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LG wants local managers to aid growth

By Liu Baijia (China Daily)
Updated: 2006-04-20 07:09

LG Electronics will promote more people to managerial posts in China from its local staff as part of the localization of its business in the country.

Nam K. Woo, president of LG Electronics China, said yesterday in Beijing that a key aim was to have 80 per cent of managerial jobs taken by Chinese employees. Currently all managers are Korean.

"We want to make China a strategic base for our business so we must be a leader not only in sales, but also in research and development and in localization," said Woo.

A low percentage of local managers is believed to be a disadvantage for South Korean companies because of the higher cost of employing expatriate Koreans and the difficulty in adjusting in China.

Park Rae-Jeong, senior economist with the LG Economic Research Institute, said South Korean companies have problems finding local staff because there are few Korean speakers in China.

Even those who speak Korean are language majors with little business or technological background.

Koreans can communicate with their colleagues at the firm's global headquarters in Seoul, something that helps decision-making.

However, as the South Korean giant tries to build up the firm in China, localization of some management is necessary for its future growth.

The company had sales of US$10 billion last year in China, along with 13 factories and 38,000 employees. This represents more than half of the firm's total's 72,000 workers.

It has even built a twin-tower building in Beijing, similar to its twin-tower global headquarters in Seoul, as a gesture of its ambitions in China.

The electronics giant, facing tough competition in low-end electronics sectors in China, such as traditional CRT TV sets and single-door refrigerators, has started to make major changes in the way it operates.

Tae-kil Kang, president of the consumer electronics and information technology marketing division, said his company would spend 60 per cent of marketing resources on mobile phones in the future.

A further 30 per cent would go on high-end electronics products such as plasma and LCD TV sets, side-by-side refrigerators and notebook computers, with the remaining spent on other products.

Yesterday, LG Electronics released more than 40 new models onto the Chinese market, including a 50-inch plasma TV set, a 71-inch gold-plate plasma TV set and a 55-inch LCD TV set.

The company is employing a "blue ocean" strategy in which it will look to develop new markets rather than compete in established ones.

LG has also divided its handset business and its electronics unit to give them each more authority in pricing and marketing.

Woo, who has just started in his new post, has changed the company's marketing organization from a centralized one to one with five regional headquarters. They will be able to decide their own marketing strategies.

Kang said his company aimed to improve its market share in China this year with new products, more aggressive marketing and organizational changes.

(China Daily 04/20/2006 page10)