracy and IP infringement to be relevant to their use of gen AI, and about half continue to view cybersecurity as a risk (Exhibit 7).

Conversely, respondents are less likely than they were last year to say their organizations consider workforce and labor displacement to be relevant risks and are not increasing efforts to mitigate them.

In fact, inaccuracy— which can affect use cases across the gen AI value chain , ranging from customer journeys and summarization to coding and creative content—is the only risk that respondents are significantly more likely than last year to say their organizations are actively working to mitigate.

Some organizations have already experienced negative consequences from the use of gen AI, with 44 percent of respondents saying their organizations have experienced at least one consequence (Exhibit 8). Respondents most often report inaccuracy as a risk that has affected their organizations, followed by cybersecurity and explainability.

Our previous research has found that there are several elements of governance that can help in scaling gen AI use responsibly, yet few respondents report having these risk-related practices in place. 4 “ Implementing generative AI with speed and safety ,” McKinsey Quarterly , March 13, 2024. For example, just 18 percent say their organizations have an enterprise-wide council or board with the authority to make decisions involving responsible AI governance, and only one-third say gen AI risk awareness and risk mitigation controls are required skill sets for technical talent.

Bringing gen AI capabilities to bear

The latest survey also sought to understand how, and how quickly, organizations are deploying these new gen AI tools. We have found three archetypes for implementing gen AI solutions : takers use off-the-shelf, publicly available solutions; shapers customize those tools with proprietary data and systems; and makers develop their own foundation models from scratch. 5 “ Technology’s generational moment with generative AI: A CIO and CTO guide ,” McKinsey, July 11, 2023. Across most industries, the survey results suggest that organizations are finding off-the-shelf offerings applicable to their business needs—though many are pursuing opportunities to customize models or even develop their own (Exhibit 9). About half of reported gen AI uses within respondents’ business functions are utilizing off-the-shelf, publicly available models or tools, with little or no customization. Respondents in energy and materials, technology, and media and telecommunications are more likely to report significant customization or tuning of publicly available models or developing their own proprietary models to address specific business needs.

Respondents most often report that their organizations required one to four months from the start of a project to put gen AI into production, though the time it takes varies by business function (Exhibit 10). It also depends upon the approach for acquiring those capabilities. Not surprisingly, reported uses of highly customized or proprietary models are 1.5 times more likely than off-the-shelf, publicly available models to take five months or more to implement.

Gen AI high performers are excelling despite facing challenges

Gen AI is a new technology, and organizations are still early in the journey of pursuing its opportunities and scaling it across functions. So it’s little surprise that only a small subset of respondents (46 out of 876) report that a meaningful share of their organizations’ EBIT can be attributed to their deployment of gen AI. Still, these gen AI leaders are worth examining closely. These, after all, are the early movers, who already attribute more than 10 percent of their organizations’ EBIT to their use of gen AI. Forty-two percent of these high performers say more than 20 percent of their EBIT is attributable to their use of nongenerative, analytical AI, and they span industries and regions—though most are at organizations with less than $1 billion in annual revenue. The AI-related practices at these organizations can offer guidance to those looking to create value from gen AI adoption at their own organizations.

To start, gen AI high performers are using gen AI in more business functions—an average of three functions, while others average two. They, like other organizations, are most likely to use gen AI in marketing and sales and product or service development, but they’re much more likely than others to use gen AI solutions in risk, legal, and compliance; in strategy and corporate finance; and in supply chain and inventory management. They’re more than three times as likely as others to be using gen AI in activities ranging from processing of accounting documents and risk assessment to R&D testing and pricing and promotions. While, overall, about half of reported gen AI applications within business functions are utilizing publicly available models or tools, gen AI high performers are less likely to use those off-the-shelf options than to either implement significantly customized versions of those tools or to develop their own proprietary foundation models.

What else are these high performers doing differently? For one thing, they are paying more attention to gen-AI-related risks. Perhaps because they are further along on their journeys, they are more likely than others to say their organizations have experienced every negative consequence from gen AI we asked about, from cybersecurity and personal privacy to explainability and IP infringement. Given that, they are more likely than others to report that their organizations consider those risks, as well as regulatory compliance, environmental impacts, and political stability, to be relevant to their gen AI use, and they say they take steps to mitigate more risks than others do.

Gen AI high performers are also much more likely to say their organizations follow a set of risk-related best practices (Exhibit 11). For example, they are nearly twice as likely as others to involve the legal function and embed risk reviews early on in the development of gen AI solutions—that is, to “ shift left .” They’re also much more likely than others to employ a wide range of other best practices, from strategy-related practices to those related to scaling.

In addition to experiencing the risks of gen AI adoption, high performers have encountered other challenges that can serve as warnings to others (Exhibit 12). Seventy percent say they have experienced difficulties with data, including defining processes for data governance, developing the ability to quickly integrate data into AI models, and an insufficient amount of training data, highlighting the essential role that data play in capturing value. High performers are also more likely than others to report experiencing challenges with their operating models, such as implementing agile ways of working and effective sprint performance management.

About the research

The online survey was in the field from February 22 to March 5, 2024, and garnered responses from 1,363 participants representing the full range of regions, industries, company sizes, functional specialties, and tenures. Of those respondents, 981 said their organizations had adopted AI in at least one business function, and 878 said their organizations were regularly using gen AI in at least one function. To adjust for differences in response rates, the data are weighted by the contribution of each respondent’s nation to global GDP.

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• Published: 04 June 2024

Case analysis of hepatotoxicity caused by vancomycin

• Jiayao Wu 2 &
• Yulu Zhou 1  

Journal of Medical Case Reports volume  18 , Article number:  267 ( 2024 ) Cite this article

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Although the correlation between liver toxicity and vancomycin is generally considered low, it has been observed that the use of vancomycin can lead to abnormal liver function indicators, such as elevated aspartate aminotransferase, alanine aminotransferase, alpha fetoprotein, and jaundice. To further understand the clinical features associated with vancomycin-induced liver toxicity and to provide clinical guidance, we conducted an analysis of the characteristics and clinical manifestations of vancomycin-induced liver injury.

Patients with liver function injury who received vancomycin treatment at the Third Xiangya Hospital of Central South University and Hunan Maternal and Child Health Hospital between 2016 and 2021 were selected for retrospective analysis of their general characteristics, vancomycin course, dose, liver function index, severity of liver injury, and concomitant medications.

Of the 4562 patients who received vancomycin, 17 patients were finally included, with an incidence rate of 0.37%. Of these patients, 12 were male (70.6%) and 5 were female (29.4%), ranging in age from 17 to 84 years with a mean average age of 45.41 ± 20.405 years. All patients were evaluated using Naranjo’s score, with score ≥ 3. The dosage, time, and plasma concentration of vancomycin were analyzed and it was found that nine patients (52.94%) had abnormal liver function when initially given a dose of 1 g every 12 hours. In total, 14 patients (82.35%) with liver injury were taking vancomycin in combination with two to four drugs, and severe liver injury occurred in patients taking vancomycin in combination with two drugs. The occurrence time of liver injury was 2–12 days after starting vancomycin, with a mean of 4.53 ± 2.401 days. Of these patients, 16 patients (94.1%) showed liver function abnormalities within 7 days of taking the drug, and 2 patients with grade 3–4 liver injury both showed liver function abnormalities within 3 days of taking the drug. Only 4 of the 17 patients (23.53%) had vancomycin blood concentrations within the normal range, and there was no correlation found between blood concentration and severity of liver injury. Analysis of the correlation between the severity of liver injury and vancomycin showed that none of the patients had allergies such as rash, two patients (11.76%) had jaundice, and fatigue occurred in five patients (29.41%). The remaining ten patients (58.82%) had no symptoms related to liver injury. All 17 patients had abnormal aspartate aminotransferase/alanine aminotransferase levels and 9 patients also had abnormal bilirubin levels. In 15 patients (88.24%), the severity of liver injury was grade 1, indicating mild liver injury, and no correlation was observed between the severity of liver injury and creatinine. Of the 17 patients, 1 patient received no intervention, 4 patients stopped taking vancomycin after developing liver injury, 1 patient reduced the dose, and 11 patients (64.7%) were treated with hepatic protectant.

Although the study concluded that the incidence of liver injury was not high, the liver toxicity of vancomycin should still be considered and liver function indicators should be monitored during the clinical use of vancomycin.

Peer Review reports

A preprint has previously been published [ 1 ].

Various drugs can cause injury, including antibiotics, antidiabetic drugs, antipsychotic drugs, antitubercular drugs, and antineoplastic drugs. Among these, antibiotics have been shown to be the most common agent involved in adverse drug reactions in hospitalized patients, with effects ranging from gastrointestinal to organ dysfunction and hypersensitivity reactions [ 2 ]. Vancomycin is a glycopeptide antibiotic that is primarily active against Gram-positive bacteria, such as Staphylococcus aureus , Streptococcus , Clostridium , Actinomycetes , Enterococcus , Listeria , and so on. It does not show cross-resistance with other antibiotics. It exerts antibacterial effects by inhibiting the synthesis of bacterial cell wall glycopeptides, altering the permeability of the bacterial cell membrane and destroying its barrier function, and selectively inhibiting the biosynthesis of bacterial RNA to prevent bacterial replication [ 3 ]. Studies have reported that the incidence of adverse events in the vancomycin group was 12.5%, and the most common adverse reactions were nephrotoxicity, ototoxicity, red man syndrome, allergic reactions, and abnormal liver function indicators, such as abnormal aspartate aminotransferase (AST), alanine aminotransferase (ALT), and alpha-fetoprotein (AFP) level [ 4 ]. Owing to the excretion of more than 80% of vancomycin in the urine in the form of prototype [ 5 ], its nephrotoxicity has also received widespread attention. Although the correlation between liver toxicity and vancomycin is very low, abnormal liver function indicators, such as elevated AST, ALT, AFP, and jaundice, have been observed with the use of vancomycin. A meta-analysis of 20 randomized controlled trial (RCT) studies from 1950 to 2010 showed that 321 patients (6.83%) treated with vancomycin experienced liver function abnormalities, which were mainly mild to moderate increases in serum transaminases [ 6 ]. To further investigate the clinical characteristics of vancomycin liver toxicity, we analyzed the clinical data of patients with vancomycin-induced liver injury.

Data source

A total of 4562 hospitalized patients who received vancomycin treatment in the Third Xiangya Hospital from 2016 to 2021 were selected. According to the inclusion and exclusion criteria, 17 patients were finally included. Inclusion criteria: (1) received vancomycin treatment during hospitalization, (2) blood concentration of vancomycin was monitored during medication, (3) had a Naranjo score of ≥ 3 with vancomycin. Exclusion criteria: patients who did not meet the above inclusion criteria.

Retrospective research methods were used to read and sort the patient records, and to extract information, such as sex, age, site of infection, vancomycin dosage, blood concentration, adverse reaction time, symptoms, indicators, treatment measures, and outcomes.

Observation indicators

The purpose of using vancomycin in enrolled patients; time of adverse reactions; symptoms; liver function indicators: AST, ALT, direct bilirubin, indirect bilirubin; renal function: creatinine; plasma concentration; outcomes; and concurrent diseases and medications.

Statistical methods

SPSS 22.0 was used for statistical analysis.

General situation

A total of 17 patients with liver injury were included with an incidence rate of 0.37%, including 12 males (70.6%) and 5 females (29.4%) aged 17–84 years with an average age of 45.41 ± 20.405 years. Among the 17 patients, 1 patient had a history of cholecystectomy, 1 patient had a history of hepatitis B, and 1 patient had a history of alcohol consumption. Overall, 6 patients had aggravated liver injury and the remaining 11 patients had new-onset liver dysfunction. Naranjo’s assessment scale was used to evaluate all patients for the correlation of adverse reactions and score ≥ 3, which was very likely relevant in ten patients and possibly relevant in seven patients. Physicians discontinued vancomycin in all patients. The general information of the patients is presented in Table  1 , and the clinical information of the patients is presented in Table  2 .

Analysis of dosage, time, and plasma concentration of vancomycin in patients with liver injury

Vancomycin dosage and treatment course.

Among the 17 patients, 9 patients (52.94%) were given vancomycin at a dose of 1 g every 12 hours, among which four patients had higher-than-normal blood concentrations of vancomycin, and one patient had liver injury severity of grade 4; the severity of liver injury was grade 1 in three cases, which was lower than normal. In total, four patients (23.53%) were given 1 g every 8 hours after the initial administration of 1 g every 12 hours. Out of these four patients, the blood concentration of vancomycin was higher than the normal value in one patient, two patients were lower than the normal range, and one case had a normal range with grade 3 liver injury severity. The dose adjustment of all patients was based on their vancomycin blood concentration. The average administration time was 6.82 ± 3.264 days, ranging from 3 to 15 days. There were four patients (23.53%) who received vancomycin for 3–6 days, and one of them had grade 4 liver injury. Overall, six patients (35.28%) received vancomycin for 6–9 days, and one case had grade 3 liver injury (Table  3 ).

Concomitant medication

The study examined the effect of drug combination in 17 patients. The mean number of concomitant medications was 2.82, and 14 patients (82.35%) used two to four drugs at the same time (Table  3 ), of which five patients (29.41%) used two drugs, another five patients (29.41%) used three drugs, and four patients (23.53%) used four drugs; two patients with grade 3–4 liver injury were treated with two drugs at the same time.

The time of liver damage after medication

The time of liver damage occurrence in 17 patients was analyzed. Abnormal liver function indexes appeared within 2–12 days after patients began taking vancomycin, with an average onset of 4.41 ± 2.293 days. In total, 16 patients (94.1%) showed abnormal liver function within 7 days after drug administration (Table  3 ), 1 patient had abnormal liver function 12 days after treatment, and 2 patients had grade 3–4 liver injury 3 days after treatment.

Vancomycin plasma concentration

After vancomycin administration, the plasma concentration of all patients was determined by high-performance liquid chromatography (HPLC). The blood drug concentration ranged from 1.20 to 37.19 μg/ml, with an average of 14.8906 ± 11.21257 μg/ml. Among them, six patients (35.29%) did not reach effective blood concentration. Overall, seven patients (41.18%) had a vancomycin level beyond the normal range. Among these seven patients, six patients (85.71%) had a Naranjo’s score indicating a possible reaction, and one case had a probable reaction. However, only one patient with grade 3–4 liver function damage had a blood drug concentration above the upper limit of normal, which is grade 4 liver function damage, suggesting that there may be no correlation between severity and plasma concentration.

Correlation analysis between the severity and vancomycin

Whether there is drug rash with eosinophilia and systemic symptoms (dress) syndrome.

DRESS syndrome, also known as drug hypersensitivity syndrome or drug eruption syndrome with eosinophilia and systemic symptoms. It has been reported that the typical clinical manifestations of DRESS syndrome induced by vancomycin include extensive rash, fever, eosinophilia, and involvement of multiple organ functions. Among these, rash and fever are the main clinical manifestations [ 7 ]. In this study, 13 patients developed fever, which was initially attributed to an infection, but none of them displayed clinical manifestations related to allergy, such as rash.

Changes of liver and kidney function and severity of liver injury

Among the 17 patients, yellow skin staining was present in 2 patients (11.76%), with 1 of them having multiple organ failure, while 5 patients (29.41%) experienced fatigue. The remaining ten patients (58.82%) showed no evidence of liver function damage. All 17 patients had abnormal liver function indexes, mainly including increased AST/ALT and increased direct/indirect bilirubin levels. All 17 patients had abnormal AST/ALT levels, with 14 patients (82.35%) having both elevated AST and ALT levels, only 2 patients had an elevated AST level, and 1 patient had an elevated ALT level. In total, nine patients (52.94%) showed abnormal bilirubin levels, with four cases (23.53%) displaying abnormal AST/ALT and bilirubin levels. Among the 17 patients, 7 patients (41.18%) had AST/ALT ≤ 3 upper limit of normal (ULN), while 2 patients (11.76%) had 3 ULN < AST/ALT ≤ 5 ULN, 7 patients (41.18%) had 5 ULN < AST/ALT ≤ 20 ULN, and 1 patient (5.88%) had ≥ 20 ULN.

Among these 17 patients, 5 patients (29.41%) had increased creatinine levels, 3 patients had AST/ALT between 5 ULN and 20 ULN, and 1 patient had AST/ALT above 20 ULN. In total, three of these patients had grade 1 liver injury and one had grade 3 liver injury with an AST/ALT ratio between 5 ULN and 20 ULN. There was no correlation between the severity of liver function injury and increased creatinine level. According to the grading standard of the severity of drug-induced liver injury [ 8 ], the liver function of the patients was evaluated, revealing that the severity of liver injury in 15 patients (88.24%) was grade 1; 2 patients with grade 3–4 liver injury showed systemic skin jaundice. Only one patient with vancomycin blood concentration beyond the normal range had grade 4 liver function injury (Table  4 ).

Interventions and outcomes

Among the 17 patients, 1 patient did not receive any intervention, 4 patients stopped taking vancomycin after experiencing liver injury, 1 patient was given a reduction in vancomycin dosage, and 11 patients (64.7%) were treated with hepatic protectants. Among the patients receiving treatment, seven patients were treated with reduced glutathione, three patients were treated with two kinds of hepatic protectants (phosphatidylcholine + adenosylmethionine, magnesium isoglycyrrhizinate + reduced glutathione, reduced glutathione + polyene phosphatidylcholine), one patient was treated with three kinds of hepatic protectants (reduced glutathione, enephosphatidylcholine, and adenosylmethionine). Overall, 11 patients (64.71%) were treated for 3–29 days, with an average of 12.27 ± 9.76 days, and 12 patients (70.59%) showed improvement in liver function after intervention. Among them, eight patients (47.06%) returned to the normal level of liver function index and four patients (23.53%) had continued to decline, but did not return to the normal level during hospitalization. In total, two patients (11.76%) were discharged upon request by their family members without any signs of improvement, with no follow-up data available, and three patients (17.65%) died owing to multiple organ failure caused by the progression of the primary disease, including two patients with respiratory failure and one patient with acute cardiac failure.

When administered intravenously, vancomycin can be distributed through most of the body’s tissues and fluids. It can achieve effective bacterial concentrations in serum, pleural fluid, pericardial fluid, ascites, urine, and atrium, but not in bile. At the same time, the medication is not metabolized in the body and is ultimately excreted in the urine as a prototype. In patients with kidney dysfunction, vancomycin excretion will be mitigated, and studies have shown that abnormal liver function affects the pharmacokinetics of vancomycin. Previous pharmacokinetic studies have shown levels of vancomycin in liver tissue and bile to be below the detection limit [ 5 ]. In a Japanese study, vancomycin-conjugated monoclonal antibodies were used to target vancomycin molecules in the kidney and liver of rats, and immunohistochemistry was used to monitor the uptake of vancomycin in the kidney and liver of rats. The study showed that vancomycin is not metabolized by the liver [ 9 ].

Compared with nephrotoxicity, even though the correlation between hepatotoxicity and vancomycin was low, abnormal markers of liver function, such as AST, ALT, elevated AFP, and jaundice, were associated with the use of vancomycin. Results of a meta-analysis of 20 RCTs conducted between 1950 and 2010 showed that patients who received vancomycin had a significantly higher incidence of abnormal liver function, especially serum transaminases, compared with patients who did not receive vancomycin. Although the levels are elevated, most are mild to moderate [ 6 ]. In a retrospective cohort study of patients receiving vancomycin with hepatic impairment, it was observed that 237 patients with no or mild hepatic impairment and 171 patients with moderate-to-severe hepatic impairment were observed. Patients with hepatic impairment had very high mean concentrations, lower clearance rates, longer half-lives, and higher rates of acute renal damage [ 10 ]. Another study demonstrated the significant impact of liver function on vancomycin pharmacokinetics [ 11 ] and showed that patients with acute or chronic liver failure are at a higher risk of reduced survival rates [ 12 ]. At present, the cause of abnormal liver function indices caused by vancomycin remains unclear; however, timely use of regular doses of vancomycin in patients with liver damage may result in increased blood concentrations [ 13 ]. Studies have shown that higher intensive care unit (ICU) mortality rates are observed when the average plasma concentration of vancomycin is 15–20 mg/L or > 20 mg/L [ 14 ], and greater incidences of nephrotoxicity are observed when the trough concentration of vancomycin is > 15 mg/L [ 15 ]. For the Chinese population, the guidelines recommend that the plasma concentration of vancomycin in adult patients be no higher than 20 mg/L [ 16 ]. In this study, through a detailed retrospective analysis of the case data of patients with vancomycin-induced hepatotoxicity, the characteristics of vancomycin hepatotoxicity, including occurrence time, blood concentration, intervention measures, and liver function indicators, were described in detail. In this study, 0.37% of the patients had liver function impairment. Consistent with previous findings, most patients had mild liver injury, mainly characterized by mild to moderate transaminase abnormalities; however, no correlation was observed between the severity of liver injury and blood drug concentration or kidney injury. To confirm whether there was a correlation, the correlation between the time of administration of vancomycin, the total dose, and the blood level was assessed in 17 patients. The results showed that there was no correlation between the increase in liver function indices and the administration time, total dose, and blood concentration of vancomycin, which may be related to the small sample size. Further work is required.

Similar to nephrotoxicity, the mechanism of hepatoxicity is also linked to oxidative stress and mitochondrial malignant lesions [ 17 ]. The reason for the large difference between vancomycin nephrotoxicity and hepatotoxicity may be related to the different types of transporters on liver cells and renal tubular cells. Vancomycin nephrototoxicity primarily causes damage to kidney cells by affecting renal tubular mitochondria. While the majority of drug delivery to mitochondria requires transmembrane transport proteins. Recent studies have shown that the expression of Oat1/3 and Oct2 was observed in the rat vancomycin renal injury model, which may play an important role in the transport of vancomycin to the renal proximal tubule cells. At the same time, vancomycin can inhibit the expression of oats 1, oats 3, and oct2, leading to decreased transport of endogenous toxins and increased kidney injury [ 18 ]. In the liver, members of the organic anion transporter (OAT) family involved in vancomycin transport are less expressed, which can be the main cause of nephrotoxicity and hepatotoxicity. At the same time, studies have shown that vancomycin can be detected in the hepatic sinusoidal endothelial cells of the liver for up to 8 days after injection, while it was not detected on the surface of hepatocytes and bile capillaries with the therapeutic dose of vancomycin in rats, indicating that vancomycin cannot pass through cells and enter the liver [ 9 ]. The study also demonstrates that the vancomycin-bound carrier is absent from the surface of the hepatic cell membrane. At the same time, some studies have shown that the genes of oats and OCT are expressed in certain rat hepatocytes [ 19 ], which can be related to the onset of vancomycin hepatotoxicity.

During this study, 17 patients were assessed for liver damage caused by the use of vancomycin. The general condition, severity of liver injury, liver function indices (AST/ALT, direct bilirubin/indirect bilirubin), and liver injury were assessed. The correlation between the severity and vancomycin was analyzed. In all patients, the type of liver injury was mainly asymptomatic abnormal liver function indicators, two patients had jaundice and eventually died of systemic multi-organ failure due to concurrent disease progression. The dosage, time, and blood concentration were analyzed and nine patients (52.94%) had abnormal liver function when they initially used vancomycin with a conventional dose of 1 g every 12 hours. Most of the patients had one to three complications and were necessarily treated with two to four drugs at the same time, including antibacterial drugs, antiviral drugs, antihypertensive drugs, and a few patients were treated with antitumor drugs, which may exacerbate hepatotoxicity and severe liver injury in patients who used two drugs. Overall, 94.1% of patients reported abnormal liver function within 7 days of taking vancomycin. In 76.47% of patients, the blood concentration was out of the range of effective blood concentration. Among the seven patients who exceeded the normal value, the Naranjo’s score of 85.71% patients was probably related, suggesting that higher blood concentration may lead to the occurrence of abnormal liver function, but no linear relationship between blood concentration and liver injury was found. In this study, the hepatic toxicity induced by vancomycin was described in detail, and patient data were analyzed to provide a baseline for the clinical use of vancomycin. However, owing to the small amount of data and large patient differences, more data are needed for more in-depth analysis.

In the clinical setting, the focus should be on the liver toxicity of vancomycin, and the liver function indicators of patients should be monitored.

Availability of data and materials

All data generated or analyzed during this study are included in this published article.

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Wu, J., Zhou, Y. Case analysis of hepatotoxicity caused by vancomycin. J Med Case Reports 18 , 267 (2024). https://doi.org/10.1186/s13256-024-04574-4

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