International Business Strategy - Essay Example

LG Electronics – Global Strategy in Emerging Markets 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? During the formative years, the Korean electronics industry provided lucrative opportunities for companies like LG, Samsung, and Daewoo, family-owned businesses known as the chaebol. The chaebols were the leaders, and inevitably the rest of the Korean electronics market followed them. They saw the opportunities for growth in manufacturing at the time and used it to their advantage. These early market leaders capitalised on the developed markets demand for oil refining, cables, heavy manufacturing and energy; coupled with the national agenda to boost exports through consolidated economic growth in electronics, refining and chemicals, the chaebols and the Korean electronics industry found it easy to expand their businesses from the local industry to the developed markets like the US and Europe. Their growths were also pushed by the popularity of acquisition, development in insurance and securities trading at the international level. Another major factor that contributed to the development of the Korean electronics industry was the national agenda enacted in the form of Economic Development Plan that encouraged foreign direct investments in securing technology, and joint ventures with international electronics companies. What this did was boosted technical knowledge transfer from giants such as Hitachi, GE, Sanyo and NEC. Korean electronics now not only secured technical know-how but also had the infrastructure of raw material and skilled labour to boost their exports to other countries of the world. Moreover, these international companies with their established presence in the developed countries markets provided the leverage for the Korean companies to enter into the new markets. Coupled with the emphasis on technological research and development by the government, local electronics companies now got the confidence to enter into the developed markets under their own brands. The aim was to break away from the OEM business structure and create their own legacy in the new markets. 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. Did LG adapt its business model or change the local institutional contexts or a mixture of both? Initially, when LG penetrated developed markets, it faced setbacks from advance technologies, designs, and highly competitive market structure. With a not-so stable corporate infrastructure, LG had to forego the challenge and established itself in emerging markets. Today, LG is one of the largest consumer electronics companies in the world. With established financing backup, highly advanced R&D technologies and designs, and a well-defined business strategy, it can breach any market that it wanted to in the world and compete with global giants. This has been accomplished through a distinct pattern of approach to market entry. When LG enters a market it first identifies supportive infrastructure, like government policies, consumer perception and tries to eradicate adverse factors such as monopoly, intellectual property rights, which it had done in the case of Brazil. Once the company has established base, it starts to educate its consumers and introduce products. Sometimes products are customised and developed to cater to niche local needs like in India LG developed a cricket TV to cater to the nations love for the game. Similarly, in Russia, LG relied on localisation of products and sponsorship for events to get noticed. This has been a major turning point for securing the Russian market. In China, it has adopted similar strategy to Brazil and India, with the added strategy of using around 98 per cent of local manpower to both secure its resources as well as appeal to their loyalty. LG is now able to operate in a highly developed infrastructure to cater to the markets which have strong government, society, and media backing, elements which are important for supporting businesses in the long run. These business strategies adapted to local institutional contexts have worked well for LG in boosting success in sales, localisation, and R&D in emerging markets. These trends have become LGs core business model through which it breach locales competitions and grows itself as the leader in the markets. 3. What are critical points of learning that can be distilled from its success in emerging markets? How may these advantages be leverage to compete in developed countries? Are the advantages transferable? During its growth period, LG Electronics has learned many strategic lessons while entering and establishing business in BRIC countries. From Brazil it learned to work with the government to eradicate market disadvantage, and focussed on after-sales services to outlying locations. This led to consumer loyalty. Similarly, in India LG had learned that sometimes partnership with locals do not prove viable. It needs to invest more and become independent in order to establish ones business in a new market and inevitably bring the market to the level of the firms product offering. In Russia, LG has learned to work around localisation to meet specific local needs in order to attract the attention of the consumers. With China, LG has used the same strategy as Brazil and India but adapt it by establishing production facilities, R&D facility, and earn local peoples trust by emphasizing on corporate social responsibility. There is a consistent pattern of strategy for entering emerging markets which LG has used for building its corporation through grass-roots development. For example in Brazil it educated the consumers and build up local infrastructure before it could sell LG products. In India similar it had to create awareness in order to get consumers to appreciate LG products. In China and Russia, it had to build products from scratch in order to create a market. These elements demonstrate that LG has seen opportunities in emerging markets and adapted its corporate strategy to change the local institutional contexts. This mixture has been useful for building the companys business positioning in each of these markets, and they have been partially transferable to new markets wherever LG went. As a result, LGs growth and success have been led by its strategy of being a leader in sales, research and development, and localisation in emerging markets. The characteristics of these markets have demonstrated similar, if not consistent, trends of lack of specialised intermediary institutions and a host of adverse denominators which have worked for the success of LG, and ironically the disadvantage for competitors from the West. References Khanna, T. et al (2005) Strategies that fit emerging markets. Harvard Business Review Ramaswamy, K. (2003) Case Study: LG Electronics – Global Strategy in Emerging Markets. Thunderbird School of Global Management. Read More