Professional Documents
Culture Documents
Strategies
Corporations may make a foreign direct investment. Foreign direct investment is
direct investment into one country by a company in production located in another
country either by buying a company in the country or by expanding operations of an
existing business in the country.
A subsidiary or daughter company is a company that is completely or partly owned
and wholly controlled by another company that owns more than half of the
subsidiary's stock.[9][10]
A corporation may choose to locate in a special economic zone, which is a
geographical region that has economic and other laws that are more free-marketoriented than a country's typical or national laws.
Business Strategy: global profit maximization
According to Howard Perlmutter (1969)*:
Multinational companies may pursue policies that are home country-oriented.
or host country-oriented or world-oriented. Perlmutter uses such terms as
ethnocentric, polycentric and geocentric. However, "ethnocentric" is misleading
because it focuses on race or ethnicity, especially when the home country itself is
populated by many different races, whereas "polycentric" loses its meaning when the
MNCs operate only in one or two foreign countries.
According to Franklin Root (1994), an MNC is a parent company that
1. engages in foreign production through its affiliates located in several countries,
2. exercises direct control over the policies of its affiliates,
3. Implements business strategies in production, marketing, finance and staffing that
transcend national boundaries (geocentric).
In other words, MNCs exhibit no loyalty to the country in which they are
incorporated.
it is not risky
Problem: the mother firm cannot exercise any managerial control over the
licensee (it is independent)
The licensee may transfer industrial secrets to another independent firm,
thereby creating a rival.
Direct Investment
It requires the decision of top management because it is a critical step.
export continues
3. Multinational Stage
The company becomes a multinational enterprise when it begins to plan, organize and
coordinate production, marketing, R&D, financing, and staffing. For each of these
operations, the firm must find the best location.
Rule of Thumb
A company whose foreign sales are 25% or more of total sales. This ratio is high for
small countries, but low for large countries, e.g. Nestle (98%: Dutch), Phillips (94%:
Swiss).
Examples: Manufacturing MNCs
24 of top fifty firms are located in the U.S.
9 in Japan
6 in Germany.
Petroleum companies: 6/10 located in the U.S.
Food/Restaurant Chains. 10/10 in the U.S.
US Multinational Corporations Exxon, GM, Ford, etc
Conflict of laws
Conflict of laws is a set of procedural rules that determines which legal system and
which jurisdictions applies to a given dispute.
The term conflict of laws itself originates from situations where the ultimate outcome
of a legal dispute depended upon which law applied, and the common law courts
manner of resolving the conflict between those laws. In civil law, lawyers and legal
scholars refer to conflict of laws as private international law. Private international law
has no real connection with public international law, and is instead a feature of local
law which varies from country to country.
The three branches of conflict of laws are
Jurisdiction whether the forum court has the power to resolve the dispute at
hand
Choice of law the law which is being applied to resolve the dispute
Globalization
purchase of licenses, etc. Thus, both the negotiating power of MNCs and the 'race to
the bottom' critique may be overstated, while understating the benefits (besides tax
revenue) of MNCs becoming established in a jurisdiction.
Transnational Corporations
A Transnational Corporation (TNC) differs from a traditional MNC in that it does not
identify itself with one national home. Whilst traditional MNCs are national
companies with foreign subsidiaries, TNCs spread out their operations in many
countries sustaining high levels of local responsiveness An example of a TNC
is Nestl who employ senior executives from many countries and try to make
decisions from a global perspective rather than from one centralized
headquarters. However, the terms TNC and MNC are often used interchangeably.
Criticism of multinationals
Main articles: Anti-globalization and Anti-corporate activism
Anti-corporate advocates criticize multinational corporations for entering countries
that have low human rights or environmental standards. They claim that
multinationals give rise to huge merged conglomerations that reduce competition and
free enterprise, raise capital in host countries but export the profits, exploit countries
for their natural resources, limit workers' wages, erode traditional cultures, and
challenge national sovereignty.
CHARACTERISTICS OF MULTINATIONAL
CORPORATIONS
The multinational corporations have certain characteristics which may be discussed
below:
(1) Giant Size:
The most important feature of these MNCs is their gigantic size. Their assets and sales
run into billions of dollars and they also make supernormal profits. According to one
definition an MNC is one with a sales turnover of f 100 million. The MNCs are also
super powerful organizations. In 1971 out of the top ninety producers of wealth, as
many as 29 were MNCs, and the rest, nations. Besides the operations, most of these
multinationals are spread in a vast number of countries. For instance, in 1973 out of a
total of (,000 firms identified nearly 45 per cent had affiliates in more than 20
countries.
(2) International Operation:
A Fundamental feature of a multinational corporation is that in such a corporation,
control resides in the hands of a single institution. But its interests and operations
sprawl across national boundaries. The Pepsi Cola Company of the U.S operates in
114 countries. An MNC operates through a parent corporation in the home country. It
may assume the form or a subsidiary in the host country. If it is a branch, it acts for
the parent corporation without any local capital or management assistance. If it is a
subsidiary, the majority control is still exercised by the foreign parent company,
although it is incorporated in the host country. The foreign control may range anywhere between the minimum of 51 per cent to the full, 100 per cent. An MNC thus
combines ownership with control. The branches and subsidiaries of MNCs operate
under the unified control of the parent company.
IMPORTANCE OF MULTINATIONAL
CORPORATIONS/MERITS
The Multinational Corporations have been observed as the instrument of development
in the developing states for example National Petroleum Construction Company
NPPC has been awarded contract of laying transmission line in Kuwait. Following are
the important advantages of MNCs.
1. Globalization
The first advantage of Multinational Corporations MNCs is that they work for the
globalization and went to give global village shape to the whole world. For example,
shell works nearly in 132 states of the world that has integrated the Holland, with the
host countries because in millions the employees are paid by the shell that simply
means that they are the citizen of Holland, because Holland cant not provide here own
citizen to all these 132 states of the world.
If shell has been closed million employees will become jobless and due to this billion
of families will be affected. Thus it means that from only one MNCs (Shell) billion of
people are taking advantages and the same is the case of the other MNCs also.
2. Increase world dependency
The most important advantage of MNCs is that it increasing the dependency of world
countries over each other due to that they become friends of each other.
3. No war
MNCs also plays very important role in the maintenance of world peace. For example
there are a lot of Germany and French MNCs that are working in Germany and
French, they will always try to focus on friendly and good relationship and boost their
economies.
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8. Job opportunities
In countries where unemployment is a major problem foreign corporations or firms
provide great opportunities to the local people. Since, it is too expensive to import
large number of skilled labours from abroad or from the home country. The foreign
investors find it cheaper to train unskilled labours needed by the enterprise.
9. MNCs produce more and better products
MNCs produce more and better products at lower costs because they establish their
plants in those countries where they can draw resources easily.
10. World modernization
MNCs are regarded as agents of world modernization in the developing countries.
They produce new jobs, introduce new technology, and train the local people in the art
of science and technology.
11. MNCs brings foreign exchange
Another most important advantage of MNCs is that it brings foreign exchange to
developing countries because in developing countries, the rate of saving is very low.
12. MNCs take economic risk
Another important advantage of MNCs is that it takes economic risk in business in
developing countries because they have financial powers and developing or third
world countries are not in such a position to take economic risk.
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MULTINATIONAL CORPORATION
COMPANY OF LG
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The company logo of LG features the letters L and G, presented in the form of a
smiling human face.
Associated companies
GS Group
LS Group
LIG Group
Fields of activity
Holding company
Electronic industry
Companies
LG Corp.
LG Electronics
USD(2011)
US$ 9.2 billion[10]
US$ 50.03 billion[11]
LG Display
LG Innotek
LG Siltron
N/A
Lusem
LG Chem
N/A
LG Household &
Chemical industry
Health Care
Services
LG Hausys
LG MMA
LG Uplus
LG International Corp.
LG CNS
N/A
SERVEONE
N/A
LG N-Sys
N/A
Group families
Electronics industries
LG Life Sciences
Telecommunication and
LG Electronics
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LG Display
LG Innotek
LG Micron
Hiplaza
Hi Logistics
Siltron
Lusem
Chemical industries
LG Chem
SEETEC
sa Knox
LG Hausys
LG TOSTEM BM
LG Life Sciences
LG MMA
LG U+
CS Leader
AIN
LG Dacom
LG Powercom
DACOM Crossing
CS ONE Partner
LG CNS
LG N-Sys
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V-ENS
Ucess Partners
SERVEONE
LG International
TWIN WINE
monkey house
pixdix
LG Solar Energy
G2R
HS Ad
Twenty Twenty
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LGs focus on marketing investment has already begun to yield results. According to
research conducted by LG, the companys brand awareness in the U.S. market has
increased from 65 percent in 2005 to 83 percent in 2007. This wider recognition has
resulted in improved profits in North America.
Improving Business Portfolio
As part of its efforts to be a highly profitable organization, LG plans to reorganize its
business portfolio during the next five years. This includes reorganizing business units
and divisions, expanding outsourcing and participating in new businesses such as
energy, B2B solutions and healthcare.
Through its reorganization to improve both its growth and profit, LG expects to
achieve at least 10 percent sales growth, 6 percent profit margin, 4 times asset
turnover ratio and 20 percent ROIC. LG aims to increase its ROIC from 10 percent in
2007 to 15 percent in 2008, with the target for ROIC in 2010 at more than 20 percent.
As cash flow has become one of the most critical elements of a companys financial
structure, LG is focusing on improving its cash flow as well as ROIC.
Global Standard
LG has also enhanced its management structure by appointing Reginald J. Bull as
Chief Human Resources Officer (CHO), an Executive Vice President-level position,
last week. Mr. Bull will direct all aspects of ensuring LGs HR policies and systems
are up to global standards.
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As a part of LGs efforts to enhance its position as a global brand and boost
performance, the company has been filling C-suite positions with non-Korean global
leaders who are overseeing marketing, supply chain and procurement.
Last year, the company appointed Dermot Boden, formerly of Pfizer, as Chief
Marketing Officer (CMO); Thomas K. Linton from IBM as Chief Procurement
Officer (CPO); and Didier Chenneveau from Hewlett-Packard as Chief Supply Chain
Officer (CSCO).
With these investments and initiatives, LG expects to achieve its business goals improving both growth and profit - as well as position itself as a truly global brand.
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LG
Political factor
Technical factor
Economic factor
Social factor
Political Analysis:
LG Electronics is the intercontinental Company which has a range of industrialized
Units and sources. The company focus the international market for his product .the
political environment nothing but how the law and government taxation policy
influence an organization .There is a lot of political interaction has integrated in this
business and it has operated between the political and legal factors. This factor may
increase the cost of factor some time it decrease the product cost. The LG electronics
facing lots of problem while its production and exporting goods to the overseas.
Economic Analysis:
LG has a very big competitive market in world and it have constant development in
their innovation in electronics equipment, secondary products, planned process of LG
etc.. it have leads to sell goods to other countries . The LG contribute the world wide
stock market and money market also. The LG have well and strong economic source
and it has capable of introduce some new technology to the electronic market. LG
leads the electronics market with enormous technology and economic resource. The
below the table shows the financial highlight of LG electronics. The sale of the
company is constantly increase the last seven year it possible by the good economic
status
Technological Analysis:
The LG has more technology shock towards its electronics product. In every
manufactured goods in LG they improve their technology and they became a first
world exporter of the country. The LG has a huge technology like LCD, plasma TV,
Games and, Laptops, Videos, CDMA Mobile phones with a number of features. The
challenger cant beat its clear imagery their technology towards its innovation of
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product. The 3D Plasma TV, Camera with massive features like clear images and slide
activities, high battery etc..
The LG introduce lots of new technology to the digital world such as This business
group has entitled more quality product and services to the customer. it has introduced
lot of technology in every business group of product. Recently the LG has introduced
3k model of Camera which has lot facilities and clear images. It is a exiting product to
the market. and also the company has introduced more innovative product like 3D
products, professional cameras, Blue ray Disk, increasing network services etc.. The
LG has lead its technology and it introduce number of products with exclusive
features to the market.
Socio-cultural Analysis:
LG Corp has introduced the number of product to the different customer into the
society. Mainly it has introduced for easy usage with several option of different user.
It has introduced to the delighting product to the customer. The LG product such as
laptop, various electrical products, mobile devices, iPod, ipad, financial services,
network system etc. So it has changing life style of the LG user. LG increase its
ethical standard contributes in Research and development and health of the
organization. It also leads to image of the country.
LG creates its employment opportunity: After the 2009 the LG has creates a more
product services and sales growth. It improve its manufacturing process to various
countries. So it creates a employment opportunity to the country. it develop career
expectation to the people and they able to recruit a more number of peoples and it
leads to employment opportunity and life style changes of the people. LG product has
a number of user form 6 years to 60 years of the people. So in every generation it
creates a lot of life changes and life expectancies of the product.
LGs New Customer and New Geographies:
At presently, LG has concentrated the end user of its consumer. The Company has
introduced lot of technologies and it has followed by their competitor. The LG has
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Promotion:
The LG different product has a different range of effects and it has many offers it
depends upon the product range and products. The LG has provided a different
Advertisement to the different countries of same product, because the people and
customer views and culture will be different into a various countries. The
advertisement and promotion strategy has been formulated by LG management to
increase its sales growth by nature.
Product:
The LG corp. has a product portfolio. There is a number of product and brand images
among the LG and it has more effective strategies towards its business. There is 3
business groups and it has increased its product services to the market and it increase
its effectiveness of networking system. The product has segmented as electronic
goods, financial services, networking system, health science R & D etc.. The different
product has a different ranges and quality effective towards its customer.Physical Evidence:
The LG has increased its infrastructure at every movement. It has several showrooms
and retail market to increase its sales growth and it should impress the customer to
buy the product. Hope it make a enormous physical quality to the LG. The every
movement of LGs workstation has increased its quality range in infrastructure facility
and it have more stylish in nature. It has increased its profitability in hardware,
software and networking system.
Competitive Strategy of LG:
This study has formulated the Porters competitive strategy. The LG Company has lot
of competitor and it has a lot of strategy to leads its competitor market. The
competitive strategy has concerned the lower cost strategy and the differentiation
strategy.
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Growth Strategy:
There is a diversified market in the strategy. The LG Corp has horizontally increased
their product to the market. Day by day company has expanded in business growth by
the way of increasing product segmentation and various product services. The LG has
a wide market towards its market and it has increased its growth strategy towards its
business. The Concentrated in the wide range of activities and it has increased its
strength and effectiveness in their price and markets. They are diversified their market
by improving both related products and unrelated products like life science, financial
services.
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Recommendation
The analysis of LG has comprises that it has more quality services and market
sustainable capability towards its business. The company still its has some unlike
movements in some markets. The LG must improve its price strategy and promotion
strategy at the movement. The LG announces the core capability and environment
development product to develop in a certain level. This makes LG a wide brand image
of the product. Even though LG employee was a many skills and talented to increase
its innovative technological products to customer. But still there is some lacking into
the marketing mix like pricing strategy and promotion strategy to reach the customer.
In future the LG must improve its pricing strategy like to cut the cost of the exiting
product by the way of minimizing its process and it must increase time utility. There
is a many competitor has arise for LG product. So the technology has concerned it
should increase to implement in timely manner. This will increase to capture a more
market in future. I hope the LG electronics and other components have more
capability to reach their customer.
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CONCLUSION
The review has explained about the Macro environment analysis and Marketing mix
strategy. It comprises the LG future development and this review has provide more
detail analysis about the LG Corp. I hope in future the LG has a very good capability
and sustainable maintenance in sales growth. The LG has entered into the more
related and unrelated products into the market. This is a good beginning of LG to
increase its market capability to its wide ranges.
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BIBILIOGRAPHY OF REFERENCES
BOOKS:
P. A. JOHNSON: ECONOMICS OF GLOBAL TRADE AND FINANCE
PUBLISHED BY MANAN PRAKASHAN MUMBAI, 2012
OTHER SOURCE OF DATA :
1. OTHER WEBSITE
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