LG Essay ⋆ Business Essay Examples ⋆ EssayEmpire

LG is a leading family-owned business conglomerate, called a chaebol, in South Korea. It was the first chaebol to adopt a holding company structure in 2001. The member companies carry out varied businesses including electronics, chemicals, and telecommunications. LG Electronics is the central company, placing special emphasis on overseas markets, and has established a global network of production and marketing.

LG is the fourth-largest chaebol, with 36 member companies and assets of 57.1 trillion Korean wons (some $57.1 billion) as of April 2008. Since its inception in 1947, LG has been controlled by the Koo and Huh families, and, from 1995, governed by BonMoo Koo, the third-generation owner and group chairman. The member companies numbered 50–63 in 1987–95, but they have gradually decreased since 2005, to less than 40. This was because, in the process of LG’s transformation into a holding company in 2001–05, many member companies constituted two separate chaebols, called GS and LS, which were controlled by, respectively, the Huh family and part of the Koo family.

At the top of the new LG is LG Corporation, the holding company that was created to take over the shareholding function from LG Chemicals in 2001. In December 2007, LG Corporation had 14 “son” companies, including three main companies—LG Electronics, LG Chemicals, and LG Telecom—which, in turn, had 16 “grandson” companies. The holding company supervises its subsidiaries regarding performance, investments, long-term strategies, and other key managerial decisions, and has the ownership of the “LG” brand, which replaced “LuckyGoldstar” in 1995. The company is fully controlled by Bon-Moo Koo, who is the dominant shareholder, a representative board member, and the chief executive officer.

Subsidiaries

The member companies of LG invested worldwide to establish a total of 176 subsidiaries for manufacture and sale in 49 countries by 2007. There are 89 subsidiaries in 15 Asian countries (including 49 in China; five each in India and Taiwan; four each in Indonesia, Japan, and Singapore), 48 in 20 European countries (12 in Netherlands; six in Poland; four each in Germany, Russia, and the United Kingdom), 34 in 10 American countries (18 in the United States; five in Mexico; four in Brazil), and five in four African countries. Sales generated in 2007 by 150 domestic and foreign affiliated companies of LG totaled some $76.3 billion, 52 percent of which was foreign sales.

The flagship company in LG is LG Electronics. Its sales for 2007 amounted to some $23.5 billion, which was more than double that by LG Chemicals and more than five times that by LG Telecom. LG Electronics earned 37 percent of the sales from mobile phones alone, among more than 25 products, and 24 percent from three others—television (10 percent), air conditioners (8 percent), and refrigerators (6 percent). The majority (72 percent) of the total sales was by export, and 85 percent of mobile phones and 42–57 percent of the other three products were sold in foreign countries.

International Sales

LG Electronics has increasingly become interested in world markets and, by 2007, created 74 subsidiaries in 42 countries, which accounted for 42 percent of all the group’s member companies. Among them are one holding company in the Netherlands, 34 subsidiaries for manufacture or research in 13 countries (13 in China; three each in Thailand, Vietnam, Mexico; two each in India, Indonesia, Brazil; six in France, Kazakhstan, Poland, Turkey, Egypt, Morocco), and 39 subsidiaries for sales or service in 34 countries (three in the United States; two each in China, the Netherlands, and Ukraine; 15 in Europe; seven in the Americas; six in Asia; and two in Africa). The company also has 28 offices or centers for sales, service, or research in 21 countries.

Sales generated in 2007 by LG Electronics and its 112 domestic and foreign affiliated companies amounted to some $53.4 billion, 81 percent of which was foreign sales. LG Electronics has put emphasis on new technology and, recently, design, and increasingly spent money on research and development (R&D): 4–4.2 percent of sales in 2002–03; 5–5.4 percent in 2004–05; 4.2 percent in 2006; and 6.6 percent (some $1.6 billion) in 2007. For R&D, the company operates 17 centers in Korea and 18 organizations in 10 countries (four each in China, United States; two each in Japan, Russia; six in India, Israel, France, Germany, UK, Brazil).

Bibliography:

LG Corporation, LG Electronics, The 2007 Annual Report, March 31, 2008, dart.fss.or.kr (cited March 2009);
LG Corporation, lg.net (cited March 2009);
Yasho V. Verma, Passion: The Untold Story of LG Electronics India (Biztantra, 2007).

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