Value Chain Analysis of LG

Value chain is a powerful approach which was developed by Michael Porter under which we analyze all activities which are being performed in a firm and then base of these activities determines that total value which is being created for a customer.

Outbound Logistics, Marketing and Sales, Service and Technological Development prove to be the core competence for LG Electronics.

Technological Development - LG has been extremely successful in the technical designs of their products. LG phones are generally perceived by the customers as mobile phones that have innovative designs and consist of latest technology. This can be proved by the fact that company has won awards such as the ‘red dot’ design award. The major strength of LG products in the technological development is its latest innovations. This is the case for its pioneering touch-sensitive displays in the company’s sound grounding in 3G technology and the overall simplicity and intuitive technology that come with any LG device.

Marketing and Sales, Service – LG has exclusive showrooms and services centers by the name of ‘LG Shoppe’ with branches in almost all the shopping centers across our country. LG has always laid prime emphasis on Customer satisfaction in the development of an effective design innovation strategy. LG’s industrial designs incorporate a balance between concept creation and lifestyle creation, so that, the needs, desire and dream of the customers feature prominently in the overall value innovation process.

Outbound Logistics – For cutting down the cost of the Outbound Logistics, LG has selected software named JDA from JDA amalgamated which is controlling all their Logistic operation by estimating Demand, panning the distribution and transportation. By using this technology, the company has been able to reduce its overall cost of Outbound Logistics by 8 percent. Over the time the company has also established a good dealer network and also have modernized its packaging by packing as compact as possible which appeals good to customer and is also cost effective. The company also have strong transportation network which includes more than 7500 trucks.

Except for the above three, which are the core competencies of LG, some of the other activities are:-

Inbound Logistics – LG has worked a lot in increasing the efficiency of its supply chain management. The activities which come under inbound logistics are material handling, warehousing and inventory control. LG has over the time made all of this operation technologically advanced to improve their inbound logistics. Like for example for the inventory control they are using a system known as Global Digital Logistics System (GDLS) which maintains the complete records of their inventory and takes care of the product lifecycle.

Operations – The operation includes all those activities which are responsible for converting the inbound raw material to the finished output. LG has been trying to increase is operation efficiency by reducing the wastage and increasing the efficiency in their current production. Their major operation advantage is that they have their production units in India itself and what makes LG different from its other competitors is its full commitment to add value to people in the most efficient way by regularly upgrading is operations.

Human Resources – The human resources are the biggest asset for any organization and LG very well understands this fact and hence they have effectively built their HR strategies. They have laid emphasis on making their work place safe and healthy for their employees. Company is also using 360 degree Performance Management system for evaluating the performance of the employees. The company is also giving various employees reward and other benefits to motivate the work force. All this have lead to reduction of the iteration rate of LG from 19 percent to just 6 percent.