Metanational Management and Global Innovation: The Case of the TFT-LCD Industry

Part 2 of Session I was devoted to case studies of successful TFT-LCD manufacturers in Korea and Taiwan, and analysis of the relation between their success and metanational management. To survive the intensely competitive conditions of the TFT-LCD industry, manufacturers must be able to decide and to act with speed. Operating under the hypothesis that this is made possible through the organic integration of corporate organizational structures and the innovations created through metanational management, the presentations focused on differences in management policies and structures between Japanese manufacturers that have reached saturation point and Korean and Taiwanese manufacturers that are continuing to grow.

The subject of the Song Presentation was "What is Behind the Success of Major Korean TFT-LCD Players?: The Case of Samsung Electronics" The following main points were made.

Samsung Electronics has been able to hold the top position in the TFT-LCD industry during the past decade based on the know-how and marketing channels developed in the course of its past successes in the semiconductor industry. Thanks to strong leadership, speedy decisions were made for the massive investments required in the liquid crystal display business. This facilitated efficient and speedy technology transfer and business development. Given the industry's short product life cycles, access to financing and speedy management are particularly important.

Developmental technologies and knowledge acquired in semiconductor businesses were shared within Samsung Electronics, but were also shared with partners and affiliates. This facilitated the joint creation of value in LCD businesses.

The following factors have contributed to the success of Samsung Electronics, as well as to the success of the entire Samsung Group: strong decision-making by visionary top executives; speed in management; willingness to take risks; and, a strong sense of responsibility. Enormous investments in technology development that will create future value require strong decision-making powers by top executives. The structure of Japanese companies is not amenable to strong leadership and speedy management.

Value is created in a number of technology development departments that exist in parallel within the group, and the corporate structure of vertical integration allows these values to be organically integrated. Intra-group metanational management creates synergy in developmental technologies. While promoting the creation of value, this synergy effect simultaneously promotes intra-group competition in development. These are the sources of the competitive advantages of the Samsung Group.

However, it is true that these successes and the strong nationalistic sentiments of the Korean people in some respects obstruct the conventional international style of metanational management. In the future, the Samsung Group will have to endeavor to realize the true forms of metanational management.

The subject of the Wang Presentation was "TFT-LCD Industry in Taiwan: The Case of AUO." The following main points were made.

To succeed in the TFT-LCD industry, a manufacturer must satisfy all of the following three requisite capacities: technology development capacity, access to financing, and market development capacity. As late-starters in the TFT-LCD industry characterized by the high speed of technological innovation, Taiwanese manufacturers had to adopt metanational management approaches.

The three requisite capacities are closely linked to metanational management. The task of metanational managers is to transform the knowledge that is widely dispersed throughout the world into innovative products and to market them. Taiwan's AUO was able to succeed based on the following pattern of metanational management. The necessary technologies were obtained from Japan, the technology leader. The necessary financing was obtained from the United States where fund procurement is open. Finally, market development was done in Taiwan. Metanational management reduces risks and maximizes opportunities.

The following implications can be derived from the metanational management strategies of startups as observed in the case of AUO.

• Importance of technological self-reliance after the transfer of technologies and knowledge has been completed, and the importance of being able to make the transition to the process of knowledge value creation.

• Creation of value based on economies of scale of funds procured.

• Linkages with existing domestic downstream industries for developing and accumulating of mass-production capabilities and adequate manufacturing capabilities.

Metanational management is critically important in industries subject to rapid technological progress, such as the TFT-LCD industry. The most important requirement for capitalizing on the advantages of metanational management is the ability of top executives to make speedy management decisions. Analysis shows that the most important key to the success of Taiwanese companies has been speed in management.

Mr. Matsumoto summarized the discussions from the perspective of televisions and LCD as a key device in televisions. The following comments were made.

Companies in the TFT-LCD industry face a choice between "make" or "buy." If they choose to "make," they are often drawn into the dilemma of having to "sell." For integrated Japanese companies, the only way to recover initial investments is to expand the scale of the production of parts. This can speed up the process in which end products become commodities and the corporate brand is undermined.

Japanese companies enjoy the advantage of being able to use devices to differentiate their end products. On the other hand, their positions can be eroded by cost competition in the production of devices. End products are affected by cultural preferences and require brand power. This may have had a delaying effect on the global expansion of Japanese companies.

Korean manufacturers have achieved a cost advantage, which has enabled them to go global with their devices. In recent years, Korean televisions have improved in quality and design, and are gaining greater brand power.

Taiwanese manufacturers enjoy a cost advantage and are well positioned to enter global markets. On the other hand, they will face a dilemma if they choose to manufacture end products in the future.