Leadership in Germany

Soon after Welch taking charge as CEO in 1981, he set the standard for each business to become #1 or #2 competitor in its industry- or to disengage. To achieve this goal in a recessionary environment and under attack from global competitors, scores of underperformance businesses were sold, even GE’s well-known consumer electronics business. Between 1981 and 1990, GE freed up over $11 billion of capital by selling off more than 200 businesses, which had accounted for 25% of 1980 sales. In that same time frame, the company made over 370 acquisitions, investing more than $21 billion. This strategy made GE’s sales recorded $52.619 billion, almost double than $27.24 billion in 1981. To achieve the goal, Welch and all GE managers try to boost productivity by restructuring, removing bureaucracy and downsizing, also creating the desired culture and management approach. In 1983, Welch had elaborated this general “#1” or “#2” objective into a “three circle concept” of his vision for GE. But on the other hand, this strategy has its own limitations, it may let GE give up some potential opportunities. In order to achieve the goal, many managers had narrowed their market definition, thus made their #1 or #2 position in their defined market, but lost many other growth opportunities in extensive markets. Since 1997, Welch refined the strategy. However, this strategy does make sense in GE’s business success. In following years, even for any new businesses, managers try to expand their business to #1 or #2 position.

According to Exhibit 7a, in 2003 Samsung enjoyed a cost advantage of $1.39 per average units. The sources of Samsung’s cost advantages in DRAMs in 2003 are:

• Economy of Scale

Large volume leads to lower unit cost, suppliers of memory raw materials would provide discounts of up to 5% for high-volume buyers. According to Exhibit 5, the DRAM production volume of Samsung in 2003