samsung's balanced scorecard

STRATEGIC MANAGEMENT ACCOUNTING

Samsung Electronics Ltd. (Balanced Scorecard Analysis)

Compiled by: Bernardus Alan Handoko 11/311392/EK/18212 Aya Putri Argatika 11/320288/EK/18685 Reza Mediar 11/320298/EK/18695 Novi Prastia 11/320299/EK/18696

STRATEGIC MANAGEMENT ACCOUNTING MAY 2014 1

SAMSUNGs Products

Curved UHD TV Samsung Galaxy S5

Samsung Gear Fit Samsung Galaxy Note PRO

Samsung SCX-3406FW


Financial Perspective

Samsungs financial perspective emphasizes the stakeholder concern about how efficient and effective the

unit is at using its resources. Its balanced scorecard in the financial perspective serves one objective which is

Maximize Return to Shareholders.

Maximize Return to Shareholders

The Company will actively pursue increases in investment return for shareholders by maximizing

profits through transparent and sound management. The Company will honor its responsibility to

shareholders and interested parties by announcing major financial and corporate information in good

faith and in a timely fashion. The Company will accept and sincerely consider legitimate petitions from

external shareholders

In increasing the shareholder value, Samsung tends to improve its productivity and revenue growth:

High Earnings Results by Strengthening Competitiveness

Recently, we often heard about Samsung product including Mobile phone, Televisions, Camera,

Refrigerators, and so on. By developing and expanding market leadership through electronic products

such as Mobile phones, Televisions, and so on, Samsung reaches enhancement in revenue. In 2013, we

delivered record sales of KRW 229 trillion, up 14% from the previous year, and both operating profit

and net profit increased by 27% and 28%, respectively, over the year to KRW 37 trillion and KRW 30

trillion.

Developing Key Competitive Advantages

Samsung is currently focusing effort in developing key competitive advantages such as technology and

brand image, and expanding a foundation for a new growth engines. Amid revolutionary changes

recently seen in the IT industry, Samsung focused efforts to enhance the R&D capabilities by increasing

R&D personnel and revamping the organization structure. It expanded partnership with external

research institutions by establishing an open innovation system, newly built internal research centers

including SofTech and Big Data Center to strengthen the software capabilities, and also plan to open

a material and future technology R&D center going forward. To expand the base for future growth

engines, Samsung is focusing its resources and competencies onto not only existing medical devices,

LED, and B2B businesses, but also on Smart Home, mobile health, and other life-care areas, which

could improve quality of life.

Increasing Profitability

Currently, Samsung tends to increase profitability through enhanced business competitiveness and

sound business management. Not only that, Samsung also tries to solidifying its leadership in IT

business. In addition, Samsung also willing to improve efficiency of the company-wide resource

management including investment and continue efforts to enhance our global SCM capability.


Risk Management Capability and Future Competitiveness for Sustainable Growth

For a company to continue its growth momentum in the mid to longer term, the key is to have an

ability to make prompt response to uncertainties and risks in the business environment. Samsung takes

preventive measures. Samsung also participates in making social contribution to local communities as

well as enhance communication with stakeholders.

In order to achieve those objectives, Samsung is using several measures:

Leading Internal Rate of Return

One of the uses of IRR is to compare capital projects. Suppose that Samsung is willing to invest in a

new plant project. The choice is whether Samsung invest in a new plant project or expansion in old

plant. The calculation of IRR will determine which one is the best investment for Samsung especially

because Samsung is an electronic company which is always having R&D department which is requiring

investment in some projects particularly short-term one.

Lagging Return on Invested Capital and Weighted Average Cost of Capital

Samsung is better to use ROIC calculation to determine its efficiency at allocating the capital under its

control to profitable investments. Comparing its ROIC and WACC reveals whether invested capital

was used effectively.

Return on Investment

Nothing attract shareholders but the number of ROI. The calculation of ROI should be maintained in

order to create more value to shareholders. That is, the ROI should be watched because theres no

point if Samsung got good number for IRR and ROIC but not good for ROI, shareholders will mark

it as a bad company.

In conclusion, financial perspective is the one perspective for Samsung to maintain the value of the

company to the shareholders. It explains about how effective and efficient a company performed. In order to

maintain the shareholder value as stated above, Samsung has to invest more capital in product R&D as the

process of creating the value. Once the value for shareholders is already made, the invested capital will increase,

the company will earn money to maintain its operation.


Customers Perspective

In Samsungs balanced scorecard, the customer perspective serves one objective, which is:

Accessibility to new, innovative products

Atkinson et al. (2012) stated that the customer perspective should describe how a company intends to

attract, retain, and deepen relationships with targeted customers by differentiating itself from

competitors. The customer perspective reflects the heart of the strategy. It should contain specific

objectives and measures for the strategys scopehow is the company performing with its targeted

customers. It also should represent the strategys advantage the unique combination of product

features, services, and relationships it has selected to satisfy its customers needs better than

competitors can. Success in the customer perspective should lead to improvement in the financial

perspective objectives for growth in revenues and profits. Therefore, this objective is very important

for Samsung as a leading technology company where its customers will wonder what kind of new and

innovative products that Samsung can offer. Also as Samsung stated in their website that SAMSUNG

is dedicated to designing products around our customer's needs. In pursuit of our commitment to our

customers, we have designed products that are easy to use and have a variety of features. The products

and their features are also designed to meet a variety of needs of persons with disabilities. This

statement shows that Samsung is very concern with the accessibility of their customers to new, and

innovative products.

Meanwhile, it uses several measures such as:

Leading - focus groups

As a leading indicator, Samsung use focus groups to understand more about what kind of customer

reaction, it would get for their new product. Focus group is a demographically diverse group of people

assembled to participate in a guided discussion about a particular product before it is launched. But to

make a focus group is very difficult, because the truth is that focus group success is highly dependent

on the skill of the discussion moderator.

Lagging customers surveying and reviews

As a lagging measure, Samsung uses customers survey to understand more about its customers. We

all know customer satisfaction is essential to the survival of our businesses. A customers survey will

help Samsung pin down its customers' likes, dislikes, and the areas of improvement that exist. Also

Samsung might to send a survey to figure out why clients stop doing business with it, how it might win

them back, and how it can prevent customer losses in the future.

Lagging - customer retention

Then we come to the last measure, which is customer retention. As we know that getting new

customers is difficult and expensive so you want to keep everyone you get. So, customer retention is

what you do to keep, or retain, customers. And Samsung takes the form of a loyalty program, excellent


customer service or just regular contact from a representative or only from sample of a population.

Customer retention statistics are typically expressed as a percentage of long term clients, and they are

important to a business since satisfied retained customers tend to spend more, cost less and make

valuable references to new potential customers.

Samsung then regularly prepares the tracked report about their repeat customers using the data and

information gathered through marketing department. Then the report will be reviewed annually. The report

might consist about repeating or supposed to be loyal customers who kept buying Samsung products compare

to the other brands because they thought that Samsung has something more (advantage) and has unique style

(differentiation) than the other brands. Since Samsung is currently in the top level of market share, Samsung

usually only think that Apple (with iPhone) is their main competitor over competing substitutes, so the report

might benchmarking the customers satisfaction between this two companies.

In conclusion, the customer perspective of Samsungs balanced scorecard may focuses on improving

the customer satisfaction level to get or increase more loyal customers. Meanwhile, the customer perspectives

objective is an important factor that lead to improvement in the financial perspective objectives for growth in

revenues and profits and determines the success of the company.


Internal Perspective

Samsungs internal perspective gives more on all activities and processes in the company in order to

maintain the outcomes for customers.

Here are the objectives of Samsungs internal perspective:

Quality Control

As we know, Samsung is a worldwide branch. It is one of the largest brands in the world. Customers

are million. From that point of view, Samsung ensures a level of quality of product by examining and

testing the quality of product. It is more to maintain or raise the level of products. Samsung ensures

the products that are provided meet the specific requirements and characteristics, such as being

dependable, safe, and satisfactory.

Speed to Market

Samsung understands the important of market for company. In this objective, Samsung injects new

innovations and more commercialization.

- Innovation

Innovation is critical to growth. Samsung made more innovations in order to get advantage over

the competitors. They understand clearly that one of the ways to speed the market is by giving

more innovations into the products. Therefore, Samsung will have lesser competitors by doing

that. One of new innovations that Samsung made is new feature on the product S5 Samsung

Smartphones.

- Commercialization

Business industry is growing rapidly. One of the reasons is because these days, customers rely too

much on commercialization. As a big company, Samsung knows the importance of

commercialization. With technology developing as quickly as it is across the world, Samsung needs

to survive. Knowing that in Asian they are on of the best, now they try to commercialize the brands

over Europe and America. As World Cup 2014 is approaching, Samsung moves quickly to become

one of the official partners of World Cup 2014. It is the agenda of Samsung that has been planned

relying on Balanced Scorecard as well.

Marketing

In few years ago, Samsung was struggling to catch up mostly in smartphone market. Market is

important way to increase the number of customers. By increasing the number of customers, it means

the revenue will be increased as well. Samsung did a market research in order to compete with the

other technology companies. For example, before producing smartphone, Samsung made a research.

They found through market that Asian-language speakers in particular wanted a device that they could


hand-write on, because drawing characters is easier with a pen. The result was combination

phone/tablet that has been unexpected hit.

Distribution

Samsung is now focusing on their smartphones. Because Samsung bids to take number one spot in the

smartphones. Therefore, Samsung has refined its distribution strategy. After doing a market research,

Samsung put its distribution on the stage. In UK, it is understood Samsung has increased its lead over

Nokia and now has a market share of around 21%. The distribution of the product must be taking

place in the efficient way. This also means Samsung has to be effective in distributing the products all

over the world.

Supply Chain Management (SCM)

Samsung has large, complex, and global supply chains in most of the products it manufactures and

makes extensive use of SCM solutions and process innovation to support and improve its operations.

Despite the extensive use of SCM solutions and process innovation to improve global business

operation, Samsung also deploy six sigma which they believed were based on four areas:

1. Project discipline

2. Sustaining results

3. Well-established HR framework

4. Quantitative strength

At Samsung, SCM and Six Sigma have been two important enablers for the groups management

innovation and growth.

Customer Relationship Management (CRM)

Customer Relationship Management is a way of using technology to give serve to the customer. For

Samsung, CRM is widely-implemented strategy for managing the companys interaction with

customers, clients, and sales prospects. Samsung stringing four processes, namely the process of

customer management, process R&D management, and supply chain management process. The

process will connect the R&D, production, marketing, and customers. Also to answer the needs of IT

infrastructure, and to speed up those four processes, Samsung use ERP system (Enterprise Resource

Planning) on the branches throughout the country and abroad.


Lagging Manufacturing Cycle Time

As a lagging measure, Samsung uses manufacturing cycle time to measure the productivity as well as

the quality of the product. It is understandable that the one of the goals of Samsung is to raise the

quality of the product. Samsung requires one period of time in order to complete one cycle of

production.


Defects per Day

Samsung measures the defects per day as prevention for miss-production. By doing that, Samsung

could minimize potential fail product. It will increase the efficiency and effectiveness of production.

Number of Products Return

Fail product should be returned. Measuring how much the product is being returned could make

another step to prevent another fail product. It is important for both, company and customers. Both,

company and customer, would love to have the best products as the outcomes.

Leading Critical Path

Samsung lists all activities required to complete a project, the length of time each is expected to take

and dependencies between tasks. Samsung wants to make everything more efficient by dividing each

project into component tasks and mapping out what needs to take place to shepherd it to completion.

Project Management

Samsung project management offers full range of services for complete customer satisfaction. Samsung

offers such as, high quality, one-stop manufacturing programs, process and analytical development,

clinical phase manufacturing, and full scale commercial manufacturing. Project management is a fully

responsible by project manager. It is important that the project will lead Samsung into more stages of

growth and expand more products.

In conclusion, internal perspective of Samsungs Balanced Scorecard may focuses on all activities and

key processes in order for company to excel at providing value expected by the customers. Samsung believes

that internal processes are lead indicators where management intervention is possible to affect customer and

financial outcomes. Samsung undoubtedly preserve the best outcomes as they are considering the best product

for the customers.


Learning and Growth Perspective

In Samsungs balanced scorecard, the learning and growth perspective serves several objectives, including

the following:

Research and development

The research and development is very crucial in this company. As we know, Samsung is a large

company manufacturing many technological products. It is known as a large gadgets and electronics

manufacturer, which the technology used and developed by this company need to be improved in an

on-going basis. The research and development therefore is a part of the company that helps to improve

the intangible features of the company. Atkinson et al. (2012) stated that research and development

identifies the current required intangibles, human resources, and the current organizational culture.

This also works for Samsung. The information technology needs to be updated and the company keeps

developing new technologies and knowledge all the time. It also applies for the human resources that

are encouraged to keep learning and developing their skills. Meanwhile, the organizational structure

also needs on-going improvement to cope with the latest situation, to increase the competitiveness of

the company, and to increase the effectiveness and efficiency of the current culture, which determines

the success of the operation. Therefore Samsung needs to facilitate the research and development

activities since its an important factors and business requirement for the company to keep its

competitiveness in the IT industry.

New market entry

The learning and growth perspective also identifies many ways and solutions for the company to

anticipate the competitors and also identifies many ways for the company to enter a new market. As

Samsung attempts to enter a new market, it needs more strategy and it needs to ensure that the market

keeps growing. The learning and growth may help to improve various processes in the company to

anticipate any situation in the market it newly enters. To achieve the new market entry, Samsung will

need to identify the environment of the new market it intends to enter and also improve many

processes required by the new market. The process itself is dependent on the skills of the employees,

which needs to be adjusted by the requirement of the new market. Samsung also needs to analyze the

new market segments and product segments, analyze the potential competitors in the new market, and

of course increase its competitiveness.

Identification of current corporate culture

As explained in the first objective, which is research and development, the identification of current

corporate culture is ensured by learning and growth perspective. The current corporate culture

determines the current and future success of the company. It determines how effective and efficient

the company operation is and also determines how high the companys objectives have been achieved.


Therefore, by identifying the current corporate culture, the company can ensure itself to improve its

best practice. To achieve the objective of identification of the current corporate culture, the company

has to identify its values and objectives first. Then it can determine the corporate culture, which will

direct the company to achieve the determined values and objectives.

Increase in current market share

As the company keeps growing bigger, it also expects to have a growing market share. Market share is

one of success determinants of a company in raising revenues. The learning and growth is then also

based on the objective of increasing current market share. By increasing the current market share, the

company is also required to keep developing its strategy and increasing the effectiveness and efficiency

of its various business processes. Therefore, Samsung is required to keep identifying its competitor by

doing competitor analysis and increase its competitiveness. It is also required to track the products

affordability and desirability in the market and customer needs.

Increase brand value

The brand value is an important factor that can keep Samsungs customer becoming loyal to its

products. The brand value is also an important factor that may determine the level of companys sales.

When the brand value is increasing, it indicates that the customers satisfaction and how they value

Samsung is increasing. However, to achieve this, Samsung needs to understand what its customers

want and the requirements of the surrounding environment.


Lagging benchmarking

As a lagging measure, Samsung uses benchmarking to measure how well it has achieved the learning

and growth objectives. By doing benchmarking, the company can identify and measure its

competitiveness in the industry, the effectiveness and efficiency of the business operation compared

to its competitors, the level of achievement, and also the market share that it has obtained.

Percentage of sales of new products

Another measure is the percentage of sales of new products. As explained previously, sales are an

important success determination of a company. Samsung, in this case, needs to measure its percentage

of sales to measure its competitiveness, market share, the success in entering new market segments,

and also how effective and efficient its business processes are.

New product sales projections

The new product sales projections is a leading factor that may help the company to measure its current

and future performance. As Samsung develops more products, indeed it needs to project the sales of

the new products. The projections should be the Samsungs target of achievement, which will

determine the success of the new products. As stated by the objectives, such as increasing market share

and brand value, and to enter a new market segments with new product segments, the new product

sales projections will be a fitted measure.


Samsung then regularly prepares the benchmarking report using the data and information gathered

through marketing and accounting department. The benchmarking report consists of the benchmarking data

against the industry and the competitors within it. It consists of the sales benchmarked against the competitors

and average industry sales, the budgets comprising the costs, the market share, the staffing, newly developed

technology and the existing technologies, the leading products, and many more.

In conclusion, the learning and growth perspective of Samsungs balanced scorecard may focuses on

improving the intangibles of Samsung and also the skills of its human resources to achieve the companys

objectives. Meanwhile, the learning and growth perspectives objectives are important factors that determine

the success of the company and the effectiveness and efficiency of companys performance. It also provides

several useful and relevant measures that will measure how well the objectives have been achieved by the

company.


SAMSUNG ELECTRONICS Ltd. Balanced Scorecard

samsung's balanced scorecard

Documents

samsung product

samsung focused efforts

pro samsung scx

sound management

sound business management

external shareholders

rd capabilities

revenue growth