South Korea-based consumer electronics and appliances giant LG Electronics had a year of major expansion efforts around the world. The year began with the announcement in January of 2006 that LG had adopted a Blue Ocean Management campaign.
Underlying its drive to become one of the top three consumer electronics manufacturers by 2010, LG said the program incorporates the understanding that only flexible companies that adapt to lifecycle and industry changes will enjoy continued growth. The Blue Ocean Strategy focuses on strengthening business capabilities and streamlining business structure in the five arenas of products, business model, work, system and human resources.
LG said it plans to double its sales volume, profit and shareholder benefit by 2010 with 30 percent of its sales volume and 50 percent of its profit being derived through Blue Ocean Products. According to LG, criteria of Blue Ocean Products are growth potential—based on sales performance, market leadership—based on market share, and its contribution toward profit.
LG Invests in R&D
To support that effort, LG Group announced R&D investment plans totaling 7.3 trillion won (approx. U.S. $7.5 billion) to identify new growth engines. LG spent 3.2 trillion won (approx. $3.3 billion) in 2006 and the rest will be invested in 2007. LG also increased its total R&D staff to 24,500. According to a report in The Korea Times, this increase in the early part of 2006 brought the total R&D staff from 16 percent of the group's total employment to 19 percent.
LG made major global manufacturing expansion efforts throughout 2006.
• In January, LG said it would invest 101 million euros (approx. U.S. $124 million) by 2011 in a plant in Poland to produce home appliances and LCD TVs. LG signed an investment contract with the government of Poland to build a plant in Wroclaw with annual production capacity of 500,000 refrigerators and 3,500,000 LCD TVs. Construction began in 2006 and the plant will be operational in the early 2007. LG expects the plant will cooperate closely with the nearby LG.Philips LCD plant, which has an annual capacity of 11 million LCDs. The plant in Wroclaw is LG's 14th global production site and its third production facility in Poland.
• LG also expanded its digital TV (DTV) production in Mexico in January, with an investment of more than U.S. $1.3 billion in the plant in Reynosa in northern Mexico.
• In March 2006, LG's business LG Electronics (Thailand) Co. said it would invest 800 million baht (approx. U.S. $20.5 million) in its Thai operations during the year. The funds would be used to upgrade the production line for air-conditioners, and for research and development (R&D).
• In April, LG formed a joint with Saudi partner H.G. Ibrahim Shaker to establish the LG-Shaker Air-Conditioning Company in Saudi Arabia. Set to open in the first half of 2007, the plant is expected to have an annual production capacity of 250,000 units by 2008.
• In May, LG opened its second refrigerator plant in Indonesia, this one near Jakarta. LG plans for about 70 percent of the plants' production to be exported. The company had announced in September 2003, just after the implementation of the Asean Free Trade Area (AFTA), that it intended to make Indonesia a manufacturing base for some of its home appliances and consumer electronics, and it has expanded production of TVs, refrigerators, air-conditioners, and other home appliances.
• In June, LG started up production at its new optical drive products facility in Ranjangaon, Pune in India. The startup LG Electronics India Pvt. Ltd. is a subsidiary of LG Electronics of South Korea, the first company making DVD writers in India. The facility is said to be the second biggest in Asia, with an output capacity of 600,000 units per month. LG intends for the Pune plant to serve as an export hub, primarily serving European markets. LG also makes TVs, aid-conditioners, refrigerators, washing machines, microwave ovens, color monitors, and telephones in Pune.
• In September 2006, LG opened a plant in Russia. The plant, which broke ground in April 2005, is said to have the capacity to produce 500,000 plasma display panel (PDP) and LCD TVs per year, as well as 700,000 washing machines, 200,000 refrigerators, 260,000 stereo systems. Capacities are scheduled to increase each by 1 million units per year for 4 years.
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