Value Chain

An organizational audit for LG Electronics

Value chain

It is a high-level model of how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers. Other words, value-chain analysis looks at every step a business goes through, from raw materials to the eventual end-user. The goal is to deliver maximum value for the least possible total cost .

A company's business consists of all activities undertaken in designing, producing, marketing, delivering, and supporting its product or service. All these activities that a company performs internally combine to form a value chain--so-called because the underlying intent of a company's activities is to do things that ultimately create value for buyers .

Value chain is the one of crucial factor of LG to enhance the product quality of company before offering to customers. It helps LG increases the value of product, creating the image of company and the trust in customers. Value chain can be affected to the price and improve worth of the product to customers. This helps the company develop new products and services in order to satisfy and delight customers and through restructuring and improving business processes to improve quality and reduce costs. However, if the company does not focus on and continues keeping their customers' needs and have not continued to add value into their products and services, they will easy to lose their competitive advantage and market share.

Research into the effect of the environment on workforce productivity and satisfaction has enabled LG to offer further added-value options in its product range. LG uses a number of processes to ensure that it can deliver high levels of service and high quality products. These include research and development of new product ideas and added-value solutions, effective strategies for marketing and sales aimed at specific market segments, quality assurance and quality control procedures to ensure a high level of service and product quality, assessing reliability of suppliers and levels of service to ensure that materials and supplies arrive on time and to a high level of quality, and using research results to develop products. LG has used the data obtained from the market research to develop new products to meet customers' needs.

LG has developed of green products. As the first company in Korea to declare a "Cleaner Environment" in 1994, LG Electronics has a decade-long track record of environmental stewardship. As company's guiding principles, they have established four key eco-design strategies - replacing hazardous substances, enhancing energy efficiency, improving recyclability and reducing use of resources. Moreover, the Environmental Strategy Team has been newly organized under the CTO to be in charge of such tasks as discovering new businesses to reduce GHG emissions and developing technologies for bio plastic production and hazardous substance replacement.

"LG Electronics has voluntarily established greenhouse gas emissions reduction targets and is carrying out various initiatives to achieve these targets in an effort to help mitigate climate change. By 2020, we plan to reduce greenhouse gas emissions by 150,000 tons during the product manufacturing stage and by 30,000,000 tons during the product usage stage. We established and completed a greenhouse gas inventory for all of our facilities in Korea as the first step to achieving these targets. By the end of 2009, we plan to complete a greenhouse gas inventory in thirty-two overseas facilities. A Green IT system will also be utilized to manage greenhouse gas emissions. Moreover, we plan to reduce greenhouse gas emissions by optimizing and increasing the efficiency of production. We also plan to minimize greenhouse gas emissions at the product usage stage by enhancing energy efficiency in our major products by about 15% by 2012 compared to that of 2007."

First, LG always would like replacing hazardous substances so that they can provide the safety and health products to customers. In order to check if the parts and materials from outside sources contain hazardous substances, the company has installed XRF (X-ray Fluorescence) equipment in its foreign and domestic workplaces and subsidiaries. Parts and materials which seem to contain such substances should be monitored precisely in the process of mass production. The system requires suppliers to register hazardous substance information such as homogeneous material data analysis at the initial development stage to eliminate harmful materials from filtering into individual parts. Furthermore, the Environmental Strategy Team operates the hazardous substance analysis lab fully equipped with precise instruments such as ICP, IC, GCMS, HPLC and VOC chamber. The lab is taking proactive steps to comply with global environmental regulations by formulating hazardous substance management standards through development and standardization of methods analyzing the growing number of substances of concern. Moreover, it supports the substitution of hazardous substances and performs green product verification by identifying and monitoring hazardous material concentration level in products and components. LG Electronics designs products to minimize their power consumption not only to boost energy efficiency, but also to reduce standby power which means the power consumed while an appliance is plugged in but not in use. Apply Recycling (ATROiD) in order to lessen the environmental impact of our products during recycling and disposal stages.

On the other hand, for many products one of the most important ways of adding value is through health and safety (H&S). This is particularly true in the electronic industry where customers and employees expect electronic products to be safe as well as attractive. LG Electronics places utmost priority on consumer safety. From the designing stage to a product's usage and disposal, LGcontinuously seeks ways to improve product safety to prevent risk to consumers' property, health and life caused by a faulty product. They approach product safety from three aspects: design defect, production defect, and warning labels. LG has observed internal processes for the development of safe products which are aimed at protecting consumer rights in accordance with laws on product liability. For example, they provide five steps of process for development of safe products.

First, LG pays attention to international safety standards as the minimum required to ensure consumer safety and abide by more stringent internal safety standards that take into account the user environment.

Second, a study of the user environment is conducted prior to product