Case Study Reference No. BOS0010A
This case was written by Pinal Shah under the direction of Joel Sarosh Thadamalla, IBSCDC. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. This case was compiled from published sources.
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LG Electronics: The Blue Ocean Strategy
“A company is not only top management, nor is it only middle management. A company is everyone from the top to the front lines. And it is only when all the members of an organization are aligned around a strategy and support it, for better or for worse that a company stands apart as a great and consistent executor. Overcoming the organizational hurdles to strategy execution is an important step toward that end. It removes the roadblocks that can put a halt to even the best of strategies1.”
LG Electronics, Inc. (LGE) was primarily known for its low-cost appliances had more than 72,000 employees working in about 77 subsidiaries and marketing units across the world. Youngdungpo-gu, South Korea based LGE was a technology innovator in electronics, information and communications businesses producing CDMA2 handsets, DVD3 players, optical storage devices, canister vacuum cleaners, air conditioners micro ovens and consumer electronics. LGE comprised four SBUs4: Mobile Communications, Digital Appliance, Digital Display and Digital Media with total revenue of more than US$ 35 billion (consolidated US$ 45 billion)5.
LGE embraced the philosophy of “Great Company, Great People,” and pursued two growth strategies which involved “fast innovation” and “fast growth” to secure global competitiveness. The company sought to secure three core capabilities – product leadership, market leadership, and people-centered leadership. (Exhibit I) Since 1993, LGE had been undertaking ‘Super A’6 pioneering activities, to strengthen its competitiveness and create profitability. In 2003, LGE repositioned itself as a leading global consumer electronics brand.7 The company also practiced TL 20058, a technological management strategy to build and sustain prominence in the global marketplace.9
In addition, to achieve an ideal management base, LGE was carrying out the Six Sigma Campaign. In January 2006, the company launched “Blue Ocean10 Management” campaign11 to be one among the top 3 EIT12 firms in the world by 2010.13
Further, LGE planned to double its sales volume, profit and shareholder benefit with 30% of its sales volume and 50% of its profit derived from blue ocean products.14
1W Chan Kim, Renee Mauborgne, “Blue Ocean Strategy,” Harvard Business Press, 2005, Page 171 2Code Division Multiple Access
3Digital Video Device
4Strategic Business Units
5Overview, http://www.lge.com/about/corporate/company_overview.jsp 6Super A- It was the activities performed in order to achieve profitability and competences. 7“LG Electronics lights up time squre”, http://www.ogilvypr.com/case-studies/lg-electronics.cfm 8 TL (Technology Leadership) 2005 - R&D efforts to achieve global technology leadership in selected business areas and technologies - is the technology management strategy adopted by LGE to position itself as a Global Market Leader 9“Innovation”, http://www.lge.com/about/corporate/corporateculture_innovation.jsp 10Blue ocean strategy is about...