LG

Trevor Newhook Competitiveness of Asian Economies – LG Electronics 4/11/11
1) What were the key strengths of the Korean electronics industry during the formative
years? How did firms leverage these advantages to enter developed country markets?
The Korean electronics industry initially focused on labor-intensive, low value-added products.
The benefit of this was a developed system of low-cost, streamlined processes that allowed
Korean companies to be competitive with larger companies. The position of OEM
manufacturers gave Korean companies a birds-eye view of the entire industry. They were able
to gain experience and knowledge of industry practices and trends, which allowed them to
learn from others successes and failures when they were ready to launch their own brands.
An example of this position is evident by looking at the differences between LG and its
competitors in the Indian market. Mr. Kim observed the differences in strategies and results
between LG and its American and Japanese competitors. In the American consumer electronics
market, LG quickly learned the importance of branding and product design, combining those
lessons to build a product with lower costs and higher profit margins. This gave LG the staying
power to finance an entry into a very competitive and expensive market.
2) Trace the strategic growth of LG electronics. Were there any distinct patterns in terms of
the company’s approach to emerging markets? Trace the commonalities across its
strategies in the BRIC countries.
LG’s electronics division was an extension of its electric parts division early in its history. It
started by acting as an OEM for other manufacturers, and then launched its own brands, which
failed in the competitive American market. After this, the company restructured its strategy,
focusing on R&D and design for emerging markets. There were 3 major factors that enabled LG
to build a strong position in the BRIC markets.
Firstly, LG did its research, and then made a strong commitment to a market. For example,
when LG went into Brazil, it did the opposite of what other companies did, and instead of
pulling out during and economic crisis, it decided to further invest in the country. This reaped
benefits when LG was able to profit from a favorable exchange rate.
An extension of the strong commitment strategy is LG’s product customization. For each of the
countries it has entered, it learns what consumers in that market want, which may be different
from consumers in other markets. In the late 1990s, LG released a ‘cricket television’, which
had several features specifically designed for the Indian market. This product addressed
problems and issues not found in other markets, such as inconsistent power sources and high
air pollution levels.
Although these emerging markets were very poor, LG still focused on releasing high-quality
products with low price tags, cutting costs on features rather than quality. The company was
willing to go to more rural areas, building its own network of distributors and service providers
that were able to reach people outside of the major urban areas.
Another major strategy that LG has used in building a presence in developing markets has been
its corporate responsibility initiatives. In India, it sponsored health care for its employees, and
in China, the company distributed masks, and donated equipment to hospitals. It has also
sponsored events in different countries, and capitalized on fulfilling stakeholders needs to build
its reputation.
The last major part of LG’s approach to emerging markets was the immense amount of trust
and autonomy that it gave local personnel. In India, the company was able to use local R&D
talent to design and build the custom products, like the ‘cricket TV’. The trust was repaid with
dedication and innovative thinking in sales, R&D, and distribution, ultimately leading to a
dominant position within this market.
3) What are critical points of learning that can be distilled from its success in emerging
markets? How may these advantages be leveraged to compete in developed countries?
Are the advantages transferable?
This study has three major points that must be considered. Firstly, it’s not always a good idea to
be cautious in a market. There are times when it’s necessary to make a huge initial investment
in order to show your commitment to stakeholders or to outflank the competition. Secondly, by
focusing the local market’s specific needs, a company can find ways to differentiate its products
in ways that local people would appreciate, building customer loyalty and discouraging
competition. Thirdly, trusting local personnel and giving them authority to make decisions both
builds customer loyalty and accesses a talent pool that is often underappreciated. An example
could be LGs ‘cricket TV’. In all likelihood, product design ideas came not from engineers in
Korea, but from local personnel, who knew the unique conditions that Indian households face.
These general ideas can all be leveraged and used in more developed countries. However, LG
was able to take situations that other companies didn’t want risk investing in, and make them
huge successes. In more developed countries, with more stable economies, the competition is
greater, and it is harder to find those niches that are ‘hidden in plain sight’. For example, LG
saw the love of cricket across the entire country of India, and was able to build a product to
meet that need. It is more difficult to find those needs in markets with so many companies
competing for business, although companies like Apple and Facebook have been able to do it.

LG

Uploaded by

Copyright:

Available Formats

LG

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

LG

Uploaded by

Copyright:

Available Formats

Trevor Newhook Competitiveness of Asian Economies – LG Electronics 4/11/11

You might also like