LG Electronic is now facing a hard time in their management. South Korean Online media, Pitchone, recently reported an interesting analysis. Let us introduce this.
The flagship smartphone device G5 have almost failed in the market. Even the company showed profit around USD500Million on 1st quarter this year, it was because of the sales from CE(Customer Electronic) and TV sets. The smartphone device division have shown around USD200Million deficit. That means that LG electronics are facing a tough challenge.
Why is this happening? It is because of the Chaebul(Korean style conglomerate) HR Style. As the management power of Chaebul are being passed on power to their 2nd or 3rd generation’s descendants, the CEO and/or General Manager of a company are designated to a retainer such as the employees from Group chairman support office.
LG Group itself are controlled by the Koo dynasty. The ex-CEO of LG Electronics, Mr Yong Nam, was working as the employee in Group chairman support office. Current president of LG Electronics, Mr. Jun-ho Cho, is also from similar background.
Some might say that what matters with background. But you need to remember one thing. They were used to work in the environment where they summarize the status as a report and/or powerpoint slide and making the logic for the communication only. Actually the money comes from Sales work that is being operated like a creature.
They were fond of recruiting the people from the major strategic firms. The major strategic firms can draw beautiful pictures but they had no action power. Accenture, Mckinsey, BCG, and other firms can draw a direction well, but the action in the actual market is different issue. LG electronics were facing the problem.
The problem occurred as the late participation in smartphone market in the year 2010. One of the major consulting firm advised them to drop Smartphone manufacture. Even LG electronics made the first touch screen device in Korean market and Smartphone device earlier than Samsung, the company have missed the timing. The G5 have failed also. And they are preparing a big investment for the launch of V10 model this year.
But if they fail again, it will be a disaster. One of Korean press reported today that the company started to cutting off dispatch program for the employees over the age of 50. This might be the beginning of failure.