Posted at 10.31.2018
LG Electronics is a global gadgets company headquartered in Yeouido, Seoul, South Korea. LG Electronics is the world's second greatest manufacturer of Tv's and third-largest maker of mobile phone. It's the lead company of LG Group, a multinational firm that excels at producing and offering electric products. LG was founded in 1947 as Lucky Chemical substance Industrial Company (LCIC) and proven an electronic company called GoldStar in 1958. GoldStar experienced high progress and profit with the aid of the lively support from the Korean administration. However, GoldStar's sales size was influenced by the crisis in the early 1980s but was soon in a position to overcome the crisis by getting sales size exceeding 1. 29 trillion. After experiencing this, GoldStar evolved its effective business strategies and centered on product diversification and strengthened national sales in Korea. Also, the company started to focus on diversifying export structure in international sales. However, in the late 1980s, the Korean federal government lowered tax barriers which allowed international competition to get into the Korean market. This harmed the sales of GoldStar and other relevant home companies. The business could challenge overseas competition by restructuring the organization structure and implementing a decentralized structure for a fresh management style. From the first 1990s, GoldStar centered on 'creating value for customers' which emphasized the company's founding process to shoot for maximum client satisfaction. This strategy was successful and the company's export exceeded US$ 2. 56 billion in 1993.
As a whole, LGE's long term strategy is to "maximize cash flow through sustained growth of cash cow business. " Since all parts have differentiated international strategies, this newspaper will concentrate specifically on the Mobile Marketing communications sector with regard to deeper research.
The LG Consumer electronics Mobile Communication Company is a global leader and innovator in mobile electronics, providing customers with unique encounters and stylish designs using its smart devices and handsets. The mobile marketing communications department of LG Consumer electronics sold 116. 7 million cell phones in 2010 2010, holding a market share of 8. 4%. Presently it includes 20 new smart cell phones and aims to become one of the leading manufactories in this sector by 2012.
The Mobile Marketing communications Division is accountable for the sales of CDMA and GSM (Global System for Mobile Marketing communications-2G cellular phone system) handsets. LGE launched its CDMA handset procedures in 1996 and its own GMA businesses in 2002. Also, the company is rapidly building a global existence in the 3G handsets. LGE come to global sales of US$ 9. 9 billion and was rated fourth after Nokia, Motorola, and Samsung in '09 2009.
Annual Sales Growth Comparison
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Global Construction and Coordination
Overseas sales are extremely important for the business and accounts for 88 percent of its overall sales. This is much higher than the rate for its competing manufacturers (Sony: 74 percent, Panasonic: 47 percent) because the home market is not large enough. Therefore, employing appropriate global strategy is essential for the procedure of LGE. For the global strategy of the mobile communication section, LGE implemented the Blue Ocean Management to outrun its competitors. The Blue Ocean strategy is to concentrate on high end products and enter into new locations or emerging market segments like China, India, Middle East, and Africa to build an uncontested industry. The primary strategy is to increase efficiency of management by developing a blue sea area which does not have competition to produce more profit. With strong technology control in this industry, LGE is competing on the market of new products in the smart devices with technologically advanced functions such as multi-core processors, 3D, bright and clear shows, and 4G LTE (Long Term Development). Through such inventions, LGE aims to enhance the client value and satisfaction and design the continuing future of the global cellular phone industry.
When a business such as LGE works internationally, it is important not only to pass on value activities across various countries, but also find productive ways of linking those value activities jointly. The issue of where and just how many places in the world to disperse various activities relates to configuration. The problem of coordination handles integrating those activities. The next will describe the various areas of global construction and coordination, and exactly how LGE specifically in the mobile phone and tablet division, is accomplishing in these areas.
Configuration contains the problem of international cost dissimilarities, which means is that difference in wage rates, and employee productivity may differ between different countries. Many companies will attempt to find employees in countries with large labor causes because often they can pay them less. LGE Mobile Marketing communications Company has an extremely impressive global network. The business has more than 80, 000 employees, employed in over 115 different operations throughout the world. By May 2011, the common salary for a managerial job in LGE Mobile Communications is USD $67, 000. Because of international cost differences however, average wages can vary with regards to the industry, and location. An LGE managerial position may have less salary, if situated in a less developed country than the United States for example.
A business environment also affects your choice of where and how to locate global activities. Presently, the main element point that professionals are concerned with, is the fact their chosen business environment must be knowledge-intensive, and technologically enabled. LGE has subsidiaries in several parts of the entire world including the United states, UK, Germany Japan, and France. All of these countries are some of the most innovative on the globe. Each has leading-edge systems, significant organizational and functional capacities, and excellent institutional performances. It is clear that LGE wishes to operate in the most effective countries.
Conducting business globally can result in high deal costs. This is actually the issue of logistics, which says that companies should reduce exchange expenditures by effectively configuring the location of value activities. For instance, it can be costly for LGE to find necessary materials for the mobile phones, and tablet devices in one country, dispatch them to another country for creation, and then send it to a 3rd country for distribution. Currently, LGE has many production subsidiaries in China, but products must be delivered overseas to North America where many distribution centers are. If LGE can reduce the expenses that come with these transactions, they will have a competitive edge.
Another key feature of settings is the digitization of products and services. Digitization is very the conversion of analog information into digital information. We have seen that products like software and music have grown to be digitized. LGE smart telephones and tablet devices certainly carry this characteristic. For example, The LG Optimus 3D mobile phone holders multi-tasking and multimedia at an extremely fast pace. In addition, it lets users promote 3D content with other suitable devices. The LG Optimus Pad is the new tablet that offers users an immersive multimedia system environment. LG's tablet operates on a 1 GHz NVIDIA Tegra 2 dual central processor chip for superior performance. The tablet also comes equipped with a 3D camera, so users can take 3D images4. Based on these advanced products by LG, its obvious that the company is digitizing information, and so that it is easy and enjoyable for consumers to utilize.
When there is a decrease in the machine cost of development associated with a rise in total outcome, this is known as economies of range. In 2007, according to Dr. Ravi Kalavakunta, the LG KU250, that was a new phone released throughout that year, was likely to provide economies of size in developing, logistics, and marketing. This must indicate, output increased in the regions of making, logistics, and marketing while also reducing the unit costs of development.
Meeting customer needs in various countries can be considered a challenging job, but it is important for LGE to keep all international customers satisfied. LGE needs to be ready to take care of things such as after-sales service, customer claims, and warranties. If a customer has an issue with either their mobile or tablet device, there are places on the state LGE website, where customers can track warranties, ask about repair services, and talk with representatives.
Value activities can be configured across various areas of the globe, but these activities should be coordinated so they could stay connected, and work towards the same ultimate goal. Coordination, the role of integrating value activities, also has several key features.
International companies may face functional obstacles in communication, such as IT infrastructure. In 2005, LGE began a five-year task to put into practice an Oracle ERP system globally. If the ERP system is completely employed, the business desires to see major improvements in various areas. These advancements include lowering reporting and research times, improved efficiency, reduced maintenance costs, and having complete awareness into global inventory and sales and marketing costs. Through this new venture source of information planning system, LGE can have better control over its global functions. It is important, that different perceptions be realized, so that each hyperlink in a value chain can meet an accurate timetable. As mentioned preceding, in 2005 LGE was facing a problem with its ERP system. Many different systems were being used internationally and this made it difficult to incorporate data, and determine the precision of information7. Plainly, there was a difficulty in keeping all items of the value chain on the same timetable. Devoid of accurate and current information from all global functions can make differences in perceptions of timetables even more burdensome. However, the new ERP system being internationally implemented should proficiently connect units; minimizing the problem of not having exact information.
Currently, LGE is likely to expand cellular phone creation in India, that may include smart devices. India produced almost 31 million mobile phones in 2007, at a value of about US$5 billion, regarding to a written report by Gartner Inc. India is a country, that is rolling out an skills in the production of mobile phones, and it is a good idea for LGE to increase creation there. Since India appears to be before other countries in conditions of development, LGE would be smart to learn their methods, and transfer them to other countries where they may have production. This is essential when describing the learning curve, another key feature in coordination.
The new ERP system stated earlier, will certainly make the copy of knowledge easier. When information from global subsidiary sites come in later, and at different times, it can cause decision-making problems for LGE. It is very important for knowledge to be up-to-date and transferred exactly when needed, so right decisions are created. With global subsidiaries keeping yourself better connected, coordination among the worthiness chain will be achieved.
LGE is planning on expanding production in India. While this is a good idea it could also be sensible of LGE to learn from the Indian production processes and copy them to other places where production functions are located. For example, LGE has development facilities, in THE UNITED STATES, specifically in Mexico, but there currently only two. That is an incredibly few set alongside the number of production facilities positioned in Asia. LGE, should copy creation knowledge to North America. Since, there a wide range of cellular phone and tablet users in THE UNITED STATES, it would lower LGE bills, such as transport costs, if it might not only sell, but also produce in THE UNITED STATES.
Globalization vs. Localization-Case Study of LGE's Transnational Strategy
Transnational strategy is a strategy selected by a company that has a business that has ruthless for both global integration and local responsiveness. LGE Mobile Communication Department (MCD) employs the transnational technique to contend in the mobile communication market that needs to be global and customized at exactly the same time. The next section focuses on several conditions of LGE's localization strategy in a few countries and draws a summary to the normal practices.
Localization is an enterprise strategy that considers weather, economic environment, and cultural difference of the target market and displays them on panning out business activities. Putting it concretely, it can be an adjusting process between the creation and the foreign language, culture and mentality of individuals surviving in the targeted region. This idea includes not only localization of monetary resources but also adaption of management style to the marketplace. Through this technique, the firm can react actively to the changes and movements of the target and can perform harmonious progress of the firm and the society
The primary of LGE MCD's strategy in China is comprehensive localization. In October, 1993, LGE started full-scale local management system, creating a manufacture organization in Heju, China. Now, they build ' locally self-sufficient management framework' with local make company and Research Corporation by constant investment like groundwork of positioning company in China. They set up Beijing R&D middle in 2002 for the development of Chinese next era product that suits for the specific needs of Chinese. Also, they perform personalized marketing positively which concentrates on the development of localization product by the look institute under Chinese holding company
In the Traditional western Hemisphere, LG Brand is recognized as a premium brand. LGE's Brazil branch was prized 'Best Corporation of the entire year 2004' by info Exame and also elected NO. 1 company in electronic marketing communications of the entire year by Gazeta Mercantil. Especially 'JD Power's Article about mobile phone- US most authoritative consumer satisfaction investigation-selected LGE's cellular phone as a top ranker in the US.
This successful outcome in this region can be explained by the success of locally self-sufficient management. This feels like the performances in china. LGE pursued thorough locally self-sufficient management in the region. Every process in the Traditional western Hemisphere of LGE - establishment of production base, supply string, sales, marketing, A/S - was done autonomously in your community and it was effective and effective.
However, performance of LGE fell less than its goals in west Europe including
Germany. It is because LGE didn't understand the purchasing propensity of natives which
is quite traditional to select product brands. Needless to say, the considerable influences of local company are another reason of LGEs poor performance. This example can be a favorable chance for LGE which has high solutions, but low brand recognition is the top obstacles.
Responding to this condition, LGE demonstrates the national characters of Germany which put focus on frugality, diligence, and credits to products and services. Instead of showing extravagant images and packages, LGE appealed functions and superiorities of its products and customers responded favorably. First of all, predicated on the trend which accents the life span value, LGE marketed its brand slogan, 'Life's Good' to natives actively. Consequently, LGE documented more than 10% increase of its brand recognition in 2008.
Moreover, LGE made an effort to develop environment friendly products, focusing on German natives who are very sensitive to environment problems. The major product of LGE cellular phone, Chocolate phone the first cellular phone of Korea, which satisfied RoHS standards therefore, it achieved recognition as the 100% environmental friendly product. By reaching RoHS certification, the worthiness as a premium brand LGE was imprinted on German natives too.
Entering Russian marketplaces was different from entering the matured markets of Europe, initially, LGE determined the feature of Russian consumers. Because of this, the Skillet Russia strategy premiered. This strategy was established for constructing steady sales and reflecting its distinctions and diversities to products and services of LGE through strong Brand Take strategies in locals. The success of the strategy depended on making natives love LGE brand, before making them buy products and services. To do this, LGE launched several cultural activities such as LG happening, Pass up LG contests and, employed outstanding workforces in local, supporting them to analyze in LGTCM or Software lab in Shangtesburg, in order to make LGE brand image more Russian-friendly.
The Midsection East area countries have quite different culture and religion from other areas. Therefore, it is important to represent the needs of local customers because of its particularity. Product managers who sent in the Middle East area manage specific products, cooperating with the marketing team of head office. The major work of localized LGE MCD is a Mecca cellphone. Mecca can be an Islamic holy place, and every Muslims should worship 5 times every day, facing the Mecca. At this moment, the direction of Mecca changes along the place where they are simply. Considering this point, LGE posted the mobile phone which can show the route of Mecca.
Components of International Strategy
The a key point of LGE MCD's transnational strategy is the chasing the locally self-sufficient management through detailed localization in a globalized market. The locally completed management is that processes which include constructing creation infra, obtaining components, advertising, marketing, and service are operated autonomously in local. But, this locally completed management also shows different aspects in its degree and functions by situations and conditions of the spot.
When thinking of the international strategies of LGE, the the different parts of International strategy are distinctive competence, scope of operations, source management, and synergy. Distinctive competence can be defined as a exceptional competitiveness that cannot be easily imitated by opponents. LG Electronics also has some distinctive competence as a worldwide firm. At first, its remarkable R&D system is one of the distinctive competences of LG Gadgets. To react to different needs in various countries, LG Electronics launched around 30 laboratories for R&D. Through these global R&D systems, LG Consumer electronics can develop brand new technologies and reinforce its primary competence management. Because of this, LG Consumer electronics developed the world's first multifunctional cellular phone which can acquire mobile broadcasting. Technology of digital screen device also the field LG Electronics customized in. Especially, the advanced technology of LG display device contributes development of cell phones and tablet PCs.
LG Electronics also has its global competence in product design. Because LG Electronics realized the value of its original design early, it established LG Design Management Centre, enhancing its product design. Because of this, in the International Discussion board on Design (iF prize) organised at Hanover, 7 LG Consumer electronics mobile phones won awards. Which means that design of LG cellular phone is highly assessed globally, it is therefore not overestimating that LG design management is its distinctive competence.
When analyzing opportunity of businesses of LG Gadgets, we can recognize that LG Electronics inserted many worldwide countries already. China, America, Russia, India, and Germany are the primary countries where LG Gadgets entered. Inside the mobile phone market of China, LG retains high market talk about, taking second or third place. And, because of the NAFTA which gave more chance to trade freely, taking away a tariff wall structure, LG Electronics placed America and Canada as a proper location. The cellular phone market of Russia keeps growing rapidly every year, Russia is also quite attractive market for LG Electronics.
Analyzing the PPP (Purchasing Electric power Parity), India is raked 4th globally. It means that the market of India has extensive potentials. Most of all, the Reliance Infocomm, the major Indian telecommunication company will keep increasing its services. Because of increased purchasing power of middle class in India, the size of cellular phone market is also increasing. For these reasons, the mobile phone market of India can be approximated highly. Therefore, LG Electronics tried to increase its market talk about in India. Finally, Germany is the country LG Electronics entered, which includes also considerable economic potential. Germany shows the greatest trade, in comparison to operate amount of other countries in Europe. CeBit, the biggest exhibition of computer and communication technology, is also placed in Hanover, Germany. Considering, German natives' appreciable attention toward the CeBit, LG Electronics which includes advanced technology has quite many chances to increase its mobile phone and tablet Laptop or computer market share.
LG Electronics concentrated its tool on the marketplaces of China, America and Germany. LG Electronics, obviously, moved into Africa and the Middle East. Nearly all countries in Africa and in the centre East have large human population. But, except Iran and Turkey, almost all of nations show low purchasing power. Because of this reason, LG Consumer electronics put its extra resources in Germany and India. In India, LG Consumer electronics founded facilities and R&D team consisted of more than 200 peoples. To improve its brand consciousness and secure distribution channel, more than 120 dealerships were founded in India. Especially, as written above, LG Electronics shows several online marketing strategy like developing environment friendly products, doing activities marketing in Germany, due to its largest cellular phone market in European countries.
Organization Composition of LG Electronics-Vertical Structure
Also, LG Gadgets has specialized in digital display. Thanks to the advanced technology of digital display, this year LG Electronics shows its will to maintain with Samsung in the area of digital LED tv set. Standing on the basis of this superior LED Television set, LG Electronics retains publishing advanced DMB cell phones and tablet Laptop or computer. Moreover, using FPR technology that differs from technology of Samsung and other companies, LG Gadgets shows high performance in 3D Television market globally. Thanks to its 3D TV technology, LG Consumer electronics printed the world's first 3D mobile phone, Optimus 3D, last month. These results show synergy impact in LG technology.
LGE's basic global organizational framework has been a vertically decentralized model. Because the 1980s, LGE adopted a decentralized management structure to beat the strong competition it faced in the domestic market. LGE's sales and revenue depend heavily on the efficiency of the business's procurement performance since it signifies 80 percent of the company's revenue. Ever since the company followed a decentralized structure, business and operation has been centered on the individual sections in each overseas subsidiaries rather than the company as a whole. This strategy has had its merit during the past few years to raise the company's global market talk about due to flexible changes and rapids replies to the environment at the subsidiary level. Decisions were made directly by those who had been involved somewhat than by the higher level professionals located at headquarter. This is an ideal proper management system for LGE to improve sales by motivating and recompensing each local branch matching to its performance. However, this also created structural problems since each abroad subsidiaries and each business unit had its strategy, process, and dealer for procurement. There is little cross-unit coordination which raised inefficiency of the business operation. Therefore, LGE made a decision to enhance its global procurement company in 2008 to centralize and globalize its procurement chain.
LGE is re-inventing the framework from highly decentralized to center-led organization in order to create a procurement management that can organize across the five different business units and eight regions. This new composition will be able to coordinate the value of LGE globally and preempt inefficient duplicate activities.
The illustration above depicts the change strategy that LGE has began since 2008 and the goal that it is designed to achieve by 2011-2012. Prior to the transformation, LGE is basically a business that is influenced by each business product with little coordination. However, the illustration shows the way the company changed into a center-led group by 2010 and its own future plan to further combine the framework into a global procurement firm. While these fast changes are ongoing on the structural level for the improvement of efficiency of LGE, the company must be cautious to be able to retain the great things about a decentralized structure in the body of a centralized one. The advantages of its previous decentralized structure are not negligible since it helped LGE achieve the global position and sales that it is enjoying today. Therefore, somewhat than abandoning the decentralized framework altogether, it is strongly recommended for LGE to look at a transnational strategy and incorporate the great things about centralized and decentralized strategies in several operating areas (e. g. centralize procurement framework while retaining a decentralized marketing and sales structure).
Organization Structure of LG Electronics-Horizontal Structure
LGE's internal horizontal composition is complex because of the grand scale of the company. LGE uses diverse specifications to separate the functions and allocate duties such as the product division structure, and the matrix framework.
This graph shows the essential horizontal group of LGE. Top of the four containers show the merchandise division composition of LGE (currently divided into five business divisions: MC, HA, BS, HE, AC). LGE's five business section are then split into sub-units concentrating on the precise products in each department. The set of the lower eight containers is the complex matrix composition of the company (from still left: Korea sales and marketing, Customer support, CPO, Human resources, CTO, European head office, North American headquarters, China head office). This matrix composition is a mix of the efficient and geographical department structures. The sections of customer service, human resources, CPO (Key Procurement Official), and CTO (Key Technology Official) represent the differentiated functions of LGE. It has the benefit of having a clear reporting system according to the relevant function but creates inefficiency in communication between the functions in each regional branch. This is why there is also the geographic department framework to allocate the jobs and resources clearly according to regional focus. Combining these two structures creates the unique matrix composition of LGE which seeks to take advantage of the advantages of each while preventing the side effects.
This corporation strategy is to maximize efficiency in assigning responsibility for special tasks but there's also dangers of misunderstandings and problem with such multiple reporting lines. Therefore, LGE should create a different level of sub-units below the panel of executives and above the existing sub-units: the one which is in charge of all the functional division and another that is only in charge of geographic division. This way, all matters associated with functions entirely can be reported to top of the level of efficient division unit and everything matters relating to geographical specifics can be reported to top of the level of geographic division unit. All the information can be merged and matched as the new sub-units article right to the LGE headquarter. Despite the fact that this can present more benefit the abroad branches, it will be able to decrease the remaining side effects and risks of the existing matrix structure and improve for the role of future global leadership.
Conclusion and Recommendations
Other than its success in offering electronic goods to consumers, LG in addition has been studying sociable trends and had taken notice of a few of the recent problems which has been rising. As LG places it, with great management comes great responsibility. Now days with the increasing craze of mobile phones and internet, kids start to communicate with these technology at a very early age. Together with the quick advancing technology which allows cell phone to really have the capability to record and send photographs and video, issues such as misuse of mobile phones and internet to send suggestive and explicit pictures has increased, especially among young adults. A study sponsored by LG in 2009 2009 has found that 22 percent of teens have obtained a nude picture while 12 percent of teens have sent or forwarded a nude picture, and 11 percent took a nude picture on the mobile phones. The company also discovered through its research that among teenagers, these behaviors are believed normal and for most, being the target of such text messages can even reveal a higher social status. Over time LG has been adding smart telephones and tablets in the hands of consumers than some other producer. LG has used on the responsibility of combating mobile phone misuse by building its highly praised teenager campaign in 2010 2010. The program was launched at the 2010 International GADGETS Show "LG Text message Education" which gives guidance and methods for the parents how to provide for their children's mobile use. This program tackles issues such as young sexting, handling children's mobile use, recognizing possibly harmful cellular phone patterns and other issues faced by parents and children. This is an initial of its kind program among mobile phone manufactures in america which is a very effective marketing tool to reach the parents of the kids cellphone users.
Another problem LG happens to be addressing is the very risky cellular phone tendencies, texting while traveling. At the Consumer Electronics Show, LG has installed a traveling simulator to set-up awareness concerning this risky behavior. Regarding to research done by National Highway Traffic Security Supervision, 6, 000 lives were said and 500, 000 studies of injuries were made based on distracted travelling, which actually is more than the quantity for dui. LG has created a "LG Don't Word & Drive" simulator that in a safe and controlled environment, allowed consumers to experience the risk and potential issues of texting while travelling. Users are made to drive a online highway indicate while receiving texts and are asked to respond with short text messages. In the end, an individual is evaluated on the difference of safe practices between travelling without texting compared to with texting. The simulator experience will provide a comparative evaluation between the two driving profiles of traveling with distractions and complete drivers control. Also for necessary on the road communication, LG create handsets that contain impressive design and features to permit consumers to drive safely on the road.
LGE is not only an effective company in terms to be a head in the mobile marketing communications industry; it is socially dependable in trying to resolve issues in current population. However, there is always room for improvement for the business's global strategy as mentioned in this paper. To increase the coordination and balance on local focus, LGE should think about locating strategic regions such as North America where its demand is high to further build production facilities. Furthermore, LGE should carefully keep up with the most appropriate combine between its global integration and local responsiveness with is transnational strategy since it is the most rewarding but also the most challenging technique to maintain. Restructuring the company's organization structure vertically on the global level and horizontally on the internal company level can be effective improvements for future years. When taking these suggestions into consideration, the company can maintain and improve its global strategy in the new competitive time in the mobile communication market. LG will keep on taking control in the mobile communication environment with new designs and progressive technology to help expand gratify its current and prospective customers.