Technologies through the ages have helped to organize economy and also to bracket the industrial sectors based on the value transformations they provide. This change of value through different industry sectors is described as the industrial value chain as shown in Figure 1 below (Betz, 2011). The industrial value chain begins with the resource acquisition industry sector like silica extraction for computer chips. The end users for this silica are the silica refiners which is the next industry sector. After refining the silica, the silicon is used by computer part manufacturers to turn it into chips and computer parts which is the third industry sector. Next sector is the computer manufacturers like Apple and Dell. After this the value chain has service companies for the computers as well as the retail network to sell the computers as the next industry sector. Betz in this case study reviews Samsung Electronics, an electronics company which created laptop components but moved through the value chain to become a leading laptop manufacturer (Betz, 2011). Figure 1: Industrial value chain (Betz, 2011)
Betz describes the evolution of laptop computers from without disk drive earlier model to the heavy IBM and Toshiba models in 1986. Toshiba redesigned the laptop to lighter version and became successful by 1990. With the advance of laptop adoption, operating system company Microsoft and chip manufacturer Intel grew alongside. Samsung became a major global parts supplier for laptops by 2001 (Betz, 2011).
In 2001 Samsung proceeded to cross the chasm from being a parts supplier to a computer manufacturer when it sent its laptop, which was thinner and lighter than the market leader Sony Vaio, to Michael Dell. This laptop was sold by Dell in U.S. under the Dell label and helped Samsung move up the industrial value chain. Samsung also displayed how they were eager to get cutting edge technology when they started making chips instead of buying from Sony or Matsushita. So Samsung displayed vertical integration in both the directions and move from a parts supplier to a major device producer (Betz, 2011).
Conclusion and Recommendations
Betz points out that firms in the parts/subcomponents sector should focus on R&D in the improvement of parts, redesign of lines to manufacture the parts, inventing new production processes and improving unit production processes by integrating (Betz F. , 2011). The parts/subcomponents firms have to be technologically advancing as well reducing costs which is challenging (Betz, 2011). Samsung in its desire to become a global laptop competitor from a parts supplier also researched on areas outside the prescribed. Samsung spent time in evolving its R&D to push for need for transformation with actionable planning (Park & Gil, 2006).
Park and Gil (2006) discuss how Samsung established its corporate R&D center- Samsung Advanced Institute for Technology (SAIT) to align business units for value creation. SAIT struggled initially to find its place between development orientation and research orientation but worked with the business unit to find the spot of driving value. Since then SAIT has been driving value innovation at Samsung mainly by aligning business strategies with R&D processes with Design for Six Sigma (DFSS). This transformation has been driven by consensus for need of change by strong top management and actionable planning for the strategies (Park & Gil, 2006).
Park and Gil (2006) further elaborate how SAIT has been evolving Samsung in multiple electronic sectors like DRAM semiconductors, LCD (Liquid Crystal Display), handsets, Laptops and more recently smartphones and Phablets. SAIT works with business leadership to bring their product and process excellence into business strategy. They have a main focus on organizational transformation based on the next value chain they can climb and get a better market share due to their existing product and process excellence (Park & Gil, 2006).
In conclusion the authors commend the role SAIT has played as a driver of business strategy in Samsung through their product and process excellence. They have repeatedly driven up the value chain in multiple electronic sectors/products by first excelling in the parts and then becoming the major device producer. The authors recommend Samsung to keep driving business strategy through technology innovation though it is clear that Samsung practices incremental innovation, instead of entering a new product segment, which is good to bring excellence to current products and drive costs down.