Recounting Brilliant Pioneer’s Achievement

Late Samsung founder Lee’s miraculous legacy remembered on occasion of the centenary of his birth

An international symposium took place at the Shilla Hotel on Feb. 10 on the occasion of the 100th anniversary of the birth of late founder Lee Byung-chol of Samsung Group, the largest conglomerate in Korea that includes Samsung Electronics Co. The event’s theme read “Korea’s economic growth and entrepreneurial spirit,” with most of the participants agreeing that the late business leader created a Korean-type corporate model, respected by all those in the business community and pursued in the future. About 500 people from various walks of life including business leaders, academics, students and former executives of Samsung Group, attended the symposium organized jointly by the Federation of Korean Industries (FKI), the Korea Management Society and the Samsung Economic Research Institute (SERI).
Chairman S.R. Cho of the FKI in his opening speech at the international event, said, “We have to follow the entrepreneurial spirit of our senior business leaders if we wanted to have the Korean economy reach the status of an advanced economy in the world.”
Chairman Lee Hyun-jai of the Hoam Foundation, named after the late chairman’s penname, said the century of the Samsung Group’s track record left by the late founder holds the nation’s economic future over the next century, adding that “Hoam’s thoughts and philosophy belong not only to us, but to the future of the whole world.”
Among the many respected persons attending the symposium were Professor Tarun Khanna of Harvard University Graduate School of Management; Professors Langly and Dominic Bahjo of Paris University (No. 4 Paris University); Professor Isao Yanagimachi of Keio University in Tokyo; Professor Chang Jin-ho of Yonsei University Management School; and Professor Song Jae-woo of Seoul National University School of Management. Professor Tarun Khanna, in his speech entitled “The New Business Creation of the Korean Business Collectives,” analyzed the contributions made by the Korean business communities to Korea’s industrial and economic growth in terms of statistics and theory. Samsung and other global business firms played the role of growth engines by creating businesses despite the ups and downs of business cycles. He said it would be like denying an elephant in the room if one tries to deny the positive side of Korean business development and only stress the negative side.
Professor Bahjo of Paris’ Sorbonne University, said the late chairman mixed the Confucian tradition with Western business models by putting the talents of employees to good use. The late founder came close to a reform business leader model called for by Schumpeter. He went on to note that the late Lee’s business management model is applicable to European business operations as it is practical and implementable.
Professor Yanagimachi of Keio University said Samsung has now become a business model to itself, as it has nowhere better to learn to run a business than from its own experiences. Its history is a textbook for any business firm in the world. “You have to have talented people that can produce goods not yet in the market with new concepts yet to be developed,” the Japanese professor said.
A giant company like Toyota can make management decisions unrelated to market conditions, ignoring what consumers want sometimes. Samsung should be careful, too, he warned, commenting on Toyota’s ongoing recall of its cars.
Professor Chang Jin-ho of Yonsei University, Professors Langly and Bahjo of Paris University and Professor Isao Yanagimachi of Keio University each took 40 minutes to deliver their papers. Professor Chang’s paper presentation was entitled “Hoam’s Place in Korea’s Management History.” The French professors spoke on “Hoam’s management ideal from the viewpoint of European management history,” while Professor Yanagimachi spoke on “Hoam’s Talent Management.”
Professor Chang, the last speaker of the event, talked about “Businessmen’s Spirit and Korea in the 21st century,” pointing to the need of the next generation of business leaders to adopt Hoam’s business leadership style.

Young Lee was already a rich man in the 1930s, with his thriving alcoholic beverage business in Daegu and he came to Seoul soon after the liberation of Korea from the Japanese colonial rule that extended over 36 years. What he found in the capital city was chaos with the confrontation between the right and the left heating up.
There he came to have an awakening that poverty was at the bottom of all the problems that the country faced and doing business had more significance than just making money ― it helped stabilize the country in all respects. The young businessman thought that a nation could not have political stability when poverty dominated the entire country ― political stability comes only with the stable livelihood of the people helped by surging economic growth. The energetic businessman was determined to pursue his ideals on business to help develop the national economy and make the country rich. The young future tycoon returned to Daegu where he started to take on international trade, thinking that the country had to import the necessary goods from overseas, as there were no technology, capital or energy in place to turn out goods.
He also entered the flour milling business, in addition to the alcoholic beverage production business. In 1948, he returned to Seoul and set up Samsung Trading. He exported squids and imported cotton threads, which the country needed the most at the time to make clothes. With cotton threads selling so well, the company soon became the 7th largest trading firm in Korea within a year of its launch.
Two years later, in June of 1950, the Korean War broke out. He couldn’t get out of Seoul in time when the North Korean soldiers occupied the city. He had to hide himself in his driver’s house for three months until the U.N. forces recaptured Seoul. During his time in hiding, his belief that he had to build up his business for the sake of the country out of patriotic reasons grew stronger. In one of his speeches later, he recalled that he learned how precious the country and the liberal democracy were to every Korean, significantly changing his philosophy on life at that time. He said he painfully realized that one has to have a country to do business and also have a family.
In the 1950s, Lee recorded great success in running the so-called “three white businesses,” which were flour milling, sugar refining and textiles, to the extent that he was criticized for only taking on consumer goods businesses.
He defended himself against such criticisms by saying that it is not important what kinds of businesses you are in so long as they are necessary for the livelihood of the people. He went on to add that Korea has to produce excellent quality goods and supply them to society at low prices, which is the mission for businesses and the value of their existence.
With the popularity of coffee rising in Korea, Samsung started Cheil Sugar Refining in 1953, although his aides told him that it was more profitable to import sugar and sell it on the domestic market. But he went ahead with the new sugar company. Within a year, the prices of sugar fell by one third, yet he didn’t raise sugar prices as his executives suggested, saying that a large company should not impinge on the public interest for the sake of its profit.
Samsung set up Cheil Textile, as its sugar mill began to turn profitable after a short time, and produced the Goldentex brand fabric, which has become a brand name among Korean textile fabrics up to now. The late Samsung founder knew that there were very good markets for both sugar and textiles in Korea then. In 1969, Lee also set up Samsung Electronics out of nowhere even before the Korea Fertilizer incident involving Samsung’s alleged smuggling of saccharine, a chemical sugar. Lee’s decision to launch an electronics company has been lauded as one of his greatest legacies to be remembered for a long time to come.
The late chairman knew that the electronics industry was a futuristic growth engine in terms of workmanship, technology and demand. He said any company with more than 100 million won in capital should make contributions to society and the country as their sacred duty, stressing once again his strong belief in businesses’ obligations to society and the country as well.
It was the same idea for Lee that made him launch the semiconductor production business, as it was a core business not only for the country, but for Samsung as well with its great growth potential. He said there were many businesses that he could start if he just wanted to make money, but Samsung should also think in terms of its contribution to Korea to build a business that can stand out in the world. He continuously held on to his patriotic zeal that doing business was not only for money, but also for the successful development of the national economy.
Lee rapidly set up Samsung’s management system starting with the secretary’s office in the middle of the 1950s and increased the number of group affiliates through either outright purchases or mergers with other companies. The group took over stakes in such companies as Ankook Fire and Marine Insurance, Hankook Tire, Hyosung Trading, Keunhwa Trading and Poongkuk Spirit, among others.
Lee was the first conglomerate leader to introduce a modern management system in Korea to run the expanding business group including the open employment of staff through exams and interviews, jettisoning “employment through connections,” such as school, family and friends. In June 1954, Samsung first hired four college graduates through its open employment system. The group put up an employment announcement at the campus of Seoul National University in November 1956, and in January the following year, some 2,000 answered the ads and participated in written tests and interviews held by the group to select the final candidates.
He also assigned the secretariat that he newly set up to take charge of such key responsibilities as advertising, public relations, planning and others, in addition to protocol duties for the entire group. The office directly under the chairman of the group was given additional responsibilities later on including finance and audit. The powerful secretariat continued to help run the group under the direction of the top executive of the group and under former chairman Lee Kun-hee, who took over the group following the late Lee’s passing. The powerful office, acting as a control tower for the group, changed its name several times under former chairman Lee including the restructuring headquarters and the strategy and planning office.
Lee’s sensitivity to details showed up blatantly while Cheil Textile was being set up. His notes included 48 detailed items to be considered in setting up the new company including the types of machinery to be imported and the selection of its lot based on such details as weather conditions in the area and a comparison of similar textile fabrics produced in such advanced countries as France, Germany, Great Britain and Italy.
When a U.S. textile machinery maker protested Samsung’s moves to import textile machinery from somewhere other than the United States, the late tycoon showed them his notes that included the superiority of the textile machinery that he was about to import and the U.S. company backed off.
The late Samsung head had extremely detailed personnel policies and management plans. His notes always had the work he had to take care of during the day and people to meet. He always checked the notes just before he went home from the office and set up his plan for the next day based on the results of the current day’s schedule.
A modern management study shows that one manager can take charge of 30 staff under him, but the late Lee managed 100 people through his detailed memos and schedules, said former president Choi Woo-sok of SERI.
Lee’s hard work and brilliant business strategies paid off handsomely. Samsung Group has grown enormously since he launched Cheil Sugar in 1953. As of the end of 2008, the group’s affiliates totaled 64 with total annual sales of 191 trillion won and net income of 11.7 trillion won with 170,000 employees on its payroll, 4,865 with doctoral degrees in their respective fields.
The group’s total exports directly from its plants at home amounted to $79.9 billion, accounting for 18.9 percent of Korea’s total exports in 2008. The group had 477 branch offices and wholly-owned subsidiaries in 68 countries as of 2008. nw

Late Founder Lee Byung-chol standing with a shovel at a sugar refinery, at Cheil Sugar he founded, the first in the country.

(Photo from left) A group of founding members of Samsung Trading Co. including Founder Lee Byung-chol, 3rd R, in the middle row.Founder Lee Byung-chol.