Lg Global Strategy Essay

This assignment focusses on LGs worldwide system looking into their operations in brazil nut and India as well as look intoing minor voices of their efforts in Australia, China and the regular army. LG (Lucky GoldStar) ope ranges in the Consumer Electronics Industry on an inter field of study scale. The sources of reading used for empirical evidence range from faculty member journals and Interviews with LG Directors to information gathered from the LG press website and different academic online resources. To evaluate LGs system wizard must access its worth, its usefulness and whether LGs decisions and investments moody into real r horizontalue.To understand LGs Global Strategy success unrivallight-emitting diode must understand LGs background. LG started in 1947 as a cosmetics puzzle out shaper. LG expanded in to numerous industries in later years, eventually LG operated in the consumer electronics grocery store. LG has turned into a very successful multinational com p any(prenominal) nowadays, in the past two decades LG Electronics market grapple had grown at 22% from 130 million in the 1980s to 65 million the mid-nine standstills and 7.1 billion by archeozoic 2005. LG owed much of its success to the South Korean G all overnments incentive generative market it provided for the consumer electronics market.President commons 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 authentic. As a result, many western companies came to set up joint ventures, LG pctnered with Philips, a European electronics confederation. LG-Philips became the largest manufacturer of flat strain TVs in world. By 2006, the groups gross revenue revenues massed up to $23 billion, making profits of $500 million. Of all of LGs various revenue streams, LG Electronics provided 47% of the total revenue. LG knew they had to operate in the consumer electronics market transnationally.LG was encouraged to invest in localized explore and emergence by the Government making extensive amounts of research radix. This particular point is atomic number 53 of the most heavy methods by which LG implemented a successful Global Strategy. During the mid-1980s over 120 private research institutes and 18 research consortia were gived. (W. R. shin bone and A. Ho, 1997.) Having exalted quality research and development infrastructure allowed LG to take a shit 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 prefer for its products, and this was something they had to do in every countries crosswise the globe instead of selling a set of standardized products. During the ni canies LG started a external Strategy that aimed to capitalize on the emerging BRIC economies ( brazil-nut tree, Russia, India and China).LG started in Brazil by building a manufa cturing plant in Manaus creating televisions and videocassette recorders to be sold around Brazil. The Government of Brazil offered low-tax income rate incentives for businesses to build manufacturing plants in underdeveloped areas as well as subsidizing primer coat for investors setting up operations. LG took salutary utility of these incentives to establish themselves in Brazil. Brazil In the 1990s had very high import tariffs, low chump wisdom and had high competition in the grey goods market.In 1990, flip-flop rates plummeted making planning for businesses very difficult. Global players in Brazil decided to withdraw their operations or terminate them entirely. This provided a number point for LG, they decided to expand their presence and create a strategy that would make Brazil a manufacturing hub for trades in South America and the USA. The mint in Brazilss currency allowed LG to take on some low-priced advantages that make exporting very advantageous(Ramaswamy, K. 2 007). 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 wasnt well recognized in Brazil so it required to build some backbreaking customer awareness. LG took advantage of the immense national popularity of football and started a stigmatizeing campaign with sports events sponsorship. The LG sponsored a high be national football team in Sao Paolo(Ramaswamy, K. 2007), this brought immediate brand recognition to its products. LG now needed to transfer its brand recognition into tangible revenue though customizing its products to suit the needs of Brazilians. LGs consumer electronics were a refreshing taste to Brazils market, LG gave most of its products a 3 year warranty pairing that with their promise of instant portion if a customers product failed or broke-down. It used repair swear out vans able to r apiece a customers location in short time period. This helped ensure customers would receive a high train of quality and reliability from LG, this proved to be a worth-while competitive advantage over other competitors.LGs efforts in Brazil certainly reflected a good example of a well implemented world-wide strategy. They took advantages of the Governments tax incentives, furthermore LG filled the void in the consumer electronics market that was created by previous companies leaving when times got tough and created a strong marketing campaign. The scoop measure of their strategys success in Brazil is that in 2006 LG posted sales of 1.2 billion, a 36% increase compared to the previous year. LGs well implemented strategy in Brazil clearly led to market domination and a high profit. This was a strong international strategy, and LG adopted similar tactics in India.LG started operating in India when the Indian Government created advantageous market reforms allowing foreign companies to establish their own solely owned subsidiaries in India. L G quickly took advantage of these reforms and created LGEIL (LGE India Ltd.) in 1997. LGEILs source factory was built in Greater Noida(40km from New Delhi), which manufactured laundry machines, televisions, air conditioners and refrigerators.Mr Kwang-Ro Kim, Managing Director at the time s attend, We knew it was important, for example, not to downgrade the Indian market and instead to treat it seriously as we would any developed market, he goes on to explain this meant preparing a preparing a full strategy and emphasizing good-quality products, the ruff technology, the best network and access to the best people(Kim, K. R. 2005.). LG created these specialized products with vast research and development infrastructure, just desire they had in South Korea.Local research and development teams were made to create product variations that were designed for the unique demands of Indias market. For example, they launched a cricket television set that had a built-in cricket game to take a dvantage of the millions of people who adored cricket in India. LGEILs Golden center field technology used in TVs allowed the brightness of the screen to be adjusted to the surrounding level of light., this proved to be an important feature because India is very prone to power supply imbalances that effect lighten intensity. furthermore, they designed an air filtration system to keep its air conditioners running(a) efficiently. This design was implemented because Indias metropolitan areas have high levels of particulate matter pollution. Its home appliance products were fitted with circuits able to handle the regular voltage fluctuations Indian households had. LG presented an Indianised face to its products but keeping the technology at global standards(Mathur, U. C. 2010). These variations in products brought a refreshing taste to the Indian home appliance market. wholeness problem LGEIL faced was the geographical diversity and Indias lack of infrastructure making distribution o f it products difficult. To reach minute towns and villages in India a cheering distribution system needed to be adopted, their tiered approach allowed an anchoring regional distributor to supply cities and then complimented this system with offices in far areas for the small towns. This system encompassed 4,000 access points to reach the masses to Indias giant population. A website called lgezbuy.com helped their distribution with online ordering as well as providing detailed information about(predicate) their products and comparative pricing for different areas of the country. This was the first attempt by a major electronic goods manufacture and proved successful by creating another competitive advantage for LG.Customer Service was an important part of LGEILs strategy, just as they did in Brazil, they provided repair vehicles for reaching remote areas in short periods of time. Vans were fitted with electrical generators to ensure appliances could be fixed even in a country wi th regular blackouts. This was unseen to the Indian mart from any other competitor and became very favorable for customers. This walking-after sales service allowed traveling crews to cover ares that were previously unaccessible(Lee, D. W. 2005). This gave LG a competitive advantage over its Indian market competitors much(prenominal) as Onida or Whirlpool.In term of marketing strategy, LGEIL decided to sponsor an Indian Cricket team. This proved such a success that LG decided to sponsor the Cricket World shape in 2002(LG. 2009). LG became the largest sponsor of cricket in the world and this gained instant brand recognition for them across India, a country full of millions of cricket fanatics.A strong marketing campaign reaching customers all over India LGs localized product range and services provided with the products paid off rich dividends. LGs turnover for 2002 crossed Rs. 3000 Crore, that is a 37% increase on the previous year(Mathur, U. C. 2010), thats 38million. LGEIL cle arly beat their competitors, for example in the color television market LG had a market share of 26.4% and their near competitor, Onida, only had 10.8%. In the refrigerator market LG had a market share of 30.9%, Whirlpool, their nearest competitor only had 23.6%(Sinha, P. R. 2005)1. This was the same story with all their other home appliances. Clearly LG was making considerable profit and stood out from their competitors by providing quality products and services. But LG knew they had to do more to establish a strong foothold in India.LG had to demonstrate to India that they were not purely profit operate they believed this would give LG a credible send for in India and gain the fealty from the Indian market. LG subsidized primary schools and gave educational books to children. They even built a village school close to manufacturing facilities. Local employees were staffed for most of the top managerial positions of LGEIL. This managerial tactic allowed a South Korean company to bulge as an Indian business. These resulted in huge good-will from Indian customers which was the final tie in a successfully implemented Strategy.In 2006 Mr Nam Woo, President of LG Electronics (LG), uncover LGs ambitious plans to grow its presence in China. LG had leant many lessons from its early missions in emerging markets such as Brazil and India that would help LG hinderance a dominate global player. We want to make China a strategic base for our business, so we must be a draw not only in sales, but also in research and development and in localization.(Liu Baijia, 2006). LG took advantage of Chinas cheap excavate costs and soon where able to leverage an entire manufacturing network to swear out countries such as Russia and the USA (Ramaswamy, K. 2007). This is evidence of LG looking elsewhere to export their products, this was an integral part to LGs Global Strategy.Not every part of LGs strategy was perfect though, many of their products were recalled, for example, in Australia 2009 some of LGs refrigerators broke down due to faulty wiring which resulted in reduced insulation from electricity passing through. It could cause minor electric shocks(Global Data, 2009). Furthermore LG had to recall its Spyder Cell Phones in the USAover 30,000 stall phones of this type were in use (Global Data, 2009). This adversely affected their brand name and shows lack for careful attention to product design which reflects a stinking global strategy, this showed similar results to their efforts in the USA.LG started to look towards providing its products in the West, most notably the USA, an already challenging market. LG started supplying US stores with its home appliances such as microwave ovens and toasters. The conquest for shelf space was extremely difficult because of LGs poor brand recognition as well as questions about LGs product reliability and quality. The USA was not the place for LG to expose its products. The products that the USA consumer electro nic market wanted were the more fashionable European and Japanese home appliance products. LG failed to create a series of products the USA market wanted in comparison to its competitors. This clearly shows a languid strategy in LG selling its products global.Overall, the international strategy LG implemented shows a pattern, in emerging economies such as Brazil and India, LG thrived, however in developed economies such as Australia and the USA, LG was unsuccessful. LGs successes derived from 3 key areas that created a useful and worth-while international strategy. Firstly, they invested heavily in research and development to create products that suited the needs of the local market. LG now has over 36 research and development activities worldwide (Global Data, 2009). Secondly, they pursued a marketing strategy that targeted each countrys whole population. In both Brazil, and India we see LG sponsoring sports events and teams which was a great way to create instant brand recognitio n across each country.Thirdly, LG treated emerging markets seriously by providing quality products complimented with high caliber services, this was a worth-while decision because countries like Brazil and India hadnt been able to this kind of service. The content researched is very interesting and insightful and poses the question, Can these trine factors be applied as a international strategy for any multinational company?. To fully evaluate LGs international one must further research there operations in Russia and China. Whilst LG showed signs of weaknesses, their international strategy gave their products and services a competitive advantage over their competitors making them market leaders in specific countries. LGs efforts created LG a net income of over $13.1 billion in 2011 due to their global presence and is ranked 47th in the Fortune 500 companies, these achievements derived from what was a successful International strategy.BibliographyW. R. Shin and A. Ho, 1997. Industr ial transformation Interactive decision-making process in creating a global industry. Public Administration every quarter. Summer.Kannan Ramaswamy, 2007. LG Electronics Global Strategy in rising Markets. Understanding Global Strategy.Kwang-Ro Kim, 2005. Premium Marketing to the Masses An interview with LG Electronics Managing Director. The McKinsey Quarterly Special Edition Fulfilling Indias PromiseC. Mathur, 2010. Global Business Strategies. LG Group. Pg 290Duk-Woo Lee, 2005. LG the No.1 company in India. LG News. february, Vol. 24LG, 2009. Asia and Pacific Sponsorship, the Cricket World Cup. LG Press Website. (URLhttp//www.lg.com/global/about-lg/corporate-information/global-sports-sponsorship/cricket-world-cup.jsp)P. R. Sinha. 2005 Premium marketing to the masses An interview with LG Electronics Indias Managing Director. McKinsey Quarterly.Liu Baijia, 2006. LG wants local managers to aid growth. China Daily. April 20, 2006Global Data, 2009. SWOT Analysis of LG.