Focus
Samsung Founding Chairman
Lee Byung-Chull’s Place in
Korean Business Management
Korea’s Economic Development
and Lee’s Business Expansion
The name “Samsung” was used for the first
time when Chairman Lee Byung-Chull estab-
lished the Samsung Trading Company on
March 1, 1938. The name has a two-part mean-
ing: “Sam ” in Samsung means big, abundant,
and strong, while “sung” means bright, high,
and eternally shining light.1 In November 1948,
Lee changed the name to Samsung Corpora-
1 Lee Byung-Chull, Hoam Chajŏn [Autobiography of Ho Am] (Seoul: JoongAng Ilbo, 1986), p. 34.
58 | www.seriquarterly.com
CHANG Jin-Ho
Front view of Samsung Trading Company building, founded in 1938.
tion and began in earnest a trading business
based in Seoul. While it began as just a small
trading company, Samsung Corporation grew
into one of Korea’s leading trading companies
in just one year.
With the establishment of Cheil Jedang (CJ) in
August 1953, Lee began a manufacturing busi-
ness. In the wake of the cease-fire agreement
signed at Panmunjeom at the end of the Korean
War, the situation on the Korean Peninsula was
 |Table 1 Korea: Major Economic Indicators

1953 1960 1965 1970 1975 1980 1985 1990

Population (millions) 21.5 25.0 28.7 32.2 35.3 38.1 40.8 43.4

GNP ($ billion) 1.4 1.9 3.0 8.1 20.9 60.6 91.1 251.8

GNP per Capita ($) 67 79 105 253 594 1,597 2,242 5,883

Exports ($ million) 40 33 175 835 5,081 17,505 30,283 65,016

Agriculture /
47.3 36.8 38.0 26.6 24.9 14.7 12.5 8.7
Forestry / Fisheries
Mining 1.1 2.1 2.0 1.5 1.6 1.5 1.2 0.5
Share of
GDP by Manufacturing 9.0 13.8 18.0 21.0 25.9 28.2 29.3 29.2
Industry (%)
Electric / Gas
2.6 4.1 4.7 6.6 5.9 10.1 10.6 13.7
/ Water
Services 40.0 43.2 32.1 42.2 41.7 45.5 46.5 47.9

Light Industry 78.9 76.6 68.6 60.8 52.1 46.4 41.5 34.1
Manufacturing
(%)
Heavy Industry 21.2 23.4 31.4 39.2 47.9 53.6 58.5 65.9

Source: Bank of Korea.

chaotic. In the midst of a massive inf lux of
cheap aid goods, there were many that discour-
aged Chairman Lee from a huge investment in
the manufacturing business that would take
years for the investment amount to be returned.
However, assured that the nation’s economic
development would begin with the manufactur-
ing of substitutes for imported goods, Lee de-
cided to make a large-scale investment and to
build a factory with the money he earned
through his trading business established in the
ashes of the Korean War.
Chairman Lee’s business expansion provides a
roadmap of how the Korean economy and its
industrial structure developed over time. Dur-
ing the Japanese colonial period from 1910 to
1945, it was difficult for Korean companies to
grow under Japan’s monopolization of capital
and oppressive corporate environment. And
with the Korean War in 1950, any green shoots
of business activities and industrial facilities
created after the surrender of Japan in 1945
soon turned into ashes.
The Korean economy remained in poverty un-
til the end of the 1950s.2 In 1953, the time Chair-
man Lee launched his manufacturing business,
Korea’s GNP per capita was a mere US$67, the
lowest level in the world (see Table 1). Consider-
ing the economic situation in the 1950s, Chair-
man Lee specifically chose to start sugar and
textile businesses, both of which could substi-
tute imports. He said, “The necessities of peo-
ple’s lives must be home-produced. This will
build domestic industries, provide a stable sup-
ply of inexpensive goods, and offer more jobs to
people as well as contribute to the nation’s tech-
nological development and expansion of indus-
trial activities.”

2 In the 1950s, GNP growth was 7.6 percent in 1957 when foreign aid reached its peak and the year had a bumper crop, but GNP
growth slowed to 5.5 percent in 1958, 3.8 percent in 1959, and merely 1.1 percent in 1960.

April 2010 | SERI Quarterly | 59

Samsung Founding Chairman Lee Byung-Chull’s Place in Korean Business Management

|Figure 1 Dependence on Sugar Imports Imported Sugar

(%) Domestic Sugar
120
100
80
60
40
20
0
1952 1953 1954 1955 1956 1957 1958

Source: Samsŏng 50 nyŏnsa [50 Years of Samsung History] (Seoul: Samsung, 1988).

|Table 2 Samsung Group’s Sales by Industry

1956 1966 1976 1986 1996 2003 2008

Electronics 16% 20% 29% 48% 54%

Machinery 4% 6% 4% 6%

Trade/Construction 10% 34% 32% 34% 9% 8%

Chemistry 1% 2% 3% 4%

Finance 33% 3% 34% 25% 30% 21%

Manufacturing (Including CJ) 100% 50% 38% 7% 1% 2% 2%

Services and others 6% 9% 3% 3% 4% 4%

Total 100% 100% 100% 100% 100% 100% 100%

Total (￦100 million) 6 117 3,678 149,321 740,860 1,182,543 1,890,009

Source: Samsŏng 60 nyŏnsa [60 Years of Samsung History] (Seoul: Samsung, 1988). Korea Fair Trade Commission; KISVALUE.

Figure 1 shows Korea’s dependence on imported
sugar in the 1950s. In 1953, the nation’s depen-
dence on imported sugar stood above 90 percent.
However, with CJ kick starting an increase in
domestic sugar production, by 1958 100 percent
of sugar was provided by domestic companies.3
over the past 50 years. In the 1970s, Korea
achieved annual average GNP growth of 9.5
percent amid turmoil in the global economy
brought about by stagflation and oil crises. By
1979, Korea’s GNP per capita rose to $1,662
from $210 in 1969.

Table 2 indicates the proportion changes in Samsung’s export strategy in the 1970s was to ex-
Samsung Group sales according to industry pand export volume by switching the focus from

3W
 ith rumors that CJ achieved huge success through sugar manufacturing, a large number of sugar producing businesses opened at
the time. The domestic sugar demand was 50,000 tons a year but sugar manufacturing capacity reached 150,000 tons, resulting in
price competition and business failures. As a starter in the field, CJ held 70 percent of the domestic market via the pursuit of
business rationalization.

60 | www.seriquarterly.com
 CHANG Jin-Ho

light industry products to electronics and heavy
and chemical industrial goods. Establishing
Samsung-Sanyo Electric in 1969 and Samsung
NEC in 1970, Samsung laid the foundation for
Korea’s electronics industry. Lee said at the time,
“Electronics is the most suitable industry for the
nation’s economic development stage consider-
ing all aspects including technology, labor force,
added value, domestic demand and export pros-
pects.” Samsung produced both black-and-white
and color TV sets with its own technology and
exported its home appliances through Samsung
Corporation. As Table 2 shows, the percentage
of electronics in Samsung’s total sales increased
to 16 percent in 1976 and Korea’s trade & con-
struction sector, driven by Samsung Corpora-
tion also took a larger portion.
From 1980 to 1986, Korea achieved rapid eco-
nomic growth averaging 7.9 percent a year.4 Ko-
rea’s core industries changed from those related
to the heavy and chemical industry in the 1970s
to technology-intensive cutting-edge industries
such as semiconductors, telecommunications,
and ultra-precision machinery in the 1980s.
During a stay at the Okura Hotel in Tokyo in
February 1983, Chairman Lee reassessed his
ideas and decided to invest in the semiconduc-
tor business, declaring 1983 as the year to start
investing in semiconductors. The semiconduc-
tor business was a tricky area due to fierce com-
petition with the United States and Japan and
the need for massive investments and a work-
force proficient in technology. Chairman Lee’s
decision on this risky investment was highly in-
fluenced by his son, Chairman Lee Kun-Hee
(Vice Chairman at that time). Chairman Lee
Kun-Hee, who had an avid interest in semicon-
ductors, acquired Hankook Semiconductor
with his own money. He then urged his father to
seriously consider launching into the semicon-
ductor business. So, semiconductors became
the last business for Chairman Lee Byung-
Chull and the first for Chairman Lee Kun-Hee.5
In December 1983, Samsung succeeded in de-
veloping the 64 Kb DRAM chip and became
the world’s third producer of VLSI chips.
Table 3 compares the timing of development of
each type of semiconductor between Samsung
Electronics and Japan’s major chipmakers. At
the time of development of the 64 Kb DRAM
chip, Samsung Electronics was about four years
behind Japan’s leading chipmakers. However,
relentless pursuit meant that Samsung Elec-
tronics overtook the Japanese chipmakers and
emerged as the world’s first developer of the 64
Mb DRAM chip. Thereafter, Samsung Elec-
tronics has maintained its status as the global
leader in developing next-generation DRAM
chips, retaining the largest share in the global
memory chip market since 1993.

|Table 3 Developments of Semiconductors: Samsung Electronics vs. Japan’s Major Companies

64 Kb DRAM 256 Kb 1 Mb DRAM 4 Mb DRAM 16 Mb 64 Mb 256 Mb 1 Gb DRAM

DRAM DRAM DRAM DRAM
Development by
Apr. 1983 July 1985 July 1986 May 1988 Jan. 1989 Aug. 1992 Aug. 1994 Jan. 1996
Samsung Electronics
Approx.
Approx. 4 Approx. 3 Approx. 2 In the same Overtaken Overtaken Overtaken
Development by Japan 6 months
years earlier years earlier years earlier year by Samsung by Samsung by Samsung
earlier

Source: Samsŏng Chŏnja 30 nyŏnsa [30 Years of Samsung Electronics History] (Seoul: Samsung Electronics, 1999).

4 Korea’s
 GNP reached $60.3 billion in 1980, ranking 45th globally, then reached $95.1 billion in 1986, ranking 18th. Korea’s GNP per
capita also sharply rose from $1,589 (ranking 53rd) to $2,296 (ranking 34th) for the same period.
5 Samsŏng
 60 nyŏnsa [60 Years of Samsung History] (Seoul: Samsung, 1998), p.113.

April 2010 | SERI Quarterly | 61

Samsung Founding Chairman Lee Byung-Chull’s Place in Korean Business Management

|Figure 2 Samsung Group’s Sales-to-GNP Ratio

(%)
25.0

20.0

15.0

10.0

5.0

0.0
’53 ’55 ’57 ’59 ’61 ’63 ’65 ’67 ’69 ’71 ’73 ’75 ’77 ’79 ’81 ’83 ’85 ’87 ’89 ’91 ’93 ’95 ’97 ’99 ’01 ’03 ’05 ’07

Source: Samsŏng 60 nyŏnsa [60 Years of Samsung History] (Seoul: Samsung, 1998);
Korea Fair Trade Commission; Financial Supervisory Service electronic disclosure system, <http://dart.fss.or.kr/>.

Business Achievements of ed: “Companies make investments with the most

Chairman Lee Byung-Chull
Chairman Lee strived to fulfill corporate social
responsibility based on the corporate mission of
“business contribution to the nation’s economic
development.” The growth of Samsung Group is
rooted in this spirit. Regarding the corporation’s
responsibility to the nation’s economy, Lee stat-
reasonable combination of various production
factors. In the process, they pay the price to the
provider of material resources so as to sustain
production, wages to the provider of labor, inter-
est or dividends to the provider of capital, tax to
the nation for providing social stability and an
investment environment, and use the remaining
net profits into expansion of production.”6

|Figure 3 Samsung Group Employees |Figure 4 Taxes Paid by Samsung Group

160,000 147,154 8,000
(Unit: ￦100 million)
140,000 7,000
120,000 6,000
100,000 5,000
80,000 75,000 4,000
60,000 3,000
40,000 25,790 2,000
20,000 9,080 1,000
267 1,871 4,801
- -
1953 1960 1965 1970 1976 1980 1986 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

Source: S amsŏng 50 nyŏnsa [50 Years of Samsung History] Source: S amsŏng 60 nyŏnsa [60 Years of Samsung History]
(Seoul: Samsung, 1988). (Seoul: Samsung, 1998).

6 Ho
 Am Ŏrok [湖巖語錄]: Kiŏpŭn Saramida [Analects of Ho Am: a Company Is Its People] (Seoul: Ho-Am Foundation, 1997), p. 36.

62 | www.seriquarterly.com
 CHANG Jin-Ho

Figure 2 shows the ratios of Samsung Group
sales to the nation’s GNP from 1953 to 2008.7
Sales accumulated by Samsung Group in-
creased from ￦113 million in 1953 to ￦206 tril-
lion in 2008. Compared to the nation’s GNP,
Samsung Group sales accounted for a mere 0.2
percent of GNP in 1953 but continued to in-
crease to 15.1 percent by 1987 and 20.1 percent
by 2008.8 Over the past 50 years, the Samsung
Group sales-to-GNP ratio twice reached above
20 percent: during the currency crisis in 1998
and global financial crisis in 2008. This indi-
cates that the Samsung Group made important
contributions to the Korean economy during
times of economic crises through aggressive ex-
port growth. In 2008, the percentage of exports
in Samsung Group sales was 78.8 percent, while
exports by Korea’s ten major conglomerates ex-
cluding Samsung accounted for 43.5 percent in
combined sales.
Figure 3 shows the growth in the number of
Samsung Group employees. The number of
employees in Samsung Group, which totaled a
mere 267 in 1953, soared to 147,154 by 1986. Ac-
cording to figure 4, which shows taxes paid by
Samsung Group, the amount of tax paid by
Samsung Group increased from ￦42.2 billion
in 1975 to ￦717.1 billion in 1986. The ratio of
taxes paid by Samsung Group to the nation’s
total tax revenue neared 5 percent in 1986. Fig-
ure 3 and 4 reflect the realization of Chairman
Lee’s business philosophy that the most impor-
tant corporate social responsibility is the contri-
bution to the nation’s economy by sharing the
fruits of business operations in the form of tax-
es, wages, and dividends.
Figure 5 represents Samsung Group’s profit-
ability from 1953 to 2008. The profitability is the
ratio of net profit earned by Samsung Group to
the Group’s total sales. Chairman Lee always
emphasized the distinction between companies
and charity organizations. According to a state-
ment he once made, companies must make a
profit and it is a sin to make losses. He believed

|Figure 5 Samsung Group’s Net Profit-to-Sales Ratio

(%)
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
’53 ’55 ’57 ’59 ’61 ’63 ’65 ’67 ’69 ’71 ’73 ’75 ’77 ’79 ’81 ’83 ’85 ’87 ’89 ’91 ’93 ’95 ’97 ’99 ’01 ’03 ’05 ’07
-2.0
Source: Samsŏng
 60 nyŏnsa [60 Years of Samsung History] (Seoul: Samsung, 1988).
Korea Fair Trade Commission; Financial Supervisory Service electronic disclosure system, <http://dart.fss.or.kr/>.

7 S
 amsung Group’s nominal sales growth, which is on non-inflation adjusted basis, posted an annual average of 31.3 percent from
1953 to 2008. The annual sales growth of Samsung Group was 58.5 percent in the 1950s, 33 percent in the 1960s, 47.2 percent in the
1970s, 31.7 percent in the 1980s, 14 percent in the 1990s, and 10.1 percent in the 2000s.
8 T
 he ratio of Samsung Group sales to the total sales of all other companies subjected to external audit was 11.4 percent in 2008. As
for net profits, the ratio was 33.5 percent. As of the end of 2009, the combined market capitalization of all listed companies belonging
to Samsung Group accounted for 20.3 percent of total market value of all other listed companies.

April 2010 | SERI Quarterly | 63

Samsung Founding Chairman Lee Byung-Chull’s Place in Korean Business Management

Chronology of Lee Byung-Chull’s Life and Samsung Group

Highlights of Lee Byung-Chull and Samsung Highlights of Domestic and Foreign Affairs
Feb. 12, 1910 Born in South Gyeongsang Province 1910 Japanese annexation of Korea

Dec. 1926 Married while in middle school 1926 Massive anti-Japanese demonstrations on June 10
Enrolled at Waseda University in Japan
Apr. 1930 1929-1933 Great Depression
majoring in politics and economics
1935 Decided to open a business 1935 Adolf Hitler’s declaration of rearmament
Sohn Kee-Chung wins gold medal in the
Mar. 1936 Partnered in a rice mill in Masan Aug. 9, 1936
marathon at Berlin Olympic Games
Sept. 1937 Liquidated rice mill and automobile businesses July 7, 1937 Beginning of Sino—Japanese War
Teaching Korean in Korean middle schools
Mar. 1, 1938 Established Samsung Trading Company in City of Daegu Mar. 3, 1938
prohibited by Japanese government
1939 Take over of Chosun Breweries in Daegu Sept. 1, 1939 Beginning of World War II
June 3, 1941 Registered Samsung Trading Company as a corporation Dec. 8, 1941 Japanese attack on Pearl Harbor

Nov. 1, 1948 Renamed Samsung Trading Company to Samsung Corporation July 17, 1948 Promulgation of Korean constitution
General meeting of Samsung Corporation
Dec. 15, 1950 Sept. 15, 1950 Incheon landing
board members in Busan
Jan. 11, 1951 Samsung Corporation established as stock company Jan. 5, 1951 Chinese attack on Seoul
Aug. 1, 1953 Established CJ July 27, 1953 Signing of cease-fire agreement
Controversy over constitutional amendment
Sept. 15, 1954 Established Cheil Industries Nov. 29, 1954
by rounding off to nearest whole number
Established Hyosung Corporation and acquired
1957 Oct. 4, 1957 Soviet Union’ successful launching of world’s first satellite
Hanil Bank and Heungup Bank
Acquired Ankuk Fire & Marine Insurance, US’ establishment of National Aeronautics
1958 Jan. 1958
Commercial Bank, and Hankook Tire and Space Administration (NASA)
Created secretarial office of Samsung
1959 Jan. 1, 1959 Cuban Revolution (inauguration of Fidel Castro)
and acquired Chohung Bank
Appointed as first chairman of Korea
Aug. 16, 1961 Businessmen’s Association (later renamed May 16, 1961 Military coup
the Federation of Korean Industries)
Government’s redemption of Hanil Bank,
Oct. 15 Oct. 15 Reversion of commercial banks to government
Chohung Bank, and Commercial Bank
Acquired Anbo Fire Insurance (present
Nov. 29, 1962 Mar. 22, 1962 Resignation of President Yun Bo-Seon
Samsung Fire & Marine Insurance)

Established Tongyang Broadcasting Corporation (TBC)

1963 and Radio Seoul; acquired Tongbang Life Insurance; Nov. 22, 1963 Assassination of US President John F. Kennedy
handed over Hyosung Corporation and Hankook Tire

Korea—Vietnam Agreement on dispatchment

1964 Established Korea Fertilizer Company with ￦100 million Oct. 31, 1964
of Korean troops to Vietnam
Established Samsung Foundation of Culture and
1965 JoongAng Ilbo and acquired Sungkyunkwan University June 22, 1965 Signing of Korea—Japan treaty
and Saehan Paper (present-day Hansol Paper)
Established JoongAng Development and Korea Hospital and
1966 Aug. 18, 1966 Beginning of Cultural Revolution in China
announced donation of Korea Fertilizer Company to the nation
1967 Established Jeonju Paper (present-day Hansol Paper) June 5, 1967 Beginning of Arab—Israeli War
Established Samsung Electronics and
1969 July 21, 1969 Opening of Seoul—Incheon Expressway
Samsung—Sanyo Electric
Established Samsung NEC with Samsung—Sanyo July 7, 1970 Opening of Seoul—Busan Expressway
1970 Electric starting pilot TV production and Samsung
NEC starting production of cathode ray tubes Dec. 7 Confirmation of general development plan of four main rivers

1972 Established Cheil Synthetics 1972 Beginning of New Community Movement

Acquired Imperial Guesthouse (present-day Shilla Hotel) and
1973 Aug. 3, 1973 Kidnapping of presidential candidate Kim Dae-Jung
established Samsung Corning and Cheil Communications
Aug. 15, 1974 Death of First Lady Yuk Yŏng-Su
Established Samsung Petrochemical and Samsung Heavy
1974
Industries, and acquired shares in Hankook Semiconductor First discovery of North Korea’s
Nov. 15
underground tunnel to South Korea

64 | www.seriquarterly.com
 CHANG Jin-Ho

Highlights of Lee Byung-Chull and Samsung Highlights of Domestic and Foreign Affairs
1975 Samsung Electronics exports its first TV 1975 Referendum on Revitalizing Reforms constitution

1976 Opened Yongin Nature Park Sept. 9, 1976 Death of Chinese President Mao Zedong
Established Samsung Shipbuilding (present-day Samsung US President Jimmy Carter’s announcement
1977 Mar. 9, 1977
Heavy Industries in Geoje) and Samsung Precision of withdrawal of US troops in Korea
Black-and-white TV sets produced by Samsung Electronics July 25, 1978 Birth of world’s first test-tube baby
1978 numbered 4 million (world’s top producer), exports hit
$100 million mark; Samsung Semiconductor established Aug. 12 Signing of the Japan—China friendship treaty
Lee Kun-Hee’s inauguration as vice
Feb. 27, 1979 Oct. 26, 1979 Assassination of President Park Chung-Hee
chairman of Samsung Group
Lee Byung-Chull receives an honorary doctorate in
Apr. 2, 1982 Mar. 27, 1982 Beginning of Korea’s professional baseball league
business management from Boston University
Samsung Electronics develops world’s Korean Youth Soccer Team’s first entry into
Oct. 15, 1983 June 12, 1983
first subminiature VTR (8mm) the semifinal of the world championships
Samsung Semiconductor & Telecommunication’s Bombing of Aung San National Cemetary
Dec. 12 Oct. 9
development of 64 KB DRAM in Burma (present-day Myanmar)
Inauguration of Mikhail Gorbachev as General Secretary
Mar. 15, 1985 Implementation of business unit system Mar. 12, 1985
of the Communist Party of the Soviet Union
July 1, 1986 Established Samsung Economic Research Institute Feb. 25, 1986 Exile of Philippine President Ferdinand Marcos
Special declaration by Korean presidential
June 29, 1987
Nov. 19, 1987 Death of Lee Byung-Chull candidate regarding constitutional amendment
Oct. 19 Sharpest fall in stock prices in US since Great Depression

Source: Samsŏng 60 nyŏnsa [60 Years of Samsung History] (Seoul: Samsung, 1998).

that without business rationalization, society’s
precious resources such as capital and human
power are wasted, and corporate failures even-
tually place a burden on the public.9
Management Structure of
Samsung
The continuous growth of Samsung is based on
its management structure, which embodies
Chairman Lee’s business philosophy. He always
stressed that, “there are principles and philoso-
phy to corporate management, and a manage-
ment system based on those principles and phi-
losophy.” He devoted his efforts to establishing
Samsung’s own management structure, which
incorporates his business philosophies of “eco-
nomic contribution to the nation,” “priority to
human resources,” and “pursuit of rationality”
so as to enable the operation of the organization
on a massive scale. He deemed that, no matter
how superior one’s business philosophy is, those
ideas amount to nothing without a manage-
ment structure that supports the ideas from a
practical aspect.

Lee Byung-Chull Flower wreaths

delivering a speech at congratulating the
a building dedication completion of Korea
ceremony, 1967 Fertilizer Ulsan
factory, 1967.

9 Samsung Group’s net profit-to-sales ratio from 1987 to 2008 averaged 4.5 percent, more than twice the average of 2.2 pecent for
Korea’s ten major conglomerates excluding Samsung. Many companies posted deficits during the currency crisis in 1998, but
Samsung Group maintained profits with its net profit-to-sales ratio further increasing in the 2000s.

April 2010 | SERI Quarterly | 65

Samsung Founding Chairman Lee Byung-Chull’s Place in Korean Business Management
From left to right: Kim Chae-Myŏng (plant manager),
Lee Byung-Chull, and Cho Hong-Je (vice president)
in front of CJ Busan office, 1953.
Chairman Lee said, “A company is its people.”
He clearly pointed out, “A company is run by
people. People operate the company. The com-
pany succeeds or fails depending on its people.
And a company creates those people.”10 Lee
considered the management structure of nur-
turing outstanding talent as the driving force
behind a company’s eternal advancement. He
asserted, “a company’s success depends on how
much it can secure and nurture competent tal-
ent and make effective use of them.” Based on
the principle of “priority to human resources,”
Samsung’s goal in the management of human
resources is to hire talented employees, nurture
them with systematic training, and dispatch
them to the right positions so that they can
maximize their ability.
In 1957, Samsung adopted an open recruitment
system for the first time in the country’s history
and the system is maintained to this day. The
10 Ho
 Am Ŏrok [湖巖語錄]: Kiŏpŭn Saramida [Analects of Ho Am: a Company Is Its People] (Seoul: Ho-Am Foundation, 1997), p. 74.
66 | www.seriquarterly.com
fundamental rule of the system is to select capa-
ble talent without regard to region of origin or
academic background. In the recruitment ex-
amination, the interview became more impor-
tant than the written test. Regardless of his busy
schedule, Chairman Lee always participated in
the interviews, showing keen interest in secur-
ing outstanding individuals.
Samsung’s human resource management does
not only recruit talented people, it also incorpo-
rates continuous training. “I spent 80 percent of
my life searching for talented employees and
training them,” Chairman Lee recollected. He
created a world class training institute at Yon-
gin Nature Park and visited the institute at ev-
ery opportunity, believing that even the most
outstanding employee cannot serve as a part of
an effective work force without the right guid-
ance. He considered a company’s neglect to
nurture talent as a crime, believing that it was

“A company’s success
depends on how much
it can secure and
nurture competent
talent and make
effective use of them.”
an abandonment of social responsibility. He
once said, “If a company fails to train its people
as a valuable part of human resources who are
capable of serving the society and the nation,
the company is neglecting its social duty, and
this is equivalent to committing a crime equal
to corporate insolvency.”11
In May 1959, Samsung Group opened a secre-
tarial office with the aim of spreading Chair-
man Lee’s business philosophy and improving
business coordination and information sharing
among its many affiliates. Planning and coor-
dination and secretarial offices in the govern-
ment and private sectors began to be formed in
the early 1960s, but by then those of Samsung’s
were at a much more advanced level. Chair-
11 Ho
 Amŭi Kyŏngyŏngch’ ŏlhak [Management Philosophy of Ho Am] (Seoul: Samsung Economic Research Institute, 1989), p. 211.
CHANG Jin-Ho
man Lee classified the operation of Samsung
Group based on the following principle. The
chairman takes care of the major issues. The
secretarial office supports the Group’s subsid-
iary companies and, where there are common
areas of interest it provides the appropriate
guidance and support while also managing
them at the same time. Also, the presidents of
each subsidiary company should have a strong
sense of responsibility that is befitting their in-
creased authority and responsibility. Accord-
ingly, the secretarial office took the leading role
in advancing the Group’s management rights
after its establishment.
In September 1975, Samsung Group became
the first conglomerate in Korea to introduce a
full-scale business unit system. The business
unit system, which reflects Chairman Lee’s em-
phasis on responsible management, clarifies the
responsibility of each member of the company
and gives the appropriate authority. In order to
implement this system, business units were clas-
sified based on product and region. Also, a bud-
get accounting system and a profit center evalu-
ation system were established. Under the
business unit chiefs, each business unit handles
overall tasks such as human resources, produc-
tion, sales and maintenance to achieve the goals
set by the business unit.
When Samsung Group’s business units set a
goal, they include specific numbers such as sales,
profits, and the number of technical develop-
ment cases, as well as the long-term management
direction of the company. This is based on
Chairman Lee’s belief that “business managers
must establish a long-term development goal,
clear directions, and specific indicators.” One of
the things that he always emphasized was “indi-
cators of advanced management.” Each business
unit has to clearly understand the technology
April 2010 | SERI Quarterly | 67
Samsung Founding Chairman Lee Byung-Chull’s Place in Korean Business Management

and management performance levels of ad- Everlasting Companies

vanced companies and then set goals and sched-
ules on how to narrow the gap. The indicators of
leading companies become an important stan-
dard for business units in setting their manage-
ment goals to enhance the company’s interna-
tional competitiveness. Chairman Lee explained,
“Whether it be scholars or politicians, everybody
strives to be number one. The same goes for en-
trepreneurs. They should always pursue the
highest position. There is no development if they
aim to be the third or fourth. Efforts to become
number one advance the company.” Based on
this belief, Chairman Lee inspired the pursuit-of-
being-number-one spirit into Samsung Group.
Due to the constant changes in economic con-
ditions, industrial structure, and science and
technology, companies that fail to adjust to
these changes fall behind and dwindle away.
For example, out of Japan’s 100 largest compa-
nies, only two (a paper company and a textile
company) succeeded in remaining in the group
from 1896 to 1982. The average life-span for a
company to remain in the top 100 is believed to
be just 30 years.12 Another example is the US
Dow Jones Industry Average (DJIA), which
consists of major companies in the United
States. Among those included in the DJIA in

13
|Table 4 Ten Major Companies

1965 1975 1980 1985 1991 1995 2000 2005 2008

Hyundai
Dongmyung Samsung C&T Samsung C&T Samsung C&T Hyundai Samsung Samsung
1 Wood
Korean Air Engineering &
Corporation Corporation Corporation Corporation Electronics Electronics
Construction

Geum Sung Daewoo Hyundai Hyundai Samsung C&T

2 Textiles
CJ
Corporation
Daewoo
Corporation Corporation Corporation
Hyundai Motor SK Energy

Samsung C&T Samsung C&T Hyundai Samsung Life Samsung Samsung

3 Panbon Textiles
Corporation Corporation Corporation Insurance Electronics Electronics
LG Electronics GS Caltex

Kyung Sung Daewoo Samsung Life

4 Textiles Corporation
Sun Kyung Yukong Daewoo Daewoo Daewoo
Insurance
Hyundai Motor

Honam Oil Samsung Life

5 Daesung Wood Samyang Korean Air
Refinery
Hyundai Motor LG International
Insurance
SK Holdings POSCO

Hyundai
Yang Hee Export Samsung
6 Association
Kia Hyoseong Engineering &
Electronics
Hyundai Motor LG International GS Caltex LG Electronics
Construction

Daehan
Goldstar Dong Bang Life Samsung Life Samsung Life
7 Dong Il Textiles
Electronics
Daerim
Insurance
Education
Insurance
Hyundai Motor Kia Motors
Insurance
Insurance

Dongship Poly Dongah Samsung

8 Chemical
Lucky
Construction Electronics
Yukong SK Holdings SK Holdings SK Networks S-OIL

Kukje Korea Life

9 Daehan Flour Tongyang Nylon
Corporation
Sun Kyung
Insurance
Kia Motors SK Networks S-OIL SK Networks

Taehan Hyundai Gold Star Kyobo Life Kyobo Life Kyobo Life Hyundai Heavy
10 CJ
Electric Wire Corporation
Lucky GoldStar
Electronics Insurance Insurance Insurance Industries

Source: K ong Pyŏng Ho, Han’kukkiŏp Hŭngmangsa [Rise and Fall of Korean Companies] (Seoul: Myŏngjin, 1993);
KISVALUE (1995–2008 data).

12 Lee Byung-Chull, Hoam Chajŏn [Autobiography of Ho Am] (Seoul: JoongAng Ilbo, 1986), p. 245.
13 Ten
 major companies owned by Koreans in 1936: Dong-A Securities (Cho Joon-Ho), Taechang Textiles (Baek Nak-Seung),
Kyeongsung Textiles (Kim Yeon-Soo), Hamheung Taxi (Bang Eui-Seok), Youngbo Unlimited Partnership (Min Kyu-Shik),
Taechang Mining (Choi Chang-Hak), Hwa-Shin (Park Heung-Shik), Kyeongsang Joint Bank (Jung Jae-Hak), Honam Bank (Hyun
Joon-Ho), and Dong-A Industry (Ha Joon-Seok).

68 | www.seriquarterly.com
 CHANG Jin-Ho

“Entrepreneurs should With concerns over the rise and fall of compa-
nies depending on the constant changes in eco-
always pursue the highest nomic conditions and industrial structure,
position. There is no Chairman Lee affirmed, “Entrepreneurs are
fated to take the lead in innovation and cre-
development if they aim to ation.” He believed that it is an entrepreneurs’
mission to devote themselves to creating an ev-
be the third or fourth. erlasting company that will serve as the founda-
Efforts to become number tion for the nation’s wealth and power. His spirit
of endless study lives on in his son and succes-
one advance the sor, Chairman Lee Kun-Hee, who continued to
company.” develop Samsung into the world-class company
that it is today.
Translation: KIM Young-Kyu

Keywords
Samsung, Korean business management,
manufacturing, GDP by industry, exports, GNP per
capita, management structure, chaebol

1896, General Electric is the only survivor. Com-

panies that fail to respond to the constant chal-
lenges and environment during that specific era
are destined to disappear. The same goes for
Korean businesses.

Table 4 shows the ranking of Korea’s ten major

companies (based on sales) since 1965. None
that made the top ten in 1965 were listed in
2008. This is a reflection of the volatility that
Korean companies have suffered for the past
forty years. Out of Korea’s 100 largest compa-
nies in 1965, only six remained in 2008. The re-
maining companies either went bankrupt or
were forced into M&As with other companies.14
Companies that failed to respond to the chang-
ing economic environment and industrial struc-
ture went out of existence.
CHANG Jin-Ho is professor of business administration at
Yonsei University. His research interests include corporate gov-
ernance, Korean conglomerates, M&As, and valuation. He was
formerly professor at University of Pennsylvania and senior as-
14 S
 tate-owned companies and banks were excluded from sociate at KPMG. He holds a Doctor of Business Administration
both lists. from Harvard University. Contact: chang@yonsei.ac.kr.

April 2010 | SERI Quarterly | 69