At LG Electronics, We Love to Meet Consumers. We Listen Closely to Their Needs and Desires
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WHEN LG EleCTRONICS MEETS CONSUMERS At LG Electronics, we love to meet consumers. We listen closely to their needs and desires. Then we work to create the world’s finest products. Products that deliver more convenience. More satisfaction. And a brighter, more hopeful future. Isn’t it time we got to know each other better? At LG Electronics, we love to meet consumers. We listen closely to their needs and desires. Then we work to create the world’s finest products. Products that deliver more convenience. More satisfaction. And a brighter, more hopeful future. Isn’t it time we got to know each other better? WHEN CONSUMERS MEET LG EleCTRONICS What do you look for in a product? Are you easily seduced by sleek styling? Does reading the specs excite you? Or do you seek out products that exemplify both style and substance? At LG Electronics, we are creating products with stylish design that is second to none. But that beauty is more than skin deep. The real soul of our products is the smart technology that enables them to deliver simply amazing user experiences. Combined together, they create a perfect harmony that fits your life. That is why life’s good—and getting even better—with LG. 01 CONSUMERS + LG ELECTRONICS 11 FAITH + LEADERSHIP 41 IMPRESSION + PERFORMANCE 51 STYLISH DESIGN + SMART TECHNOLOGY 56 FACTS & FIGURES 60 GLOBAL NETWORK 62 MANAGEMENT / BoaRD 63 CORPORATE MILESTONES 64 FINANCIAL STATEMENTS Looking for the finer things in life? With stand-out products that reflect your lifestyle and aspirations, LG puts you in a class all your own. 02 + 03 Looking for the ultimate life makeover? With contemporary products that make your home comfy, fresh, and beautiful, LG makes you the center of attention. 04 + 05 Looking for a little fun? With sophisticated products that bring you and your loved ones together to share, play, and relax, LG puts you at the center of excitement. 06 + 07 Looking for the next big thing? With trend-setting products that keep you entertained, informed, and connected, LG puts you on the leading edge of cool. 08 + 09 CLASSY. CHIC. WOW. HIP. WHATEVER WAY YOU WANT TO PUT IT, LIFE’S GOOD WITH LG. THE PERFECT HARMONY OF AND IT IS GETTING EVEN BETTER WITH... CREATING GREATER VALUE FOR EVERY STAKEHOLDER IS OUR ONE AND ONLY FOCUS. CEO MESSAGE 12 + 13 DEAR SHAREHOLDERS, CONSUMERS, BUSINESS PARTNERS, AND EMPLOYEES, PRODUCT PIPELINE HEALTH To have a healthy ORGANIZATIONAL HEALTH Our business pipeline, our current products must be aligned performance ultimately depends on the quality against clear target segments and our positioning of our people. We must have a more talented and I am pleased to report that the year 2007 was a solid year for LG Electronics as the must reflect true differentiation. We must also motivated organization than our competitors have clear technology and product road maps if we are to surpass them. passion and performance of our employees yielded concrete gains in profitability. Our through multi-generational product planning home appliance and mobile phone businesses were exceptionally successful in providing in all our businesses. FINANCIAL HEALTH When we are healthy in the previous six areas, we will naturally be in good our consumers with superior value by delivering stylishly designed smart appliances and CHANNEL COLLABORATION HEALTH Volume- and financial shape. That said, we must set mobile phones. Our display business also achieved an impressive turnaround during the transaction-based channel relationships are signs appropriate goals and quantify them as key of an unhealthy relationship. In addition to overall performance indicators so we can measure and second half of the year as improved market price positioning and steady cost reductions channel coverage and in-store share, we need to track our progress to ensure that we have the have robust multi-year partnership arrangements correct management systems in place and that helped put it solidly back on the path to profitability. with our partners, including collaborations in product they are working correctly. planning, promotions management, and all-around information sharing. It was exactly 50 years ago this year that Looking at the numbers, we generated incremental revenue growth as non-consolidated LG Electronics was established in Korea and sales rose just over 1.4% to KRW 23.5 trillion. Efficiency gains helped lower selling and CONSUMER RELATIONSHIP HEALTH Every began work on the nation’s first radio set. A lot has interaction with our consumers is a “Moment of changed since then, and we have weathered many administrative costs and overcome a higher cost of sales, boosting operating income by Truth”—an opportunity to make a positive challenges along the way to become a truly global 5.5% to KRW 564.6 billion. On the non-operating side, a strong performance by our impression. We need to make sure that we are company doing business in over 120 nations. constantly listening to and acting on what our Today, as we begin to take a closer interest in the equity-method investees helped net income rise more than fourfold to KRW 1.2 trillion. consumers tell us to ensure that each moment of health of our businesses, we will be laying the The response from the investor community was overwhelming, sending our share prices truth meets and exceeds their expectations. foundation for an even more successful future as we enter our sixth decade in business. I look forward soaring over 80% for the year from KRW 55,000 to KRW 100,000, far outpacing the BUSINESS PORTFOLIO HEALTH We are in some to working with our talented management team to of the most rapidly changing industries in the position the company to achieve its full potential in performance of our global top-tier competitors. world where growth, profitability, and competitive 2008 and beyond as we continue to create greater dynamics can change in just a matter of months. value for all our stakeholders. We hope you will be We must succeed in markets that are big and among them. While our 2007 results are clear proof that our renewed focus on profitability is already growing and countries where we have more profit paying dividends, we still have much to do if we are to achieve our goal of entering the opportunities. We must also have a clear picture of what our portfolio should look like in the future and ranks of the world’s top-three consumer electronics companies by 2010. In last year’s shape it through timely action, including exiting report, I outlined six strategic initiatives that the executive team and I believe will enable businesses as necessary. us to meet our ambitious goal. To recap, the initiatives are: 1) manage for ROIC as well BRAND HEALTH There is no question that our global presence has made us one of the world’s most as growth, 2) structure our business portfolio for leadership, 3) base strategies on clear YONG NAM recognized brands. The question is, are we projecting VICE CHAIRMAN & CEO segment, target, and positioning insights, 4) invest in a clear, global identity, 5) innovate a clear identity that resonates with consumers? We must create a brand consumers are passionate in design as well as technology, and 6) develop a truly global organization. about and willing to pay a premium for. As we continue to press ahead with these strategic initiatives in 2008, our focus will be squarely on the overall health of our businesses, not on short-term performance. Specifically, we will be paying close attention to the health of our product pipeline, channel collaboration, consumer relationships, business portfolio, brand, organization, and finances. Let me briefly go over these seven measures of health. 14 + 15 Consumer electronics is one of the world’s most 1. MANAGE FOR ROIC AND GROWTH Growth is RISING challenging businesses. Over our 50 years in the good. Growth with profitability is superior. While ABOVE industry, we have faced and overcome countless some might be satisfied with being a global leader challenges to emerge as one of the world’s leading in revenue, we aim to be a leader in shareholder ALL names in electronics. Today, the following six returns, profitability, growth, revenue, and market initiatives are guiding us as we refocus on the share—in that order. Today, our key performance CHALLENGES greatest challenge of all—creating value for our indicators emphasize cash flow and return on shareholders, consumers, partners, and people— invested capital, keeping us focused on creating as we take the next step toward becoming a global shareholder value as we aim for an ROIC of 20% top-three consumer electronics company. by the end of the decade. YOUNG HA LEE SIMON KANG BB HWANG SKOTT AHN President & CEO President & CEO President & CEO President & CEO Digital Appliance Company Digital Display Company Digital Media Company Mobile Communications Company 16 + 17 2. STRUCTURE OUR PORTFOLIO FOR LEADERSHIP as the middle market is squeezed by competition a clear identity that we believe will resonate with consumers even more passionate about our brand. We operate in over 120 countries today, competing in from above and below. Our clear segment, target, consumers around the globe: LG is a refreshing roughly 30 product categories. We are already a clear and positioning (STP) insights are now guiding us as brand with products that make you feel sophisticated. 6. DEVELOP A TRULY GLOBAL ORGANIZATION To leader in a number of these fields. In the ones that we create consumer value with aspirational and be one of the world’s top companies, we have to have we are not, we are now making strategic, objective premium products to win at both ends of the market.