LG Operation Strategy Final Report

Domestic competition led them to restructure their operations in early ass, merging the two major business heads under a new name -? LEG Electronics. In 2006, they launched the now popular “Blue Ocean Strategy’ to become one of the top 3 in the mobile handset market.

However, heir strategic alliance with Microsoft did not give the dividends they expected. In other Segments Of the consumer electronics industry, they stand in the top 4 globally. Lag’s consistent revenue patterns can be attributed to their operational strategy, by means of which they have been able to keep costs down.

In 2010 LEG entered the smartened industry. Following is a division wise breakup and the financial performance of the smartened division of LEG. Fig. 1 Division wise breakup Fig. 2 Financial Performance of smartened division of LEG Group 4 Final report for Proof.

Kimono Kim Cassia MBA page 12 SOOT Analysis Strength Most of all, LEG Electronics has as many global network in sales and manufactures as Samsung Electronics. Its brand awareness can stand even with Samsung Electronics.

For research and development, LEG Electronics maintains one of the most advanced technologies in smartened and home appliance. Its smartened and home appliance can compete against Samsung Electronics. Namely, strength in technology stems from robust research and development activity. 2. Weakness Due to huge spending in marketing promotion, its profits can plummets significantly in case sales amount is not sufficient.

More importantly, because f inappropriate management philosophy towards smartened industry – consulted by McKinney – LEG Electronics has small shares in global smartened market. And we can speculate that inappropriate management direction had been caused by high turnover in management.

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3. Opportunity Increasing demand of high technology products, being lowered entry barriers to new regions, PTA, and fast growth of emerging economies are a critical chance for LEG Electronics to thrive in the future. But, those opportunities can be applied to other competitors, too. . Threat Severe competitions for new technology will be one of biggest burden to LEG Electronics in smartened and home appliance. For examples, during a few years, we cannot find innovative advances in smartened. On top of that, LEG Electronics should catch up two giant players: Apple and Samsung as soon as possible in smartened industry. If LEG Electronics cannot overtake them in a few years, its future might be eve similar to Sony. In addition, LEG Electronics needs to consider China’s chase, for example Axiom.

With cheaper price, Chinese competitors are pushing LEG Electronics in order to make LEG Electronics a loser in smartened industry. Cassia MBA Page 13 Evolution of Supply Chain from Mobile phone to Smart phone For studying the past changes in operational strategy of LEG we chose one of the factories in the Shagging province of China and compared the change of operation strategy from the days of mobile phone to smart phones. LEG, in 2001-2003, built two mobile phone factories in Shagging, the coastal province of China. 90% of its products were for export.

The mobile phone factories in China could accomplish the end-toned process of mobile phone production, with the following process: Fig. 3 Pre smartened operational flow LEG used the most cost-efficient way to purchase the components. For high alee-added components like chips LEG imported from Korea and other countries; for the general components like shell or battery LEG purchased from China’s local providers and for the packaging materials like box or cover, LEG purchased from nearby suppliers. But due to multiple supplier sources the problem of LEG was delivery of material; the too long time became the bottleneck of the whole process.

Therefore, ensuring the delivery in time became a key challenge. Aiming to improve the process of the factories in China, LEG conducted the revolution in 3 aspects: Cancel Utilize HUB to delete the unnecessary logistic nodes and decrease frequency Of logistic. Change Change the processes during the supply chain and reinforce the shortage nodes. Collaborate Combine the storage with the management, focus on core processes and outsource the unprofessional processes. Page | 4 The diagram below shows the detailed change of the supply model of Lag’s factory in China Fig. Post smartened operational flow After the revolution, because of the hub, Lag’s whole lead time of the process before the manufacturing time decreased from 40 hours to about 20 hours, the efficiency sharply improved. Understanding SCM and ERP in LEG 1. Supply Chain Management The ultimate aim of Supply Chain Management is to provide higher quality consumer service and in the mean while cutting down the inventory cost and unit cost. Supply Chain includes Buying the products, Movements of raw materials, Organizing manufacturing, Supplier management.

Then the small change in customer demand it leads to bigger change in manufacturing unit this is called bullwhip effect. Symptoms of bullwhip effects are excessive stock of raw materials. Poor commodities forecast, insufficient or excessive capacity utilization and poor services to customer. These are the effect sand symptoms. SCM in LEG had been started in late ass. The SCM in LEG needs various manual certifications in each stage of operation. The SCM is implemented and then training is given to top management first and then training is provided to the internal staffs and also for its partners like vendors and suppliers.

After that the company found to operate a smooth supply chain in raw material stage, work in process and finished good stage LEG is one of the players in the competitive electronic market and there are lots of good companies in the market and LEG has competitive advantage in supply chain management. It has competitive advantage in cost control because heir inventory cost is very less. Their inventory cost is less because they are placing fewer orders in order to reduce the cost of manufacturing. LEG avoids the cause of bullwhip effect by accurate demand forecasting, operating short Final report for proof.

Kimono Kim page | 5 lead time, segmenting product line, reducing price fluctuation to local market. LEG has increased their productivity by 10 % with the use global Supply Chain Management and company checks the current status of product shipment and company has lots of options to reduce the inventory cost with the help of Supply Chain Management. A Company maintains “Elasticity’ and “Malleability’ to match their supply and demand for their products. Company still takes more initiatives to reduce the cost of manufacturing; inventory costs with the help of Global supply Chain Management.

In LEG management gives more importance to Supply Chain department, in every unit company has one supply chain manager and he or she is the full responsible of that unit supply chain. In their company website they announced that company has reduced 1. 8 % manufacturing cost with the help of effective supply chain; hence company has effective supply chain and company has competitive advantages in their filed and company stands number one position in the market with the help of proper Supply Chain Management.

Company forecasts very well and avoids the bullwhip effect in supply chain. LEG does regular market research for Bullwhip effect and company uses the resource properly and wisely. Company believes in partnerships for better supply chain process and company has chosen proper inventory control method to avoid excessive production cost. Hence it can be said that in reducing production cost and improving productivity Supply Chain Management plays vital role. If very organization use Supply chain Management they can also reduce the manufacturing cost. . Enterprise Resource Planning ERP is business term for the wide set of actions supported by multi module application that helps the organization to manage various functions and manage with a particular software and stored data with the help of memory. Various functions like purchasing, order placing, supplier details, customer details, guest details in hotels and operations. ERP also includes application modules like human resource management and financial. Typically ERR system integrates with a relational database system.

ERP is a consistent platform it guarantees that there is no inconsistency in the information that is processed in the organization. ERP is essential for every firm in the world to get competitive advantage and it is necessary to train the people to use the ERR. The most important advantage of Enterprise Resource Planning is its accounting applications. ERP can integrate revenue information, profit analysis and cost of manufacturing and other financial. If a company wants to compete with global players, company should start implementing ERP.

With use of ERP any organizations can get reduce the cost and lots of time will e saved. ERP in LEG Enterprise Resource Planning of LEG gives clear idea about their operational strategy. Currently company uses ORACLE ERP, they using this new ERP on August 2009. In LEG every year company spends $ 4 billion for their ERR implementation and giving training for their workers. They implemented ERP when they want to cut reporting and analysis period, improve performance, and reduce maintenance costs and to achieve complete visibility into global stock and marketing and sales costs.

After implementing ERP their company moved to third place in Plasma TV market, and they positioned at 5th place in cell phone segment. Company maintains their all information in ERP. They are updating each and every outgoing and incoming raw material and finished goods &unfinished goods. Company sends message to every department with the uses of ERR and company Chief IT Manager Mr.. Wang said that by using ERP company reduced their order placing times and order processing time and he added that now company are able to process their Order without errors.

Since LEG is an electronic Group 4 Page 16 company they started using ERP before 8 years now company enjoys the benefits of Enterprise Resource Planning. Company delivers the product in mime they started using ERP because it gives clear cut information all supplies and finished products. With the use of ERP company utilizes their supply chain management and customer relationship management very well. Hence it is said that Enterprise Resource Planning helps company to save the time and to minimize the errors henceforth it leads to improve the performance Of organization and increases the profit of the organization.

Challenges and Recommendations 1. Inability to find good partners – LEG has traditionally failed to find good partners in both its upstream and downstream supply chain. One of the major reasons for its position in the smartened market is its initial collaboration with Microsoft Mobile SO. As the Windows Mobile SO tanked it took LEG with it. And LEG lost important first mover advantage. Similar is the story of its collaboration with Maxilla in 2012. Recommendation – It is imperative that LEG chooses its SCM partners carefully.

An example for the same is their collaboration with Google which resulted in Nexus. At kick units a month, it remains Else’s highest selling smartened. 2. Timing of product release – Samsung simultaneously launches products in arioso price ranges. Then they pour their products out in 150 countries worldwide through a tight and well-established supply chain. On the other hand, LEG held a large-scale promotional event for GO in New York in early August, but began selling the product only in mid September. LEG began selling GO in Europe only after October.

Meanwhile, Apple released its phone AS on September 10 and began selling the new phones simultaneously in 9 countries beginning on September 20, and Samsung also began putting its Galaxy Note 3 in shops in October. Similarly, LEG started manufacturing smart ear 6 years after Samsung did. Recommendation -? Timing is everything. In the demand and fashion intensive market of smartness losing out the time race is losing the initiative and market competitiveness. 3. Growing inventory costs – As Else’s smartened innovations are few and erratic, this leads to huge inventory buildup and times and stock shortage at the others.

A more stable market demand will help them stabilize their operations. Recommendation – LEG should continue its move towards Lean Operating. Lean operating systems have four basic principles: (1) elimination of waste ND (2) reduced cost- see LEG and Inventory Management -? now more KIT and demand led, avoid stock piling costs from supply led strategies Group 4 Page | 7 (opportunity costs, waste, dated), the ideas board (cost reduction improvements – savings KICK USED/month) and staff cost cutting (stop overtime); (3) Improved quality – the ideas board (quality improvements) and (4) increased speed and response. . Stuck in the middle – LEG lacks differentiation. It’s not in the premium segment like Apple and Samsung, nor is it in the low cost segment like MicroVAX or Leno. Recommendation – Should they go the Axiom way and mind a niche in hardware or go the Google way and develop a niche in software. Can they be the next big thing in smartened evolution? Can flex screens be the next thing in smartened?

These are the questions LEG needs to evaluate. 5. Growing competition in the sub premium range – There is a slew of low cost Memos around the globe. The competition has intensified with Telecoms providers also getting in the race of MOM. Recommendation – The thing to do is to hang in there.