General Trading Company

Samsung C&T

Team 4

Suh, JinwonLee, jiwoong

Lee, junglokeChoi, myungwon

2010.03.04.Thu

22

AGENDA

I. General Trading Companies

II. Samsung C&T Analysis

III. Vision and Future Strategy

33

AGENDA

I. General Trading Companies

II. Samsung C&T Analysis

III. Vision and Future Strategy

44

Beginning of GTC

The government encouraged the formation of Korean GTC to fo-cus on exporting products.

• Early General Trading Companies were established in 1940’s in Japan (Mitsubish, Mitsui etc)

• In the beginning, GTCS mainly exported their family companies’ products and imported raw materials to manufacture them

Japan

Export ProductsFamily Companies

GTC

Foreign Companies

Foreign CustomersImport Materials

• In 1970’s, Korea Government encouraged establishment of GTC to promote exports

• Main function of Korean GTCs was exports, and they didn’t export only their family companies’ products, but also other companies’ products

Korea

Export ProductsFamily Companies GTC

Foreign Companies

Foreign CustomersImport Materials

Other Companies

55

Main Function of GTC

Finance, Overseas Investment, Information, Organizer, Converter are GTC’smain functions.

GeneralTrading

Company

• GTC buys products from companies and pays them cash before selling products.

• It can provide liquidity to customer companies.

Organizer

Information

Overseas Investment

Converter

Finance

• GTC can organize and lead consortium with various companies for huge projects

• GTC’s vast information and various experiences makes this possible.

• They can make advantageous deals by using information from their international network

• They build overseas factories and invest on foreign assets directly or for companies which don’t know about foreign market.

• They invest on small but promising companies

• They help small companies by importing, exporting, financing for small companies

66

Change of GTC’s BM

GTC is diversifying its business model, because conventional trading has become less profitable.

Business model of GTC

Past

Export ProductsFamily Companies GTC

Foreign Companies

Foreign CustomersImport ProductsOther Companies

Profit from trad-ing

Market Change

Manufacturers including family companies started to export directly.Conventional BM has been less profitable.

Now

TradingProject

Organizer

Invest onNatural

Resources

Invest & Help

Small Business

Financing

Business Diversification

77

AGENDA

I. General Trading Companies

II. Samsung C&T Analysis

III. Vision and Future Strategy

88

History of Samsung C&T

Samsung GTC has a long and illustrious history that represents the history of the import/export business of Korea.

Samsung GTC is formed as a legal entity as of 1952First focuses on the food and textile industry

Starts increasing its operations to heavy chemical industrySamsung focuses all its export activities to Samsung GTC

Strengthens its presence in the textile industryThe oil shock led to an even more aggressive market developing tacticsDevelops an import and resources development branch

1950

1960

1970

Despite overall weak economy, Samsung GTC grew an average 31.8% over 5 yearsFocused on electronics and heavy industry chemicalsStarted developing long term goals and networks

Samsung GTC merged with Samsung Construction to become Samsung C&TFocuses on high margin productsOverhauls portfolio to strengthen resource and project development

Reorganized to increase synergy between construction and tradingFocused on finance, marketing, IT, risk management, M&A, and distribution

1980

1990

2000

99

What Samsung C&T is doing

Samsung C&T’s business area covers diverse fields such as energy, industrial materials, natural resources. At first glance each unit seems unrelated to each other.

Samsung C&T

Energy &Environment

Bio energy

Power gener-ation

Plant

Industrial materials

Iron & Steel

Chemical

Electronic materials

Textile

Naturalresources

Oil / Gas

Coal / Mineral

Business Area Energy & Environment

Industrial materials

Natural resources

• Bio diesel palm plantation• Solar power plant• Transportation facilities

• Trading of stainless• Storing of chemicals• Trading materials for semiconductor• Investing on fashion companies

• LNG trading• Mineral resources development

1010

Function - Finance

Samsung C&T’s businesses can be divided by function into four sections; finance, investment, marketing and logistics.

Finance

Investment

Marketing

Logistics

Business process

Money lending

Manufacturing company

Large sizedcompany

Raw materialscompany

SamsungC&T

Cash

Raw materials

Cash

Product

Bond

Product

• Samsung C&T plays a role that prevents insolvency by paper profits of small sized company.

• They act as a clearinghouse that guarantees performance by providing cash against bonds.

1111

Function - Invest-ment

Finance

Investment

Marketing

Logistics

Business process

Money lending

SamsungC&T

Promising Company

Equity

Investment - money- Operation- Organizing

suitable companies

Samsung C&T invests in companies or business areas considered promising.

Construction company

Electroniccompany

Equipmentcompany

...

Suitable companies

1212

Function - Marketing

Finance

Investment

Marketing

Logistics

Business process

SamsungC&T

Manufacturingcompany

Right to

Sell overseas

Money

Samsung C&T buys the right to sell overseas from companies that lack an overseas sale network and utilize their own connections to provide access to foreign markets.

China

Unitedstates

Europe

...

Foreign Market

1313

Function - Logistics

Finance

Investment

Marketing

Logistics

Business process

SamsungC&T

Buyer in China

Products,Materials

Samsung C&T transports products, materials.

Seller in Japan

Money

Products,Materials

Money

• Very simple business process• Less than 5%

1414

Corporate Vision

Although Samsung C&T is currently doing well, it needs a new vision that will sustain profits.

2006 2007 2008 20090

2000

4000

6000

8000

10000

12000

14000

9498 9731

1181210876

275 282.6 364.1 280.5

Revenue Operating Profit

What vision does Samsung C&T need to drive growth in the future?

1515

Corporate Vision

The corporate vision embodies the reason for the existence of the firm given shape and direction by the taken strategy.

Vision

Corporate Objective

Corporate Strat-egy

Overall goal of organization

The “how to” achieve the objective

The shape of achieving the vision

Core Competency + Analysis of External Factors= Our Corporate Strategy

1616

Value Chain – Finding R&C

This value chain analyzes the activities of the trade business to capture the resources and capabilities of Samsung C&T.

Contract Outbound logistics

Afterservice

MA

RG

IN

MA

RG

IN

Product se-lection

Firm Infrastructure

Human Resource Management

Technological Development

Procurement

• Marketing &Sales

• Search for suppliers

• Procure right to sell

Su

pp

ort

ing

Act

iviti

es

Prim

ary

Act

iviti

es

R&

C

• Network• Human Re-sources

• Accumulated trading experi-ence

• Trading experience• Financial power• Family of biz. “Samsung”• Biz. Alliance• Brand

• Logistics

• End-users & oversea compa-nies

1717

Value Chain – Finding R&C

MA

RG

IN

MA

RG

IN

Another value chain describes each stage in Samsung C&T’s recent renew-able energy project in Ontario that indicates other R&C.

Su

pp

ort

ing

Act

iviti

es

Prim

ary

Act

iviti

es

Organizing(consortium/partnership)

Bidding Construction OperationSearch

Firm Infrastructure

Human Resource Management

• Wind, so-lar panel cluster

• equip-ment

• Financing• Investing

Related par-ties:• suppli-

ers,• end-user

Technological Development

Procurement

• Network• Versatility• Human Re-source

• Project de-velopment

• Experience• Financial power

• Family of biz. “Samsung”

• Biz. alliance

• Brand• Accumulated experience

• Relationship with govern.

• Logistics• Equipment procurement

• Financial stability

R&

C

1818

V.R.I.O – Finding core compe-tency

The R&C of Samsung C&T is further developed into a core competency by the VRIO analysis

R&C Value Rarity Costly to Im-itate

Organization

Network O O O O

Versatility O X X O

Human Resource O O O O

Project Development O O O

Accumulated Experi-ence

O O O O

Financial Power O X X X

Family of business O O O O

Business Alliance O X O O

Brand O O O O

Relationship with gov. O X O O

Logistics (Triangle) O X X O

Equipment procurement O X X O

Financially Stable O X X O

1919

Core Competency - Network

Samsung C&T’s core competency include its powerful and wide network of global contacts.

Global Network (& Information)

93 offices in42 countries

DaewooInternational

50 offices in38 countries

SK networks72 offices in22 countries

Overview

2020

Core Competency – Human resource, Accumulated experience

Samsung’s human resources and accumulated experience also provides competitive advantage over rivals.

Accumulated ExperienceHuman Resource

Samsung’s special Future strategy group composed of foreign experts

• Established early in 1997• Preparing for Globalization• 200 foreign experts in Samsung who graduated from Top MBA schools

Ability-oriented system

• Samsung has strong merit system than any other companies.

• Competitive employees show great commitment to Samsung

Bought mining rights from Mexico of 73M barrels of oil

2008 JAN

World’s Largest Wind, Solar Panel Cluster in Ontario

2009 DEC

2010 FEB

First Asian company to construct So-lar Panel Plant in California

2121

Core Competency – Brand, Family of busi-nesses

Samsung’s core competency includes it’s powerful brand and the aggre-gate family of businesses.

Brand

http://www.interbrand.com/best_global_brands.aspx

SamsungC&T

Construction company

Electroniccompany

Equipmentcompany

Samsung does everything.Samsung ranks 19th in the world.

Family of Businesses

2222

External Factors Analysis

The external factors analysis indicates that GTC should find busi-ness opportunities in Environmental & Green energy.

Political Factor Economic Fac-tor

Social Fac-tor

Technology Factor

• Strong Environ-mental

Regulations

• Tension mounts be-tween US and China

• Global Recession

• Polarization

• Rise of BRICS economy

• An Aging Society

• Increasing awareness of the

Environment

• Well-being Trend

• CompetitionOn Developing Green energyTechnology

External factors change

ConventionalTrade business

• Influenced by Economy• Too much fluctua-

tions• Unstable

Environment&

Green Energy

Business

• High growth rate• Stable

Implications

2323

AGENDA

I. General Trading Companies

II. Samsung C&T Analysis

III. Vision and Future Strategy

2424

Internal analysis External analysis

Vision

The analysis of Samsung C&T shows its need to exploit business opportunities that can better utilize their core competency.

VISION

Samsung C&T’s core competence is its unique

infrastructure know-how

Trade Biz Less attractiveRed ocean

Network

Brand

Family of businesses

Accumulated experience

Human Resource

The push for alternative re-newable energy in developed countries

Low growth rate Not stable (affected by ex-change rate)

Direct exporting is increasing

Find new STAR business!

2525

Vision

By strengthening its core competence, Samsung C&T Corporation will strive to become the world’s best project developer.

New VISION

The World’s Best

Project Developer

VISION

‘Global Value

Creating Company’

Too Vague: - core competencies are not reflected on vision

Not Informative: - Vague on what busi-ness we are in.

actively en-gages in busi-ness of en-

ergy/environment.

provides opti-mal business

solutionsto customers

(in many forms)

Short- and mid- term

Long-term

2626

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