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issue: September 2004 APPLIANCE Magazine

Executive Corner
An Aggressive Approach


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by Lisa Bonnema, Editor

When APPLIANCE magazine traveled to South Korea 3 years ago to write a Special Section on LG Electronics (LGE), we knew it was one company that was going to impact the global appliance industry.

Michael Ahn, U.S. president and CEO, LG Electronics (LGE)

And lately, it seems we’re not alone. Just this past June (2004), LGE topped BusinessWeek’s Information Technology 100 List and was coined “The Next Big Player” on the cover of TIME magazine.

Perhaps the real evidence, however, is in the numbers. In 2003, the South Korean manufacturer reported sales of U.S.$40 billion. More recently, the company reported that net profit almost doubled in the second quarter of this year, helped by the record sales and robust demand for its mobile handsets and home appliances. Sales for the quarter saw an increase of 25 percent over the same period last year.

Although LGE has clearly stated that its intentions are global, the company has taken some pretty aggressive actions this past year toward the U.S. appliance industry, starting with the establishment of a North American headquarters early this year and the appointment of Michael Ahn, a 28-year industry veteran, as U.S. president and CEO. Combine that with a marked presence at every major trade show this year, an innovative TV refrigerator that is still making headlines across the U.S., and a multi-year North American marketing budget that allots $100 million for 2004 alone, and it is easy to see why U.S. appliance companies are taking notice.

APPLIANCE recently interviewed Mr. Ahn to find out what makes this electronics giant tick and what its plans are for the U.S. appliance market.

Q: LGE’s recent move to establish a North American Headquarters put three core businesses—Digital Display & Media, Digital Appliances, and Mobile Phones—under your leadership. What has been your strategy in managing these businesses?

A: LG has established a new organizational structure for LGE North America, which combines all of our core business groups under the leadership of myself, as president and CEO for LGE North America. This has helped to maximize synergies across our various divisions, brands, and operations as we position LG as a premium brand in the U.S.

Furthermore, managing our core businesses is about continuing to build the brand’s awareness overall through aggressive marketing campaigns with an equally committed focus on each division’s mission to bring the most innovative products to market.

Q: What is the greatest challenge you face as president of LG Electronics USA?

A: The U.S. marketplace is challenging because there are so many well-established brands. As a result, it requires a significant investment in both product development and marketing to succeed. That said, we are dedicated to establishing LG as a leading brand in the U.S.

Personally, this is a very exciting new role for me. Under my leadership, there are significant opportunities for growth with display and digital video products, information technology products, mobile phones, and digital appliances in North America and abroad.

Q: LGE’s global vision is to rank among the top three electronics, information, and telecommunication firms in the world by 2010. What is LG’s specific goal for the North American market?

A: Our goal in North America is the same as it is worldwide—to become one of the leading players in the industry. By looking at the North American market independently—thinking globally, but acting locally—and interacting with our consumers here, we are able to successfully develop and market products that appeal to our retail customers.

Over the past few years, we’ve stepped out from the behind the “OEM scene” to bring to market our own LG-branded products with digital appliance and mobile phones, and most recently we’ve done this with our digital displays and media products. We have put a heavy focus on perfecting and bringing to market our unique and proprietary technology, as well as a real value proposition to our existing and future customers.

Q: What is LGE’s goal for the North American major appliance segment, and what strategies will you implement to ensure success?

A: Since our entrance into the U.S. market more than 20 years ago, we have seen demand for our products grow significantly. We believe this growth is a testament to the quality of our products in terms of functionality and design, as well as growing recognition of the LG brand. Also, Korean products are increasingly being recognized as innovative, high-end, and sleek.

LG has made significant strides over the past few years and is no longer considered a second-tier market player. We’ve achieved product leadership, and we’re proud of that—which is why our branding campaign emphasizes “Life’s Good.” Furthermore, we are elevating our marketing strategy to establish LG as a top-tier global brand.

We will continue to invest heavily in research and development in order to bring to market appliances that truly enhance people’s lives. Design and technical features are equally important, and we are focusing on both in order to become one of the top-selling appliance producers in the U.S. Additionally, we are marketing LG much more aggressively in the U.S. with a multi-year $300-million branding campaign. For the first time, appliance commercials on network and cable television will join our ongoing aggressive print campaign.

Q: Will LGE acquire any businesses or brands to strengthen its share in the North American market?

A: We have no immediate plans to acquire any businesses or brands, as we plan on doing this organically. We currently have very strong relationships with many different manufacturers, and we will continue to explore alliances that we believe will benefit both parties and lead to even better products for our consumers.

Q: Do you think leading U.S. appliance players are prepared for the competition LGE and other foreign companies are bringing to the appliance industry?

A: While LG is a relatively new player in this arena, we are as well-established overseas as the leading U.S. manufacturers are in the U.S. Speaking from this position, I can say that we have never rested on our laurels, but instead have worked to bring even better technologies and innovations to market, regardless of the competitive environment. So, while I can’t judge whether established U.S. appliance producers are or are not ready for competition, there is no denying that those who remain stagnant will be challenged by LG and any other company—American or foreign—that introduces product innovation.

 

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