Strategic Direction In Corporate Context: Case Study Of LG Corporation

Business Unit Research

Discuss about the Strategic Direction in Corporate Context.

Strategic management is the process of implementation and formulation of the major objectives and initiatives taken by an organisation’s top management based on resources and internal as well as internal environments. Each of the organisations competes in a competitive field and the organisation and strategic management aim to set the objectives of the organisation (Hill et al. 2014). In this study, competitive environment and business level strategy of a larger organisation is described. Therefore, the management needs to have core knowledge of the business. This study focuses on the academic definition of various management concepts and discussion is done with respect to the theoretical concept.

The corporation is a firm that must meet legal requirements to be identified as having a legal existence with a separate entity from its owners. As stated by Schuchmann and Seufert (2015), corporations are mainly owned by the shareholders who can share the profits and losses generating through the organisation’s operation. A corporation has three different characteristics; firstly, it must have legal existence, secondly, limited liability and thirdly, continuity of existence after the capacity of life spans of the owners.

In this study, LG Corporation is selected to discuss the competitive advantage and strategic business unit. LG Corporation is a public organisation and it has been working in the conglomerate industry. LG has it’s headquartered in Seoul, South Korea.

Product Portfolio is the overall collection of products offered by the organisation. Product portfolio can provide characterised views of company growth, stock type, profit margin driver, market leadership and income contribution. As stated by Comerio and Batini (2015), matured companies mainly have diversified product portfolios. In this context, LG Corporation serves worldwide and it offers electronics, chemicals, telecommunications, information technologies and power generation. In addition, large enterprises have the support and potential infrastructure to make broader offerings to the customers.

Service Portfolio can be described as the core repository for all the concepts and ideas for all services in an organisation. Each of the services must be listed to the current status as well as history. According to Picard (2014), service portfolio has majorly three parts, service pipeline, service catalogue and retired services. LG has service catalogue and it is visible to the consumers and the support team.

As opined by Krush et al. (2015), a strategic business unit is a fully-functional unit of an organisation that must have its own direction and vision. Moreover, strategic business unit mainly operates as a separate unit and it is one of the significant parts of the organisation. Strategic business units need to report to headquarter about the running and operational status. LG Corporation segregates the business into several business units. In this study, LG Electronics is selected as one of the single strategic business units of LG Corporations among the others. It can be added that LG Electronics itself has some of the traditional business units within this. As stated by Harman et al. (2014), LG Corporation wants to position its business to address tomorrow’s issues and challenges of the business as a result of segregating business units. This business units’ strategy will enable the corporation to grab even more expanding market and consumers. LG Electronics operates independently and it focuses on the target market. LG Corporation has multiple structures of the products and LG has different product c categories.

Business Unit Revenue

A product line can be defined as a group of same categories of products under the name of the single brand and the products are sold by the same organisation. Zhou et al. (2015), supported this by saying companies can sell several product lines under their brands. LG Electronics tries to expand their product lines by adding a new product to the existing product lines as customers like to purchase from the same brands with which they are familiar earlier.

In the business, service line can be defined as the grouping of all services related to the particular department of that business (Priyanka and Srinivasan 2015). LG Electronics has the service line devoted to the home appliances where the customers can share the problems regarding washing machines, refrigerator and kitchenware.

In business accounting, revenue of the business is the income that an organisation captures from its normal activities of the business. As pointed out by Zhang et al. (2014), revenues mainly come from the selling of the services and goods to the customers; moreover, some of the organisations get revenues from the royalties and interest. Priyanka and Srinivasan (2015), supported this by further saying revenue is a certain amount of money that an organisation actually gets during a period and it is included deductions and discounts given for returned products and services. Revenue can be calculated by multiplying the price of the products at which services or goods are sold by the number of units. In addition, revenue can also be stated as the sales on the income statement.

LG Electronics is the business unit of LG Corporations and it is a multinational electronics organisation. LG Electronics is the tech behemoth as it posted the biggest ever revenue in its history in the year 2017 due to introducing the Smart Television set. It reached to the record sales and its revenue touched a record high of 61 trillion won (USD 57 billion). Operating profit of LG Electronics was 2.46 trillion won ($ 2.34 billion) in the year 2017 (Lg.com 2018). LG Electronics increased its revenue by 10.9% compared to 2016 and its operating profit took a leap of 85%.

Table 1: Financials of LG Electronics

(Source: Lg.com 2018)

Political factors determine the government’s responses and influence to the economy for a certain company or industry. LG Electronics has been working in the global environment; stability of the government and potential changes to the legislation can impact on LG Electronics. A country’s government may impose a tax duty to the foreign companies and in this respect; LG Electronics can face the issue.

Economic factors of the organisation can resonate with long-term effect and some of the economic factors are inflation rate, the purchasing power of the customers. A country’s GDP can be another factor that can influence one company to make business (Plouffe et al. 2016). LG Electronics needs to consider the economic development of the country along with interest rate, economic growth patterns and foreign exchange rate in order to do the business.

As stated by Katz et al. (2016), social factors can gauge the determinants of demographics, cultural trends and population analytics. LG Electronics can take the advantage of the population if the people like to use electronic gadgets and electronic products. Customers’ preferences need to understand the company in order to market the products. In addition, technological factors are associated with the innovation and it can affect the operations of the company.

External Environment Analysis

Technological innovation must be favourable for the organisation. LG Electronics always believes in technological innovation as they have separate traditional business units for innovation where they research about product development.

Legal factors are associated with the policies of the country in which it is running. The laws and regulations that can impact the organisation are Health and Safety of the employees, Corporations Act, Export Duty and Fair Trade policies. LG Electronics follows the consumer laws and labour laws.

Lastly, environmental factors are equally important as it is the crucial factors for the organisation as it is associated with the greenification, climate change, geographical location, weather and tourism. LG Electronics must consider the electronics waste as it can harm the nature. The harmful rays of electronic products need to make more environments friendly. In addition, LG Electronics takes the strategy of CSR where it tries to prove itself to be aware of environmental sustainability. 

Sustainable competitive advantages are organisation assets, abilities and attributes that are difficult to imitate or exceed. Sustainable competitive advantages provide a favourable and superior long-term position over the competitors in the market (Pinto 2015). The sustainable competitive advantage is required in order to thrive in the global environment and it provides values to the investors in the business. As stated by Asiedu (2015), powerful brand value, pricing power and low pricing strategies are some of the sustainable competitive advantages of an organisation in an industry. LG Electronics has powerful brand value as it has been on the market since 1958 and the consumers are aware of the name of the brand globally.

Four factors of sustainable competitive advantages are valuable, rare, costly to imitate and non-substitutable. The organisations must have resources that help them to sustain within the industry. As stated by (Considine et al. 2016), tangible resources are financial, physical, technological and organisational resources whereas, intangible resources are associated with the human, innovation and reputation resources. The firms need to have the capacity to deploy the resources in a correct way in order to achieve desired end state. Therefore, resources, as well as capabilities, provide an organisation competitive advantage. Core competency distinguishes an organisation competitively and it reflects the personality of the brand.

Value helps LG Electronics to neutralise the threats or exploits the opportunity. LG has strong brand value and it has quality human resources. Rare factors are not possessed by many others in the industry and LG Electronics has a strong global presence with a good R&D team; they can innovate the products often. Inimitability is the customer base of LG Electronics and revenue generation (Saeidi et al. 2016). Lastly, non-substitutable nature is the no strategic equivalent present in the organisation. LG has non-substitutability when it brings first-kind of electronic products and other companies try to imitate this (curved mobile or television).

Strategic direction leads to the attainment of objectives of a firm. The strategies are the actions that that managers must take to attain more than one organisational objective (Werhahn et al. 2015). Strategies are the general directions of the organisation that results from the strategic planning process. Strategies integrate the organisational process, accessing and utilising the organisational resources. As stated by Nguyen et al. (2017), while making a strategy, it is needed to consider the reactions of the stakeholders’ of the organisation, employees, customers, investors and suppliers. Strategies are the blueprint of the organisational activities and decisions. Strategies are significant as it tries to foresee the future as without the strategic direction, an organisation cannot deal with uncertainties events. Strategic directions help the organisation to develop a team to organise the operations’ routine in order to meet the goals of the organisation.

The mission statement of LG Electronics is to provide reliable and safe products to the customers with reasonable price. The vision of the LG Electronics is to empower the quality of life with economic vitality. The strategic direction of LG Electronics will be to reach more customers with affordable price. In the developing countries, LG Electronics can reduce the price without compromising the quality and it may increase the revenue of the organisation. Therefore, LG Electronics needs to set the objectives and they can collect the market information accordingly. After that, they can identify the alternative solutions available in the market. The strategic direction of LG Electronics will be to increase the customer base. The can take the strategy of social media promotions and keep the website content fresh. LG Electronics needs to maintain an excellent customer support team.

Conclusion

It has been noticed that strategic management is the identification of strategies to carry out the best performance of the organisation. Managers in the organisations must have good knowledge of competitive advantages for the organisation. In addition, LG Electronics has been doing good in the consumer electronics market and they have recently innovated green products. LG Electronics tries to reduce the resource consumption, increase recyclability, enhance energy efficiency, replace hazardous substance, improve home entrainment and reduce carbon emission.

Reference List

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Comerio, M. and Batini, C., 2015, October. Efficiency vs Efficacy Driven Service Portfolio Management in a Public Administration. In Service-Oriented Computing and Applications (SOCA), 2015 IEEE 8th International Conference on (pp. 139-146). IEEE.

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Lg.com. 2018. Smart Phones, OLED TVs, Home Appliances & Monitors | LG India. Available at: https://www.lg.com/in [Accessed 12 Mar. 2018].

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