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.