LG Electronics is forecast to achieve the best business performance this year since 2009 when the company posted 2,680.7 billion won, the highest-ever operating profit. LG Electronics announced the 1st quarter results on April 28: It chalked up 505.1 billion won in operating profit. At that time, an LG Electronics executive said things now cannot be compared to the situation in 2009. The big difference is that LG Electronics made the feat in 2009 thanks to saving money on marketing and overhead costs, but the company now walks the walk due to improved product competitiveness, coupled with continued R&D investments.
A driving force behind LG Electronics’s recent success is Vice Chairman Koo Bon-joon, who had been at the helm of the company since 2010 until recently. Vice Chairman Koo now heads the division responsible for creating new growth engines at LG Corp., the holding company of the group.
Specifically, the Home Electronics Business Division in charge of TV sets and Home & Appliance Business Division logged 7.7 percent and 9.6 percent in the biggest-ever ratio of operating gain to revenue in the first quarter of this year. Based on the 1st quarter results, nine securities companies forecast that the average operating profit for the whole of 2016 would stand at 1,908.7 billion won. They attributed LG Electronics’ charming business performance to former LG Electronics Vice Chairman Koo’s bold and massive R&D investments.
Looking back to October 2010 when ex-LG Electronics Vice Chairman Koo took office, LG Electronics was in a bad situation. The company saw its annual operating profit nosedive 6.5 percent to 176.4 billion won in 2010. At that time, some analysts pointed out that marketing and outside consulting capability that LG Electronics had depended as its strengths until 2009, but no longer.
Vice Chairman Koo turned to R&D and quality to restore LG Electronics’ manufacturing fundamentals, rather than marketing strategies. Under his stewardship, the company continued to expand R&D investments without interruption even though it did not yield immediate outcomes. LG Electronics saw R&D investments surge 19.4 percent and 10.5 percent in 2010 and 2011, respectively, when the operating profit dropped below the 1 trillion won mark. The company raised R&D manpower to 19,614 people last year, a 1.5-fold jump from 12,554 people in 2009. The figure is expected to surpass the 20,000 mark this year.
LG Electronics’s R&G strategy has paid off in an interval of two to three years. For instance, the company launched a project to expand a gap between its second runner-up air-conditioner maker in 2013. It established two R&D centers in such areas as Changwon. The project paid off by successfully releasing a premium dual air-conditioner product with tow wind conduits. The metal mold ethical center he company set up in Pyeongtaek has played a pivotal role in innovating the design and durability of smartphones and home appliances.
Vice Chairman Koo is now charged with the automotive parts and energy solution segments, core components that the B2B the group badly wants to nurture as future growth engines.
LG Group Chairman Stresses Exploration of Future Growth Engines
Chairman Koo delivers New Year’s message in which he calls for fundamental and anticipatory changes to overcome crisis
In his New Year’s message, LG Group Chairman Koo Bon-moo stressed fundamental and anticipatory changes to overcome a crisis and ensure sustainable growth. He delivered the message on Jan. 4 in which he put forward three management tasks — advancing its business structure, innovating the way LG companies do business, and setting forth substantive changes through thorough action.
In a reshuffle of executives made last November, LG Group Chairman Koo transferred LG Electronics Vice Chairman Koo Bon-joon to the head of the division responsible for creating new growth engines at LG Corp., the holding company of the group, and attached more focus on B2B businesses. Vice Chairman Koo is now charged with the automotive parts and energy solution segments, core components that the B2B the group badly wants to nurture as future growth engines.
Stressing anticipatory changes, the LG Group chairman has led LG’s growth in exports, which have earned two thirds of its annual total from abraod. LG Group saw its sales jump to 150 trillion won, a five-fold surge from 30 trillion won in 1994. This is in conformity with Chairman Koo, 21 years in office, who advocates market leadership.
Chairman Koo emphasizes thorough execution without defining boundaries to attain market leadership.
Koo Bon-moo’s efforts to nurture a secondary battery business have come a long way. Looking back at 1991, LG Group Chairman Koo, then group vice chairman, made a business trip to the United Kingdom Atomic Energy Authority in which he watched the development of a secondary battery. Recognizing the secondary battery as the group’s future new growth engine, he brought a sample of the rechargeable battery and told his R&D staff to research secondary batteries.
