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Creativity drives LG growth

[The faces inside KOREA’S CONGLOMERATES:LG]

Nov 24,2008
The faces inside Korea’s conglomerates is a weekly series about key figures in major conglomerates to help readers understand Korea’s business world.



Koo Bon-moo (63) ?LG Corp. chairman ?Bachelor뭩 in business administration, Ashland Univesity ?MBA, Cleveland State University
“Thinking outside the box” could be described as the LG Group’s mantra.

The nation’s fourth-largest conglomerate in terms of assets believes creative thinking will help it find out what consumers really want.

This, the group says, is a prerequisite to success.

LG’s creative, consumer-oriented management has helped make it a global competitor with rivals such as General Electric, Nokia and Sony.

According to the company, LG TVs account for 40 percent of the units sold in the Middle East, and it is Indonesia’s top supplier of air conditioners, TVs, washing machines and refrigerators. The company also sold one of every five cell phones in the United States in the third quarter, an LG public relations official said.

One of the group’s success stories is LG Electronics, one of two flagship units. LG Chem is the second.

At a time other mobile phone manufacturers were not thinking about consumers’ finger length and size, LG Electronics did a survey to find out how this varies depending on ethnicity. Based on the survey, the company customized mobile phones for overseas markets.

LG Group is expected to achieve 100 trillion won ($69.1 billion) in sales by the end of this year, mainly owing to earnings from its major affiliates such as LG Electronics, LG Chem, LG Display, LG Dacom and LG Household and Healthcare.

LG is the third conglomerate to achieve the 100 trillion won mark since the U.S.-led economic turmoil erupted, after Samsung Group and Hyundai-Kia Automotive Group.

Entering the so-called 100 trillion won club is meaningful for LG because the achievement comes after some of the group’s affiliates became separate GS affiliates in 2005.

As of last year, LG Group, which has 39 affiliates under its wing, earned 5.1 trillion won of operating profits based on sales of 94 trillion won.

Industry experts say LG Group Chairman Koo Bon-moo’s 13-year consumer-oriented management policy is behind the company’s success.

Koo, grandson of Koo In-hwoi, the late founder of LG Group, took office as chairman in February 1995.

“Whenever he makes business trips overseas, he always takes time to drop by the houses of local LG customers and loves to bombard them with questions to find out what is good and bad about LG products,” said an LG Group official.

Koo is also famous for his design-oriented management policy because he thinks beautiful and ergonomic designs appeal to customers. Koo already allotted 100 billion won to design of LG products for this year.

“Even people who never heard about LG must be familiar with the Chocolate, Shine and Venus phones or its three-door refrigerators with flower patterns because they are coveted items by consumers,” said John Park, an analyst with Daishin Securities.

Koo has four vice chairmen who back him up. All are graduates of Seoul National University.

Kang Yu-sig, vice chairman of LG Corp., serves as Koo’s right-hand man. He successfully led the group’s transition into a holding company(LG Corp.) in 2003 when it moved away from a complicated structure of cross investments between affiliates. It was LG’s first attempt among the nation’s jaebeol to change into a holding company. Cross investment has been regarded as a chronic jaebeol problem because it makes it hard to achieve management transparency. Kang also led LG’s restructuring division in 1998.

Koo Bon-joon, vice chairman and CEO of LG International Corp., is Chairman Koo’s younger brother.

The younger Koo took the reins of LG International Corp., the group’s trading arm, in March 2007 to rebuild the company after its fashion division was separated into an independent affiliate in 2006.

Nam Yong and Kim Bahn-suk, both vice chairmen and the respective CEOs of LG Electronics and LG Chem, are company stars. Nam is an electronics expert who has been working for LG’s electronics division since he joined the company in January 1976.

He emphasizes consumer insight so he listens to recorded consumer complaints at every meeting. He also wants to complete the globalization of LG Electronics, promising to replace 80 percent of the Korean chiefs of overseas corporations with local employees in the near future.

Kim is a longtime chemical expert. He led a profit turnaround in 2007 by achieving 10 trillion won of sales and 763.6 billion won of operating profits. LG Chem is also a pioneer in the nation’s hybrid car industry, producing lithium polymer batteries.

LG also has seven affiliate presidents, six of whom graduated from Seoul National University.

Hur Young-ho leads LG Innotek and LG Micron, which make digital components. His nickname is “Midas touch” because he turned LG Micron from red to black in 2001, a year after he took leadership. He had also raised sales at LG Innotek by five times in February 2008 compared to 2002 when he was appointed as president.

Cha Suk-yong, president of LG Household and Healthcare, leads the Korean wave in Asia with diverse lines of cosmetics. About 60 percent of LG Household sales come from China and 20 percent from Vietnam.

Park Jong-eung, president of LG Dacom, is an old hand in the telecom area because he used to lead LG Group’s three telecom affiliates including LG Telecom and LG Powercom. LG Dacom leads the nation’s Internet telephony market.

Kwon Young-soo, president of LG Display, practices on-the-spot management. He bases his work entirely in LG Display’s two display plants, one in Gunsan and the other in Gumi.

Shin Chae-chol, president of LG CNS, a 33-year veteran of IBM’s Korean unit, has accumulated 36 years in the information technology sector.

Jung Il-jae, president of LG Telecom, the smallest mobile phone operator here, turned a profit in the second quarter of this year, while its rivals SK Telecom and KTF failed to do so due to excessive marketing costs.

Lee Joung-sik, president of LG Powercom, makes frequent visits to customer centers to hear their complaints. He has achieved double-digit annual growth since 2005 when LG Powercom made its foray into high-speed Internet service in the nation’s saturated Internet market.

Today’s LG began as Lak Hui Chemical Industrial Corp. in Busan in 1947, but its CEOs come from various regions of Korea ranging from Jeju Island to Seoul to Daejeon.

“Samsung seeks out genius-like employees, while LG focuses more on one’s attitude,” said Kwak Sook-cheol, the author of “Great People,” which touches on the LG Group.

Kwak has worked for LG for the past 30 years, and once led a team specializing in LG’s corporate culture.


By Sung So-young Staff Reporter


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