Samsung, the world’s largest producer of memory chips and the sixth-largest cell-phone maker, is among the biggest and most successful multinationals operating in Russia. Part of that success may be attributed to Don-Joo Lee, the head of Samsung’s C.I.S. operations, who has occupied the post since the challenging days of September 1998. He discusses Samsung’s goals and strategy in the region, and his views on the development of Russia’s consumer market.

Raising employee moral and improving intercultural relations were top priorities for Don-Joo Lee, head of Samsung Electronics’ C.I.S., on his arrival to Moscow after the 1998 financial crisis. He spoke to The Leader about the changes that have taken place at the corporation and the electronics market since then.

Why did you decide to come to Russia?

After my mission in the United States, where I had worked for almost 6 years as audio products manager in Samsung’s New Jersey office, I was offered three different locations within the company: India, the Philippines and Russia. Actually, there was one more – China. Since I had had no experience in Europe and was absolutely ignorant of Russia, I thought I could benefit the most if I went to Russia. Now I am in charge of marketing in Russia and three other countries of the CIS: Armenia, Georgia and Azerbaijan.

When you came to Russia your mission was to make changes at Samsung’s Moscow office. So, what has been changed?

A lot. Before the 1998 crash, the Russian market was a supplier’s market. First of all, we had to worry about distribution and collection. Today, in a buyer’s market, the main issues are marketing and brand promotion.
Raising employee morale was also a challenge. I saw a lot of crying and yelling, no respect and a lot of tension between Korean and Russian employees. People wouldn’t even greet each other in the morning. So, I tried to change the culture of corporate relations to instill mutual respect and good corporate culture and spirit.
After the market crash in August 1998, salaries dropped roughly 30 percent across the industry on average. But we had a 10 percent salary increase for all our employees at that very time. Today, we continue asking our workers if they are happy with their earnings and inquire whether a similar position in Sony pays more. And if so, we increase the pay.

What is Samsung’s strategy for winning over Russian consumers?

Just in the last six months we introduced new products to meet Russian needs: a slim washing machine to fit into small living quarters, which are so typical in Russia, a new Plano TV that amplifies a weak signal and removes voltage fluctuation problems, to name just a few. In the future, we are planning to play a more active role in the mobile phone market. In September, we plan to launch a strong advertising campaign to promote our new products. Within some two years we expect to match Sony in brand positioning.

Could you tell me what the differences and similarities are in doing business in Moscow and other parts of Russia?

Well, competition is certainly much fiercer here in Moscow. While good marketing is crucial for Moscow, distribution and product reliability are essential for successful business in the regions. There are such problems as remoteness, poor communication and transportation. In Moscow we have all our best agents, the area is more controllable, etc. I would put it this way: Moscow is important for us, but the regions are equally important.

What is Samsung’s policy regarding hiring Russian professionals?

Samsung’s policy is localizing responsibilities in the field. The highest position for a Russian national within the company is senior manager. Actually, most positions — except for those of directors, which require communication with the headquarters in Korea — are available to Russians. Russians do all the marketing and administrative jobs. As a multinational company, Samsung makes an effort to concentrate on local management. Unlike LG Electronics, where Koreans hold more than 20 top positions, Samsung has just ten Koreans directors.

Our salaries are flexible: they depend on the success of the company. We also encourage and require our staff to attend workshops and educational programs, enroll in MBA courses, etc. The company covers all tuition costs if an employee agrees to works for the company for at least 1.5 years after graduation. We also offer a wonderful tennis club and fitness center, organize regular activities such as picnics, parties and other corporate events to build up the team spirit.

Has the so-called “Sunshine Policy” of Korea’s President Kim Dae-Jung resulted in a gradual opening of North Korea for South Korean business? How promising is this new market for Samsung?

We have an assembly factory near the border with North Korea. As long as North Korea remains a closed country, consumers will be attracted by a label that reads “assembled in North Korea.” The cost of North Korean labor is one of the lowest in the world, while the skills of workers are among some of the highest. Once the country opens up, it may become a very attractive market. But when this might happen remains an open question. Although North Korea is rich in natural resources, marketwise it is not interesting — its people have no money to buy our products.

Samsung was the first Korean chaebol — a big South Korean corporation — to cooperate with small and medium-sized companies instead of competing with them. How efficient has this new approach been?

Originally, it was a direction given by the Korean government. Many big chaebols have suffocated medium and small firms. Instead, we have decided to play fair and to share our knowledge and technologies. I can say that Samsung has not been negatively affected by this government measure. In fact, it offers some competitive advantage: small companies have lower expenses, so such businesses practices make us more price-competitive.

In other countries, especially the United States, large corporations have been trying to concentrate on certain core businesses, while in Korea chaebols have incessantly extended their activities to new areas. However, our goal is to focus only on telecommunications and semiconductors.

Last month, Business Week ranked Samsung as 42nd in its rating of the best global brands. Does the company have any ambitions to be in the top ranks in the future?

What I can say is that Samsung has set an internal goal to increase its brand value ten times by the year 2010. Last year, Samsung’s brand value was $5.4 billion; this year it is $6.4 billion. This is the highest increment. So, we could very well top off the list some day.

How much does Samsung invest in advertising its brand?

Actually, Samsung is the biggest investor in promotion of its brand among electronics companies. It invests as much as cosmetics or tobacco companies, which are the biggest advertising spenders in Russia. the biggest advertising spenders in Russia.