Strategic Management Report: LG Corporation Business Analysis

This report delves into the principles of strategic management by analyzing the competitive environment and business-level strategy of a selected strategic business unit (SBU) within LG Corporation. The report begins with a definition of a corporation, product portfolios, and service portfolios, setting the stage for an in-depth examination of LG Electronics as a key SBU. It explores the identification of product and service lines, revenue generation, and an external environment analysis encompassing political, economic, social, technological, environmental, and legal factors. Furthermore, the report identifies and discusses the four factors of sustainable competitive advantage, and concludes by making recommendations for defining the strategic direction of the business unit. The analysis is supported by references to scholarly articles and provides a comprehensive overview of strategic management concepts in a real-world business context.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Student’s name:
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Author’s note:

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Table of Contents
Introduction......................................................................................................................................3
1. Identification Corporation...........................................................................................................3
a. i. Defining and discussing Corporation...................................................................................3
ii. Defining and discussing Product portfolio and Service portfolio...........................................4
2. Business Unit Research...............................................................................................................4
a. i. 1. Defining and discussing Strategic Business Unit.............................................................4
b. Identification of Product and Service Lines............................................................................5
i. 1. Defining and discussing Product lines and service lines......................................................5
3. Business Unit Revenue................................................................................................................5
a. Identification of Revenue Centre.............................................................................................5
i. 1. Defining and discussing revenue..........................................................................................5
5. External Environment Analysis...................................................................................................7
a. Identify the Political, Economic, Social, Technological, Environmental and Legal operating
environment of the selected business unit...................................................................................7
i. 1. Providing a definition for the term operating environment..................................................7
6. Source of Sustainable Competitive Advantage...........................................................................8
a. i. Defining and discussing the four factors of sustainable competitive advantage..................8
7. Strategic Direction.......................................................................................................................9
a. 1. Making recommendations for defining and discussing the strategic direction....................9

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Conclusion.....................................................................................................................................10
Reference List................................................................................................................................12

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Introduction
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.
1. Identification Corporation
a. i. Defining and discussing Corporation
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.

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ii. Defining and discussing Product portfolio and Service portfolio
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.
2. Business Unit Research
a. i. 1. Defining and discussing Strategic Business Unit
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

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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.
b. Identification of Product and Service Lines.
i. 1. Defining and discussing Product lines and service lines
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.
3. Business Unit Revenue
a. Identification of Revenue Centre.
i. 1. Defining and discussing revenue
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),

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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%.
Revenue of LG Electronics (worldwide) 57 billion USD
The share of sales of LG Electronics in
Korea
23%
LG Electronics’ sales in North America 13.7 billion USD
Revenue comes from home entertainment
segment
17.55 billion USD
Table 1: Financials of LG Electronics
(Source: Lg.com 2018)

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5. External Environment Analysis
a. Identify the Political, Economic, Social, Technological, Environmental and Legal
operating environment of the selected business unit
i. 1. Providing a definition for the term operating environment
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.

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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.
6. Source of Sustainable Competitive Advantage
a. i. Defining and discussing the four factors of sustainable competitive advantage
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

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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).
7. Strategic Direction
a. 1. Making recommendations for defining and discussing the strategic direction
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

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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.

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LG Electronics tries to reduce the resource consumption, increase recyclability, enhance energy
efficiency, replace hazardous substance, improve home entrainment and reduce carbon emission.

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