LG Hones Global Strategy to Meet Local Needs
By Cho Jin-seo
Staff Reporter
Even the most powerful global brands recognize the need for local thinking. McDonald's sells McCurry pizza in Delhi instead of the meaty Big Mac burgers. Starbucks serves Red Bean Frapuccino in Asian countries, which was motivated by red bean sherbet, a traditional dessert in Korea.
The idea of ``localized global'' management has been clear at LG Group for more than a decade. Since the group took LG as its new name instead of the hereditary Gold Star brand 12 years ago, the group has set the goal of making it a global brand that caters to the demands of locals as well _ a management philosophy referred to as ``The LG Way.''
The strategy of localization and differentiation has become even more important this year. While the LG brand is being shared by its affiliates ranging from electronics to chemicals and from mobile communications to plant construction, the group is encouraging them to have flexible and localized management policies when operating in different regions of the world.
For rich countries in Europe and North America, LG wants to be recognized as a premium brand by introducing fancy, high-tech products. In emerging countries such as China, India, Russia and Brazil, the priority is to build a complete business circle of R& D, manufacturing, sales and service.
In Middle East and Africa, the group is audaciously increasing investment to preoccupy the untouched markets of electronics, chemicals and natural resource development. Lastly, the Southeast Asian region is now considered as one of its main markets, not a mere manufacturing complex with cheap labor.
The most notable success has been seen in Europe by LG Electronics. At major international airports, the group's flagship company had greatly raised its brand value with the successive hits of its sleek mobile phones, the Chocolate, the Shine and Prada Phone. Other high-end electronic products such as side-by-side refrigerators and flat-panel TV sets also helped the firm win the heart of meticulous consumers of France, Britain, and Germany.
Reflecting the celebratory mood with its Europe business, the company sent its cutting-edge LCD and plasma TVs to the sunny Mediterranean beaches of Cannes to sponsor the 60th Cannes Film Festival last month. ``In Europe, we will focus on LCD TVs larger than 32 inches and plasma TVs over 42 inches, especially the high-definition class,'' a company official said.
The company also set up advertisement billboards at entrances to major international airports such as London's Heathrow and Berlin's Tegel airports. With such effervescent marketing activities, the company looks to sell more than 400 million flat-panel TV sets in Europe this year.
North America is another strategic point for LG Electronics' premium goods. The company's third-generation mobile phone sales reached 2 million units in April. In January, LG showed off the world's first Blu-ray/HD-DVD compatible player at the Consumer Electronics Show in Las Vegas, and received the Grand Prize from the event organizers.
LG Chem is also aggressively expanding into America. The leading chemical company has a global workforce of 10,000 employees. The company is operating an acrylic solid surface factory in the United States in 2005 to sell more high-value items. It also plans to export rechargeable batteries and petrochemical products.
Localization is a more crucial issue in the BRICs countries for LG. LG Electronics has become one of most popular electronics brands in Russia, Brazil, where it also runs sizable factories for the former Soviet and Latin America regions, respectively. In Brazil especially, sales grew from $800 million in 2004 to $1.3 billion in 2005 to $1.8 billion in 2006. LG Chem's Russia sales also have posted an average of 70-percent growth since it established a subsidiary in 2004.
In India, LG is the firm leader in the TV, refrigerator, washing machine, microwave and CDMA-type cell phone markets. With the completion of manufacturing complex in Pune, near Mumbai, where it produces GSM-type cell phones, TVs, air conditioners and washing machines, the company is to expand its leadership from north to the southwest region of the country.
The main strategy for the China market for LG Chem is to strengthen capacity expansion and maintain market dominance. The company plans to secure a competitive edge for the PVC product by building a plant that would supply feedstock to the product. Moreover, the company has plans to more than double the current ABS production by the end of 2008. The company also launched a holding company in Beijing in 2005.
In the Middle East, LG International Corp. is winning a series of lucrative orders for plant construction in Oman and Yemen. The company already produces 1,100 barrels of crude oil and 700 barrels of natural gas every day from wells in Oman and another 6.4 million tons of natural gas in Qatar.