This assignment focusses on LG’s Global Strategy looking into their operations in Brazil and India as well as researching minor parts of their efforts in Australia, China and the USA. LG (Lucky GoldStar) operates in the Consumer Electronics Industry on an international scale. The sources of information used for empirical evidence range from Academic journals and Interviews with LG Directors to information gathered from the LG press website and other academic online resources. To evaluate LG’s strategy one must access its worth, its usefulness and whether LG’s decisions and investments turned into tangible revenue.
To understand LG’s Global Strategy success one must understand LG’s background. LG started in 1947 as a cosmetics cream manufacturer. LG expanded in to many industries in later years, eventually LG operated in the consumer electronics market. LG has turned into a very successful multinational company now, in the past two decades LG Electronics’ market share had grown at 22% from £130 million in the 1980s to £65 million the 1990s and £7.1 billion by early 2005. LG owed much of its success to the South Korean Government’s incentive rich market it provided for the consumer electronics market. President Park Chung Hee of South Korea enacted the Economic Development Plan, which aimed to help the electronics industry by making it the national priority sector that would be developed. As a result, many western companies came to set up joint ventures, LG partnered with Philips, a European electronics company. LG-Philips became the largest manufacturer of flat screen TVs in world. By 2006, the group’s sales revenues massed up to $23 billion, making profits of $500 million. Of all of LG’s various revenue streams, LG Electronics provided 47% of the total revenue. LG knew they had to operate in the consumer electronics market internationally.
LG was encouraged to invest in localized research and development by the Government making extensive amounts of research infrastructure. This particular point is one of the most important methods by which LG implemented a successful Global Strategy. During the mid-1980s over 120 private research institutes and 18 research consortia were created. (W. R. Shin and A. Ho, 1997.) Having high quality research and development infrastructure allowed LG to create a series of products that were tailored to the needs of South Korea. LG learnt from this episode that research and development created a competitive advantage for its products, and this was something they had to do in every countries across the globe instead of selling a set of standardized products. During the 1990s LG started a International Strategy that aimed to capitalize on the emerging BRIC economies (Brazil, Russia, India and China).
LG started in Brazil by building a manufacturing plant in Manaus creating televisions and VCR’s to be sold around Brazil. The Government of Brazil offered low-tax rate incentives for businesses to build manufacturing plants in underdeveloped areas as well as subsidizing land for investors setting up operations. LG took full advantage of these incentives to establish themselves in Brazil. Brazil In the 1990’s had very high import tariffs, low brand recognition and had high competition in the grey goods market. In 1990, exchange rates plummeted making planning for businesses very difficult. Global players in Brazil decided to withdraw their operations or terminate them entirely. This provided a turning point for LG, they decided to expand their presence and create a strategy that would make Brazil a manufacturing hub for exports in South America and the USA. The fall in Brazils’s currency allowed LG to take on some low-cost advantages that make exporting very advantageous(Ramaswamy, K. 2007). LG was the largest exporter of electronic goods in South America. LG now tackled the areas of marketing and financial management to clamp down it presence in Brazil.
LG wasn’t well recognized in...