Case Study 3

LG Electronics: Global strategy in emerging markets

Suggested case discussion questions
Q1

Explain how LGs experience within its domestic market (South Korea)
influenced how it expanded into the BRIC emerging economies

All MNCs are shaped, to some degree, by their domestic markets. In LGs case, its
emergence in Korea during the decades following the Second World War strongly affected its
ability to expand into the BRIC economies. The domestic Korean market was highly
competitive, which helped hone its ability to enact come from behind approaches in other
locations as it was used to having to fight its way to the top. The Korean Government placed
strong emphasis on R&D within LGs home economy, which had a double-effect on it. First,
the importance of high quality R&D enabling quick and effective localization of products and
services was always central to its approach to expanding its presence within the emerging
economies this runs counter to much perceived wisdom that suggests emerging economies
do not have infrastructure to support such a policy. Second, it built on its experience of
working with governments, which it then displayed most effectively in Brazil. The Korean
Government encouraged foreign direct investment which saw LG partner with Hitachi of
Japan, again, allowing it to develop valuable partnership experience that would be brought to
bear on joint ventures within emerging economies. Lastly, emerging within an economically
disadvantaged South Korean economy gave LG an awareness of its social responsibility,
which it displayed most effectively in India.
Q2

Compare and contrast how LG developed its presence in the Brazilian and
Indian markets

There are several similarities in how LG expanded into the Brazilian and Indian economies.
First, in both countries LG appears to be combining a taking brands from local to global
strategy, by turning local engineering excellence into innovation on a global scale. Second,
it utilized the incentives governments offered and the changes in government policy to
maximize the benefits it was able to access. In India, a change in policy meant that it could
launch a fully owned subsidiary, rather that joint venture with an Indian firm. While in
Brazil, tax incentives and subsidized land were optioned to establish manufacturing plants.
Third, it marketed itself in both countries through sponsoring national sporting events raising
its brand recognition. Fourth, LGs experience in Brazil directly influenced its strategy in
India when it launched a fleet of repair vans to reach geographically remote areas at short
notice. And last, localization of product and services provides a cornerstone of LGs
strategies in both India and Brazil. One area of possible divergence is in the employment of
local staff to top management positions. We are informed that in India local employees
occupy most of the top management positions within LGEIL and that this even resulted in
some Indian staff being recruited back to Korea to manage parts of its niche analogue
television business. Whereas, no mention is made of the percentage of local Brazilians
occupying similar top management positions.
Q3

Looking to the future, explain the challenges ahead LG faces

The first main challenge facing LG is that in the emerging economies, where it had worked
hard to establish itself, competition is increasing rapidly from both new entrants and
revitalized old-timers. How LG responds to this, particularly in India and China, will be
vital. The second major challenge that LG needs to address is its position in the developed
economies, where established Japanese, European and U.S. companies have consolidated
their positions while LG had its focus on the emerging markets. Therefore, in the future, LG
has to successfully hold off local competition in the emerging economies, while
simultaneously, coming up with new dimensions to its emerging market prowess enabling it
to stake a claim in the developed markets as well. Analysts are divided on whether the
capabilities it has built up in the emerging economies are transferable to the developed
economies. However, maybe there is a third way. There are still large areas of Africa, the
Middle East and Latin America that remain to be fully exploited by the LG machine. The
experience and expertise LG has developed in the BRIC countries may find a more natural
outlet in these emerging, or yet-to-emerge economies.