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STUDIES

ON

LG ELECTRONIC COMPANY

IN PARTIAL FULFILMENT OF FULL TIME, MBA PROGRAM

(2013-2015)

SUBMITTED TO:

RADHA

BK School of Business Management

Gujarat University, Navrangpura,

Ahmedabad-380009

Phone: +917926304811

info@bkschool.org.in

SUBMITTED BY ROLL NO.

Abdul Mahboob Shujaeee 11301

Najeebullah Hemat 11327

Ahmad Farhad 11355

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Introduction to the LG

Being competitive and maintain a good position in the market is the most common goal of the

organization today however, household consumer goods are very essential to our daily lives.

Whether it is machine refrigerator or a TV; these produced is the primary need of the people in

the world. But since customer are looking for short delivery times. Long period warranties.

Innovation, diversification and customization of product with high quality and affordable prices

it is hard for companies to survive in such competitive market and keep their customer loyally

LG Electronics was established in 1958 as Gold Star, the company started producing radios,

TV, Refrigerator, air condition and washing machines, with its innovative and expertise it led the

way into creating advance.

In 2005 the company ranked top 100 global brand, in 2006 LG growth of 14% till now has

become the largest plasma panel manufacture

This study will investigate the different marketing strategies used by LG Electronics, its

performance in the market, market share, sales and profitability and will be focusing more on the marketing of a washing machine using contemporary marketing tools and techniques.

Vision statement of the company

LG pursues its 21st century vision of becoming a true global digital leader who can make its

customers worldwide happy through its innovative digital products and services

SWOT Analysis

The SWOT analysis is a useful tool for companies to identify the internal and external factors

that are favorable or unfavorable to achieve the company’s objectives. We will analyze LGE’s

strengths, weakness, opportunities and threats in the market.

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Strengths

LG is multinational company and has created brand image around the world

It is established in developed countries but also in developing countries

It is the world’s largest plasma panel manufacturer

Have reliable products, easy to use and modern product design

Wide range of products to serve all categories

Invests a lot in Research and Development to create the right product for the consumers and

satisfy their needs

LG is growing quickly and gaining market share trough innovation and customer satisfaction to

retain its loyal customers

Diversifies manufacturing locations in the globe with manufacturing unit in tax incentive

Have the widest distribution channels in the industry, 47 branches with 10000 trade partners

LG was the first company to launch steam washing machines

Weaknesses

Samsung Company offers the same products and is a nation and international competitor

Difficulty in operating complex machines due to the lack of training in (Morocco)

Opportunities:

Fast growth of the home appliance market with the highest share

Focus on Research, Development and innovation to attract new potential buyers and retain

existing customers

LG received a patent for washing machine in Rep of Korea this might also be viewed as strength

and a stronger brand image

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Competitors are continuously improving their products trough innovation and research; this

might make LG lose some of its customers

Financial crisis around the world affects consumer’s purchasing power.

LG is comparable with its close competitor Samsung in Korea and Worldwide

Price War with competitors

Cheap Chinese Products that might be an alternative in some countries

Differential advantages

Fast innovation as a competitive advantage:

‘’LG wants to make people’s lives richer, easier and better. Our goal is to put a smile on all our

consumers’ faces. “Smart technology” enables consumers to do things more easily and

experience things more pleasurably. Consumers expect LG’s products to contain the world’s

most advanced technology, and that our hardware and software have been perfected. In addition,

they expect LG products to work in ways that are simple yet smart.’’ (LGE Annual Report,

2010)

LG has set extremely high innovation goal, the company is aiming for a target of 30% more than

what its competitors can do, this also means 30% more sales and increased market share. This

makes LG up to 3 years ahead of competitors in terms of technology.

Core Capabilities:

Here LG goal is to offer technologies that suits people’s needs, as it stated on its annual report ‘’

the core goal of our product development processes is to create technologies that enrich people’s

lives. It flows directly from LG’s guiding principle of “creating harmony among people.”

Innovation flourishes best when it anticipates or answers a need that enriches people’s lives. We

create products that help people get more out of life, have more leisure time, and experience

more pleasure. We do this by always understanding their needs and continually surpassing their

expectations.’’

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LG retains its customers by providing them with long term warranties (10 years) covering the

core technologies such as its washing machines. Its innovative technology brings trust to its

consumers by bringing the world’s smartest largest capacity washing machines in the market. At

the end of 2010, it launched an 11kg washing with ‘’ a new and innovative damping system and

fixed outer tub.’’ Beside the innovative technology, LG washing machines and the other product

line of home appliances fits perfectly into consumer’s lives, the company combines both product

design and simplicity that appeal to the consumer’s sophisticated taste. They also have a special

series of washing machines with a line of photo-etched design with various colors that attract

most consumers and especially young housewives whom are attracted to this stylish design with

the pleasure of touching the products sharp technology and features that makes everything ideal

and easy to use.

LG Electronics has achieved a big market share for washing machines and has shipped 10

million Washing Machines in 2008, Said Mr. Young Ha Lee, President of LG Digital Appliance

Company and announced its business strategies for achieving the top positions globally in this

category with sales of 7 billion USD by 2012.

Roots of competitive advantages

Technical Resources:

LG relies on its Research and Development capabilities and product innovation in collaboration

with worldwide engineers from companies like IBM. As it engaged the global business services

company IBM in Korea to design a new ‘’customer-driven-process’’ framework to outsource its

product developing effort. This will result in a higher rate of success for new product

development with reliable planning and monitoring and also a faster time to the market since the

LGE Company is beneficiating from IBM’s efficient product development process.

As LGE stated (LGE, 2011) ‘’our future growth will be built on the combined strength of our

product innovation and our understanding of the customer. With the help of IBM’s process

expertise, we are getting closer to realizing that vision’’ (S. Choi LGE, 2011)

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Marketing Resources:

LGE relies on the loyalty and trust of its customers and this trough efficient communication tools

with the cooperation of many famous companies worldwide like Best buy. The company was the

first brand to sponsor the 1999 World Cup of Cricket and also in 2003.

LGE Introduces its new products using contemporary communications tools like TV

commercials, Radio, Internet and billboards in order to create more brand awareness in many

countries. The company has 10000 traders worldwide and more than 47 branches, and this play

Human Resources:

LGE offers diverse educational programmers to its employee’s trough learning centers

worldwide, it focuses on favorable working environments that let its employees demonstrate

their capabilities at full. It also focuses on individual’s creativity to create value respecting

diversity of skills. It rewards its employees based on performance, create equal opportunities

built on trust among people without considering gender, race, age, religion or nationality, and

thus creates motivation and commitment.

Michael Porter's Five Forces Analysis

The Bargaining Power of Buyers

the bargaining power of buyers is moderate. There aren't many companies that offer the same quality of products as those of LG Display or have advanced as much technologically. The

company’s televisions, monitors, notebook PCs and applications stand out among existing competitors. LG Display reduces the buyer power by designing its products in ways that appeal

to and fit the needs of today's customers. Everything from the slim and sleek, wide view, portable and compact designs and display technologies make the products superior to the competing companies.

The Bargaining Power of Suppliers

As far as LG Display's bargaining power of suppliers, the power is on the lower end. The

company forms information partnership to create cooperation among supply chain partners for mutual success. It enters into a cooperative relationship with its suppliers by becoming their shareholders. This allows LG Display to promote strategic relationships with equipment and

parts suppliers, which enables a stable source of supply at competitive prices. The result is high-quality parts at a lower cost which is done through sharing product concepts with suppliers early

in the product development cycle. This kind of cooperation with suppliers has lowered costs by

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10% compared to the fourth quarter of 2008. LG Display stands apart from its peers in terms of market share, cost competitiveness and supply capacity.

Threat of Substitute Products or Services

the threat of substitute products is moderately low. Substitutes for LCD are LED (Light-Emitting Diode) and OLED (Organic Light-Emitting Diode), both are newer technologies currently

developed by the company. As long as LG Display can maintain its current market share of a quarter percent for the newer products, substitute products would not be considered as threats. The company’s development of new products and technologies that can be differentiated from

those of its competitors increases switching cost as well as reduces buyers’ propensity to substitute. In addition, its innovation technology is another switching cost for consumers.

Threat of New Entrants

The threat of new entrants is low in the flat panel display industry (TFT-LCD technology) due to its various entry barriers such as rapidly evolving technology, capital-intensive characteristics, brand equity, expected retaliation among existing competitors and the significant investments

required by the economies of scale. In addition, the industry may not be as appealing to potential competitors due to its highly competitive nature. Existing competitors have already experienced

pressure on their prices and margins due largely to additional industry capacity from other panel makers in Korea, Taiwan, China and Japan. Other entry barriers also include LG Display’s absolute cost advantage in its supply chain management and learning curve advantage with its

years of experience as a leading player in the industry

Rivalry among Existing Competitors

Rivalry among existing competitors is on the higher end. Although the company’s market share

increased to 26.4% in 2009 from 20.4% in 2007, there is still intense competition within the industry. Competitions are likely to remain intense not only due to the expected large demand for

LCD panels in the market today but also due to additional industry capacity from other Asian LCD panel makers such as Samsung, AU Optronics and Sharp. However, the average selling prices may continue to decline as a result of technology advancements and cost reductions. In

order to stay competitive, LG Display strives to differentiate itself with not only cutting-edge technology but also innovative designs. The BusinessWeek article "LG Bets Big on TV Design"

clearly demonstrates this business initiative.

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Different marketing strategies used by LG electronics:

Business Strategy LG Display Co Ltd uses differentiation as its main business strategy by producing goods and

services that are unique to the market. That is products that are used to experience new, rich life of digital display through a variety of TFT-LCD LG Display provides, such as the production and supply of thin-film transistor liquid crystal displays called TFT-LCD panels, principally used

for televisions to provide slim and sleek design. It also provides large, wide and high performance screens for notebook computers and wider, brighter and crisper screens for desktop

monitors. In addition, it provides TFT-LCDs for handheld products such as mobile phones, and lighter and slimmer products for industrial and other applications such as entertainment systems, automobile navigation systems, portable DVD players, digital photo displays and medical

diagnostic equipment. The customers served by LG Display include manufacturers of notebook computers, televisions and desktop monitors.

The customer service center provides product repair and warranty services to customers in the Americas region, where the demand for LCD TVs is rapidly growing, especially in the United States, Canada, Mexico and Brazil. The service center features optimized facilities and analysis

equipment to provide warranty services primarily for LCD panels that are 32 inches and larger. In addition, the Company has one sales subsidiary and four representative offices in the U.S. As

part of their strategy to improve customer alignment; this enables them to better respond to the needs of their customers in a timely and efficient manner.

Level of Strategies of LG Smart technology for customer

LG is increasing its focuses on “smart technology” that ads convince and joy to customer’s

lives.

Expansion- it is expanding itself worldwide for more profit and sales of the company by opening

different stores at different places.

IN ODER TO SUSTAIN LEADERSHIP among global electronics and information

technology companies LG R& D is driving the development of “great product” and strength a

process of “select and focus” in key area such as cell phones and digital TVs.

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RETRENCHMENT: A strategy used by this company is, to reduce the diversity or the

overall size of the operations of the company. This strategy is used in order to cut expenses with

the goal of becoming a more financial stable business.

EXPANSION-LG believes in “Brands may be important, but good products are what the

market is looking for.” therefore, it is increasing its products variety and expanding the business

worldwide.

Green product strategy

LG has set a strategy to develop products that reduce environmental impacts throughout the life

cycle of the products. It is classified into three categories human, energy, and resource.

Human

To reduce the environmental impact on human, LG has been working t improve home

environment for its consumers by replacing hazardous substance, reducing noises from home

appliances and adding anti allergy and anti-bacterial features.

Energy

LG energy strategy focuses on two key areas energy efficiency enhancement and reduce

greenhouse gas emissions during using and manufacturing.

LG has an internal process in place to manufacture products while talking environmental issues

such as product as product decomposing and recyclability into considerations from the product

development stages and uses evaluations and support tools such as recycling checklists

Resources

LG is trying to improve resource efficiency by reducing the use of resource and improving

recyclability of products. From the development phase, LG works to enhance material quality

and product structure, and strives to improve product performance while reducing the size and

weight based on collections with recyclers. To improve recyclability, LG has an internal process

in place to manufacture products.

LG has developed slim design products to reduce the use of resources as well as for ease of use.

LG manages energy and water usage in connections with waste eliminations activities to use

resource effectively during manufacture process.

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Product mix of LG

Product mix is a combination of products manufactured or traded by the same business house to

reinforce their presence in the market, increase market share and increase the turnover for more

profitability. Normally the product mix is within the synergy of other products for a medium size

organization. However large groups of Industries may have diversified products within core

competency. Videocon, L.G, are some examples.

Dimensions of product mix

Number of products: The amount of products that is produced by a particular company.

Range of product: A complete portfolio of products that a company manufactures and/or

markets.

Type of product: A group of items within a product line that share one of several possible

forms of the product.

Product line: A group of products that are closely related because they function in a

similar manner, are sold to the same customer groups, are marketed through the same

types of outlets, or fall within given price ranges.

Product length: It refers to the total number of items the company carries within its

product lines.

Product width: It refers to the number of different product lines the company carries.

Product depth: It refers to the how many variants are offered of each product in the line.

Product consistency: It refers to how closely related the various product lines are in end

use , product requirements, distribution channels

LG’s product lines

Since its initial years in India, LG has focused on bringing out new models regularly in its

product range. In its first year of operation in India, LG launched 70 models across a range of

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products. In 1997, it introduced its Golden Eye Technology TV, which had a light sensitive

natural algorithm ‘eye’.

The ‘eye’ responded to the changes in lightening in the room, accordingly and adjusted colour

sharpness, brightness, contrasting and balance them automatically.

Thus, LG showed that it cared for customer health through its products. LG’s concern for health

of customers was its unique selling proposition(USP) in the Indian consumer durable market.

Dimension of product mix in LG

LG operates its business through 6 divisions. These are also the product width of LG Electronics.

These are:

1. Home appliances

2. Mobile communications

3. Home entertainment

4. Computer products

5. Air conditioning

6. Business solutions

The item that comes in the product width is the product line.

Home appliances:

The home appliances make products like refrigerators and washing machines. The various home

appliances are:-

1. Side by side refrigerator

2. Double door refrigerator

3. Single door refrigerator

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4. Washer dryer combos

5. Front load washing machine

6. Top load washing machine

7. Semi automatic washing machine

8. Dish washer

9. Microwave oven

10. Vacuum cleaner

11. Air purifier

12. Water purifier

Mobile communications

LG mobile devices are made for GSM as well as for CDMA networks worldwide. The various

mobiles are:-

1. Smart phones

2. Touch phones

3. Multimedia phones

4. Dual sim phones

5. Basic phones

6. All types of mobile phones

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Home entertainment

The home entertainment makes products like TV’s, DVD Players etc. For example:-

1. Plasma TV

2. Color TV

3. Music system

4. DVD Player

5. LED LCD TV

6. Blue Ray Players

7. Home Theater System

8. PDP Modules

9. OLED Panels

10. USB Memory

11. DVD Records

12. MP3 Players

13. LCD TV

Computer products:

LG provides following computer products:-

1. Desktop

2. Flat panel monitors

3. LCD monitors

4. Projector

5. Optical media

6. Notebook

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Air conditioning:

The various types of ACs are:-

1. Split AC

2. Window AC

3. Cassette AC

4. Ducted AC

Business solutions:

LG provides various products for business:-

1. Monitors

2. Car infotainment

3. Telemeters

4. Digital signage solutions

5. Security devices

6. Video conferencing

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Greener products of LG

In the latest, LG produced various Greener Products. They are:

1. Mobile Phone: LG has made mobile phones environment friendly by replacing harmful

materials with healthy substitutes, at the same time increasing energy efficiency and

recyclability.

2. Washing machines: LG electronics has adopted the Life Cycle Assessment (LCA) system

for its product development and carries out the development of its eco-products in stages.

3. TVs: The Company has also improved the TV’s light efficiency while enhancing the

circuit components and designs, and reducing energy consumption.

4. Eco-Design: LG’s eco-design strategies reduce the environmental impact of a product’s

development, production and circulation all while improving efficiency of resources and

recyclability and reducing use of hazardous materials.

5. Hazardous substances: Since 2005, LG’s products have ceased to contain any of the six

most hazardous substances specified by the EU. LG adheres to strict regulations

regarding the management of hazardous substances in its production processes.

The partnership

LG Electronics chooses to promote harmony and build constructively on a labor-management

relationship rather than an employee-employer relationship. This illustrates that management and

workers are not in a vertical relationship, but in a horizontal one.

This culture is necessary for LG Electronics as it strives to become one of the world's top

companies. Such a relationship is transformed into a value-creation relationship whereby both

parties endeavor to address mutual problems and create new values together.

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Strategic alliance of LG

LG Electronics is making technical advances and identifying business opportunities through

various associative relationships with some of the world's leading companies. LG Electronics is

striving to become number one in the world by mingling in various business and technological

fields and making strategic alliances with world famous companies. "Strategic association

between corporations," in which companies with different infrastructures cooperate in the fast-

developing 21st century business field, is of key significance in terms of strengthening the

existing industry and creating a new one.