Global strategy of LG Electronics as a leading Korean company Tomikazu Hiraga
Senior research Fellow
NLI Research Institute
Economic recovery in advanced countries including Japan is still sluggish, although corporate financial performance 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. Leading Korean companies have a larger presence in the world market and attract considerable attention. I will focus on LG Electronics, Inc., a leading company ranking with Samsung Electronics Co., Ltd. in the world’s electrical and electronics industries, with the largest market share in home appliances markets in important emerging countries, such as India, Brazil, and Indonesia, and relatively advanced management methods including corporate governance, which are highly valued, and will discuss features or important points of its global management and personnel strategy in this article. (Reference: Exchange rates as of August 5, 2010 were as follows. The Japanese yen/Korean won foreign exchange rate was approximately ¥0.074 to the Korean won. The Japanese yen/Indian rupee rate was approximately ¥1.87 to the Indian rupee. ) Leading Korean zaibatsu—The LG group
The Korean zaibatsu (chaebol), a unique large companies group, is very influential in Korea’s 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. Share holding relationships are complicated.
4. Zaibatsu companies are engaged in businesses in diversified business areas. Table 1 shows changes of companies groups and the LG group has occupied a higher position, although some groups failed or are downgraded due to the Asian currency and financial crisis in 1997 and 1998. Also its LG’s leader is in the third generation ahead of 1
LGE ranked fourth in its industry in Global 500
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 percent
・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. ・LGE’s 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(10.5 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,...
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