LG Electronics Strategic Analysis

This assignment requires a comprehensive analysis of LG Electronics' strategic position within the global electronics market. Students are to examine current market trends, identify key competitors, and assess LG's strengths and weaknesses. The analysis should delve into LG's marketing strategies, product offerings, and financial performance. Furthermore, students must evaluate the challenges facing LG and propose potential future strategies for success.

Analysis of LG Group

Table of Contents
1 Introduction...................................................................................................................................1
1.1 Overview of LG.....................................................................................................................1
1.2 The nature of the business......................................................................................................1
1.3 The markets served................................................................................................................1
1.4 The challenges faced..............................................................................................................1
2. Define success.............................................................................................................................2
3. Reason for Success......................................................................................................................4
4. Internal analysis...........................................................................................................................5
Value Chain Analysis of LG........................................................................................................5
VRIN Framework........................................................................................................................6
5. Contribution of the leader of LG.................................................................................................8
6. Review the strategy used by LG..................................................................................................9
Competitive Strategy....................................................................................................................9
Positioning Strategies.................................................................................................................10
Growth Strategy.........................................................................................................................10
7. Future of company based on PSET Factors...............................................................................11
Company remained successful in 10 years down the road........................................................12
Conclusion.....................................................................................................................................12
REFERENCES..............................................................................................................................13

1 INTRODUCTION
1.1 Overview of LG
LG Electronics is a multinational electronics firm based in South Korea. It is covered under the
umbrella of the group of LG and employs 82,000 people in 119 subsidiaries all across the world.
The company has four business units, i.e. Vehicle Components, Home Appliance & Air Solution,
Mobile Communications, and Home Entertainment. The company was ranked second in the
world in the manufacturing of televisions in 2011 (Lin and Tsai, 2016).
1.2 The nature of the business
As far as the areas served are concerned, it operates and sells its products all over the world. The
product portfolio of the organization entails home theatre system, televisions, computer
monitors, refrigerators, wearable devices, washing machines, Smartphones, other smart
appliances (Namgyoo and Jeonghwan, 2012).
1.3 The markets served
LG is encountering problems in growing its market share in the Smartphone industry due to
issues in securing an efficient supply chain and also due to insufficient release dates of the
products. Its competitor, Samsung, simultaneously introduces merchandise in different price
brackets. It then pours its products out in 150 nations via a well-established and strong supply
chain. LG, on the other hand, organized a big scale promotional campaign for G2 in early August
but could start selling only by mid-September. Moreover, it started selling in Europe only post-
October. Meanwhile, its competitors launched new phones and started putting them in the
markets even before October (Byeong, 2013).
1.4 The challenges faced
LG Electronics has been unsuccessful in making a timely hit. In the Smartphone sector, a
product's performance is fundamental. Nonetheless securing a carrier, pricing and a strong
distribution channel are also critical. LG is falling behind in sales in spite of making the best
products due to such chronic issues.
The report herewith discusses the reasons for the success of LG and conducts its internal analysis
using various tools. The strategies used by the company are going to be included in this report.
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2. DEFINE SUCCESS
The achievement of an action within a specified period of time is defined as success can also
mean completing an objective or reaching a goal (Paik and Zhu, 2013). There are four main
components of balance scorecard including customer, learning and growth, business process and
finance. The following points show the balanced scorecard of LG Company:
Customer perspective: The target market is the middle segment in which the customers with
middle-income are targeted. The company offers an eco-friendly product and provides the best
products that have the long life. The organization does its best in terms of meeting the demand of
customers and strives to get the good response from the customer (Lin and Tsai, 2016).
Learning and Growth perspective: LG Company use innovation to products and use it as a source
to gain competitive advantages. The organisation taps the customers' knowledge to be stable in
the market; however, competitors are looking for innovation in products. Making in mind, the
company is introducing new technology so as to become a market leader in the smartphone
market (Espinoza and Ukleja, 2016).
Business process perspective: The organization has the best human resources that are the result
of its effective business practices. Furthermore, it uses the best inventory control system that
affects the quality in an effective manner. Adding to this, business effectively uses the skills of
personals and has coordination between different departments so as to handle the operations. The
business entity appoints qualified professionals and managers to who can take decisions at a
regional level.
Financial perspective: From this perspective, the company is doing well, as, in 2016, its sales are
55367bn (KRW), however, it has been increased from previous years. The sales of previous
years were 56509bn in 2015 against which company has earned the profit of 1193bn,
nonetheless, the profit is increased from previous years and reached at 1338bn in 2016 (Financial
data: LG electronics. 2017).
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Figure 1Financial highlights LG 2016
(Source: Financial data: LG electronics. 2017)
Figure 2Net income of LG Electronics from 2009 to 2016
(Source: Statista, 2016)
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3. REASON FOR SUCCESS
The few main reasons because of which company is getting success are as under:
1. Innovation - Innovative Marketing strategy adopted by LG group is noticeable. LG is said
to be the LG was the primary brand to take entry in cricket industry at a big level, been
the sponsor of World cup in 199 and the same up till 2003. By adopting that strategy,
Company makes its name the worldwide famous. In a line to this, LG has opened the best
research and development centres and is making surveys before entering into new
markets
2. LG adopted the local and effective technique of manufacturing in order to make a
reduction in cost and to beat high duties on import. Manufactures of LG, computer
monitor and refrigerator is within India and the facilities for manufacturing located in
Delhi, Noida. Likewise, all over the world, Company created its manufacturing setup
which results in reducing the cost of the product (Lin and Tsai, 2016).
3. Market Penetration - Regional Distribution Model of LG, further this step lead to the fast
stock rotation and well-access to the class markets of B, C and D. Next was the
Information technology Leveraging benefit.
4. LG has been rewarded an agreement so as to make development in Information
Technology solution to LG Soft India. This specified project engaged both support and
development of Enterprise Resource Planning, Supply Chain Management, Customer
Relationship Management and Information Technology as well to allow LG services
(Murray Newsland., 2015).
5. Employee Satisfaction: The company is using various online and offline channels to
create a good bound and healthy environment with the organization. LG is continuously
giving full efforts in order to build a better company culture for communication for
solving problems.
6. Effective management: LG group also conducts various programs for employees to
ensure their work-life balance (Paik and Zhu, 2013). By this employees will work happily
which is beneficial for the company. According to this score, a proven designed method
and automation tools can be used by managers for controlling and assessing the activities
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7. Customer satisfaction: It strived to meet the demand of customers in each and every
sense; therefore, it has offered opened various customer care centres and has a maximum
interest in customer reviews.
4. INTERNAL ANALYSIS
Value Chain Analysis of LG
Primary Activities
Inbound Logistics: LG is working on increasing the supply chain efficiency; thus it has put too
many efforts. Material handling, Warehousing, Inventory control activities come under the
inbound logistics. LG has been working a lot on this to make its inbound bound logistics more
advanced. Example: it introduced Global Digital Logistics System (GDLS) which maintains an
effective record of inventory and looks after product lifecycle.
Operations – LG is trying to develop its operational efficiency by minimizing the waste and
enhancing their current production (Goasduff and Pettey, 2012). The production units are
situated in suitable location that makes it different from other competitors and commitment of
company puts value to people in the most efficient way by regularly upgrading is operation
Outbound Logistics – LG group introduced JDA software from JDA amalgamated which is
smoothing all logistics operation by analyzing the demand distribution and transportation, it
further reduced the cost of its outbound logistics. Over a period of time, the organisation has
developed a sound dealer network and also has expanded its packaging skills by packing it core
conveniently and cost-effectively. The company also has around 7500 trucks which define its
good transportation network (Osman, 2012).
Sales and marketing: LG electronics has several showrooms and service departments naming
LG Shoppe along with its branches in many shopping centres all over the globe. Customer
satisfaction has been the priority of LG Company in bringing design innovative strategy. LG's
industrial design is trying to keep a pace between concept creation and lifestyle creation. So that
it can live up to the dreams, necessity, and desires of its customers (Mudambi and Puck, 2016).
Support activities
Infrastructure
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LG is positioned as a socially responsible organisation engaging in numerous projects for CSR.
In a well-mentioned working environment, it has a little hierarchy and encourages customers to
work as partners through the end assembly process to fix up the products and to jointly be
socially responsible.
Technological and Research & Development: Technology designs of LG are successful and the
product is perceived as mobile phones having innovative designs and latest technology. The
company has attained a remarkable achievement of technological creation and design of their
product portfolio. Mobile phones of LG are generally more consumed by customers due to its
new innovative ideas and designs. By being good in introducing new technologies the LG group
was honoured by the ‘red dot' design awards. The key feature of the LG products is its featuring
new, original and creative technology.
Human Resources – The HR is the most valuable and useful resource for any type of
organization and LG is one of them who understand this fact very effectively and accordingly
plan its strategies. The company is trying to make their workplace safer by making healthier
policies. In addition to this, LG also adopted a system of 360° performance management to
assess the employee work and performance and reward them accordingly. LG group also offers
several awards in order to encourage and stimulate its employees (Osman, 2012).
Procumbent
LG Company has integrated a best of breed transportation management into its existing
enterprise management system. To reduce supply chain costs and survive the price competition,
LG has drastically reduced the number of and since moving to a centralised procurement system
is now able to negotiate even lower costs with supplier
VRIN Framework
Supply Value
Chain Activity
Chain Activity
Evaluation (Core Competencies)
Sustainability?
Inbound
Logistics
Value – Looking towards environmental sustainability, it
focuses on recycling and Global Digital Logistics System.
Rarity – another competitor can also use this system in units.
Company.
Inimitability –Material handling, warehousing and inventory
control activities increase cost if competitor uses same
YES, it adopted
environment
sustainability
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system.
Non-Substitutability – It is not difficult to substitute as
competitors will value the relationship with the suppliers.
Operations Value – production units in India makes it different from
competitors.
Rarity – Many rivals are using a similar concept.
Inimitability – Can be imitated easily.
Non-Substitutability – It is easy to substitute.
Yes, Competitor does
not have advantages
Outbound
Logistics
Value – The company maintains relationship with supplier,
transportation network which includes more than 7500
trucks
Rarity – Other competitors in the industry are using a similar
concept.
Inimitability – Building effective relations with suppliers
Non-Substitutability: Difficult to reach at global platform
due to high competition
YES, strong
relationships with
suppliers and cost price
is affordable
Marketing and
sales
Value – Customers value product as it conducts effective
marketing
Rarity – LG has maintained global network and no one can
imitate.
Inimitability – It will be at high risk for a competitor to copy
innovative marketing.
Non-Substitutability – It is difficult to substitute
NO, Innovative
marketing by other
brands
Firm
Infrastructure
Value – Value chain is controlled effectively
Rarity – Not many competitors have such infrastructure.
Inimitability –High risk because competitor manufacturer
may increase the opportunity cost. Non-Substitutability – It
is not difficult to substitute
YES, staff commitment
Procurement Value –Overall cost is reduced by 8 % and use of JDA
Rarity – Not many competitors in this field
Inimitability – It will not be easier to imitate.
NO, innovation in
market
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Non-Substitutability – It is not difficult to substitute
Human
Resource
Management
Value – 360-degree Performance Management system,
motivated employees
Rarity – Not many rivals share such concept
Inimitability – Competitor can imitate.
Non-Substitutability – Not difficult to substitute.
Yes, staff commitment
and significantly looks
for better career
opportunity
Technology
Development
Value – LG group is trying its best to give market new and
innovative products.
Rarity – Tough competition to innovative products.
Inimitability – Cannot imitate such resources. Non-
Substitutability – It is difficult to substitute.
NO, LG has to improve
the quality of products
5. CONTRIBUTION OF THE LEADER OF LG
The current vice president of LG Electronics' parent company is Koo Bon-Joon who has joined
from 2015. The leadership structure is changed to offer all managerial authorities liberty and
responsibility to give rapid and better decision-making. Changing demands and environment of
today’s world, a company needs a leader who is flexible to the fast-changing business
environment and can make decisions to satisfy diversified consumer segments. The leader is
focused towards company's growth therefore, it adds practices to make technological
revolutionary via LG`s innovative start off and rapid growth. The creative nature and fast
decision-making capabilities of leader make LG as a fast and smart global brand of the future.
The existing leader of a company is a democratic leader and allows subordinates to take part in
decision-making which is the main factor of success and employees satisfaction. The success of
LG is depended on leadership style and it makes its leading position in the market in terms of
employee retention. The innovative leading style adopted by the company’s CEO makes it
worldwide famous.
The leader focuses on creating an organizational culture where smooth communication between
all the employees can be possible. Instead of giving the order, he focuses on open and better
communication of an employee to upper management timely. He is keen to offer a healthy
environment and definite use of resources. This is the remarkable step of LG towards the
environment which helps in creating a good working atmosphere in the company. "Great
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company, great people" is the main theory of LG’s CEO which signifies its perspective of
planning and featuring new technologies. LG has achieved great success all because of its people
leadership. LG is planning to relocate its brand integrity by developing "Life's Good" Slogan &
new pioneering logo (Kim et al, 2008).
This will be the favourable move and emerges in establishing the brand name for LG. The
leader’s main motive is to make customers satisfied with products. If resources are utilized
properly they give better results. So, with merger or acquisition, LG group has to focus on the
aspects of consequences. LG is constantly trying to bring products to their customers in a
secured, safe and valuable environment. The main aim of the brand is its quality. LG created a
good brand image of its product with high customer satisfaction and reliability of their product in
the market as a leader sets high marks and standards when it comes to reliability. The leaders
decided to design value-added strategies that assist surpassing competitors or reducing weakness
via make improvement in efficiencies and operations. Due to effective leadership practices, LG
is performing efficiently and give tough competition to its competitor by innovative products and
strategies. The focuses of Koo Bon-Joon towards company's growth makes it technological
revolutionary.
6. REVIEW THE STRATEGY USED BY LG
Competitive Strategy
LG has innumerable rivalries in the market of electronics. Some of its rivalries are Samsung and
Toshiba Corporation. They preserve a contentious idea to bring high-end mobile devices and
other multimedia products into the market. While observing LG, it is constituted that both Sony,
as well as Samsung, are its biggest opponents. Consumers in Singapore are nowadays showing
too much interest towards the latest technology since they have become more flexible to adopt
new technologies. So, because of this brands having smaller market chain are bringing
diversified product portfolio that tests various advertisement tactics to bring more customers
(Kim, et al, 2008).
LG electronics emerges new technologies which improve customer's living standards and
equipping them with more pleasant lifestyle. LG electronics imposing customer feedback, by
which customer feels valued. Stylish design & intelligent, innovative product and enhance
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customer value results in creating a good image of the product. Research and development
department has the considerable role to bring out of the box ideas and apply those ideas to
products (Gunasekaran Lai, and Cheng, 2008). LG group is using global differentiation as their
business plan of action to obtain competitive advantages. Just like its competitive brand like
Apple, LG also avails the same integrated collaboration environment & intelligence system in
their organization. All departments of LG company works collectively along with design and
promotion to maintain the standard of their products which are specifically meant for its
unlikeness and originality. In recent times, LG will be soon joining hands with Microsoft for
space collaborating in the windows mobile phones.
The organization expands its gainfulness, intensifies its product and brand in the marketplace,
and utilizes externally available resources in order to expand the business to properly use their
brand and product portfolio. LG group bringing commodities in the market which are more
likely related to the needs of customer and analyses expectations of target market depends on
STP which stands for Segmenting, Targeting and Positioning strategy. LG modernize it all
externally and internally available resources for improving competencies of business entities by
recruiting most efficient and effective individuals to develop best HR pool in over the world
(Wilson, et al, 2012).
Positioning Strategies
Currently, LG has also amended its positioning strategy and its positioning strategy and its brand
image in order to have a better brand image with a better face. The recent face of LG is
technologically smarter, as the products, it has introduced to the market. Its products are smarter
and priced accordingly. Not only quality, the brand's pricing strategy is also a decisive part of its
marketing strategy. LG is a modernize brand, centralize on innovative technology, developing
new and uncommon products to the market and spends in creating an impressive brand devoted
to the humanity. LG has a varied range of products from home appliances Mobile phones and
communication, electronics and vehicle mechanism. It is said to be the most ruling producers of
flat panel TVs, Washing Machines, Refrigerator and various other electronic home appliances.
LG has located itself as a smart and customer friendly brand.
Growth Strategy
One of the main strategies of LG is to ascertain growth is by attacking the premium market.
Secondly, they focus on tracking attainment. As per the Bloomberg article the possibility that LG
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is planning of merger or purchase the manufacturers. For the detailed and simple value chain
analyses of LG which helps in finding out the acquisition reality (Kim, et al, 2008).
The merger which is best fits for LG group is Vertical Merger. So, LG group can either
combines their works with the supplier or retail outlet. LG suppliers have a good margin on the
components they sell to LG group. So in case if LG group make a merger with the suppliers, it
will be beneficial for the company. With the merger, LG can focus on making the more profits
and can save cost. But, though there is a risk. Suppose, if LG will not be able to make the enough
usages of the suppliers, in that case, the efficiency of the persons can reduce which is not good
for the company. Less utilization of resources will result in creating cost and breakdown of
machines.
7. FUTURE OF COMPANY BASED ON PSET FACTORS
LG Company is an international electronic firm; however, the main issue is of existing market
position in the smartphone market. To remain successful in the market company has to focused
on four main factors of PESTLE analysis such as political, economic, social and environmental,
from which it can attain better profits in future. The business remained successful in other
markets over the years, but the increasing competition in the market allows it to focus on such
factors.
Political factors: While working in the international market company has to focus on the policies
designed by a government of each country where it operates. The government set the regulation
in an electronic market on the basis of consumer benefits. For capturing market share in the
Smartphone industry company has to follow the regulation of WIPI obligation that is designed
by the government, but now government has abolished the WIPI obligation, so Korean
companies are facing huge competition that is going to affect the performance of company (Kim,
et al, 2008)
Economic factors: With the availability of cheap smartphone more and more people are using
mobile contents that are called as an application program. In the application market, there are a
number of categories so that customers can easily compare products. Being an electronics
company, LG can take care of consumption habits of customers in relation to smartphones can
capture the huge market share. The growth in the consumer income and growth of GDP and
varying lifestyles will significantly affect the LG operations (Cooper, 2000).
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Social factors: Following a social entity, LG has to pay attention towards supporting of human
rights and giving equality to all the employees, although, LG is totally engaged in improving and
introducing the Global Labor Policy. The demand of customers regarding smartphone and
Android application will be useful for the business to grow in future.
Technological factors: The organisation is paying more attention to modern techniques; however,
to derive its customers it is useful to pay attention to legal factors like as use of technology to
improve production technology. However, it significantly helps individuals to decrease the price
of the products and allows customers to afford products (Karsalari, Saberi and Kalimdast, 2017).
Company remained successful in 10 years down the road
The smartphone industry is growing very fast and LG has all the potentials to beat its existing
rivals in the market. However, some areas in the product that company has to look for are battery
and the colours of the smartphone. The product must be designed while considering two main
factors as youth generation are looking for smartphones with such features. The new products
designed by the company must have a built-in battery and it should extend the battery life, and
emphasize the major improvement. Adding to this, to capture the huge market share, it can go for
offering unique services like as free portable chargers for the consumer within a specific time
zone. Making portable battery and offering portable chargers could be a part of differentiation
strategy of LG that allows it to cope up with the existing issue and to be the best seller in the
electronic market for smartphones.
Additionally, a business entity can offer Digital Multimedia Broadcasting services, where fro it
can advertise its product and services as most of the people spend their time with watching TV in
the metro. therefore, it can successfully capture the market share in upcoming 10 years.
CONCLUSION
The above report discussed the issue faced by a leading electronics company in the smartphone
market which is of fundamental product's performance; therefore the company is losing its
market share. The balance score cared revealed that company is facing issue related to customer
complaints regarding products, therefore an urgent need for establishing research and
development department. Its success depends on various programs for employees to ensure their
work-life balance. Core competencies of LG include product leadership in the electronic market,
Market leadership, People leadership. The organisation is suggested to offer portable battery and
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offering portable chargers could be a part of differentiation strategy of LG that allows it to cope
up with the existing issue and to be the best seller in the electronic market for smartphones.
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