LG rises, then soars, from Goldstar's ashes

The rebranding led to one of the most dramatic corporate turnarounds in the history of consumer electronics

MATT HARTLEY
Globe and Mail

"One must use new wineskins for new wine."

Yong Nam appears almost grandfatherly as he leans back in his chair and translates an old Korean saying.

In 1995, Mr. Nam was one of a handful of top executives at Goldstar Co. who met to decide the future of the Korean electronics manufacturer on the eve of the digital revolution.

They faced the daunting challenge of shedding their company's reputation as a budget producer of cheap televisions and air conditioners. After much wrangling, the Goldstar name was laid to rest in favour of a new moniker, LG Electronics Inc.

That rebranding was the first step toward one of the most dramatic corporate turnarounds in the history of consumer electronics, changing both the proverbial wine and wineskin of the company.

Today, Mr. Nam is the chief executive officer of LG and finds himself leading the company through another seismic shift as it moves closer to becoming a world-leading cellphone maker.

"We want to be perceived as having very stylish design and very smart technology," Mr. Nam said in an interview with The Globe and Mail during a brief Canadian visit.

"Whether it is mobile phones or appliances or TVs, those products have to contain those two critical elements."

Since Mr. Nam took control of LG last January, shares of the company have nearly tripled in value. Profit shot up to $634-million (U.S.) in the first quarter of 2008 from $184-million in the first quarter of fiscal 2007.

Yesterday, LG announced that, in 2007, its Canadian division generated more than $1-billion (Canadian) in annual revenue for the first time. Global sales reached nearly $44-billion (U.S.).

In Canada, LG has gone from being a "push" brand retailers once persuaded consumers to purchase to a label associated with everything from energy saving washing machines to flat screen televisions and touch screen smart phones.

According to research conducted by Millward Brown, the company's unaided brand awareness jumped from 27 per cent to 48 per cent in the past 18 months.

It is the mobile division that is attracting the most attention from analysts, as the company continues its climb through the rankings in global cellphone market share. LG's mobile division now accounts for almost 40 per cent of the company's revenue.

In the first quarter of this year, LG sold a record 24.4-million cellphones, more than the 22 million world No. 4 Sony Ericsson Mobile Communications AB projected it would sell during the same quarter.

With a slew of new touch screen cellphones such as the Venus recently hitting the market, LG has its sights set on leapfrogging embattled Motorola Corp. to become the No. 3 handset maker by the end of the year, trailing only Samsung Electronics Co. and Nokia Corp.

LG's plan to avoid becoming the next Motorola - which has struggled financially after failing to find a follow-up to its hit Razr phone - stems from Mr. Nam's insistence that LG executives focus on consumer trends.

"Nobody can dictate the market," Mr. Nam said. "Consumers have lateral choices and we have to win over those choices. We have to dig and observe and find all those insights, which needs to be reflected in our products, service, design and everything."

For Mr. Nam, who formerly headed up the company's telecom business, convenience is key to drawing in new users.

When he was helping to design ez-i - one of the first mobile Web services - Mr. Nam concentrated on limiting the number of clicks it took for users to find the information they were seeking. Each additional click would frustrate and turn away 20 per cent of users, he said.

"Whether they tap into the Internet or they want access to anything from music downloads or video downloads or chatting, it should be easy," he said.

For now, the biggest challenge facing LG is the tumultuous economic situation in the U.S., a key market for the company and one that Mr. Nam is following closely.

"Until now, we were not that hard hit as opposed to some of our competitors," he said. "However, our growth has slowed down a little bit."