LG Electronics looks to the developing world for growth
- 02, 26 2009
Johannesburg, South Africa, February, 25, 2009 – Massive growth in electrification in South Africa and Africa is making it a prime target for companies like LG Electronics who are seeking to weather the global financial downturn, its CEO Mr Yong Nam told LG Electronics’ South African and African business partners yesterday.
Mr Nam said the increase in electrification matched a desire by people living on the continent for products that made their lives easier and connected them to the rest of the world.
“South Africa was one of the earliest and remains the fastest growing market for mobile phones and technology,” he said. “This was largely because mobile phones were portable and assisted in overcoming mobility infrastructure limitations in South Africa. But now South Africa’s infrastructure is catching up and more people are demanding our other consumer electronic products. This makes South Africa and Africa one of the most important territories for LG Electronics in 2009.”
LG Electronics, a global leader and technology innovator in consumer electronics sees South Africa as an important hub for its expansion into sub-Saharan Africa.
“Of course South Africa and Africa is not isolated from the economic recession but this market has the biggest potential to grow,” said Mr Nam. “In this region we aim to achieve more than 20 per cent of sales growth in 2009, the Middle East and Africa region remains one of LG Electronics’ top international markets with sales of US$ 3.9 billion in 2008 – 22% higher than in 2007.”
The company has intensified its efforts to increase market share despite the volatile economic situation. “Every company –- not just LG -- has been affected negatively by the economic downturn,” said Mr Nam who was behind the turnaround of LG Telecom during the Asian financial crisis of 1997. “LG Electronics will be intensifying its efforts to increase market share despite the economic situation.”
To achieve this, LG Electronics underwent a reorganisation at the beginning of 2009 to increase its focus on business solutions. The restructure maximises the growth potential in existing businesses while at the same time allows for the development of new ones. “These changes will help LG Electronics expand its value chain from stand-alone hardware to commercial solutions, providing longer term growth potential, profitability and partnerships which will elevate the LG Electronics brand -- but not at the expense of innovation,” he explained.
Mr Nam confirmed that the company would not reduce –- and could even increase –- its investment in R&D, marketing, branding and design. LG Electronics will continue to invest in future growth engines such as solar power, commercial air conditioners and business (B2B) solutions; all sectors LG expects will expand and become increasingly profitable once the economy is back on track.
Globally, LG is targeting a reduction in expenses of 3 trillion Korean Won (KRW) in 2009
(US $1.9 billion). This company-wide initiative, which includes headquarters and all 82 subsidiaries around the world, also applies to manufacturing and indirect costs.
LG has been working to further improve its procurement system, which includes everything from raw materials to investment in facilities, financial services and recruitment. Its efforts to improve its cash flow has already resulted in reduced inventory, increased liquidity, optimised supply chain management and a more consolidated and efficient purchasing process overall.
“These initiatives will enable LG to improve both growth and profitability over the long-term, regardless of the economic climate,” Mr Nam remarked. “Becoming a stronger global brand will be a natural outcome of this effort,” said Mr. Nam.
Peet van Rooyen, Managing Director of LG Electronics South Africa, and the first non-Korean head globally of an LG Electronics subsidiary company said: “LG Electronics is set to capitalise on the South African and African market in this time of financial strain and efforts are underway to improve standards to global levels. These improvements which include the HR system, reorganisation of business portfolios, focus on customer-centric processes; mean that LGE will continue to research, develop and supply Africa with products that consumers want, backed by our brand.”
“We see the global crisis as an opportunity for us to differentiate ourselves -– as we innovate, and strengthen customer service to build sustainability,” concluded van Rooyen.