LG Mergers and Acquisitions (Ch 14)

Here is a short list of notable LG M&A Activity:

It should be noted that LG itself was created as a result of the 1958 merger of Goldstar (electronic products) and Lucky (home products).

In February of 2013, LG announced that they would acquire from HP their web operating system for use with its TV's. The idea is to have a web platform to make the TV's internet-enabled. This is a key competitive parity strategy, most easily achieved with an acquisition.

In December, 2008, LG Chemical acquired super-absorbet ploymer operations from a company called Kolon. This allowed LG Chemical to increase production of certain chemicals significantly.

LG and Strategic Alliances (Ch 13)

LG has long considered strategic alliances to be a key part of their overall approach. Here is one key example:

As I posted before, LG is making a new generation of smartphones featuring curved screens. They employed vertical integration, using their own chemical company to make the batteries and their own screen technology company to make the high-resolution screens. But software and operating systems are not within LG's core competencies, so LG entered into a strategic alliance with Microsoft for the phone operating systems.

This alliance is much more than LG simply purchasing Microsoft technology. The deal involves joint research and development efforts to achieve tighter integration between LG hardware and Microsoft software. It also encompasses an joint investment in marketing the phones. The benefits LG in that they get help marketing the phones and a name-brand operating system. And it benefits Microsoft in that their operating system gets on more phones and makes them at least a parity player with Samsung.

LG Corporate Organization Structure (Ch 12)

LG Is an M-form (Multidivisional) Organization

LG uses a two-dimensional M-form structure, with one dimension being the major functional organizations (i.e., Electronics, HVAC), and the other dimension geographical, where LG subsidiaries operate around the globe.

Figure 1 - LG Functional Organization 

Figure 2 - LG Geographic Organization

LG also uses a corporate organization structure for its core staff:

Figure 3 - LG Corporate Organization 

M-Form is the only logical structure that LG can use as it has numerous divisions that produce a variety of unrelated products. As a global company, it must also create subsidiaries for these companies to operate locally. Despite this independent structure, LG's corporate organization is very strong and is responsible for unifying key processes like supply chain management so that LG can leverage its size and limit the threat of suppliers, for example.

LG Diversification Strategies (Ch 11)

 Main LG Companies

• LG Electronics (LGE) is the main LG company. LGE makes TV's and a variety of electronics. LGE also makes home appliances, which is a diversification strategy
• LG Display is more of a vertical integration that makes displays for other LG companies (LGE, LGT)
• LG Telecom makes smart phones and is another diversification
• LG Chem is mostly a vertical integration. LG Chem makes batteries and other components for LGE and LGT

Here are two very distinct diversifications for LG:

• LG Life Sciences: This is a pharmaceutical company.

• LG Solar Energy: This is an HVAC solutions company, with emphasis on solar panel technology.

What are the possible rationales for these diversifications?

LG has global reach through many retailers and corporate relationships. Sharing customer service and marketing activity could represent a significant economy of scope to develop these lines of business.

As previously noted, LG manages all its suppliers and purchasing centrally. Putting these lines of business together, to the extent that many similar raw materials and logistics are needed, gives LG tremendous power over its suppliers. 

Leveraging this diversification requires a high level of organizational capability, which LG is known to have. So diversification may be a competitive advantage for LG due to their strength of organization.