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Samsung Slipping in China Market, 20 Years On
Published on: 2012-10-11
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altBusiness executive Tan Hong joined Samsung Group's China home appliance division in 1995 and was immediately impressed by the South Korean behemoth's culturally sensitive interest in Chinese consumers.
Tan warmed to the appliance and electronics manufacturer after he was initially assigned to run a charity-brand awareness project that focused on donating second-hand computers to poor students in the remote mountains of Hebei Province.
Today, after 20 years in China, Samsung is trying to keep those warm and fuzzy feelings alive. But it's facing cold challenges including competition from Chinese appliance makers in small cities and complaints about the company's executive hiring practices.
Back in the 1990s, Tan's appreciation for Samsung's corporate culture grew after he learned most Korean senior executives can speak Chinese fluently. Newly hired executives are routinely sent for language lessons at Peking University or Tsinghua University in Beijing. They're also given time to travel around China, study customs and get to know the people.
New Chinese employees are likewise sent to Samsung headquarters in Seoul for several months of marketing and corporate culture training. Tan's training lasted six months, deepening his appreciation for the company.
Since Samsung opened its China division in 1992, executives have been busy making friends and cooperating with the provincial and city governments that strongly influence China's business climate. The company has signed numerous factory deals in exchange for local government subsidies, land rights and preferential policies.
Three northeastern provinces with large numbers of ethnic Koreans – Liaoning, Jilin and Heilongjiang – were targeted for factory investments in 1995. Samsung then expanded into one of the nation's manufacturing hubs Guangzhou Province and the wealthy cities of Beijing, Tianjin, Shanghai and Suzhou.
Wang Zhile, a research fellow at the Ministry of Commerce-affiliated institution Chinese Academy of International Trade and Economic Cooperation, said Tan's impressions in the 1990s were not misplaced.
Samsung's decision to invest heavily in Tianjin manufacturing plants underscored its good relations with local government officials, said Wang. Samsung has reportedly invested US$ 10.6 billion in China since 1992, including US$ 1.6 billion last year. It plans to add US$ 2.16 billion worth of projects this year, and more in the future.
"Samsung has a dozen subsidiaries in Tianjin alone," Wang said. "They can get special treatment from local government.
"Of all the multinational companies, Samsung is the most devoted to knowing the Chinese market," he said.
And for good reason: A Samsung executive who declined to be named said any multinational that wins hearts in the huge Chinese consumer market can win the world. 
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