LG 2007 Annual Report Download - page 10

DEAR SHAREHOLDERS, CONSUMERS, BUSINESS PARTNERS, AND EMPLOYEES,
I am pleased to report that the year 2007 was a solid year for LG Electronics as the
passion and performance of our employees yielded concrete gains in profitability. Our
home appliance and mobile phone businesses were exceptionally successful in providing
our consumers with superior value by delivering stylishly designed smart appliances and
mobile phones. Our display business also achieved an impressive turnaround during the
second half of the year as improved market price positioning and steady cost reductions
helped put it solidly back on the path to profitability.
Looking at the numbers, we generated incremental revenue growth as non-consolidated
sales rose just over 1.4% to KRW 23.5 trillion. Efficiency gains helped lower selling and
administrative costs and overcome a higher cost of sales, boosting operating income by
5.5% to KRW 564.6 billion. On the non-operating side, a strong performance by our
equity-method investees helped net income rise more than fourfold to KRW 1.2 trillion.
The response from the investor community was overwhelming, sending our share prices
soaring over 80% for the year from KRW 55,000 to KRW 100,000, far outpacing the
performance of our global top-tier competitors.
While our 2007 results are clear proof that our renewed focus on profitability is already
paying dividends, we still have much to do if we are to achieve our goal of entering the
ranks of the world’s top-three consumer electronics companies by 2010. In last year’s
report, I outlined six strategic initiatives that the executive team and I believe will enable
us to meet our ambitious goal. To recap, the initiatives are: 1) manage for ROIC as well
as growth, 2) structure our business portfolio for leadership, 3) base strategies on clear
segment, target, and positioning insights, 4) invest in a clear, global identity, 5) innovate
in design as well as technology, and 6) develop a truly global organization.
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.
PRODUCT PIPELINE HEALTH To have a healthy
pipeline, our current products must be aligned
against clear target segments and our positioning
must reflect true differentiation. We must also
have clear technology and product road maps
through multi-generational product planning
in all our businesses.
CHANNEL COLLABORATION HEALTH Volume- and
transaction-based channel relationships are signs
of an unhealthy relationship. In addition to overall
channel coverage and in-store share, we need to
have robust multi-year partnership arrangements
with our partners, including collaborations in product
planning, promotions management, and all-around
information sharing.
CONSUMER RELATIONSHIP HEALTH Every
interaction with our consumers is a “Moment of
Truth”—an opportunity to make a positive
impression. We need to make sure that we are
constantly listening to and acting on what our
consumers tell us to ensure that each moment of
truth meets and exceeds their expectations.
BUSINESS PORTFOLIO HEALTH We are in some
of the most rapidly changing industries in the
world where growth, profitability, and competitive
dynamics can change in just a matter of months.
We must succeed in markets that are big and
growing and countries where we have more profit
opportunities. We must also have a clear picture of
what our portfolio should look like in the future and
shape it through timely action, including exiting
businesses as necessary.
BRAND HEALTH There is no question that our global
presence has made us one of the world’s most
recognized brands. The question is, are we projecting
a clear identity that resonates with consumers?
We must create a brand consumers are passionate
about and willing to pay a premium for.
ORGANIZATIONAL HEALTH Our business
performance ultimately depends on the quality
of our people. We must have a more talented and
motivated organization than our competitors
if we are to surpass them.
FINANCIAL HEALTH When we are healthy in the
previous six areas, we will naturally be in good
financial shape. That said, we must set
appropriate goals and quantify them as key
performance indicators so we can measure and
track our progress to ensure that we have the
correct management systems in place and that
they are working correctly.
It was exactly 50 years ago this year that
LG Electronics was established in Korea and
began work on the nation’s first radio set. A lot has
changed since then, and we have weathered many
challenges along the way to become a truly global
company doing business in over 120 nations.
Today, as we begin to take a closer interest in the
health of our businesses, we will be laying the
foundation for an even more successful future as we
enter our sixth decade in business. I look forward
to working with our talented management team to
position the company to achieve its full potential in
2008 and beyond as we continue to create greater
value for all our stakeholders. We hope you will be
among them.
YONG NAM
VICE CHAIRMAN & CEO
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