Breakdown Of Samsung Heavy, Samsung Engineering Merger Clouds Lee Father-Son Succession
Ah, the joys of being a larger conglomerate.
I’ve mentioned before that I follow Apple because as a financial analyst, it pays to learn from those who've achieved great success. This also extends to Samsung Electronics because they’ve had a great three year run. They are almost the anti-Apple in the way that they aggressively carpet bomb whatever market they are coveting. There are few companies in the world that can do what they do.
But I’ve spent a lot of time working for large multi-national conglomerates and I find it quite humorous when internet commenters speak about Samsung as if it is one large company where the ship builders from Samsung Heavy are working along side the chip makers from Samsung SemiConductor. It doesn’t work that way.
One advantage to the conglomerate for erecting these independent companies is increased accountability. The aim is to make sure that all pieces of the business pull their own weight and that none of the low margin businesses remain hidden by larger more profitable product markets. And it’s this accountability piece that can make dealing with a sister subsidiary potentially more problematic than than just dealing with an outside vendor. Because if there is one thing that every division president will go to the mat for, it’s fighting to make sure that their division doesn’t unfairly absorb costs that belong to another subsidiary. Division presidents tend to be a very competitive lot and their scorecard of choice is the quarterly income statement. The last thing they want to see is a another division rising in stature at their expense.
So I have no problem comparing Apple directly to Samsung Electronics the subsidiary. They are two companies of similar size and in similar markets. Knowing human nature and my experience with corporate politics I don’t think the fact that the Samsung Electronics division is part of the larger Samsung empire is as big of a factor as some make it out to be. The fact that Samsung SemiConductor is actively courting Apple while Samsung Electronics is trying to squash it is one sign how independent these subsidiaries are. But further bolstering my thesis, is the fact that Samsung is trying to consolidate their subsidiaries to gain efficiencies. Besides trying to merge Samsung Heavy and Samsung Engineering, it’s also been announced that Samsung Electronics is merging with Samsung Telecommunications.
The official word on the merger is they are trying to achieve greater efficiencies of scale but I’ll put that into laymen’s terms for you. Unless you put two similar groups under the same leadership team, they fight and bicker and won’t work well with each other.