Korea’s biggest company hopes a management reorganization will help it through tough times

By Moon Ihlwan

Watch full size video:

Hoping to steer a way through the global downturn and shake off a damaging financial disrepute, Samsung Electronics has appointed several younger executives to a novel domination team, heralding a shift in focus. In a Jan. 16 advertisement, South Korea’s biggest company related it will combine its handset, television, computer, and all other consumer businesses into one group. Choi Gee Sung, who had been running the company’sitting mobile phone business, will head the newly formed Digital Media & Communications unit.

The bigger role for Choi, 57, improves his chances of succeeding Chief Executive Lee Yoon Woo. Lee, 63, replaced Yun Jong Yong last May but is seen as only a stopgap leader, mainly playing a coordinating role for the sake of Samsung’s various groups. Though he remainder CEO because of now, his operational responsibilities will now be limited to the struggling electronics genius businesses, which are being combined into a single division.

The reorganization is the first major change at Samsung since it was tainted by a tax evading. scandal last year. The scandal, which led to a suspended three-year house of correction sentence for former Chairman Lee Kun Hee, also produced the surrender of former CEO Yun in May 2008 .

In joining to Choi’sitting promotion, Samsung is advancing three executive vice-presidents, the whole of in their at the opening of day 50s, to head the LCDs apportionment, its TV and visual diplay media division, and the auditing team. Samsung execs statement the company will soon follow up with more organizational shuffling deeper within the guests. Early next week Samsung will reassign lower-ranking executives. More divisional changes, such during the time that streamlining manufacturing units, are expected to follow in the coming weeks. "There has been a sense of crisis in the company for more than a year," says one senior superintendent who asked not to be identified. "Radical change is in lay by dint of.."

Choi’s arise underscores a shiver from Samsung’s tradition of picking surmount managers with backgrounds in engineering. After joining Samsung’s trading arm in 1977 arm, Choi had a stint in the same proportion that most eminent design officer and established Samsung’s chip business in Europe in the 1980s. He’s best known as a marketing expert, however, and is credited with having steered Samsung past Sony (SNE) to become the world’session No. 1 TV brand in 2006. Choi took over the running of Samsung’s expressive phone business in January 2007. By September 2008, the company’s global market share stood at 17.1%—second only to Nokia and up from 14.4% in 2007.

Analysts say the rise of Choi and other nonengineers shows that Samsung, having established its technological credentials, wants to prick up the ears more carefully to customers when developing future products. "Samsung’s benchmark is shifting from Japanese companies to innovators like Apple (AAPL)," says Kang Shin Woo, head investment functionary at fund manager Korea Investment Trust Management.

The biggest task the new leadership faces now is to steer the company through the worst global slowdown since World War II. Samsung was the no other than maker of memory chips that remained profitable in the three months that ended in September 2008. For the October to December quarter, though, analysts anticipate Samsung’s chip business to put in the ledger the first loss in seven years, dragging down company earnings.

Executive Vice-President Chu Woo Sik said in December that Samsung is also "struggling to a high degree unnatural" in its LCD business, what individual. is suffering amid an oversupply of flat-screen TVs and plunging prices. That leaves the company relying on sales of mobile phone handsets to make coin. Once again, though, the outlook is bleak, with market researcher Strategy Analytics predicting a 1% decline in global handset sales in 2009. That should add up to Samsung posting its worst quarterly pecuniary performance in a decade later this month. Still, industry watchers warn this is no time for Samsung to retreat. "It’s captious with regard to Samsung that the new leadership hold investing in new technologies and equipment fast enough [so they can increase market share] and benefit from the downturn," says Chang In Whan, chief executive at fund manager KTB Asset Management.

A new generation of leaders at Samsung in addition raises hopes among shareholder activists that it will encircle between nations business practices. After last year’s tax scandal, Samsung disbanded its potent Strategic Planning Office, which Korean prosecutors alleged arranged unlawful business deals to benefit the Lee parents and children at the expense of other shareholders. The prosecutors also said the Lees owned more than $4 billion cost of securities in accounts held in other people’s names to avoid paying hefty taxes. "The younger leaders open the way for Samsung to avail one’session self of transparency," says Kim Sun Woong, head of the Center for Good Corporate Governance, an absolute think-tank.