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Diversification Story Series 2:Samsung: From Trading Company to Global Conglomerate

 


In 1938, in a small town in Korea, Lee Byung-chul founded Samsung as a trading company that sold dried fish, noodles, and groceries. Few could have imagined that this modest start would grow into one of the most diversified and powerful conglomerates in the world. Samsung’s story is not just one of scale — it is a case study in relentless diversification, guided by discipline, bold bets, and the courage to divest when necessary.

Horizon 1: The Core – Building the Foundation

Samsung’s early decades were about building a base in Korea’s industrial economy. From trading, it expanded into textiles and food processing. By the 1960s and 70s, Samsung moved into consumer electronics — black-and-white televisions, home appliances, and semiconductors.

This was Samsung’s first horizon: establish a strong and profitable foundation in products essential to everyday life. Its televisions, refrigerators, and washing machines became household names in Asia, then globally. By the 1990s, mobile phones were added to this core — laying the groundwork for Samsung’s position as one of the world’s largest consumer electronics brands.

Lesson: Use the core to build scale, brand trust, and financial stability.

Horizon 2: Growth – Expanding Adjacencies

By the late 20th century, Samsung wasn’t content with being an electronics maker. It pushed into adjacent industries where its capabilities — scale, technology, engineering — could dominate.

  • Semiconductors (1980s–1990s): Samsung invested heavily in memory chips and processors, eventually becoming a global leader. Today, semiconductors are one of Samsung’s largest revenue streams.
  • Shipbuilding and Construction: Through Samsung Heavy Industries and Samsung C&T, it entered infrastructure, engineering, and mega-projects worldwide.
  • Financial Services: Samsung Life Insurance, Samsung Fire & Marine Insurance, and Samsung Card made it a financial powerhouse in Korea.
  • Display Technology: From LCD panels to OLED, Samsung expanded into components that powered not only its own devices but also those of competitors like Apple.

Lesson: Growth came from adjacencies that leveraged Samsung’s industrial capabilities, spreading risk across industries while building synergies.

Horizon 3: Transform – Betting on the Future

In the 21st century, Samsung began planting transformational bets in entirely new frontiers:

  • Biotech & Healthcare: Through Samsung Biologics and Samsung Bioepis, it entered biopharmaceutical manufacturing — today a multibillion-dollar growth engine.
  • Artificial Intelligence & 5G: Heavy investments in AI research, smart devices, and next-generation networks.
  • Renewable Energy & Batteries: Aiming to lead in sustainable technologies for the future of energy and mobility.

These moves represent Samsung’s third horizon — businesses that could redefine its role in the global economy decades from now.

Lesson: Transformational bets ensure longevity beyond today’s consumer cycles.

When Diversification Fails

Samsung’s diversification story is remarkable, but not every venture succeeded. The company shows discipline in pruning businesses that no longer fit or failed to scale.

  • Samsung Motors (1994–2000): Attempted to enter the automobile industry but faced losses; sold to Renault (now Renault Samsung Motors).
  • Samsung Techwin (Defense & Cameras, divested 2014): Exited defense technology and optics, sold to Hanwha Group.
  • Samsung Petrochemicals & General Chemicals (divested 2015): Sold to Hanwha as part of restructuring.
  • Printing Business (divested 2016): Sold entire division to HP for $1.05B, recognizing commoditization.
  • Plasma TV Production (shut 2014): Discontinued as LCD and OLED became dominant.

Lesson: Diversification requires courage not only to enter but also to exit. Samsung shed businesses that diluted focus, reallocating capital to stronger growth areas.

The Mindset Behind Samsung’s Diversification

Samsung’s journey shows a mindset of bold ambition balanced by pragmatism:

  • Core strength first: Build consumer trust with electronics and phones.
  • Adjacency expansion: Use industrial, financial, and technological capabilities to grow across sectors.
  • Transformational bets: Invest early in biotech, AI, and renewable energy to prepare for the next era.

Closing Thought

From dried fish to smartphones, from textiles to biotech, Samsung’s story is one of audacious diversification. It invested where it had strength, divested where commoditization eroded margins, and never stopped betting on the future. Some ventures failed, but others reshaped industries. A century on, Samsung stands not just as Korea’s most powerful conglomerate, but as a global case study in how disciplined diversification across horizons can transform a trading company into a world leader.

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