By Yoon Ja-young
A long-awaited turnaround for LG Electronics in mobile communications took place in the fourth quarter of last year. It posted an operating profit of 12 billion won after seven quarters of losses. Behind this is Vice Chairman and CEO Koo Bon-joon, who took control of the firm in the fall of 2010.
Once one of the two pillars of the country’s electronics industry with Samsung, LG suffered a 650 billion won operating loss in its handset businesses in 2010. At that time, it fell behind due to belated moves in the smartphone arena, while Samsung rose to become a world-class manufacturer, competing head to head with Apple.
There were both expectations and concerns about Koo from the group’s owner family. The CEO is the younger brother of group Chairman Koo Bon-moo but Bon-joon proved that management leading with a sense of ownership works in times of crisis.
His predecessors had put the company in jeopardy by making a series of ill-timed decisions.
The market was shifting to smartphones, but LG was enraptured in the then glory of its globally successful Prada feature phone.
Focusing on short-term achievements, its management chose to cut costs instead of invest with a long-term perspective. It took a lengthy recovery but now the Optimus, LG’s latest smartphone, has helped the firm get back in the game.
Koo has steered LG to profit.
He reorganized the business portfolio and made efforts for volume in lieu of value.
Back on track with a lineup of competitive smartphones, LG has set its handset sales target for this year at 80 million, albeit down 10 percent from last year’s sales.
In a tremendous reversal the CEO is opting for bold investments over immediate profits for better results in the long run.
Despite market concerns he decided on a capital increase of 980.4 billion won last year and poured 600 billion won into the handset business. He looked ahead and bet on fourth-generation (4G), Long Term Evolution (LTE) which has turned out well. LG Electronics is continuing its massive investments this year, planning to spend 4.2 trillion won.
It has also made achievements in other sectors. Its home entertainment division sold 8.8 million flat-screen TVs in the fourth quarter, a record high. The home appliance business division saw sales reach 3 trillion won.
The CEO has also tried to change the corporate culture, encouraging employees to pay attention to the fundamentals instead of performance. Meanwhile, he continues to inspire workers who were somewhat depressed due to the company’s poor performance in the market. He has had pizza delivered to them and given long vacations around the end of the year to refresh morale.
Despite some negative factors, management by chaebol families works in some ways. Koo proved this in a time of crisis.