Ateneo de Zamboanga University

Graduate School
School of Management and Accountancy
MASTER IN BUSINESS ADMINISTRATION (MBA)

Case Study
LG Electronics: Global Strategy in Emerging Markets
In Partial Fulfillment
Of the Requirements for
Strategic Management
BA 583

Submitted to:
Professor Francis H. Arroyo
Submitted by:
Arlene A. Miguel
Eunice T. Tan
August 27, 2016
LG ELECTRONICS: GLOBAL STRATEGY IN EMERGING MARKETS
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I.

CASE SUMMARY
By 2007 Korea had become synonymous with high quality innovative consumer

electronic products. It was this year when LG showcased the worlds first dual-system DVD
player compatible with Blue Ray and HD-DVD standard. The market value of LG electronics
grew at a compounded growth rate of 22% from $200 million in mid-1980s, $1 billion by
mid-1990s and almost $11 billion by 2005.
In 1947, LG was born as the Lak Hui Chemical Industry. The company was founded by
Mr. In-Hwoi Koo. The evolution of LG Groups business started from manufacturer of
cosmetic creams, then manufactures injection moulding machines for products based in
plastics, also production of plastic components for telecommunications business and moving
into oil refining, shipping to transport crude oil.
In 1958, Goldstar Co. which is now the LG Electronics established to consolidate
expansion of the companys fast growing area of plastics. It pioneered the growth of the
Korean electronics and appliances industry. LG had a meteoric growth starting in 1970s, in
this period it also move into financial services as an insurance company and a securities
trading firm.
Moving on in 1980s was the period of dedicated internationalization. LG started intensive
exports to developing countries. LG electronics suite for consumers product from home
appliances to mobile phones is instrumental to the launching of LG brand worldwide. It is the
forefront of groups globalization effort with approximately 47% of revenues. Though LG
strategy was effective in the countries it already succeeded the market in India, Brazil,
Russia, and China, however competitive landscape started to be stiffer. Also, LG still

considering the population growth in other emerging markets and less-developed countries,
especially large areas such as Africa and the Middle East along with Latin America. Mr. Nam
Woo, President of LG Electronics is presently in charge to oversee the entire spectrum of LG
operations and helping the company on its recent challenges.
II.

PROBLEM STATEMENT

How will LG Electronics be the global market leader as a consumer electronics and appliance
manufacturer?

III.

OBJECTIVES
1. To be the global market leader in consumer electronics and appliance industry.
2. To maintain its fast innovation with latest technology on products.

IV.

AREAS OF CONSIDERATION

Domestic Market (Korean Electronics Industry)

The Korean market was highly competitive

The Korean Government placed strong emphasis on R&D making Korean

companies to exploit technological innovations while reducing costs

LG built on its experience of working with governments, which it then displayed

most effectively in Brazil

Universities were encouraged to build elite groups of experts in science and
technology

The Korean Government encouraged foreign direct investment which saw LG

partner with Hitachi of Japan

Strategies in BRIC markets

Both countries combining a taking brands from local to global strategy by turning

local engineering excellence into innovation on a global scale

Utilization of government-offered incentives and government policies
Sports sponsorships and organization of events
Signing of agreements with local distribution chains to gain quick access to the

market
Localization of product and services served as cornerstones of LGs strategies

Challenges faced by LG

V.

The emerging economies, where it had worked hard to establish itself,

competition is increasing rapidly from new entrants and existing players

LG needs to address its position in the developed economies

ANALYSIS OF THE CASE (SWOT)

Strengths

Location-specific advantage
Focus on process innovation, Investments in R & D
Ability to visualize markets in the long term
Anticipatory globalization
Market leader in many of the emerging markets

Weaknesses

Difficulties in establishing a foothold in developed-country markets

Low brand awareness in emerging markets

Opportunities

Growth in developed markets

Geographical diversity
To enter Africa, Middle East and Latin America markets.

Threats

VI.

Import tariffs
Volatility of exchange rates
Significant competitions, dominating local players and new entrants
Market risks such as heritage, government policies and economic environment

ALTERNATIVE COURSES OF ACTION

1. Maintain position in existing emerging markets and aggressively exploit the

same markets such as the large areas of Africa, Middle East and Latin America
using the strategies used in BRIC.
Pros:

Able to create specification based on the needs of the local markets

Able to produce cheap products and still have the same quality of international

ones
Able to support talented local employees by training them on global standards
Be cost-efficient in manufacturing of the products thru savings in materials,

labor, and others.

Population growth is quite promising

Cons:

Foreign rivals will continue to dominate in the developed-country markets

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Other hometown rivals will plunge ahead into developed markets

2. Maintain position in existing emerging markets and penetrate developed

markets such as Japan, U.S. and Europe using the BRIC strategy.
Pros:

LG won as many as 14 awards for excellence in design and creativity

therefore more innovative products may be offered which will shift the

interest of consumers to LG
Able to support talented local employees by training them on global standards
Able to create specification based on the needs of the local markets

Cons:

Difficulty in penetrating developed markets due to existence of other strong

brands
Some of the BRIC strategies might not work well in developed markets

3. Maintain position in existing emerging markets and conquer developed markets

such as Japan, U.S. and Europe using other strategies since the latter markets
have different environment than the other. This may be any or all of the
following:
Having famous artists and influencers endorse the products
Use China as a source for operating a business to supply products
Exploit social media for advertising
Concentrate on marketing and sales activities by establishing retail stores
in known factory outlets
Pros:

Cost reduction thru import and export savings

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LG won as many as 14 awards for excellence in design and creativity

therefore more innovative products may be offered which will shift the

interest of consumers to LG
LG has the ability to visualize markets in the long term therefore it can think
of more creative ways to compete with the other brands and not be limited to
the BRIC approach.

Cons:

Difficulty in penetrating developed markets due to existence of other strong

brands
New strategies might not work since it is would still be on trial
Further market study and understanding might be needed

4. Maintain position in existing emerging markets, exploit other emerging markets

using the BRIC strategies and conquer one developed market (U.S.) first for trial
using other strategies. This may be any or all of the following:
Having famous artists and influencers endorse the products
Use China as a source for operating a business to supply products
Exploit social media for advertising
Concentrate on marketing and sales activities by establishing retail stores
in known factory outlets

Pros:

Cost reduction thru import and export savings

More innovative products may be offered which will shift the interest of

consumers to LG
The BRIC approach was already tested therefore applying this method to the
emerging markets will most likely succeed

Trying to conquer only 1 developed market can save money than having many
at the same time

Cons:

VII.

Difficulty in penetrating developed markets due to existence of other strong

brands
New strategies might not work since it would still be on trial and the cost that

may be incurred during trial may be too high

Further market study and understanding might be needed

RECOMMENDATION
We choose ACA No. 4 because the environment and circumstances of developedmarket countries may vary from that of the emerging markets where the BRIC
approach worked. Market risks are not as volatile as that of the emerging markets,
meaning the possibility of economic crisis and fluctuation of exchange rates are not
too high. Other strategies may be done as trial in one market first so that the costs and
failure will be in smaller scale than in trying to conquer many at the same time.
Finding the right formula as what LG did in the BRIC would be advantageous in
conquering the developed markets. In conquering the new developed markets, highend products and strong brand presence are needed unlike in emerging markets where
cheaper products are most preferred. To compete with other electronic giants, the
products would need excellent and creative designs since the consumers in the
developed markets have diverse lifestyle and higher cost of living. LGE should focus
on both markets using different methods just like what the other competitors do.
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VIII. PLAN OF ACTION

Time
2 weeks
1 week
1 month
1 week
2 days
6 mons to 1 year
after

Action plan
Collate information regarding potential market (developed)
Plan which developed market will be conquered
Define the strategies that are suitable for the decided developed
market
Discuss the needed resources for the strategies
Appoint leaders to set out the strategies for the developed markets
and emerging markets
Leaders will set out the plans
Monitor the results of the strategies for both markets