Global Strategy of Lg Electonics

Chapter 1 AN INTRODUCTION AND COMPANY BACKGROUND LOOK AT LG ELECTRONICS LTD Consumer electronics be irresistible, there is nothing quite fascinating than to see aroundone habituate an electronic gadget for the eldest time. There is absolutely no uncertainty that consumer technology sparks imagination like nothing else. The Consumer-Electronics industry is the conception of entertainment, communication and office harvest-festivals. Currently, the globose consumer electronics industry is dominated by the South Korean, Japanese and Ameri mint companies.One of these South Korean companies is LG Electronics Inc. Originally being constructed in 1958, LG Group is the merger of both Korean companies, Lucky and GoldStar, hence the acronym LG. Its current slogan, Lifes Good is the bacronym. LG Electronics is the flagship of LG Group, one of the worlds salientst electronics conglom timete. The society is the worlds coope say largest manufacturer of television sets and third largest producer of mobile phones. Being its p young in Seoul, South Korea, LG currently employees 95,000 people general with 75 subsidiary companies spherically.The main atomic takings 18a for mathematical product division lies in mobile communication, digital appliances, digital peril and digital media. In terms of diffusion mesh topologys and worldwide sales, LG stands highest in the consumer electronics industry. Being a good control over the white goods grocery, LG has the highest grocery store per centum in the home appliances. The ships companys desire to create a happier, better life has always surrounded its history. It has unveiled many new products, employ new technology in the form of mobile devices and digital television in the 21st century and pass overs to reinforce its status as a global company.A BRIEF LIGHT INTO CONSUMER ELECTRONIC INDUSTRY From the early 1900s till late 1980s and 90s, consumer electronics, computers, and telecommunications have widened as separate industries. whence came the era of digitalization and it changed the rules of the market by knocking d cause the walls between and making these industries one as the Consumer electronics industry. Now the consumer electronics market is an industry of $2 one million million. We tail assembly segment the consumer electronic industry into entertainment, productivity and communication.The emergence opportunities for this industry include mobile devices, personal era, networks and frameing smart homes. There exist many investment opportunities in this industry. The convergence of the three separate industries into one is brewing up the perfect storm. And as it was quoted, where theres chaos, theres opportunity. On November 4, 1959, the Kookje e veryday News, one of the most influential newspapers in Korea, published the story of the initial Korean-made radio get arounded and manufactured by LG Electronics (the company was therefore known as Goldstar).By introducin g all the different kinds of appliances produced by LG, the newspaper projected that In the near future, we will be victimization these devices in our daily lives. In June 1959, LG Electronics embarked on an aspiring(prenominal) project the first-ever Korean-made radio. Th companys lack of experience made many industry observers to doubt the companys success, aside fro the fact that the lying-in itself was a historical challenge. The topical anesthetic anesthetic production of component parts was also problematic. Nevertheless, LG Electronics succeeded in producing component parts in local regions, such a switches, sashes, and transformers.Finally, the first domestic radio (Model Name A-501) in Korea came of the assembly line in November, only five months by and by the project started. A-501 marked a new era in the history of Korean electronics industry, as more than 60% of the product was made with locally produced parts. The development of the first domestically produced r adio clearly shows the entrepreneurship of LG Electronics. The company steadfastly upheld its pioneering spirit and willingness to take on challenges to overcome the hardships it faced.In doing so, LG has succeeded in laying down the foundations for the Korean domestic electronics industry. LG Electronics today embodies the same old pioneering vision, which serves as the railway locomotive that propels the company toward the future. In 1958, painful memories of the Korean War still smoldered in the hearts and minds of the Korean people when LG Electronics began to lead the Korean electronics industry. Befitting its reputation as the First Korean Electronics Company, the words such as The First and The Best have always accompanied LG Electronics.The history of LG Electronics is deeply embedded in the history of Koreas electronics industry, and the companys achievements argon mileposts that brought up the level of the nations electronics industry one stage later on an early(a). After bring home the bacon in locally producing its first radio, LG Electronics wrote its own chapter in the history of Korean electronics industry with the companys bold, pioneering spirit. LG Electronics real many of Koreas first products, such as telephones, refrigerators, TVs, air conditioners, and washing machines.Today, LG has consolidated its position as Koreas guide electronics company. In 1962, the radio developed by LG Electronics became Koreas first electronic product to be exported to the USA. The company also further developed various electronic products using proprietary technologies and exported these products to numerous nations in the world, achieving the nations determination of Export Korea. In 1978, these frets led LG to r all(prenominal) the goal of earning 100 million dollars in export revenues, the first company in Koreas electronics industry to do so.This feat inspired confidence in the slogan, We can do it among Koreans who believed that exporting is the onl y way to develop Koreas economy. We made it On October 8, 1982, LG Electronics r distributivelyed an distinguished milestone as its manufacturing fructify in Huntsville, Alabama, USA (LGEAI so GSAI) completed the companys first Made in USA product. In the early 1980s, LG Electronics began to aggrandize its oversea manufacturing plants. The first overseas manufacturing corporation was established in 1982 in Huntsville, a city in northern Alabama, USA.It was soon followed by a string up of other overseas manufacturing and sales outposts in atomic number 63, exchange and South America and spousal relationship America. LG Electronics has now become a global corporation with over 76 overseas subsidiaries and over 50 branch offices. LG Electronics faced its biggest challenge during the dispute between labor and vigilance in 1989. However, the incident led the company to tone up the relationship between labor and counsel and tobecome the No. 1 Company in terms of labor and heed relationships.In the late 1990s, LG Electronics, with its new Digital LG slogan, officially announced its goal of becoming a world-class electronics corporation. Since then, LG Electronics has introduced many of the worlds groundbreaking products such as IC sets for Digital TV Receivers, 60-inch PDPs, and Internet-capable refrigerators. With these achievements, the company was able to dominate the worlds CD-ROM drive market in 1998, aside from establishing a very strong market position for its TFT-LCD for monitors, touch masks, air conditioners, CDMA WLL devices, home theaters, and other household electronic appliances.As a result, the words describing LG electronics, such as the first and the best ar no long-run just now applicable in Korea, but ar now recognized to be true aroundthe world. In January 2004, LG Electronics set the goal to become the Global Top 3. This extend defines the companys resolve tobecome the worlds top company in field of consumer electronics and mob ile communications with the awareness that to get No. 1 position is the only way to survive. To that end, LG Electronics implemented a schema to become the leader in the highly competitive sectors of home appliances, next-generation digital uncovers, and mobile communications.LG Electronics continues to snake pit the trail in new businesses and ventures into uncharted territories. The company has been able to lead the Korean electronic industry and grow into a global player with its own place among the worlds leading corporations. By taking on new challenges and progressing forward with the frontier spirit, the Legend of No. 1 of LG Electronics will continue in the global market where infinite potentials are present. THE RECORDS OF BEING THE FIRST 1958 Koreas first electonics corporation established 1959 Koreas first radio produced. 1962 Koreas first company to export radios to the USA. 965 Koreas first refrigerators produced. 1966 Koreas first black white TVs produced. 1967 Kor eas first air conditioners came off the assembly line. The first Korean corporation to establish an overseas branch office in New York, USA 1969 Koreas first washing machine produced. 1970 Koreas first electronics corporation to go public 1975 Koreas first embodied Central Research Center established. 1978 Koreas first electronics corporation to earn 100 million dollars in export 1981 Koreas first home appliance corporation to introduce a client service center. 982 First Korean corporation to establish an overseas manufacturing plant in Huntsville, Alabama, USA. 1983 First Korean corporation to establish an Integrated construct Research Center. 1997 Koreas first company to develop 40-inch PDPs using proprietary technology. The worlds first company to develop IC Chipsets for Digital TV reception. 1998 The worlds first company to develop 60-inch PDPs for HDTVs. Koreas first company to develop organic EL for next-generation displays. The companys CD-ROMs stratified No. 1 in the world 4 years later their introduction to the market. 999 Koreas first company to develop the synchronous IMT-2000 System. LGs Whisen Air Conditioners ranked No. 1 in the global market. Koreas first company to develop Korean standard Digital TVs 2002 The worlds first company to douse cooccurring IMT-2000 Color Phones with Integrated Digital Camera The worlds first developer of the 23GB HD VDR The worlds first company to release a DVD Combo for the Home Theater 2003 The worlds first company to release Intelligent Digital TVs The worlds first company to develop Integrated Synchronous and Asynchronous IMT-2000 Phones.Worlds largest 76-inch PDPs produced 2004 The worlds largest integrated 55-inch LCD TVs released. Koreas first company to release a 12X External Super Multi-DVD Writers 2005 The worlds first company to release Terrestrial DMB Notebooks Mission debate LG Electronics pursues its 21st century vision of becoming a true global digital leader who can make its customers worldwide happy by its mod digital products and services. LG Electronics set its mid- and long-term vision anew to rank among the top 3 electronics, nurture, and telecommunication firms in the world by 2010.As such, we embrace the philosophy of smashing Company, salient People, whereby only great people can create a great company, and pursue two growth strategies involving fast purpose and fast growth. Likewise, we look to secure three core capabilities product leadership, market leadership, and people-centered leadership LG Electronics Vision. LGEs mission statement explains that its goal is to become a top innovative electronics company in the world. It takes pride in its company and mployees and believes that this is what will make it into one of the most innovative companies of the 21st century. Marketing Management Philosophy LGEs operates low the product thought of merchandising management. From 52 Plasma Flat Panel televisions to thin, sleek mobile phones that also store and play music, LGE is a company that is devoted to fast innovation and fast growth (LG Electronics Vision). It has focused on developing new products in winning and key businesses, and securing technology leadership. It provides high quality and constantly updated products to further contain its success as a top electronics manufacturer. Its research and development efforts are specifically concentrated in the area of technological capabilities and developing new growth products (LG Electronics Technology Strategy). As a worldwide corporation, LGE strives to make its customers happy through its innovative digital products and services and in doing so operate under the product concept Chapter 2 LGs Global StrategySince its inception in 1958, LG expands its global operations through the historical patterns of growth in the form of (1)import substitution, (2)export to advanced nations, (3)production in advanced nations, (4)production in developing nations, (5)global production and market ing (Lee, 2000 Sue et al. , 2004). In its very first few years LG received loans and technology assistance from Germany and Japan. It produced electronic products that reached the maturity stage, took the role of providing inexpensive import substitute products to Korean domestic market.In this way, LG laid the ground work for the further growth. In 1970s LG was benefited from Korean political sympathiess export drive and built the major export centers in Gumi and Changwon area of Korea and established massive scale of export production system. By the late 1970s LG engaged in vigorous expansion strategy of the oversea marketparticularly targeting USA and Western European markets. However, in the 1980s the maturation protectionist move in USA and Western European countries stifled its export volumes. In response to these market hanges LG targeted these advanced markets by building colouring TV manufacturing plant at Huntsville, USA in 1981, established another TV and VCR factory a t Bromes, Germany in 1986 and microwave oven factory in Great Britain in 1988. Starting from 1988, with the wages increases in Korea, LG secured color TV and refrigerator manufacturing facilities in Thailand and Indonesia and started mend policies. From the middle of 1990s LG expanded its manufacturing facilities in Eastern Europe and South American regions in keeping up with the growing market opportunities in Eastern European and South American counties.At the same time arrest LG actively positioned itself for global competitive system structure. From 1993 LG implemented strategic initiatives for the emergent markets in China, CIS and India. In 1995 LG changed its existing Gold Star brand to LG brand and ground on sports marketing, it expanded to FPD TV/ Monitor market. As of 2009, LG Electronics have four business units that include Digital appliance, Digital display, digital media, Mobile communications. Its global operations has the total 114 overseas business units includ ing many manufacturing units, marketing units, research and development centers and logistics and service units.In Europe and China LG maintains regional business headquarters. However, 70% of manufacturing units are in Asia including China and India. 70% of marketing units are in North America and Europe. Based on 7 marketing organizations that cover the whole world LG engages in global strategic management. Its major products are TV, VCR, refrigerators, air conditioners, home appliances, display such as CPT/CDT, monitor, LCD/PDP TV, multi-media products such as CD-ROM drive and PC, information communication products such as handsets and IMT-2000.Particularly, afterward the middle of 2000s LG rapidly moving toward the position of one of the global top three. Within three years after announcing its goals to become a producer of high premium products with its own unique global brands, LG successfully penetrated North America and European markets. LG is also marketing the emerging ma rkets in South America, China and India with high premium product strategy. Thus, LG Electronics dare to battle in global premium markets because of its blue ocean technologies and differentiated design capabilitiesGlobal strategy of LG Electronics as a leading Korean company Economic recovery in advanced countries including Japan is still sluggish, although corporate fiscal mental process has been recovering gradually. And companies whose business activities in emerging countries experiencing an economic boom account for a larger proportion tend to show better financial performance. draw a bead on Korean companies have a larger presence in the world market and reap considerable attention. I will focus on LG Electronics, Inc. A leading company ranking with Samsung Electronics Co. Ltd. in the worlds electrical and electronics industries, with the largest market appropriate in home appliances markets in important emerging countries, such as India, Brazil, and Indonesia, and relat ively advanced management methods including corporate governance, which are highly valued, and will discuss features or important points of its global management and personnel strategy . Leading Korean zaibatsuThe LG group The Korean zaibatsu (chaebol), a unique large companies group, is very influential in Koreas corporate sector.Top 28 companies by market capitalization other than public corporations account for 58 percent in the aggregate market value (Korea Composite Stock Price Index KOSPI) at the end of 2009 and most of those companies belong to zaibatsu company groups. Striking features of the zaibatsu are as follows 1. Many zaibatu started as a family company. 2. Zaibatsu leaders and their relatives and affiliated companies are major shareholders. 3. serving holding relationships are complicated. 4. Zaibatsu companies are engaged in businesses in diversified business areas. hows changes of companies groups and the LG group has occupied a higher position, although some grou ps failed or are downgraded due to the Asian currency and financial crisis in 1997 and 1998. Also its LGs leader is in the third generation ahead of other major zaibatsu and he introduced a holding company system, aiming at clarifying the structure of owning and controlling group companies. Total assets of the LG group with 53 affiliated companies reach 78. 9 trillion won, the fourth largest in Koreas private sector and combined market capitalization of the groups leading our companies (LG Corp. , (a holding company), LG Electronics, LG Display, and LG Chem. ) accounted for most seven percent of the aggregate market value at the end. LG Corp. , a groups core company, controls three large segments, that is, electronics, chemicals, and telecommunications and services. Among these, LG Electronics plays a central role in the electronics segment. However, the group expects LG Chemistry to play a heightened role in its battery business, one of the most important and shiny business area s.Features of LG groups management policies are as flows 1. Relatives including the zaibatsu leader, large shareholders, carried out corporate management in collaboration 2. Its extent of diversification of business lines is relatively limited and electronics and chemicals businesses have expectant mainly. 3. The groups management has abided by its management policies of considering man beings first and the group was the first zaibatsu to start recruiting employees publicly. Thus it has actively wrestled with the appointment and training of promising staff to be professional conductors. . The group is said to have fewer relationships with politicians and less reliance on them. As a result, it managed to grow its businesses and concentrate management resources by its own policies and strategies. In Korea, many companies face difficulties in dealing with unions and labor strikes. However, both employers and employees agreed on a pay increase for 20 years in a row without any offensi ve negotiations in LG Electronics. The situation is different from Samsung Electronics which does not have a labor union.The February 26, 2005 issue of the Toyo Keizai describes corporate culture of the leading zaibatsu as Samsungs management, Hyundais guts, and LGs harmony and solidarity. 2 LGE ranked fourth in its industry in Global vitamin D LGE has five segments Home Entertainment (TVs and audio products), Mobile Communications (cellular phones and handsets), Home Appliance (home appliances), Air Conditioning, and Business Solutions (monitors, commercial displays for hotels, equipment for automobiles, and security solutions).LGE has expanded into approximately 80 countries and the number of employees exceeds 80 thousand. Its consolidated financial results (FY 2009) and position in the industry are as follows ? Sales 73. 0 trillion won (a 15. 3 percent increase year over year) ? Operating profit 4. 2 trillion won (a 3. 6 percent increase y-o-y), operating profit margin 5. 8 per cent ?Net profit 2. 8 trillion won (a 145. 0 percent increase y-o-y) ? Total assets 44. 8 trillion won (equity capital 17. 2 trillion won) ?LGE was ranked fourth in its industry in 2009 Fortune Global 500 in terms of sales volume, behind first-place Siemens, second-place Samsung Electronics, and Hitachi and ahead of Panasonic and Toshiba, which were ranked fifth and sixth, respectively. ?LGEs TVs or cellular phones market share and respective position in terms of sales volume in 2009 in the world. LGE had the second largest market share in terms of TV sales (the same 12. 4 percent share as SONY. Samsung Electronics had the largest share of 23. 3 percent. ) and the third largest share in cellular phones sales(10. percent. It was behind Nokia (38. 3 percent) and Samsung (20. 1 percent)). The company is one of the companies with the largest market share with respect to refrigerators, air conditioners, washing machines, microwaves in the world and is the leading home appliance supplier in growth markets including India, Brazil, and Indonesia. Its overseas sales account for 88 percent in its overall sales and is at a higher level in comparison to competing Japanese manufacturers (SONY 74 percent, Panasonic47 percent, and Sharp48 percent).This is largely because Koreas domestic market is not large enough for the company to expand its businesses. Chapter 3 Strategic features of its global management are as follows 1. Selection of growth markets rear endd on long -range plans 2. lively and bold decisions to expand into new markets and concentration of management resources 3 3. Decisions by local offices on development, locally designed products, building a sales network and internationalization of headquarters 4.Effective sales promotions with emphasis on its brand name I would like to examine those points by citing concrete examples and touch upon its expansion into India, a typical success case in an important market. Expansion into India with can-do attitudes Its main markets targeted for growth have been those of emerging countries with large potential for growth and fewer strong rivals. LGE expanded into India with the second largest population in the world and a younger age structure and longer population bonus design in 1997 (establishment of LG Electronics India, LGEs fully owned subsidiary).Although many of its rival companies including Japanese companies exported their products from home countries to India at that time, LGE started producing products at its factories ahead of the rivals and acquired a competitive advantage. LGE placed a antecedency on strategic advantages of taking the lead and determined it without hesitation, disdain insufficient infrastructure with respect to operations of the factories, product distribution, or representatives daily lives.The company has marketed a series of products, fully taking into accounts consumers tastes and regional needs or features, including TVs which work in an bad voltage situati on, various kinds of colorful and flowery and lockable refrigerators with large crispers for vegetarians and cool cases for womens cosmetics, TVs with on-screen display options in ten regional languages, washing machines with a sari (a national female costume) cycle, and microwave ovens with cooking menus including 77 kinds of Indian dishes.Its products attract customers attention. Also it markets low-end products, while marketing high-end products at the same time in order to increase brand images, in relation to its brand strategy. Furthermore, it has made efforts to establish sales and service offices, building a network of offices across India. Expatriates dispatched from Korea (around 30 people) are mainly involved in the strategic matters or so ,and it has apply many talented local employees who knew markets and consumers since its start of local production.The company has actively made use of such local human resources with respect to sales of products and customer service, or development and design of products. The organization has been operated by local staff over a long time and heads of personnel and sales and marketing divisions are Indians. The company has introduced an evaluation system on a performance basis which is understood and acceptable by local employees and welfare program including welfare facilities arduous to motivate such employees.On the other hand, there are some points to be noted with respect to representatives dispatched from Korea. First of all, the head of the local subsidiary has held the position since the founding of the subsidiary over a long time and made efforts to enable the companys business to take root and expand from a longer point of view. Secondly, many Korean representatives are accompanied by their families and it appears easier for them to commit to their work, unlike Japanese representatives, many of whom are employees working away from their families in Japan.Furthermore, when it comes to marketing method s on raising companys awareness or corporate image, LGE places more emphasis on concentration and efficiency effects in each market than Samsung Electronics which seems to address the methods worldwide. As a result, it becomes a sponsor for cricket events which is very popular in India, as sports marketing rooted in the region. Additionally, LGE has two factories (It will start another new factory shortly. ) and one R & D center in India.Although the companys total investment amounts to approximately 13 billion rupees, it plans to spend 15 billion rupees to expand its production as a production and export base in accordance with its worldwide strategy, not just for sales in India. Sales in its Indian business stood at 130. 9 billion rupees in 2009, accounting for approximately six percent in LGEs total sales. It plans to increase the percentage to 12 percent in 2015, which will exceed the proportion of Korea.Making use of local human resources and inner internationalizationon a HQ b asis I would like to pay attention to features of LGEs personnel strategy. First of all, making use of foreign human resources (local human resources and those without Korean nationality). The company tries to cut the number of representatives dispatched from Korea in various overseas offices considerably and employs many local staff members and promotes some of them to a higher position. Furthermore, capable officers and employees without Korean nationality are recruited in its headquarters positively.Seven out of 13 executive officers, the highest level of officers, who are in charge of clobber business operations including marketing, procurement, supply 5 chain, HRM and strategy, do not have Korean nationality. This shows that its personnel system has been internationalized to a large extent. It is often said that how foreigners can show their abilities is closely connected with internationalization of headquarters (internationalization at home) and therefore it is important and necessary. It appears that the companys method is advanced on this point.That is, the Company employ many translators in order to support Korean employees who were not good at preparing English documents, when it made English its common language in the company. This was a measure to help the system to take root. Also the company says that employees average TOEIC score is said to be over 900 (excluding R & D staff who is involve to have technical expertise, rather than language expertise), although high TOEIC scores of new employees of the company are often talked virtually. The average score including such R & D staff is between 800 and 850. ) It is said that there is a rule inside the company that there is no need to reply if an e-mail message in Korean is sent to an overseas office from its headquarters. It is reported that Rakuten and FAST RETAILING will make English the common language and I consider it important for those companies to create a mechanism to pay close attenti on to or support employees in order to help the system to take root and social function efficiently, like LGE does.LGE and other leading companies including Samsung Electronics and Hyundai Motor have taken similar measures, including targeting emerging markets with large growth potential and fewer strong rivals ahead of them and concentrating management resources on its business there, launching products timely, taking into accounts consumers tastes and regional needs or features, valuing a brand image, and making good use of foreign human resources, despite differences about where to place emphasis on or which method to take.Especially features or strength of Korean companies lies in their can-do attitudes of cultivating a new market ahead of others, despite adverse conditions of insufficient infrastructure. On the other hand, companies utilize and maintain their strength, when responding to changes in their business environment properly. It is impossible to continue success by u sing the same business model and method. On this point, skillful responses of such Korean companies, which are sandwiched between companies of advanced countries including Japan and those of China, may not function properly and they may face a difficult situation in the future.Actually LGEs operating profit plunged in the second quarter of FY 2010 due to intensified disputation in the worlds smartphone industry. I consider it necessary to watch responses of LGE and Samsung Electronics, while Japanese major companies start making more efforts to cultivate emerging markets. Also the corporate culture of Samsungs management and LGs harmony and solidarity and any changes in their culture in the future, Chapter4 Initial Business Operation in India LG India is established in 1997 as a 100% subsidiary of LG. It currently positions as the global No. market share firm in the areas of color TV, microwave oven, automatic washer, airconditioner . LG India operates new manufacturing facilities in Noida, New Delhi and Pune in the region of Mumbai. LG aligned with an Indian company and supply 70% of its total component parts. Particularly, the second factory in the Pune region around Mumbai produces GSM mobile phones, TV, refrigerators, air conditioners and washers. With its increasing production capabilities LG now expands its target market areas to Southwest Region beyond the current North East Region market.Noida factory at the Indias northern area of New Delhi produces TV, refrigerator, air conditioners and microwave oven. Besides, LG operates software R & D Center in Bangalore from 1998 to utilize excellent pools of research resources. LGs strategic vision is to make India with 1. 1 billion people as the second global production base and achieve 10 billion . LG also plans to produce 20 million mobile phones by 2010 through utilizing production base in Pune . LG occupies 1 market position in home appliances including color TV, refrigerator, washer, air-conditioner, micr owave oven, DVD players.LG also ranks 3 in PC, monitor and mobile phones. In 2005 LGs PC market share was fifth but customer preference rank was 1. Indian customers consecrate and preference of LG products are quite absolute. Within seven years after LG India started its operation the total sales of household electronic goods reached up to one billion dollars. The 2005 sales figure was 1. 8 billion ($) and its employees are 2,800. As of 2008, its employees are 3,000. The number of its branches is 125. All the dealerships are 18,200 and service centers are 1,100. In this way, LG established sales and service network throughout India.By 2010 LG will increase sales by 6 billion ($) and the amount of additional investment is 150 million ($). Presidential Leadership of LG India Mr. Kim started LG India . His career advancement details include operation manager of electronic division of Changwon LG, Korea (19941996). Since then, his mostly oversea work experiences include Chicago, USA ( 19811984), Germany (1996), Dubai (19771980), Central America (e. g. , Panama 19881994). In November 1996 he agreed to work for LG India, and after one month of preparation and training he arrived in January 9th, 1997.He assumed the position of the president of LG India in 1997 and since then he made it grow to be No 1 global firm of home appliances market. In recognition of his outstanding performance in LG India he was promoted to the senior executive president of atomic number 34 Asia Division in 2005. In January 2008 he concluded his work at LG after completing his work as the president of LG India. Since 1997 the annual growth rate of LG 9 India was 25-30%, which is the result of continuous innovative thinking for localization, brand building with new product ideas and ever changing marketing strategy including sports marketing.Some of his leadership elements are summarized as below (Kim, 2009). (1) Openness and Transparent Management Mr. Kim asserts importance of openness in l ocalization. This openness is based on watching of local workers and beliefs on them. Without rank(a) management, however, this openness is not attained. Mr. Kim really tried to make management transparent in localization of LG. For example, he had corporate meeting with more than 150 mangers at 900 A. M. of every 2nd Saturday of each month. Here, all the cost information, profit and loss statements are disclosed to all the participating managers.In this way all the mangers understand the overall operational status. Outsiders are allowed to visit and observe the factory operations. Mr. Kim says, Positive thinking enhances the meaning of this life. If you have such positive view of work and India, then you will experience quite different results compared to those who gaze India as a place of endless sufferings. Positive thinking, optimistic perspective and open management are quite important. Such mindset also relates to the motivation of employees in India. (2) Emphasis on Em in dex numbermentFor localization, beliefs in local workers have connection to empowerment. Mr. Kim always puts this credo into practice. For example, he says, The great power is in entrusting others. Many Korean executives ask, Are Indian managers trustworthy? Mr. Kim always replies, Yes, I trust them. To the extent I trust them, they display their loyalty. Ordinary people trust others no more than 50%. However, we expect others to trust ourselves 100%. 99% of people want that. Empowerment transforms people. If you cannot trust others, then dont demand their loyalty, either.Although you may experience undesirable results later, it is better to trust people first. For example, at nine oclock there is no Korean manager and yet many Indians work here and there. Indian managers work on their own initiatives. Compared to India LG, Mr. Kim comments on a factory of LG China, At nighttime many Korean mangers stay in the factory and supervise Chinese workers. This is not effective. If so, th ey do not regard it as their own company. They only regard it as Korean company and instead keep resentful feelings inside. 10 (3) Systematic Discipline of ManagementMr. Kim implemented empowerment and at the same time strengthened organizational disciplines. Mr. Kim used the term, discipline. Noida factory director said, Mr. Kim never cancels any meeting that he chairs. He hardly misses work because of sickness. Empowerment requires systematic face of work structures. Mr. Kim closes the book twice a month. At that time, CFO of LG Korea even did not understand the rationale of such practice. With empowerment based on trust Mr. Kim successfully implemented systematic management structures.As the result, LG India mangers took every 15th of each month same as the last day of the month for performance evaluations of each functional units. (4) Innovation based on localization of R&D and customer-focused strategy For the success of localization, Mr. Kim emphasizes continuous innovatio n based on localization of R&D and customer-focused strategy. Through localization of R&D, products which fit local customers come into existence. This credo relates to customer-focused strategy, as localization of R&D is necessary for satisfaction of local customer.For example, the total number of R & D personnel of LG India is 150, which is the largest among MNCs. India LG has the large number of R & D personnel comparing with ration of total employees. Mr. Kim comments, Localization is about independence from the Korea Head Offices. This must include R & Ds independence as well. (5) Market and Field-Based Leadership Mr. Kim visited almost all parts of India on foot. In the course of building nation-wide marketing network he visited all the important places of India. LG India has 46 marketing centers and 70 other remote area offices are in operation as well. 6) Rapid Decision Making Mr. Kims speed of decision making is very fast. The style of his decision making is, clear, candi dton and precise. He rarely says, Let me think over and talk about this later. Chapter 5 Localization Strategy in India This section summarizes localization strategy and a few success factors of LG India (Park, 11 2009). LG Korea points three factors for LG Indias superior performance outcomes. First, production of high premium quality of products, Second, localization insurance efforts, Third, strong distribution network for vast rural areas.Among these three, localization policy initiatives are the most critical of all. LG India employs unique marketing practices with right products that fit to Indian market requirements (SERI, 2007b). In 1997 LG India deployed 70 product lines all together and started establishing LG brand power in Indian market. For new product development LG India became successful to plant the brand awareness among Indians that LG products reflect Indian tastes with Korean technologies. For example, Indian traditional costumes are quite thin and therefore quit e sensitive for slight pressures.LG India developed washers that do not use circulating wing in the center and accordingly they were a huge market success (SERI, 2007a). Initially, LG India produced products in the form of OEM through strategic alliances with Indian local suppliers (Park, 2009). However, with slow productivity progress in Indian suppliers, LG senior production manger started working together with Indian workers in the factory floor. He ate with them and discovered the practical problem areas. In this way, there was drastic change in work attitude and habits among Indian workers and accordingly noticeable productivity improvement became a reality.Since more than ten different languages are spoken among workers, LG India devised a system through which workers may choose production instructions in their own languages. The primary reason why Japanese electronics firms were unable to capture Indian market was their failure in local accommodations. Because of unstable ele ctric supply in India, accidents occur in relation to uneven flows of electricity. LG India investigated the causes of this accident and subsequently developed condenser that is capable enough to function under unstable electrical flows.In this way, component parts were newly developed according to the local conditions. LG India boldly transferred almost all of decision making powers (up to 99%) to local experts who would devise effective marketing campaigns to handle changing customer requirements in India. LG India also introduced drum washer and dish washer product lines that have direct drive functionality. At the first year LG India sold 4,000 units of dish washers whose components are imported from Korea and then assembled in India. The retail price range was 40,000 to 80,000 rupees. Drum washer is produced in LG-owned factory nearby of Pune area.LG emphasizes the functional advantages of its washers in terms of substantial reduction in 12 washing time and water usage. LG Indi a also extends the period of free warranty of its new products from two years to seven years. Even in mobile phone development, LG India considered the local conditions. For example, in view of high racket level, the bell sound of the Indian phones is much louder than that of other advanced countries (Chosun, 2008. 9. 25). Even now, no more than twenty Korean managers work in LG India while the number of Indian employees is 3,000.For the good community relations LG India built public health center nearby of its manufacturing facility at Noida. It also employs doctors, pharmacists and nurses to serve the people in the community at no cost to the people. At the 2nd factory location of Pune area LG India is also in the process of building public health center. LG is not merely making money. Rather, it is establishing the favorable corporate image to the people in that it creates employment opportunities for the people and contributes to the overall wellbeing of the community.LG India also takes much effort in sports marketing. LG India sponsored cricket National Championship for more than ten years and accordingly enhanced LG brand awareness Samsung engages in sports marketing in global scale while LG employs sports marketing in national or regional level. For example, Samsung implements brand promotion through its sponsorship of Chelsea Soccer Team for targeting the entire Europe. LG, on the other hand, focuses its sports marketing for particular nations. From 1999 LG has invested heavily on Cricket World Cup which South Africa, India and Thailand hosted respectively.LG is proud of sponsoring local and regional popular sports such as Cricket World Cup and promotes its products through direct and relational marketing strategy. This is quite different from Samsungs global sports marketing based on its abundant financial resources (Park and Park, 2007). Since the most favorite sport of Indians is Cricket, LG also embedded Cricket game functions in its TVs sold in India as well. Another reason why LG India was so successful in India was its upper middle class strategy. LG India targeted upper 5% of Indians through high premium product strategy. These people have purchasing power for LG products.Besides, such brand image also allows other customers that join the upper middle classes prefer LG brands for the status symbol effect. Lastly, for localization strategy of LG India cobweb distribution and service strategy are important factors . LG India from its early pioneering years poured much of its resources to develop distribution and services networks which include 18 branches in major regions, 1,800 logistic centers and 85 service centers throughout the nation. While other firms 13 paid little attention to after services, LG India allocated almost half of its human resources for the after-services.LG India also choose saleswomen system that utilized Indias vast pool of women workforce. LG India was the first that implemented the system of s aleswomen in India. These saleswomen certainly contributed to the sales increase of electrical household goods. destruction The international economic crisis of 2008-2011 was changing both general environment and the LG Electronics growth. The consequence was a fall of the financial results Table 1. LG Electronics in 2011 a crisis of the profitability (in % of total) balance 1= Net income Revenue -0. % Ratio 2= Net income Total assets -1. 5% Ratio 3= Net income Total equity -3. 8% antecedent LG Electronics. But with around 91,000 employees en 2011, LGE remained the worlds second largest television manufacture and the fifth largest mobile phone maker. In spite of the world economic crisis, LG Electronics aims to make the company one global top 3 in terms of shareholder return, profitability, growth, sales and market share. In this way, the LG Group adopted, in 2007, three specific values and, consecutively, six strategiesTable 2. LG Electronics strategy task Vision Global Top 3 in Electronics & IT Industries Three values 1/ Creating customer values through innovations and differential designs2/ maximizing shareholder values3/ Building an organization worth benchmarking Six strategies 1/ Focusing on boosting ROIC51 instead of simple growth2/ Optimizing the portfolio3/ Counter measuring the market bipolarization4/ Technology innovation and design differentiation5/ Strengthening brand investments6/ Reinforcing global competencies Indeed, the LG Group remains a strong economic actor.It controls very profitable subsidiaries. It is the case concerning LG Chem, LG display and, above all, LG Corp. , the LG Groups holding Table 3. The profitability of the most important LG Groups companies in 2011 (in %) LG Chem. 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