Diversification Strategies Case Study

LG Chem: The Changing Strategies of the Chemical Company

OR

Abstract:

Inspite of profits of $883 million from the petrochemical business in 2004, LG Chem, the largest chemical company in South Korea, was apprehensive about the future profitability of the unit, and decided to increase its focus on the digital manufacturing unit to generate more revenues for the company. LG Chem planned to increase the revenues of the digital division from $1.2 billion in 2004 to $4.9 billion in 2007, and expected the division to account for 35% of the total revenues in 2007, up from 15% in early 2005.

The case highlights the paradigmatic shift in the business strategy of LG Chem in its effort to become a leading IT component provider in the world.

Pedagogical Objectives:

• To understand the dynamics of ‘vertical integration’
• To understand the business transformation of LG Chem from the petrochemical business to electronic goods manufacturing
• To discuss the viability of LG Chem’s business model and its sustainability in the long-run
• To understand strategic concentration and divestment of resources to maximize revenue.

Keywords : LG Chem; LG Group; No Ki Ho; LG Chem’s new strategy; LCD TV market; Consumer Electronics Association; Diversification Strategies Case Study; Industrial materials division