Strategic Managemnt about lg bcg matrix
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1.1 STRATEGIC MANAGEMENT OVERVIEW Strategic Management is all about identification and description of the strategies that managers can carry so as to achieve better performance and a competitive advantage for their organization. An organization is said to have competitive advantage if its profitability is higher than the average profitability for all companies in its industry. Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes and which decides the result of the firm‟s performance. The manager must have a thorough knowledge and analysis of the general and competitive organizational environment so as to take right decisions. They should conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should make best possible utilization of strengths, minimize the organizational weaknesses, make use of arising opportunities from the business environment and shouldn‟t ignore the threats. Strategic management is nothing but planning for both predictable as well as unfeasible contingencies. It is applicable to both small as well as large organizations as even the smallest organization face competition and, by formulating and implementing appropriate strategies, they can attain sustainable competitive advantage. Strategic Management is a way in which strategists set the objectives and proceed about attaining them. It deals with making and implementing decisions about future direction of an organization. It helps us to identify the direction in which an organization is moving. Strategic management is a continuous process that evaluates and controls the business and the industries in which an organization is involved; evaluates its competitors and sets goals and strategies to meet all existing and potential competitors; and then reevaluates strategies on a regular basis to determine how it has been implemented and whether it was successful or does it needs replacement.
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1.2 EXECUTIVE SUMMARY Strategic Management is a way in which strategists set the objectives and proceed about attaining them. Strategic management is a continuous process that evaluates and controls the business and the industries. The consumer electronics industry is consolidated as the top 10 players contribute approximately 52% of total market size. The industry, which is capital intensive and price sensitive, is a highly dynamic and fast-changing industry. Existing players includes Panasonic, Sony, Samsung, LG Electronics, Videocon etc I have done a study on LGElectronics. This conglomerate is a global leader and technology innovator in consumer electronics, mobile communications and home appliances, employing 87,000 people working in 113 locations around the world. The company was originally established in 1958 as Gold Star, producing radio, TVs, refrigerators, washing machines, and air conditioners. The LG Group was a merger of two Korean companies, Lucky and Gold Star, LG has a good brand image. And it has wide distribution network. Sony and Samsung is its biggest competitor. They pose a threat in the way of LG becoming the market leader. LG mobile phones at introduction stage (question mark).LG Appliances is at star stage and LG LCD are at cash cow stage. LG Mobile has recently launched a new mobile which looks very promising and innovative i.e. LG GZ. LG are using advertisements to improve their brand image. LG Electronics received a special award as Global Technology Innovator 2013 on 7th June 2013. One of the best thing about LG is that it is environmental-friendly and focus on the health of the consumers. They still need to work on the after sale service though.
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1.3 RELEVANCE OF THE STUDY To improve our knowledge about strategic management. To have an understanding about the LG company, their mission and vision. To make analysis using BCG Matrix. To know about their strengths and weakness. To develop our skill by providing recommendation and conclusion. To provide brief information about our analysis
1.4 RATIONALE OF THE STUDY The rationale of the study is to acquire the practical knowledge of BCG matrix analysis followed by The LG Electronics Company and which of their products are performing well.
1.5 SCOPE OF THE STUDY The scope of the study is limited to BCG matrix and SWOT analysis of one company i.e. LG Electronics Company. This paper includes, history of the company, global operation and the strategic analysis, structure of the company has been shown.
1.6 SOURCE OF STUDY 1. PRIMARY: 2. SECONDARY: websites ,journals, annual reports, newspaper etc
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2.1 THEORY OF STRATEGIC MANAGEMENT STRATEGIC MANAGEMENT -MEANING Strategic Management is all about identification and description of the strategies that managers can carry so as to achieve better performance and a competitive advantage for their organization. An organization is said to have competitive advantage if its profitability is higher than the average profitability for all companies in its industry The word “strategy” is derived from the Greek word “stratçgos”; stratus (meaning army) and “ago” (meaning leading/moving). Strategy is an action that managers take to attain one or more of the organization‟s goals. Strategy can also be defined as “A general direction set for the company and its various components to achieve a desired state in the future. Strategy results from the detailed strategic planning process”. Strategy can also be defined as knowledge of the goals, the uncertainty of events.
2.2 COMPONENTS OF STRATEGIC STATEMENT
The strategy statement of a firm sets the firm‟s long -term strategic direction and broad policy directions. It gives the firm a clear sense of direction and a blueprint for the firm‟s activities for the upcoming years. The main constituents of a strategic stat ement are as follows: 1. Strategic Intent: An organization‟s strategic intent is the purpose that it exists and why it will continue to exist, providing it maintains a competitive advantage. 2. Mission Statement: Mission statement is the statement of the role by which an organization intends to serve its stakeholders. It describes why an organization is operating and thus provides a framework within which strategies are formulated. It describes what the organization does (i.e., present capabilities), who all it serves
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(i.e., stakeholders) and what makes an organization unique (i.e., reason for existence) 3. Vision: A vision statement identifies where the organization wants or intends to be in future or where it should be to best meet the needs of the stakeholders. It describes dreams and aspirations for future. 4. Goals and Objectives: A goal is a desired future state or objective that an organization tries to achieve. Goals specify in particular what must be done if an organization is to attain mission or vision. Objectives are defined as goals that organization wants to achieve over a period of time.
2.3 STRATEGIC MANAGEMENT PROCESS - MEANING, STEPS AND
COMPONENTS The strategic management process means defining the organization‟s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises its competitors; and fixes goals to meet the entire present and future competitor‟s and then reassesses each strategy. Strategic management process has following four steps: 1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it. 2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational
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purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies. Strategy formulation is the process of establishing the organization's mission, objectives, and choosing among alternative strategies. Sometimes strategy formulation is called "strategic planning." 3. Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organization‟s chosen strategy into action . His basic strategy implementation activities are establishing annual objectives, devising policies, and allocated resources. Strategy implementation also includes the making of decisions with regard to matching strategy and organizational structure; developing budgets, and motivational systems. 4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The fundamental strategy evaluation and control activities are: reviewing internal and external factors that are the bases for current strategies, measuring performance, and taking corrective actions. Evaluation makes sure that the organizational strategy as well as its implementation meets the organizational objectives. These components are steps that are carried, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situation‟s requirement, so as to make essential changes.
Components of Strategic Management Process
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2.4 LEVELS OF STRATEGY
Corporate strategy—this strategy seeks to determine what businesses a company should be in or wants to be in. Corporate strategy determines the direction that the organization is going and the roles that each business unit in the organization will plan in pursuing that direction. Business strategy—this strategy seeks to determine how an organization should compete in each of its businesses. For a small organization in only one line of business or the large organization that has not diversified into different products or markets, the business strategy typically overlaps with the organization‟s corporate strategy. For organizations with multiple businesses, however, each division will have its own strategy that defines the products or services it will offer and the customers it wants to reach. Functional strategy—this strategy seeks to determine how to support the business strategy. For organizations that have traditional functional departments such as manufacturing, marketing, human resources, research and development, and finance, these strategies need to support the business strategy.
2.5 FORMS OF ORGANIZATION
In simple words, organizing means arranging the ways and means for the execution of business plan. It is the creation of administrative set-up for the execution of the plan. Internal Organization structure constitutes the arteries and veins through which the blood of work flows in the body of Organization. Internal Organization structures can be broadly classified into the following types/forms: Line Organization structure: Line Organisation (also called Military/Scalar Organisation) is the oldest and the simplest form of internal Organisation structure. N the line Organisation, the line of authority moves directly from the top level to the lowest level in a step-by-step manner. It is straight and
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vertical. The top-level management takes all major decisions and issues directions for actual execution. Line and Staff Organisation Structure In the line and staff Organisation, line executives and staff (specialists) are combined together. The line executives are 'doers' whereas staff refers to experts and act as 'thinkers'. The line executives are concerned with the execution of plans and Policies. They do their best to achieve the organizational objectives. The staff concentrates their attention on research and planning activities. They are experts and conduct advisory functions. Matrix Organization: It is a combination of two or more organization structures. For e.g., Functional Organization and Project Organization. The organization is divided into different functions, e.g. Purchase, Production, R & D, etc. Each function has a Functional (Departmental) Manager, e.g. Purchase Manager, Production Manager, etc. The organization is also divided on the basis of projects e.g. Project A, Project B, etc. Each project has a Project Manager e.g. Project A Manager, Project B Manager, etc. The employee has to work fewer than two authorities (bosses). The authority of the Functional Manager flows downwards while the authority of the Project Manager flows across (side wards). So, the authority flows downwards and across. Therefore, it is called "Matrix Organization"
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2.6 PESTLE ANALYSES
The PESTLE analysis should be used to provide a context for the organization‟s/individual‟s role in relation to the external environment. It covers Political, Economic, Social, Technological, Legal and Environmental factors. POLITICAL What are the key political drivers of relevance? Worldwide, European and Government directives, funding council policies, national and local organization‟s requirements, institutional policy ECONOMIC What are the important economic factors? Funding mechanisms and streams, business and enterprise directives, internal funding models, budgetary restrictions, income generation targets SOCIAL What are the main societal and cultural aspects? Societal attitudes relates to education particularly in relation to government directives and employment opportunities. Also general lifestyle changes, changes in populations, distributions and demographics and the impact of different mixes of cultures
Technological What are current technology imperatives, changes and innovations? Major current and emerging technologies of relevance for teaching, research or administration Legal Current and impending legislation affecting the role European and national proposed and passed legislation Environmental What are the environmental considerations, locally and further afield? Local, national and international environmental impacts, outcomes of political and social factor
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2.7 SWOT ANALYSES
Now you have the PESTLE context you can use this output to map out a SWOT analysis. SWOT stands for: Strengths Weaknesses Opportunities Threats
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3.1 INDUSTRY OVERVIEW
The consumer electronics industry is consolidated as the top 10 players contribute approximately 52% of total market size. The industry, which is capital intensive and price sensitive, is a highly dynamic and fast-changing industry. Costs of raw materials such as steel and copper have increased, which had a significant effect on the price of the finished goods. A combination of factors such as rising income and consumer spending affect the market dynamics significantly. The industry has essentially recovered from the recent recessionary condition globally and is in the growing phase The consumer electronics industry manufactures and distributes everything from telephones, stereo components, televisions, alarm clocks, and calculators to digital cameras, video cameras, VCRs, and DVD and MP3 players-basically, everything you see when you go into a Best Buy or Circuit City store. (Some industry observers also include desktop and laptop PC manufacturers as part of the industry.) Needless to say, consumer electronics is big business. In 2005, in the U.S. alone, consumers spent more than $75 billion on consumer electronics products, 8 percent more than in 2004. WHO CONTROLS THE DIGITAL HOME Televisions, stereos, cameras, and other consumer electronics products grow more useful and powerful when they are tied together wirelessly and can reach out to the Internet. For the digital home to take shape and for sales to soar as consumers see its advantages, companies need to figure out how to get all their gadgets talking to each other and to a central hub that will store the many megabytes of media files that entertain us. Microsoft wants the computer in the middle and is pushing its Media Center software; Sony is selling a portable LCD television that can grab video from the Internet, a personal video recorder, or a DVD player; and Sharp will launch technology for sending HDTV signals through a home's existing electrical wiring. No matter which arrangement proves popular, there should be plenty of work in turning today's homes into tomorrow's networked entertainment centers.
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The consumer electronics industry includes manufacturers of all shapes and sizes. The largest are multinational conglomerates with more than 100,000 employees and interests in many different industries. The smallest often have only one office with fewer than 50 employees focused on one product. In the middle are manufacturers that offer a range of products within a certain category, such as speakers and audio accessories. Because companies of all sizes can make similar products, industry observers usually break down the market by product category rather than company size.
3.2 COMPETITOR’S PROFILE- Existing players in the Indian market in
consumer electronics The main electronic manufacturers in the Indian market are Sony, Videocon Industries, LG Electronics, Samsung, Onida, Panasonic India, Bose India, BPL, etc. The upcoming players are D-Link, Samte, WeP and Tyco followed by Nokia and Motorola SONY ELECTRONICS Sony is a Japanese company and key players in consumer electronics especially television. The brand for Sony‟s television is BRAVIATM. It is a leader in product innovation. Sony has an ability to identify imagination and enhance people‟s life. The company has been at the cutting edge of technology for more than 50 years. Now, Sony develops its business with sales innovative products as well as Sony‟s convergence strategy. For example, Sony has Hi-Scan flat screen TV which can deliver near HDTV picture quality through Digital Reality Creation (DRC) circuitry. Sony conducts an advertisement campaigns to secure consumer attention and utilizes world class public relations to enhance Sony‟s value, reputation and brand image PANASONIC CORPORATION Panasonic has been one of the world's most prolific electronics
manufacturers since 1919. It operates worldwide through about 600 companies under brands Panasonic, Quasar, Technics, and others. The company spans multiple fields:
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Its consumer business consists of AVC (audio, video, and communications) equipment, along with hardware and software for linking it together, and home appliances (washing machines, vacuum cleaners, personal grooming aids, and commercial HVAC). In the field of devices Panasonic covers and multimedia batteries. and The eco-car company's
equipment, industrial electronic components,
solutions equipment targets environmentally conscience businesses, manufacturers, and health care firms SAMSUNG ELECTRONICS CO., LTD. Samsung Electronics is an electronics Samson. One of the world's largest semiconductor manufacturers, Samsung Electronics is also South Korea's top electronics company. It makes many kinds of consumer devices, including DVD players, digital TVs, and digital still cameras; computers, color monitors, LCD panels, and printers; semiconductors such as DRAMs, static RAMs, flash memory, and display drivers; and communications devices ranging from wireless handsets and smart phones to networking gear. The company, which is the flagship member of Samsung Group, also makes microwave ovens, refrigerators, air conditioners, and washing machines. Nearly half of sales come from the Asia/Pacific region. VIDEOCON APPLIANCES LTD It is one of India‟s ingrown companies, Videocon boasts of an annual turnover of the tune of US$4.1billion. It has 17 sites in India, and is known to be the third biggest manufacturer of picture tubes in the world. It also has global presence, with plants in Mexico, Italy, Poland, China and the Middle East... These are some of the tuff players in the world in consumer electronic industry. I have taken as LG , a known brand throughout the world as the subject of my study to find assess its BCG Matrix and various strengths, weaknesses, opportunities and threats.
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4.1 LG - COMPANY OVERVIEW
LG Electronics, Inc. is a global leader and technology innovator in consumer electronics, mobile communications and home appliances, employing 87,000 people working in 113 locations around the world. With 2012 global sales of USD 45.22 billion (KRW 50.96 trillion), LG comprises five business units - Home Entertainment, Mobile Communications, Home Appliance, Air Conditioning & Energy Solutions and Vehicle Components - and is one of the world‟s leading producers of flat panel TVs, mobile devices, air conditioners, washing machines and refrigerators. LG Electronics is a 2013 ENERGY STAR® Partner of the Year VISION: “LG’s vision is to deliver innovative digital products and serv ices that make our customers’ lives better, easier and happier through increased functionality and fun”. MISSION: “The mission of LG is to provide the customers with utmost satisfaction through leadership. The
fundamental policy of development is to secure product leadership that the Customers may have the utmost satisfaction.” LG WAY "Jeong-do Management
"Management by Principle" is the ethical code LG abides by in all its affairs-aiming to succeed through fair
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management practices, and constantly striving to better our business skills" is LG's unique application of ethics. LG will succeed through fair management practices and constantly developing our business skills. LG LOGO
LG
is
the
brand
that
is
Delightfully Smart. "Life's good" slogan, and futuristic logo are a great representation of what they stand for. The symbol mark stands for their resolve to establish a lasting relationship with, and to achieve the highest satisfaction for their customers. The letters "L" and "G" in a circle symbolize the world, future, youth, humanity, and technology. Their philosophy is based on Humanity. Also, it represents LG's efforts to keep close relationships with our customers around the world. The symbol mark consists of two elements: the LG logo in LG Grey and the stylized image of a human face in the unique LG Red color. Red, the main color, represents our friendliness, and also gives a strong impression of LG's commitment to deliver the best. Therefore, the shape or the color of this symbol mark must never be changed. It expresses the quality and sophistication that is the hallmark of our products. It is simple, modern and distinctive. Consistent and proper usage of the logo is absolutely essential. The logo is symbolic of our steadfast reputation for excellence; therefore, any variation of the logo diminishes the visual identity of LG Electronics and its products they have two versions of our logo: Corporate Logo and 3D Logo. The updated 3D Logo retains the heritage and equity of the Corporate Logo, while aligning with our new positioning. It was redrawn to strengthen the visual impact of our symbol mark and help communicate our attributes.
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4.2 LG ELECTRONICS 50-YEAR HISTORY
The history of LG Electronics has always been surrounded by the company's desire to create a happier, better life. The company was originally established in 1958 as Gold Star, producing radio, TVs, refrigerators, washing machines, and air conditioners. The LG Group was a merger of two Korean companies, Lucky and Gold Star, from which the abbreviation of LG was derived. The current "Life's good" slogan is an acronym. Before the corporate Name change to LG, household products were sold under the Brand name of Lucky, while electronic products were sold under the brand name of Gold Star. The Gold Star brand is still perceived as a discount brand. In 1995, Gold Star was renamed LG Electronics, and acquired Zenith Electronics of the United States HOW LG GREW:Pioneering Technology and Innovation 1947 -1958: Foundation 1947: Establishment of LUK HUI Chemical Industrial Corp. (now LG Chem.) 1958: Establishment of Goldstar (now LG Electronics) 1959-1969: AN INNOVATION START 1959: Korean‟s first Radios. 1965: Korean‟s first Refrigerators. 1966: Korean‟s first TVs. 1968: Korean‟s first Air Conditioners.
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1969: Koran‟s first washing Machines. 1970- 1979: GROWTH 1977: Korean‟s first TVs 1978: Achievement of USD100 Million In exports. 1980- 1989: GLOBALIZATION 1982: Established Korea‟s first production subsidiary Gold Star American in USA. Established local sales and promotion subsidiary in Germany, Canada. 1985: Establishment of product testing laboratory in Korea. 1990- 1999: FACE OF THE FUTURE. 1995: Change of company name to LG Electronics, Acquires US based- Zenith. 1996: Establishment of LG Telecom (now LG U+) 1997: World's first CDMA digital mobile handsets supplied to Ameritech and GTE in U.S. Achieves UL certification in U.S. Develops world's first IC set for DTV 1998: Develops world's first 60-inch plasma TV 1999: Establishes LG Philips LCD, a joint venture with Philips 2000-2009: GLOBAL BRAND LG 2000: Launches world's first Internet refrigerator Exports synchronous IMT-2000 to
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Marconi Wireless of Italy Significant exports to Verizon Wireless in U.S. 2001: GSM mobile handset Exports to Russia, Italy, and Indonesia Establishes market leadership in Australian CDMA market Launches world's first Internet washing machine, air conditioner, and microwave oven. 2002: Under LG Holding Company system separates into LG Electronics and LG Corporation Full-scale export of GPRS color mobile phones to Europe Establishes CDMA handset production line and R&D center in China 2003: Enters Northern European and Middle East GSM handset market Achieves monthly export volume above 2.5 million units (July) Top global CDMA produce 2004: Led global CMDA mobile phone market for the first time Commercialized world's first 55" all-in-one LCD TV. 2005: Launched LG Chocolate, the first phone in the Black Label Series. Establishes LG-Nortel, a network solution joint venture with Nortel Becomes fourth-largest supplier of the mobile handsets market worldwide. Develops world's first 3G UMTS DMB handset, 3G-based DVB-Hand Media FLO DMB Phone with time-shift function and DMB notebook computer
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2006: Develops the first single-scan 60" HD PDP module and 100-inch LCD TV. Establishes strategic partnership with UL Acquires the world's first IPv6 Gold Ready logo 2007: Led US drum washing machine market modem chip. Launches the industry's first dual-format, high-definition disc player and drive. Launches 120Hz Full HD LCD TV. Demonstrated the world-first MIMO 4G-Enabled technologies with 3G LTE. 2008: Introduces new global brand identity: "Stylish design and smart technology, in products that fit our consumer's lives." Posted No.1 spot in US frontloading washers in 5 consecutive quarters Unveiled the world's first Bluetooth headset combined mobile phone Unveiled the world's first Blue-ray network storage Developed the world's first LTE mobile modem chip. Recorded over 100 million units of LG air conditioners in accumulated sales 2009: Become the second-largest LCD TV provider worldwide. Became third-largest supplier of mobile handsets market worldwide. Became Global Partner and Technology Partner of Formula One
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2010- PRESENT: FATER AND SMARTER 2010: Unveiled the world‟s first and fastest dual-core Smartphone, LG OPTIMUS 2X Unveiled the world‟s first full LED 3D TV. 2011: Launched water treatment business Introduced CINEMAX 3D, LG‟s answer to cumbersome shutter-glasses 3D TVs Launched Smart Refrigerator‟ first in a of smart-grid enabled appliances. 2012: First to market world‟s first 84-inch ULTRA HD TV Unveils Optimus G, first LTE Snapdragon S4 Pro Quad-Core Smartphone Introduced world-leading smart appliances with enhanced connectivity and greater convenience. GLOBAL OPERATION LG Electronics is playing an active role in the world market with its assertive global business policy. As a result, LG Electronics controls 110 local subsidiaries in the world with around 82,000 executive and employees. LG GROUP 1. 2. 3. 4. 5. 6. LG.Philips LCD LG Chemical LG Telecom LG Powercom LG Twins LG Dacom
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4.3 ORGANIZATIONAL CHART OF LG ELECTRONICS
4.4 CORPORATE SOCIAL RESPONSIBILITY
VISION & STRATEGY Our CSR activities are an inseparable part of our strategies for sustainable growth and the accomplishment of our vision: “World Best at Enriching Lives through Innovation”. To this end, LGE has laid out the following strategic imperatives: Ensure that every management activity is carried out with a CSR-oriented mindset; Create differentiated value for stakeholders through innovation; Nurture win-win partnerships with all stakeholders in a spirit of mutual trust. CSR MANAGEMENT In order for LG Electronics to earn the trust of stakeholders and achieve sustainable growth, it first must become a healthy organism in the market ecosystem and assume a proactive role in making the system healthier throughout its business activities, including products and services. Additionally, we need to take care of our communities,
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help that in need become self-reliant, interface and communicate with a variety of stakeholders throughout this process, and form a trust-based relationship with them. To meet this goal, LGE established and is implementing four strategic tasks: CSR Change Management, CSR Risk Management, Stakeholder Engagement and Strategic Social Contribution. From product R&D through purchasing, production, sales and after sales service, LGE is striving to improve its CSR execution while strengthening its efforts to build consensus and partnership with stakeholders.
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4.5 PRODUCTs OF LG
BUSINESS AREAS HOME ENTERTAINMENT
PRODUCT LCD TV , Plasma Display , Display Panel, Color Television, Micro Display Panel TVs, PDP Modules, OLED Panels, USB Memory, Flat Panel Computer Monitors, Home Theatre System, Music system, DVD Recorder/Player, MP3 & MP4 Player, Laptop, Personal Computer, LCD monitor, CRT monitor, Optical Storage Devices, Desktop PCs, PDAs, PDA Phones, New Karaoke Systems, Car Infotainment
HOME APPLIANCES
Refrigerator, Washing Machine, Dishwasher, Microwave, Vacuum Cleaner.
AIR CONDITIONING & ENERGY SOLUTIONS MOBILE PHONE
Room Air Conditioner, Commercial Air Conditioner, Compressors
Premium trend setter phone , Camera Phone , Music Phone , Color Screen GSM Handset, 3G Handsets, Cellular Phones
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5.1 SWOT ANALYSIS OF LG
STRENGTHS Market leader in home appliances. Has got manufacturing unit in tax incentive. Wide range of products to serve all categories. Widest distribution network in the industry (47branches, 10000 trade partners). Good after sales service offered. Shifting to the rural market
WEAKNESS Higher overall costs than its rivals Samsung Consumers being its competitor
provides similar products. compare L.G with
Samsung its Korean rival not with other global companies. Lack of expert operators for complex machines due to illiteracy and lack of training in India
OPPORTUNITY Wide product portfolio Healthy resource generation. Alliance or joint venture with
THREATS Way behind market leader. War with North Korea Nothing unique about strategy. Highly competitive market Samsung and Sony are their
companies that have established a brand for themselves in the market. The consumer electronic services are expected to grow in Singapore. Fast growth of the home appliances market Shifting to rural areas
aggressive competitors. Matured and saturated industry: they need to protect their market position and competitive advantage
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5.2 LG’S PORTER FIVE FORCES MODEL OF LG
Porter‟s Five Forces is one of the models of competitive analysis for the purpose of developing strategies in many industries. But the intensity with which competition exists in the industry keeps varying. According to Michael Porter, the nature of competitiveness in an industry is based on the following five forces. Rivalry among Competitive Firms The enduring conflict with Sony and Samsung for the purpose of gaining customer share is too high. The competition is more intense as these firms pursue strategies that give competitive advantage over the strategies pursued by its rivals Potential Entrants Potential entry of new competitors is an important factor to intensify competition in the industry. Larger the band of new entrants, more intense will be the competition. Considering the trait of product differentiation, Development of Substitute Products LG faces stiff competition by substitute products producers firms especially when the switching cost of the customer is lower, and when the functionality and quality of the substitute product is better. On account of this reason, LG has to monitor its trend for the purpose of tracking those strategies as it may face competition not only from similar industry but also from different industry. But LG, Sony and Samsung have penetrated into the industry for a long time and they have created economies of scale, product differentiation, strong familiar brands, that will make it difficult for new brands to enter the industry. Bargaining Power of Suppliers The bargaining powers of suppliers affect the intensity of competition for LG on account of a large number of suppliers, and less availability of raw materials. Based on
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these attributes, the suppliers of LG have the power to enforce certain terms and conditions on manufacturers by charging a high cost of raw material. Bargaining Power of Buyers A buyer group is powerful if it purchases in large volumes. The bargaining power of consumers of LG is more, as products are not differentiated and widely available . In this case consumers of LG can ask for more discounts, extended warranty and services. As the satisfaction level of consumer goes up, the intensity level of competition increases. As a result, LG has to monitor the strategies of its competitors by taking into consideration the likes and dislikes of its customers.
5.3 BCG MATRIX OF LG COMPANY ACCORDING TO ITS PRODUCTS
In BCG Matrix product or business unit are identified as Stars, Cash Cow, Dogs, Question mark.BCG Matrix can use for resource allocation. STARS (high growth, high market share) 1. Stars are using large amounts of cash. Stars are leaders in the business. Therefore they should also generate large amounts of cash. 2. Stars are frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold your market share in Stars, because the rewards will be Cash Cows if market share is kept. CASH COWS (low growth, high market share) 1. Profits and cash generation should be high. Because of the low growth, investments which are needed should be low. 2. Cash Cows are often the stars of yesterday and they are the foundation of accompany.
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DOGS (low growth, low market share) 1. Avoid and minimize the number of Dogs in a company. 2. Watch out for expensive „rescue plans‟. 3. Dogs must deliver cash, otherwise they must be liquidated. QUESTION MARKS (high growth, low market share) 1. Question Marks have the worst cash characteristics of all, because they have high cash demands and generate low returns, because of their low market share. 2. If the market share remains unchanged, Question Marks will simply absorb great amounts of cash. 3. Either invests heavily, or sells off, or invests nothing and generates any cash that you can. Increase market share or deliver cash
BCG MATRIX OF LG
RELATIVE MARKET SHARE POSITION INDUSTRY SALES GROWTH RATE HIGH HIGH STARS LG Home Appliances Division e.g. Refrigerators- Market Growth 8.7%, Market Share 36.6% LOW QUESTION MARKS LG Mobile divisions Market growth 35.8%, Market Share 3.8%
LG Home Entertainment Division e.g. TVs- Market Growth 4.2%, Market share 15.2% LOW CASH COWS DOGS
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6.1 RECOMMENDATION AND CONCLUSION
RECOMMENDATION: 1. LG focus on its advertising strategy for high end products and has more sophisticated approach. This would improve the brand image of LG mobile in the market. 2. If LG is able to change the perception of the consumers about the brand it will for sure see a growth that is sustainable in the long run as well. 3. LG should try by providing lower rates to certain users or high end users
4. LG must try to come out with some specific plans and offers so that people get motivated and buy the product because of that specific offer. 5. More proportional schemes should be launched to incorporate the perfect blend of push and pull. So LG should provide dealers and distributor more perks and incentives. 6. LG should incorporate further innovations to outsmart the most potential
competitors like Samsung, Whirlpool. 7. And last not the least, the company would try to invest more in corporate governance to improve their image. CONCLUSION The result of success in today‟s highly charged competitive market depends not only in product innovation and level of productivity but also in hands of efficient service network with technological advancements and more adaptability towards environments. In order to multiply sales volume, only an efficient dealer and retail network can widen the geographical reach of a company‟s products. Assessment of environmental information and determining the relative significance of threats and opportunities is an important aspect carried by all the major players. The consumer perception of LG has widened dramatically from being a television company to a being a fully fledged consumer durable company.
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LG mobile phones at introduction stage (question mark). LG Appliances is at star stage. LG LCD is at cash cow stage. Currently none of its products are at dog‟s stag. But recently sales of LCD have dipped in the 1st quarter financial reports. LG mobile is increasing its market share but that is only due to the sale of low end products. At this point market is flooded with counterfeiting phones coming from china. So they must explore new market or re visit their strategy in their existing markets. Currently, LG Electronics constantly researches and introduces a full range of innovative, greener products and services, and continues to be a leader in developing green innovations and looking for innovative ideas and technologies which will support our efforts as, a leading company in practicing environmental management. As a leading corporate citizen, under the slogan “Hope for Life‟s Good,” LG has been playing an active role in global efforts to provide sustainable solutions and help achieve the UN Millennium Development Goals (MDGs). By engaging with diverse stakeholders such as governments, academic institutions, NGOs and its employees, LG is helping to create and share common values based on creativity, sustainability and more fulfilling lives Recent developments: LG Electronics received a special award as Global Technology Innovator 2013 on 7th June 2013 at the Plus X Award Night in Cologne, Germany. The Plus X Award is one of the most significant European innovation prizes for technology, sport and lifestyle and serves as a seal of approval for high-quality brands. It was the first time in the Plus X Award‟s ten-year history that awards went to 17 products from a single manufacturer. The LG products, including the flagship smart phone Optimus G and the first ULTRA HD TV,
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were consistent winners in the categories of Innovation, High Quality, Design, Ecology and Ease of Use
LG Electronics launched on Tuesday its new flagship smart phone which will have to compete against a flurry of new products from rivals Apple and Samsung who currently dominate the global market. The South Korean electronics giant said the new gadget is called Optimus G, There was plenty of buzz that LG would be producing the next Nexus device, just like it was manufacturing the Google Nexus 4. LG must compete for attention for its Optimus brand, which has yet to build as strong a reputation as Samsung's Galaxy or Apple's iPhone. LG Electronics Inc has become the world's No. 3 Smartphone maker behind Apple Inc and Samsung Electronics Co Ltd for the first time in the $223 billion market, industry data showed, as solid sales of high-end models helped it win customers.
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6.1 BIBLIOGRAPHY
WEBSITES: 1. http://www.lg.com/in/corporate-information/leadership/management-by-principles 2. Http://www.scribd.com/doc/109700920/lg-prjct 3. Http://www.scribd.com/doc/52404688/1053-brand-preference-and-competitiveanalysis-of-lg-new-ppt 4. Http://www.scribd.com/doc/42327740/bcg-matrix-of-lg 5. Http://www.ukessays.com/essays/marketing/analyis-of-the-marketing-strategy-of-lgmarketing-essay.php 6. Http://www.scribd.com/doc/153172397/bcg-matrix-of-lg-doc 7. Http://www.slideshare.net/search/slideshow?searchfrom=header&q=bcg+of+lg+elec tronic 8. Http://www.pwc.com/gx/en/technology/scorecard/consumer-electronics.jhtml 9. Http://visiblebusiness.blogspot.in/2012/02/organizational-chart-of-lgelectronics.html 10. http://www.ndtv.com/topic/lg-electronics/news 11. Source: http://www.lg.com/sg/img/about/assets/20090210191407688h.jpg 12. Http://www.koreatimes.co.kr/www/news/img/biz/081020_p5_lgtwo.j 13. http://www.koreatimes.co.kr/www/news/biz/2010/04/263_33015.html
REPORTS AND NEWSPAPER 1. The Economic Times 2. Business Standard 3. New Research Report On Companies And Markets, 2008 4. LG Electronic 2012 presentation.
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1.2 EXECUTIVE SUMMARY Strategic Management is a way in which strategists set the objectives and proceed about attaining them. Strategic management is a continuous process that evaluates and controls the business and the industries. The consumer electronics industry is consolidated as the top 10 players contribute approximately 52% of total market size. The industry, which is capital intensive and price sensitive, is a highly dynamic and fast-changing industry. Existing players includes Panasonic, Sony, Samsung, LG Electronics, Videocon etc I have done a study on LGElectronics. This conglomerate is a global leader and technology innovator in consumer electronics, mobile communications and home appliances, employing 87,000 people working in 113 locations around the world. The company was originally established in 1958 as Gold Star, producing radio, TVs, refrigerators, washing machines, and air conditioners. The LG Group was a merger of two Korean companies, Lucky and Gold Star, LG has a good brand image. And it has wide distribution network. Sony and Samsung is its biggest competitor. They pose a threat in the way of LG becoming the market leader. LG mobile phones at introduction stage (question mark).LG Appliances is at star stage and LG LCD are at cash cow stage. LG Mobile has recently launched a new mobile which looks very promising and innovative i.e. LG GZ. LG are using advertisements to improve their brand image. LG Electronics received a special award as Global Technology Innovator 2013 on 7th June 2013. One of the best thing about LG is that it is environmental-friendly and focus on the health of the consumers. They still need to work on the after sale service though.
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1.3 RELEVANCE OF THE STUDY To improve our knowledge about strategic management. To have an understanding about the LG company, their mission and vision. To make analysis using BCG Matrix. To know about their strengths and weakness. To develop our skill by providing recommendation and conclusion. To provide brief information about our analysis
1.4 RATIONALE OF THE STUDY The rationale of the study is to acquire the practical knowledge of BCG matrix analysis followed by The LG Electronics Company and which of their products are performing well.
1.5 SCOPE OF THE STUDY The scope of the study is limited to BCG matrix and SWOT analysis of one company i.e. LG Electronics Company. This paper includes, history of the company, global operation and the strategic analysis, structure of the company has been shown.
1.6 SOURCE OF STUDY 1. PRIMARY: 2. SECONDARY: websites ,journals, annual reports, newspaper etc
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2.1 THEORY OF STRATEGIC MANAGEMENT STRATEGIC MANAGEMENT -MEANING Strategic Management is all about identification and description of the strategies that managers can carry so as to achieve better performance and a competitive advantage for their organization. An organization is said to have competitive advantage if its profitability is higher than the average profitability for all companies in its industry The word “strategy” is derived from the Greek word “stratçgos”; stratus (meaning army) and “ago” (meaning leading/moving). Strategy is an action that managers take to attain one or more of the organization‟s goals. Strategy can also be defined as “A general direction set for the company and its various components to achieve a desired state in the future. Strategy results from the detailed strategic planning process”. Strategy can also be defined as knowledge of the goals, the uncertainty of events.
2.2 COMPONENTS OF STRATEGIC STATEMENT
The strategy statement of a firm sets the firm‟s long -term strategic direction and broad policy directions. It gives the firm a clear sense of direction and a blueprint for the firm‟s activities for the upcoming years. The main constituents of a strategic stat ement are as follows: 1. Strategic Intent: An organization‟s strategic intent is the purpose that it exists and why it will continue to exist, providing it maintains a competitive advantage. 2. Mission Statement: Mission statement is the statement of the role by which an organization intends to serve its stakeholders. It describes why an organization is operating and thus provides a framework within which strategies are formulated. It describes what the organization does (i.e., present capabilities), who all it serves
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(i.e., stakeholders) and what makes an organization unique (i.e., reason for existence) 3. Vision: A vision statement identifies where the organization wants or intends to be in future or where it should be to best meet the needs of the stakeholders. It describes dreams and aspirations for future. 4. Goals and Objectives: A goal is a desired future state or objective that an organization tries to achieve. Goals specify in particular what must be done if an organization is to attain mission or vision. Objectives are defined as goals that organization wants to achieve over a period of time.
2.3 STRATEGIC MANAGEMENT PROCESS - MEANING, STEPS AND
COMPONENTS The strategic management process means defining the organization‟s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises its competitors; and fixes goals to meet the entire present and future competitor‟s and then reassesses each strategy. Strategic management process has following four steps: 1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it. 2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational
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purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies. Strategy formulation is the process of establishing the organization's mission, objectives, and choosing among alternative strategies. Sometimes strategy formulation is called "strategic planning." 3. Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organization‟s chosen strategy into action . His basic strategy implementation activities are establishing annual objectives, devising policies, and allocated resources. Strategy implementation also includes the making of decisions with regard to matching strategy and organizational structure; developing budgets, and motivational systems. 4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The fundamental strategy evaluation and control activities are: reviewing internal and external factors that are the bases for current strategies, measuring performance, and taking corrective actions. Evaluation makes sure that the organizational strategy as well as its implementation meets the organizational objectives. These components are steps that are carried, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situation‟s requirement, so as to make essential changes.
Components of Strategic Management Process
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2.4 LEVELS OF STRATEGY
Corporate strategy—this strategy seeks to determine what businesses a company should be in or wants to be in. Corporate strategy determines the direction that the organization is going and the roles that each business unit in the organization will plan in pursuing that direction. Business strategy—this strategy seeks to determine how an organization should compete in each of its businesses. For a small organization in only one line of business or the large organization that has not diversified into different products or markets, the business strategy typically overlaps with the organization‟s corporate strategy. For organizations with multiple businesses, however, each division will have its own strategy that defines the products or services it will offer and the customers it wants to reach. Functional strategy—this strategy seeks to determine how to support the business strategy. For organizations that have traditional functional departments such as manufacturing, marketing, human resources, research and development, and finance, these strategies need to support the business strategy.
2.5 FORMS OF ORGANIZATION
In simple words, organizing means arranging the ways and means for the execution of business plan. It is the creation of administrative set-up for the execution of the plan. Internal Organization structure constitutes the arteries and veins through which the blood of work flows in the body of Organization. Internal Organization structures can be broadly classified into the following types/forms: Line Organization structure: Line Organisation (also called Military/Scalar Organisation) is the oldest and the simplest form of internal Organisation structure. N the line Organisation, the line of authority moves directly from the top level to the lowest level in a step-by-step manner. It is straight and
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vertical. The top-level management takes all major decisions and issues directions for actual execution. Line and Staff Organisation Structure In the line and staff Organisation, line executives and staff (specialists) are combined together. The line executives are 'doers' whereas staff refers to experts and act as 'thinkers'. The line executives are concerned with the execution of plans and Policies. They do their best to achieve the organizational objectives. The staff concentrates their attention on research and planning activities. They are experts and conduct advisory functions. Matrix Organization: It is a combination of two or more organization structures. For e.g., Functional Organization and Project Organization. The organization is divided into different functions, e.g. Purchase, Production, R & D, etc. Each function has a Functional (Departmental) Manager, e.g. Purchase Manager, Production Manager, etc. The organization is also divided on the basis of projects e.g. Project A, Project B, etc. Each project has a Project Manager e.g. Project A Manager, Project B Manager, etc. The employee has to work fewer than two authorities (bosses). The authority of the Functional Manager flows downwards while the authority of the Project Manager flows across (side wards). So, the authority flows downwards and across. Therefore, it is called "Matrix Organization"
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2.6 PESTLE ANALYSES
The PESTLE analysis should be used to provide a context for the organization‟s/individual‟s role in relation to the external environment. It covers Political, Economic, Social, Technological, Legal and Environmental factors. POLITICAL What are the key political drivers of relevance? Worldwide, European and Government directives, funding council policies, national and local organization‟s requirements, institutional policy ECONOMIC What are the important economic factors? Funding mechanisms and streams, business and enterprise directives, internal funding models, budgetary restrictions, income generation targets SOCIAL What are the main societal and cultural aspects? Societal attitudes relates to education particularly in relation to government directives and employment opportunities. Also general lifestyle changes, changes in populations, distributions and demographics and the impact of different mixes of cultures
Technological What are current technology imperatives, changes and innovations? Major current and emerging technologies of relevance for teaching, research or administration Legal Current and impending legislation affecting the role European and national proposed and passed legislation Environmental What are the environmental considerations, locally and further afield? Local, national and international environmental impacts, outcomes of political and social factor
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2.7 SWOT ANALYSES
Now you have the PESTLE context you can use this output to map out a SWOT analysis. SWOT stands for: Strengths Weaknesses Opportunities Threats
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3.1 INDUSTRY OVERVIEW
The consumer electronics industry is consolidated as the top 10 players contribute approximately 52% of total market size. The industry, which is capital intensive and price sensitive, is a highly dynamic and fast-changing industry. Costs of raw materials such as steel and copper have increased, which had a significant effect on the price of the finished goods. A combination of factors such as rising income and consumer spending affect the market dynamics significantly. The industry has essentially recovered from the recent recessionary condition globally and is in the growing phase The consumer electronics industry manufactures and distributes everything from telephones, stereo components, televisions, alarm clocks, and calculators to digital cameras, video cameras, VCRs, and DVD and MP3 players-basically, everything you see when you go into a Best Buy or Circuit City store. (Some industry observers also include desktop and laptop PC manufacturers as part of the industry.) Needless to say, consumer electronics is big business. In 2005, in the U.S. alone, consumers spent more than $75 billion on consumer electronics products, 8 percent more than in 2004. WHO CONTROLS THE DIGITAL HOME Televisions, stereos, cameras, and other consumer electronics products grow more useful and powerful when they are tied together wirelessly and can reach out to the Internet. For the digital home to take shape and for sales to soar as consumers see its advantages, companies need to figure out how to get all their gadgets talking to each other and to a central hub that will store the many megabytes of media files that entertain us. Microsoft wants the computer in the middle and is pushing its Media Center software; Sony is selling a portable LCD television that can grab video from the Internet, a personal video recorder, or a DVD player; and Sharp will launch technology for sending HDTV signals through a home's existing electrical wiring. No matter which arrangement proves popular, there should be plenty of work in turning today's homes into tomorrow's networked entertainment centers.
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The consumer electronics industry includes manufacturers of all shapes and sizes. The largest are multinational conglomerates with more than 100,000 employees and interests in many different industries. The smallest often have only one office with fewer than 50 employees focused on one product. In the middle are manufacturers that offer a range of products within a certain category, such as speakers and audio accessories. Because companies of all sizes can make similar products, industry observers usually break down the market by product category rather than company size.
3.2 COMPETITOR’S PROFILE- Existing players in the Indian market in
consumer electronics The main electronic manufacturers in the Indian market are Sony, Videocon Industries, LG Electronics, Samsung, Onida, Panasonic India, Bose India, BPL, etc. The upcoming players are D-Link, Samte, WeP and Tyco followed by Nokia and Motorola SONY ELECTRONICS Sony is a Japanese company and key players in consumer electronics especially television. The brand for Sony‟s television is BRAVIATM. It is a leader in product innovation. Sony has an ability to identify imagination and enhance people‟s life. The company has been at the cutting edge of technology for more than 50 years. Now, Sony develops its business with sales innovative products as well as Sony‟s convergence strategy. For example, Sony has Hi-Scan flat screen TV which can deliver near HDTV picture quality through Digital Reality Creation (DRC) circuitry. Sony conducts an advertisement campaigns to secure consumer attention and utilizes world class public relations to enhance Sony‟s value, reputation and brand image PANASONIC CORPORATION Panasonic has been one of the world's most prolific electronics
manufacturers since 1919. It operates worldwide through about 600 companies under brands Panasonic, Quasar, Technics, and others. The company spans multiple fields:
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Its consumer business consists of AVC (audio, video, and communications) equipment, along with hardware and software for linking it together, and home appliances (washing machines, vacuum cleaners, personal grooming aids, and commercial HVAC). In the field of devices Panasonic covers and multimedia batteries. and The eco-car company's
equipment, industrial electronic components,
solutions equipment targets environmentally conscience businesses, manufacturers, and health care firms SAMSUNG ELECTRONICS CO., LTD. Samsung Electronics is an electronics Samson. One of the world's largest semiconductor manufacturers, Samsung Electronics is also South Korea's top electronics company. It makes many kinds of consumer devices, including DVD players, digital TVs, and digital still cameras; computers, color monitors, LCD panels, and printers; semiconductors such as DRAMs, static RAMs, flash memory, and display drivers; and communications devices ranging from wireless handsets and smart phones to networking gear. The company, which is the flagship member of Samsung Group, also makes microwave ovens, refrigerators, air conditioners, and washing machines. Nearly half of sales come from the Asia/Pacific region. VIDEOCON APPLIANCES LTD It is one of India‟s ingrown companies, Videocon boasts of an annual turnover of the tune of US$4.1billion. It has 17 sites in India, and is known to be the third biggest manufacturer of picture tubes in the world. It also has global presence, with plants in Mexico, Italy, Poland, China and the Middle East... These are some of the tuff players in the world in consumer electronic industry. I have taken as LG , a known brand throughout the world as the subject of my study to find assess its BCG Matrix and various strengths, weaknesses, opportunities and threats.
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4.1 LG - COMPANY OVERVIEW
LG Electronics, Inc. is a global leader and technology innovator in consumer electronics, mobile communications and home appliances, employing 87,000 people working in 113 locations around the world. With 2012 global sales of USD 45.22 billion (KRW 50.96 trillion), LG comprises five business units - Home Entertainment, Mobile Communications, Home Appliance, Air Conditioning & Energy Solutions and Vehicle Components - and is one of the world‟s leading producers of flat panel TVs, mobile devices, air conditioners, washing machines and refrigerators. LG Electronics is a 2013 ENERGY STAR® Partner of the Year VISION: “LG’s vision is to deliver innovative digital products and serv ices that make our customers’ lives better, easier and happier through increased functionality and fun”. MISSION: “The mission of LG is to provide the customers with utmost satisfaction through leadership. The
fundamental policy of development is to secure product leadership that the Customers may have the utmost satisfaction.” LG WAY "Jeong-do Management
"Management by Principle" is the ethical code LG abides by in all its affairs-aiming to succeed through fair
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management practices, and constantly striving to better our business skills" is LG's unique application of ethics. LG will succeed through fair management practices and constantly developing our business skills. LG LOGO
LG
is
the
brand
that
is
Delightfully Smart. "Life's good" slogan, and futuristic logo are a great representation of what they stand for. The symbol mark stands for their resolve to establish a lasting relationship with, and to achieve the highest satisfaction for their customers. The letters "L" and "G" in a circle symbolize the world, future, youth, humanity, and technology. Their philosophy is based on Humanity. Also, it represents LG's efforts to keep close relationships with our customers around the world. The symbol mark consists of two elements: the LG logo in LG Grey and the stylized image of a human face in the unique LG Red color. Red, the main color, represents our friendliness, and also gives a strong impression of LG's commitment to deliver the best. Therefore, the shape or the color of this symbol mark must never be changed. It expresses the quality and sophistication that is the hallmark of our products. It is simple, modern and distinctive. Consistent and proper usage of the logo is absolutely essential. The logo is symbolic of our steadfast reputation for excellence; therefore, any variation of the logo diminishes the visual identity of LG Electronics and its products they have two versions of our logo: Corporate Logo and 3D Logo. The updated 3D Logo retains the heritage and equity of the Corporate Logo, while aligning with our new positioning. It was redrawn to strengthen the visual impact of our symbol mark and help communicate our attributes.
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4.2 LG ELECTRONICS 50-YEAR HISTORY
The history of LG Electronics has always been surrounded by the company's desire to create a happier, better life. The company was originally established in 1958 as Gold Star, producing radio, TVs, refrigerators, washing machines, and air conditioners. The LG Group was a merger of two Korean companies, Lucky and Gold Star, from which the abbreviation of LG was derived. The current "Life's good" slogan is an acronym. Before the corporate Name change to LG, household products were sold under the Brand name of Lucky, while electronic products were sold under the brand name of Gold Star. The Gold Star brand is still perceived as a discount brand. In 1995, Gold Star was renamed LG Electronics, and acquired Zenith Electronics of the United States HOW LG GREW:Pioneering Technology and Innovation 1947 -1958: Foundation 1947: Establishment of LUK HUI Chemical Industrial Corp. (now LG Chem.) 1958: Establishment of Goldstar (now LG Electronics) 1959-1969: AN INNOVATION START 1959: Korean‟s first Radios. 1965: Korean‟s first Refrigerators. 1966: Korean‟s first TVs. 1968: Korean‟s first Air Conditioners.
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1969: Koran‟s first washing Machines. 1970- 1979: GROWTH 1977: Korean‟s first TVs 1978: Achievement of USD100 Million In exports. 1980- 1989: GLOBALIZATION 1982: Established Korea‟s first production subsidiary Gold Star American in USA. Established local sales and promotion subsidiary in Germany, Canada. 1985: Establishment of product testing laboratory in Korea. 1990- 1999: FACE OF THE FUTURE. 1995: Change of company name to LG Electronics, Acquires US based- Zenith. 1996: Establishment of LG Telecom (now LG U+) 1997: World's first CDMA digital mobile handsets supplied to Ameritech and GTE in U.S. Achieves UL certification in U.S. Develops world's first IC set for DTV 1998: Develops world's first 60-inch plasma TV 1999: Establishes LG Philips LCD, a joint venture with Philips 2000-2009: GLOBAL BRAND LG 2000: Launches world's first Internet refrigerator Exports synchronous IMT-2000 to
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Marconi Wireless of Italy Significant exports to Verizon Wireless in U.S. 2001: GSM mobile handset Exports to Russia, Italy, and Indonesia Establishes market leadership in Australian CDMA market Launches world's first Internet washing machine, air conditioner, and microwave oven. 2002: Under LG Holding Company system separates into LG Electronics and LG Corporation Full-scale export of GPRS color mobile phones to Europe Establishes CDMA handset production line and R&D center in China 2003: Enters Northern European and Middle East GSM handset market Achieves monthly export volume above 2.5 million units (July) Top global CDMA produce 2004: Led global CMDA mobile phone market for the first time Commercialized world's first 55" all-in-one LCD TV. 2005: Launched LG Chocolate, the first phone in the Black Label Series. Establishes LG-Nortel, a network solution joint venture with Nortel Becomes fourth-largest supplier of the mobile handsets market worldwide. Develops world's first 3G UMTS DMB handset, 3G-based DVB-Hand Media FLO DMB Phone with time-shift function and DMB notebook computer
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2006: Develops the first single-scan 60" HD PDP module and 100-inch LCD TV. Establishes strategic partnership with UL Acquires the world's first IPv6 Gold Ready logo 2007: Led US drum washing machine market modem chip. Launches the industry's first dual-format, high-definition disc player and drive. Launches 120Hz Full HD LCD TV. Demonstrated the world-first MIMO 4G-Enabled technologies with 3G LTE. 2008: Introduces new global brand identity: "Stylish design and smart technology, in products that fit our consumer's lives." Posted No.1 spot in US frontloading washers in 5 consecutive quarters Unveiled the world's first Bluetooth headset combined mobile phone Unveiled the world's first Blue-ray network storage Developed the world's first LTE mobile modem chip. Recorded over 100 million units of LG air conditioners in accumulated sales 2009: Become the second-largest LCD TV provider worldwide. Became third-largest supplier of mobile handsets market worldwide. Became Global Partner and Technology Partner of Formula One
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2010- PRESENT: FATER AND SMARTER 2010: Unveiled the world‟s first and fastest dual-core Smartphone, LG OPTIMUS 2X Unveiled the world‟s first full LED 3D TV. 2011: Launched water treatment business Introduced CINEMAX 3D, LG‟s answer to cumbersome shutter-glasses 3D TVs Launched Smart Refrigerator‟ first in a of smart-grid enabled appliances. 2012: First to market world‟s first 84-inch ULTRA HD TV Unveils Optimus G, first LTE Snapdragon S4 Pro Quad-Core Smartphone Introduced world-leading smart appliances with enhanced connectivity and greater convenience. GLOBAL OPERATION LG Electronics is playing an active role in the world market with its assertive global business policy. As a result, LG Electronics controls 110 local subsidiaries in the world with around 82,000 executive and employees. LG GROUP 1. 2. 3. 4. 5. 6. LG.Philips LCD LG Chemical LG Telecom LG Powercom LG Twins LG Dacom
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4.3 ORGANIZATIONAL CHART OF LG ELECTRONICS
4.4 CORPORATE SOCIAL RESPONSIBILITY
VISION & STRATEGY Our CSR activities are an inseparable part of our strategies for sustainable growth and the accomplishment of our vision: “World Best at Enriching Lives through Innovation”. To this end, LGE has laid out the following strategic imperatives: Ensure that every management activity is carried out with a CSR-oriented mindset; Create differentiated value for stakeholders through innovation; Nurture win-win partnerships with all stakeholders in a spirit of mutual trust. CSR MANAGEMENT In order for LG Electronics to earn the trust of stakeholders and achieve sustainable growth, it first must become a healthy organism in the market ecosystem and assume a proactive role in making the system healthier throughout its business activities, including products and services. Additionally, we need to take care of our communities,
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help that in need become self-reliant, interface and communicate with a variety of stakeholders throughout this process, and form a trust-based relationship with them. To meet this goal, LGE established and is implementing four strategic tasks: CSR Change Management, CSR Risk Management, Stakeholder Engagement and Strategic Social Contribution. From product R&D through purchasing, production, sales and after sales service, LGE is striving to improve its CSR execution while strengthening its efforts to build consensus and partnership with stakeholders.
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4.5 PRODUCTs OF LG
BUSINESS AREAS HOME ENTERTAINMENT
PRODUCT LCD TV , Plasma Display , Display Panel, Color Television, Micro Display Panel TVs, PDP Modules, OLED Panels, USB Memory, Flat Panel Computer Monitors, Home Theatre System, Music system, DVD Recorder/Player, MP3 & MP4 Player, Laptop, Personal Computer, LCD monitor, CRT monitor, Optical Storage Devices, Desktop PCs, PDAs, PDA Phones, New Karaoke Systems, Car Infotainment
HOME APPLIANCES
Refrigerator, Washing Machine, Dishwasher, Microwave, Vacuum Cleaner.
AIR CONDITIONING & ENERGY SOLUTIONS MOBILE PHONE
Room Air Conditioner, Commercial Air Conditioner, Compressors
Premium trend setter phone , Camera Phone , Music Phone , Color Screen GSM Handset, 3G Handsets, Cellular Phones
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5.1 SWOT ANALYSIS OF LG
STRENGTHS Market leader in home appliances. Has got manufacturing unit in tax incentive. Wide range of products to serve all categories. Widest distribution network in the industry (47branches, 10000 trade partners). Good after sales service offered. Shifting to the rural market
WEAKNESS Higher overall costs than its rivals Samsung Consumers being its competitor
provides similar products. compare L.G with
Samsung its Korean rival not with other global companies. Lack of expert operators for complex machines due to illiteracy and lack of training in India
OPPORTUNITY Wide product portfolio Healthy resource generation. Alliance or joint venture with
THREATS Way behind market leader. War with North Korea Nothing unique about strategy. Highly competitive market Samsung and Sony are their
companies that have established a brand for themselves in the market. The consumer electronic services are expected to grow in Singapore. Fast growth of the home appliances market Shifting to rural areas
aggressive competitors. Matured and saturated industry: they need to protect their market position and competitive advantage
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5.2 LG’S PORTER FIVE FORCES MODEL OF LG
Porter‟s Five Forces is one of the models of competitive analysis for the purpose of developing strategies in many industries. But the intensity with which competition exists in the industry keeps varying. According to Michael Porter, the nature of competitiveness in an industry is based on the following five forces. Rivalry among Competitive Firms The enduring conflict with Sony and Samsung for the purpose of gaining customer share is too high. The competition is more intense as these firms pursue strategies that give competitive advantage over the strategies pursued by its rivals Potential Entrants Potential entry of new competitors is an important factor to intensify competition in the industry. Larger the band of new entrants, more intense will be the competition. Considering the trait of product differentiation, Development of Substitute Products LG faces stiff competition by substitute products producers firms especially when the switching cost of the customer is lower, and when the functionality and quality of the substitute product is better. On account of this reason, LG has to monitor its trend for the purpose of tracking those strategies as it may face competition not only from similar industry but also from different industry. But LG, Sony and Samsung have penetrated into the industry for a long time and they have created economies of scale, product differentiation, strong familiar brands, that will make it difficult for new brands to enter the industry. Bargaining Power of Suppliers The bargaining powers of suppliers affect the intensity of competition for LG on account of a large number of suppliers, and less availability of raw materials. Based on
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these attributes, the suppliers of LG have the power to enforce certain terms and conditions on manufacturers by charging a high cost of raw material. Bargaining Power of Buyers A buyer group is powerful if it purchases in large volumes. The bargaining power of consumers of LG is more, as products are not differentiated and widely available . In this case consumers of LG can ask for more discounts, extended warranty and services. As the satisfaction level of consumer goes up, the intensity level of competition increases. As a result, LG has to monitor the strategies of its competitors by taking into consideration the likes and dislikes of its customers.
5.3 BCG MATRIX OF LG COMPANY ACCORDING TO ITS PRODUCTS
In BCG Matrix product or business unit are identified as Stars, Cash Cow, Dogs, Question mark.BCG Matrix can use for resource allocation. STARS (high growth, high market share) 1. Stars are using large amounts of cash. Stars are leaders in the business. Therefore they should also generate large amounts of cash. 2. Stars are frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold your market share in Stars, because the rewards will be Cash Cows if market share is kept. CASH COWS (low growth, high market share) 1. Profits and cash generation should be high. Because of the low growth, investments which are needed should be low. 2. Cash Cows are often the stars of yesterday and they are the foundation of accompany.
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DOGS (low growth, low market share) 1. Avoid and minimize the number of Dogs in a company. 2. Watch out for expensive „rescue plans‟. 3. Dogs must deliver cash, otherwise they must be liquidated. QUESTION MARKS (high growth, low market share) 1. Question Marks have the worst cash characteristics of all, because they have high cash demands and generate low returns, because of their low market share. 2. If the market share remains unchanged, Question Marks will simply absorb great amounts of cash. 3. Either invests heavily, or sells off, or invests nothing and generates any cash that you can. Increase market share or deliver cash
BCG MATRIX OF LG
RELATIVE MARKET SHARE POSITION INDUSTRY SALES GROWTH RATE HIGH HIGH STARS LG Home Appliances Division e.g. Refrigerators- Market Growth 8.7%, Market Share 36.6% LOW QUESTION MARKS LG Mobile divisions Market growth 35.8%, Market Share 3.8%
LG Home Entertainment Division e.g. TVs- Market Growth 4.2%, Market share 15.2% LOW CASH COWS DOGS
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6.1 RECOMMENDATION AND CONCLUSION
RECOMMENDATION: 1. LG focus on its advertising strategy for high end products and has more sophisticated approach. This would improve the brand image of LG mobile in the market. 2. If LG is able to change the perception of the consumers about the brand it will for sure see a growth that is sustainable in the long run as well. 3. LG should try by providing lower rates to certain users or high end users
4. LG must try to come out with some specific plans and offers so that people get motivated and buy the product because of that specific offer. 5. More proportional schemes should be launched to incorporate the perfect blend of push and pull. So LG should provide dealers and distributor more perks and incentives. 6. LG should incorporate further innovations to outsmart the most potential
competitors like Samsung, Whirlpool. 7. And last not the least, the company would try to invest more in corporate governance to improve their image. CONCLUSION The result of success in today‟s highly charged competitive market depends not only in product innovation and level of productivity but also in hands of efficient service network with technological advancements and more adaptability towards environments. In order to multiply sales volume, only an efficient dealer and retail network can widen the geographical reach of a company‟s products. Assessment of environmental information and determining the relative significance of threats and opportunities is an important aspect carried by all the major players. The consumer perception of LG has widened dramatically from being a television company to a being a fully fledged consumer durable company.
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LG mobile phones at introduction stage (question mark). LG Appliances is at star stage. LG LCD is at cash cow stage. Currently none of its products are at dog‟s stag. But recently sales of LCD have dipped in the 1st quarter financial reports. LG mobile is increasing its market share but that is only due to the sale of low end products. At this point market is flooded with counterfeiting phones coming from china. So they must explore new market or re visit their strategy in their existing markets. Currently, LG Electronics constantly researches and introduces a full range of innovative, greener products and services, and continues to be a leader in developing green innovations and looking for innovative ideas and technologies which will support our efforts as, a leading company in practicing environmental management. As a leading corporate citizen, under the slogan “Hope for Life‟s Good,” LG has been playing an active role in global efforts to provide sustainable solutions and help achieve the UN Millennium Development Goals (MDGs). By engaging with diverse stakeholders such as governments, academic institutions, NGOs and its employees, LG is helping to create and share common values based on creativity, sustainability and more fulfilling lives Recent developments: LG Electronics received a special award as Global Technology Innovator 2013 on 7th June 2013 at the Plus X Award Night in Cologne, Germany. The Plus X Award is one of the most significant European innovation prizes for technology, sport and lifestyle and serves as a seal of approval for high-quality brands. It was the first time in the Plus X Award‟s ten-year history that awards went to 17 products from a single manufacturer. The LG products, including the flagship smart phone Optimus G and the first ULTRA HD TV,
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were consistent winners in the categories of Innovation, High Quality, Design, Ecology and Ease of Use
LG Electronics launched on Tuesday its new flagship smart phone which will have to compete against a flurry of new products from rivals Apple and Samsung who currently dominate the global market. The South Korean electronics giant said the new gadget is called Optimus G, There was plenty of buzz that LG would be producing the next Nexus device, just like it was manufacturing the Google Nexus 4. LG must compete for attention for its Optimus brand, which has yet to build as strong a reputation as Samsung's Galaxy or Apple's iPhone. LG Electronics Inc has become the world's No. 3 Smartphone maker behind Apple Inc and Samsung Electronics Co Ltd for the first time in the $223 billion market, industry data showed, as solid sales of high-end models helped it win customers.
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6.1 BIBLIOGRAPHY
WEBSITES: 1. http://www.lg.com/in/corporate-information/leadership/management-by-principles 2. Http://www.scribd.com/doc/109700920/lg-prjct 3. Http://www.scribd.com/doc/52404688/1053-brand-preference-and-competitiveanalysis-of-lg-new-ppt 4. Http://www.scribd.com/doc/42327740/bcg-matrix-of-lg 5. Http://www.ukessays.com/essays/marketing/analyis-of-the-marketing-strategy-of-lgmarketing-essay.php 6. Http://www.scribd.com/doc/153172397/bcg-matrix-of-lg-doc 7. Http://www.slideshare.net/search/slideshow?searchfrom=header&q=bcg+of+lg+elec tronic 8. Http://www.pwc.com/gx/en/technology/scorecard/consumer-electronics.jhtml 9. Http://visiblebusiness.blogspot.in/2012/02/organizational-chart-of-lgelectronics.html 10. http://www.ndtv.com/topic/lg-electronics/news 11. Source: http://www.lg.com/sg/img/about/assets/20090210191407688h.jpg 12. Http://www.koreatimes.co.kr/www/news/img/biz/081020_p5_lgtwo.j 13. http://www.koreatimes.co.kr/www/news/biz/2010/04/263_33015.html
REPORTS AND NEWSPAPER 1. The Economic Times 2. Business Standard 3. New Research Report On Companies And Markets, 2008 4. LG Electronic 2012 presentation.
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