LG Electronics Targets $600 Mil. Net Sales in S. Africa

padangekspres.net-Regional Chief Says LG Aims to Be No. 2 Spot in TVs, Mobiles

By Kim Yoo-chul
Staff Reporter

LG Electronics aims to reap $600 million in net sales from its South African unit, which covers seven African countries, this year.

In an interview with The Korea Times, Peet Van Rooyen, head of LG Electronics' South African Corp. said the company will take the No. 2 spots in both handsets and LCD TVs in all seven by 2010, up one-notch from the current No. 3 position.

In 2009, LG's TV share was 18 percent, while that of mobile phones was 14 percent, according to the company.

"LG Electronics' South African affiliate is aiming to get $600 million in net sales this year. I am confident to increase sales and strengthen brand images in this market," Van Rooyen said, Monday.

"LG will keep the No. 1 position in air-conditioners, microwave ovens, front-loading washing machines and home theaters. We are also in the process of developing a new business channel for the business-to-business (B2) segment," he added.

"Now, South Africa's infrastructure is catching up and more people are demanding our electronic consumer products. We are seeing South Africa as an important hub for an eventual expansion into sub-Saharan Africa."

The official, who was promoted to his current position, is the first non-Korean head to lead one of LG's 80 overseas corporations.

The promotion of Van Rooyen, who has been with LG Electronics South Africa for six years was part of LG's global strategy to have subsidiaries led by local people with local market knowledge, thus ensuring it remains locally relevant and a stronger globally competitive company.

LG Electronics CEO Nam Yong recently said massive growth in electricity supply in South Africa is making it a prime target for LG to weather the global financial downturn

Referring to language diversities and variable market situations, Van Rooyen said the promotion was clearly the right decision.

"South Africa has some extremes in market in terms of various consumer appetites and 11 official languages. Therefore, having local market knowledge and local culture knowledge is especially important for the market," the executive said.

The South African affiliate is expecting the flat-screen television market to see the most benefit from the upcoming World Cup, followed by handsets and home appliances such as washing machines and freezers.

"Upcoming visitors from Europe, South America and other African countries will lift TV demand capitalizing on hospitality industries and public areas. Even local consumers are expected to upgrade their TV's to take advantage of the great event as well," he said, declining to give specific numbers.

Better SCM Structure

The corporation has created a new supply chain management (SCM) team as a logistics part within the affiliate.

"LG's South African affiliate named Matthew Stuart as the chief of the SCM team. The corporation will focus on strengthening sales forecast accuracy and on-time delivery systems," Van Rooyen said.

The stress comes at a time when vulnerability to supply chain hiccups is a key factor negatively affecting the bottom lines of Korean firms that are becoming bigger with more sophisticated products.

Thus, how to minimize risks in their supply chains is everybody’s concern, according to experts, with tasks coming down to handling wide-ranging issues from assessing the right sizes of inventory to fraud.

For LG Electronics, its supply line management carries importance especially in developing and emerging markets including African countries because it has been expanding its global presence.

Its relatively weaker SCM was posing the biggest threat and a chronic headache in saving costs in overseas markets, analysts say.

As for a corporate citizen, the South African affiliate will allocate more of its budget for corporate social responsibility (CSR)-related activities.

"We plan to spend more in CSR activities in the seven African nations. LG had spent $400,000 in the countries, last year," the executive said.

In line with such socially-linked activities, the corporation has been running an individual development system for its workforce, while the unit is helping regular workers get certificates and enroll in leadership programs.

Language Hurdles

The executive said languages could be the biggest factor, hampering big export-driven South Korean corporate plans to expand their overseas footsteps.

"Languages can be a challenge, so it is important to have someone who can act as a source of information. Careful selection of incumbent local team leaders is critical, combined with intensive training on culture and business objectives."

Since 2007, CEO Nam has been pushing to make LG a truly international player by appointing foreigners to its "C-Suite" level positions.

Though some foreign executives haven't adapted well under the ongoing cultural shift due to bad communication between foreign executives and Korean staff, Van Rooyen said, "It's simply a case of utilizing strengths within a team environment to achieve a common goal."

"I have been able to align local market and cultural knowledge and LG Global business culture in LG Electronics' South African unit. This could be achieved in the other markets as well, with the right team combinations."

Nam said the company will replace up to 30 percent of the company's overseas Korean heads with foreign employees to globalize, and give more responsibilities to foreign executives to strengthen the "LG Way."



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