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LG Electronics: Strategic Alliances and Human Resource Management

Name

December 7, 2016

B6512: Global Business

Argosy University

LG Electronics has taken over a large part of the global companies in the electronics industry. It is composed of five divisions, air conditioning, business solutions, home appliances, home entertainment and mobile communication. The South Korean company has such a unique culture and economic structure. As a worldwide subsidiary, it employs 82,000 people worldwide. As a company, it has expanded from its small household origins into one of the largest companies in South Korea. Through it’s history and human resource structure, LGE has also established many strategic alliances with global partners to continue expanding the popular company.

As one of the largest companies in South Korea, LG Electronics was founded in 1947, toward the end of the Korean War. The company was originally named, Lucky Goldstar and it’s products consisted of toothpaste, face cream, soap and other personal products (Watkins, 2002). By 1959, Lucky Goldstar produced Korea’s first radio, followed by the first refrigerator in 1965, and Korea’s first TV by 1966. As Korea began to take part in the global markets, the expansion of it exports connected LG to a many countries. By 1995, the company made a strategic decision to abandon the Lucky Goldstar name and adopted the new current name, LG. “The company decided in about 1995 to abandon the Lucky Goldstar name which it feared was too much identified with cheapness and Korea and adopted LG, which was felt to be less identifiable as Korean. The change in identification was thought to assist the company in entering the higher scale market” (Watkins, 2002). On the company website, LG identifies with the motto “Life’s Good,” and focusing on the new logo. “Global, Tomorrow, Energy, Humanity and Technology are the pillars that this corporation is founded on; with the capital letters L and G positioned inside a circle to center our ideals above all else, humanity. The symbol mark stands for our resolve to establish a lasting relationship with, and to achieve the highest satisfaction for our customers” (LG, 2016). Their philosophy is based on humanity and its efforts to keep close relationships with customers around the world. As LG embarked in the home entertainment sector, it acquired America’s last television manufacturing company, Zenith, in 1995. These changes in brand identity and expansion have allowed LG to advance into the digital era with expertise in manufacturing home appliances.

In Korea, many companies have started off as chaebols. The word “chaebol translates to ‘money faction’ or ‘wealth clan’, but a chaebols is more than a company. In South Korean culture, chaebols are dynasties. The chaebols are responsible for such an extreme portion of the South Korean economy that their chairmen are celebrities” (Mu-hyun, 2015). Family members, typically run these conglomerates with key roles distributed within the chairman’s family. In South Korea, there have been many chaebols that have dominated the economy, including LG, Samsung and Daewoo. “At its peak in 1999 and prior to increased government regulation, the cross-ownership of subsidiaries within chaebols was at 43 percent, according to the Fair Trade Commission [Korean]. Loans between unrelated companies within a chaebol were also guaranteed—done to protect ownership and maintain control of the ruling family” (Mu-hyun, 2015). A chaebol is compromised of many companies with strong internal transactions controlled by a singular chairman. South Korea flourished from the fast economic contribution of the chaebols. “Lacking a traditional entertainment industry, the chairmen and founders of the chaebols became celebrities and heroes for a still-developing country” (My-hyun 2015). However, during the financial crisis in 1997, the chaebols were blamed for over expanding into “unrelated businesses without proper rationale, and their cross-subsidizing structure that prevented them from ending unprofitable business” (Mu-hyun, 2015).

The chaebols allowed the economy of South Korea to improve after the devastating effects of the Korean War. The increase in production and manufacturing in the variety of products developed by chaebols allows consumers to continue trusting these companies. With the variety of products developed, chaebols have allowed companies to diversify. LG Electronics began with radio sets, refrigerators, and televisions, later expanded into larger appliances, and mobile communications. Running a company with various products continues the success of the company with expanded presence. “The chaebols still enjoy the support of many people, who believe they led South Korea out of another crisis” (Mu-hyun, 2015). However, chaebols have the downside of being run exclusively by family members, often with various roles, which may affect how business is run. “Globalization has been a huge factor in South Korea’s growth and economic success. Modern South Korea is a leader in many industries, from technology and automobiles to music and entertainment” (Dixon, 2011). With broad expansion abroad, their products are imported at a fast pace. However, in the domestic market, international competition is not welcome, for it may hurt the domestic businesses.

LG Electronics has expanded globally with locations in various continents. “The company tries to cut the number of representatives dispatched from Korea in various overseas offices considerably and employs many local staff members and promotes some of them to a higher position. Furthermore, capable officers and employees without Korean nationality are recruited in its headquarters positively” (Hiraga, 2010). According to the company website, LG Electronics plays an active role in world markets with its assertive global business policy. “As a result, LG Electronics controls 119 local subsidiaries worldwide, with roughly 83,000 executives and employees” (LG, 2016). Being able to connect and ally with strategic companies allows LG Electronics to successfully expand and profit from the diversification. This diversification also includes alliances with companies that can also benefit from the expansions.

In 2009, LG Electronics and Microsoft Corporation allied in the development of mobile technology. “As part of the agreement, LG will make Windows its primary operating system for its smartphones and will increase both the number of Windows® phones in its portfolio and the total volume of Windows® phones it distributes” (Microsoft, 2009). Both companies would work together to develop and create new phones with strong features able to compete with leading Apple and Samsung competitor products. The plan developed “also details joint marketing efforts to expand the reach of these phones at a range of prices in markets across the globe” (Microsoft, 2016). However, a few years later in 2014, LG Electronics also partnered with Google with a 10 year patent deal. “This latest deal is a significant win for LG, not just in terms of strengthening ties with the company behind its mobile OS, but also as a sign of strength in the ever-present market battle with its Korean compatriot” (Reilly, 2014). This move was following the move that Samsung made earlier in the year with Google. Now both companies use the Android operating system in their phones, which is a positive win for Google, since a large number of devices use this system in comparison to the Apple IOS. The rivalry between Samsung and LG has allowed both companies to continue expanding the Korean economy. “Both Seoul-based, the two companies have been in competition for nearly 50 years, and they're somewhat obsessed with one another. We've all read the stories about the skullduggery between them: secrets have allegedly been stolen, accusations have been made, court cases have dragged on” (Rivington, 2013). Both companies recognize the competition and rivalry, but typically both companies tend to do the same type of product launches to keep consumers interested in both brands.

Through the long and interesting history of LG Electronics, it has demonstrated that adopting and changing to the trends and needs of consumers has allowed it to continue on the long successful path. From its humble beginnings as a personal product manufacturer, its foundation as a chaebol and development of various electronics, LG Electronics has allowed the economy of South Korea to flourish.

References:

Dixon, J. (2011). Korea's embrace of globalization. Retrieved from http://www.koreatimes.co.kr/www/news/biz/2013/05/348_91475.html

Hiraga, T. (2010). Global strategy of LG Electronics as a leading Korean company. Retrieved from NLI Research Institute : http://www.nli-research.co.jp/company/insurance/1009lg_electronics_eng.pdf

LG. (2016). Our Brand. Retrieved from http://www.lg.com/global/about-lg/our brand

Mu-hyun, C. (2015). ​The chaebols: The rise of South Korea's mighty conglomerates. Retrieved from https://www.cnet.com/news/the-chaebols-the-rise of-south-koreas-mighty-conglomerates/

Microsoft. (2009). LG Electronics Deepens Alliance With Microsoft by Selecting Windows as Primary Smartphone Platform. Retrieved from https://news.microsoft.com/2009/02/16/lg-electronics-deepens-alliance-with microsoft-by-selecting-windows-as-primary-smartphone platform/#sm.001tq6nktfkpeep101121gi6qju9v

Reilly, C. (2014). LG partners with Google in 10-year patent deal. Retrieved from https://www.cnet.com/news/lg-partners-with-google-in-10-year-patent-deal/

Rivington, J. (2013). LG vs Samsung: The story behind the biggest rivalry in tech. Retrieved from http://www.techradar.com/news/television/tv/lg-vs-samsung the-story-behind-the-biggest-rivalry-in-tech-1145280

Watkins, T. (2002). The Chaebol of South Korea. Retrieved from San Jose State University: http://www.sjsu.edu/faculty/watkins/chaebol.htm