Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Summer
2010
1. BUSINESS SCOPE
LG Electronics, Inc.(LG) is a global leader and technology innovator in consumer electronics,
mobile communications and home appliances. LG is one of the world's leading producers of flat
panel TVs, audio and video products, mobile handsets, air conditioners and washing machines.
LG's efforts continue to enhance the global presence of the LG brand and to maximize profitable
growth. In particular, LG Electronics is focusing on achieving profitable and sustainable growth
in the mobile communications and home entertainment sectors to strengthen its leadership in the
IT industry.
Global, Tomorrow, Energy, Humanity and Technology are the pillars that this corporation is
founded on; with the capital letters L and G positioned inside a circle to center their ideals above
all else, humanity. 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 their customers
around the world. The symbol 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 their
friendliness, and also gives a strong impression of LG's commitment to deliver the best.
1.1. Regions
OTHER
TIER HYDERABA
GUJRANWALA QUETTA WAHACANTTSIALKOT SMALL
NO: 02 D
CITIES
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MBA Term Report: Strategic Analysis of LG and TV Industry
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Customer wants new innovative features, styles, wide range of screen sizes, attractive
design, good sound quality and outstanding after sales services but at reasonable price.
LG TV provides wide range of televisions along with LCDs that covers screen size ranging from
21 inches to 50 inches. This range is fulfilling the entertainment need of varied customers. The
company provides LCD, Plasma, conventional, Analogue, CRT and Flatron TVs according to the
needs of its various customers that belong to the category of different economic groups.
LG has targeted its market on the basis of the product that they are offering to the consumer.
• Middle Class
LG is adding value to its brand to deliver something extra to their customers. Some of the value
addition in television is introduction of Bluetooth technology, and introduced sensors in its LCD
TVs which detects the environment of the room and changes the color preferences automatically.
LG Intelligent Sensor technology evaluates ambient light conditions in the room and
automatically adjusts brightness, contrast, and color balance to optimize picture quality. The LG
TV series are also providing full HD picture quality with an ultra slim design perfect for
customer bedroom, kitchen or office. With Smart Energy Saving Plus technology, USB
connectivity. LG TV will also save customers’ money on their electricity bills.
1.6. Considerations
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MBA Term Report: Strategic Analysis of LG and TV Industry
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The consideration of LG involve future scope, in which LG is tailoring their products according
to the future demand of the customers, Innovation focused for taking competitive advantage
using existing competencies and capabilities, bringing product range to new segments. LG
started introducing quality products in the economy range, focusing on innovation led growth.
They are planning to introduce 3D Screens in Pakistan
The competition scenario of LG in the Television industry of Pakistan, facing competition from
different competitors like: Sony, Samsung, Panasonic, Haier, Toshiba, and great competition
from low cost Chinese televisions.
Competitors like Sony define its technology, “Like no other”. Samsung defines as, “Everyone is
invited” the product for every one focusing on every one’s needs. New Year slogan of Samsung
is “Turn on tomorrow” be ahead in innovation.
LG is currently focused on T.V, Cell Phones, Home Appliances, I.T Products and Air
Conditioners segment. In order to expand its business in future LG should expand its target
market. LG future consideration is SOLAR SYSTEM segment which gives great opportunities to
LG in future.
In Pakistan LG basically providing electronics related product but in which they are not catering:
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MBA Term Report: Strategic Analysis of LG and TV Industry
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2. EXTERNAL ANALYSIS
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MBA Term Report: Strategic Analysis of LG and TV Industry
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Implication
LG television being in High-tech industry has three types of end users which are classified as:
Price Sensitive: These are those Consumers which demand for lowest possible price. Their end
user application is only mode of entertainment. Mostly CRT TV is preferred by price
sensitive customers.
Style Conscious: The customer who belongs to this category has major focus on their
personality and they choose brand which best suits their style. Their end user application is
home theater representing the style besides mode of entertainment. This is the segment for
LCD TV market.
Status Conscious: The Customers which belong to this group are mostly of Upper class which
purchases brands that represents their Status and prestige. Their end user application is
representing the social status besides the mode of entertainment. This segment is for LED
TV market.
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END USER
The above chart is showing the distribution channels of TV companies. As we know that there
only assembling plants are set up in Pakistan therefore TV companies are using distributors in
Pakistan for supplying their products in local market. Companies deliver their products to
distributors and distributors supply them to retailers, hyper market and other non- exclusive
channels. Companies are also using Brand Show Rooms (Makro, Micro, Agas Super Store and
others) for targeting their market.
PRODUCTS
3.3. Change & Effect Analysis
The consumer electronics (TV) companies are facing many difficulties due to changes in
environment and their impact on doing business in Pakistan, out of which some changes
and their effects are attempted to show in following table:
CHANGE EFFECT
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MBA Term Report: Strategic Analysis of LG and TV Industry
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Worse law & order situation Distributors are reluctant to cover northern
areas of Pakistan
Market
2009-10 Growth Rate
segment 2006-07 2007-08 2008-09
Status
- - 85 110
Conscious 4%
Style
78,500 80,000 81,500 82,500
Conscious 3%
Total Growth
5%
rate
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MBA Term Report: Strategic Analysis of LG and TV Industry
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Market
2009-10 Growth Rate
segment 2006-07 2007-08 2008-09
Status
- - 17,000,000 22,000,000
Conscious 4%
Style
3,925,000,000 4,000,000,000 4,075,000,000 4,125,000,000
Conscious 3%
Total Growth
5%
rate
• Status Conscious:
According to our analysis, LED that is catering Status Conscious segment was launched in the
beginning of 2008 in Pakistani market & its market size is showing 4% growth rate. The reasons
of growing market of LED are:
o LED’s new technology, product design, quality, innovative features and high life style
symbol therefore those people who belong to upper upper class, are showing interest
towards LED buying.
o This segment user has no effect of increasing inflation factor therefore we are observing
positive growth for LED market.
o All big names in TV market like LG, Samsung, Sony are focusing on this segment and
making strong distribution network to cater this segment.
• Style Conscious:
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Companies are targeting this segment with best cost providing strategies therefore the prices of
LCD is going down with the passage of time, that’s why its market is also showing increasing
growth rate by 3%. Other reasons behind growing market of LCD are:
o LCD’s slim body, product design, quality and innovative features attracted this segment
user because before entrance of LCD in this segment, users are buying CRT TVs and
they had no option for others because style conscious people are price sensitive to some
extent.
o LCD market shifted from Status conscious to Style conscious segment therefore those
people who couldn't afford LCD due to high prices, now they can purchase it.
• Price Sensitive:
CRT TVs is volume builder product line for TV making companies. In Pakistan, there are a lot
of people those want cheap entertainment in form of TV therefore we are observing 6% growth
rate here. Other reasons behind growing market of CRT are:
o Smuggled cheap Chinese TVs is the major factor of growing this segment because price
sensitive people are appreciating Chinese TVs in lower prices.
o Majority of rural area people are shifting to urban and sub urban areas therefore they can
also access to CRT TVs.
o There is developing a market of used TV sets therefore price sensitive people are buying
those used TV sets.
Market
2009-10 2010-11 2011-12 2012-13 Growth Rate
segment
Status
110 135 155 185 3%
Conscious
Style
82,500 84,000 85,500 86,500 2%
Conscious
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MBA Term Report: Strategic Analysis of LG and TV Industry
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Price
945,000 948,000 950,000 952,000 2%
Sensitive
Total growth
2%
rate
Market growth rate in term of Rs. in millions (Future)
Market Growth
2009-10 2010-11 2011-12 2012-13
segment Rate
Status
Consciou 16,500,000 20,250,000 23,250,000 27,750,000 3%
s
Style
Consciou 3,300,000,000 3,360,000,000 3,420,000,000 3,460,000,000 2%
s
Price
14,175,000,000 14,220,000,000 15,500,000,000 16,545,000,000 2%
Sensitive
Total growth
2%
rate
• Status Conscious:
According to our analysis, The growth rate of LED market is expected to grow by 3% in future,
3D Smart Tv is recently introduced in the market therefore companies are expecting that this
segment has potential to grow and focusing on this segment with strong distribution network and
effective promotional activities; brand showrooms and hyper market are ensuring this segment
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growth. Since this segment has no effect of increasing inflationary rate that’s why companies can
cater this segment with high prices and increasing innovative features.
• Style Conscious:
This segment is also being expected to have positive growth by 2% in future because according
to our future analysis companies are trying to reduce their prices in future therefore this segment
people have potential to buy LCD in upcoming years but the ratio of buying is relatively
decreasing as compare to past growth rate.
Companies are catering this segment with best cost providing strategies; importing cheap
electronic parts from china, reducing other operational costs and outsourcing in non-core sectors.
• Price Sensitive:
Due to increasing smuggled Chinese TV and buying of used TV sets we are expected positive
growth by 2% in future. This growth rate is relatively low before past years but due to decreasing
purchasing power of people, it is expecting that decreasing growth rate of CRT TV in Pakistan.
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Smuggled
8 0% 0% 100% 100%
Chinese TVs
Historical Growth 4% 3% 6% 5%
Projected Growth 3% 2% 2% 2%
• Analysis:
o LG is catering larger share of LCD, LED and CRT market segments, Samsung and Sony
are close competitors in its LCD and LED market.
o Smuggled cheap Chinese TV brands are major threat for LG’s CRT TV market therefore
well known companies like LG, Haier, Panasonic and Nobel should have some action
plans to compete with smuggled brands because these smuggled Chinese brands will be
major threat for their LCD and LED market.
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Market
Introduction: 3D TV is recently introduced in Pakistan by LG and yet it is on testing stage for
both LG and industry.
GROWTH: LCD and LED markets are growing for both LG and industry and they are
supposed as current bread & butter winners for L.G. LG’s LCD and LED segments are present in
Segment
the growth phase. LCD has been introduced by the company a couple of years back in Pakistan.
Therefore, LCD tends to be one of the main products of LG in TV segment contributing annual
sales of around 22,000 units in 2008 whereas LED is also sharing positive growth rate.
MATURITY: LG’s CRT is the one that reached the maturity stage due to rapid entrance of new
competitors in the local market offering stylish and economical products to the middle class
segment of customers that covers the huge market. The main competitors faced by LG in CRT
TVs are Philips, Toshiba, Nobel, and other Chinese brands.
CRT
3.7. Distribution Structure
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Television Market
In (%)
2009 2013
Whole sellers 8 4
Retailers 85 75
Hyper Market 3 9
• Analysis:
Whole sellers: It is expecting that companies will generate 4% turnover in future as compare to
8% in 2009 because companies are planning to reduce their whole sellers in upcoming years.
Brand Show Room: 12% turnover is expecting form Brand Show Rooms in future.
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• Analysis:
• LG has approx. 1300 retailers all over Pakistan those are distributing through its two
distributors.
• LG is covering only 40% retailer network whereas Samsung is covering 35%, it has a
positive effect on profitability of the company with 80% turnover share. There is still
potential to optimum earning through retail outlets.
• LG whole sale coverage is 15% whereas Samsung is covering 10%, it has also a positive
effect on profitability of the company with 15% turnover share.
• Hyper Market (Makro, Metro, Nahid Stores) are new market coverage places in which
LG is behind Samsung and there is a gap which should be fulfilled by increasing LG TVs
coverage in hyper markets.
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• LG has no any brand showrooms in Pakistan and facing gap with Samsung. LG should
discuss it with its new distributor.
• Economic Forces
The worsened economic situation in Pakistan that prevailed in between 2008 and 2009 led to the
decline in the television sales all over the country. This provided the company a drastic set back
in its sales as it experienced the worst ever drop in its Top line in the last four years of more than
55 percent. The main factors behind the drop in TV market sales during last year includes the
hike in inflation in 2008, declining rupee value against dollar as the spare parts imports become
costlier and mounting electricity tariffs during 2008-09.
• Political Forces
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The strict import policies by the government and imposition of Excise Duty of around 40 to 60
percent have also affected the imports of electronic parts. Companies import their components
from South Korea to assemble them in Pakistan at their factory located at Lahore. However, due
to the recent economic meltdown and increasing competition, Companies have decided to cut
their costs by shutting down the plant operations.
The increasing competition from Sony, Samsung, Philips, Panasonic and Chinese TV products
have led to the increasing customers bargaining power. Philips, Panasonic and Chinese products
are giving LG tough time as they are providing people CRT TV to the huge local market at the
attractive and economical price along with the same shape, look, size and design. On top of that
the Chinese products are providing customers with more than 80 percent price differential in
CRT TVs if compared to other’s CRT. LG, Samsung and other known brands provide the 21
inch CRT TV at the price range of Rs.22000 to Rs.25000, whereas the same featured Chinese
CRT is available at around Rs.5000 to Rs. 8000 in the local market.
Industry Trends
1. COMPETITORS
• There are many competitors of LG in the market which includes Sony, Samsung
from the same country Korea, Philips Panasonic, Electrolux and low cost Chinese
competitors.
• The major player in the LED and LCD segment are Samsung at first, LG at
second and Sony at Third.
• The Philips and Panasonic are major players in CRT TV but not in LCD and
LED.
• LG, Samsung and Sony compete in LED and LCD segments with almost similar
offering to their customers.
• There are high exit barriers because this is high-tech industry which needs heavy
investments it is not easy to exit.
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• Cross company rivalry increases the chances for decreased profitability for one
company and increases for other one; because companies want to grab higher market
share.
2. BARRIERS TO ENTRY
3. SUBSTITUTE PRODUCTS
4. CUSTOMER POWER
• Customer demand and preferences push pressure on the company for price down,
new features and durability and a high level of service.
• Due to many competitors providing similar sort of product customer may switch to
competitor’s product.
5. SUPPLIER POWER
• Good relations with the suppliers can create cost advantage while poor supplier
relation may increase the cost of production.
• Few suppliers are also a threat they may become a threat in increasing the cost of
components.
• LG and other brands have shifted to import components from china rather than Korea
due to costly components.
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TREND
Introduction of n
3.
and compact tech
INTERNAL ANALYSIS
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STRENGTHS WEAKNESSES
Threats and Weaknesses Which Could Be Converted Into Opportunities and Strength
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• Analysis:
• Rural Markets : L.G has been emphasizing on urban areas mostly but if it also focus on
rural areas demand by making customized products (low cost and price) for rural
markets; it can lead to enhanced market share.
• Growing LCD Market: LCD market is growing rapidly which is a great opportunity for
LG to cash its LCD technology.
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• Low Cost Provider China: Most parts are imported from china due to cheap cost and it
is required that it should be revised to import all or most of the parts and CBUs from
china. As it takes high cost to import a complete CBU or parts from Korea.
• Cheap Brands from China: Unbranded TVs from china is a threat for LG but the
quality and features of LG is its strength through which it is fighting against competitors.
The CRT and LCD segment are being affected most by these Chinese brands.
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A
Factors
• Analysis
• The most important factors considered by the consumers are Innovative Features, High
Resolution Screen, Durability, Sound and Affordable Price.
•
Innovative
The top priority of LG is Innovative features and High Screen Resolution because these
are the two most important factors which a customer wants in a T.V, which reflects the
fact that LG is customer focused.
Features
Rating Against Customer Buying Criteria (Evaluation Table)
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QUALITY AND P
NON PRICE ATT
CUSTOM
PRODUCT-RELAT
• Implication
During the purchase decision a television customer look for product related features as Style,
size ease of portability, sound and other features while service related only after sale service
factor is taken into consideration. The three competitors have been assigned different
percentages on these features according to our evaluation which a customer considers during
purchase of one of these brands. When we measure quality LG, Sony and Samsung have
improved.
When we talk about relative price today of these three competitors LG is at moderate level,
Samsung’s prices are high and Sony’s Prices are much higher than these two.
The Relative price four years back LG and Samsung was both at high prices and Sony was again
at very high prices at that time. This is because Sony remained focusing to upper class only while
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InnovativeFeatures
MBA Term Report: Strategic Analysis of LG and TV Industry
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Samsung and LG focused on upper and upper middle class. But now LG is focusing on lower
and middle class as well that’s why LG is focusing on low cost strategy.
• L.G is focusing on innovative feature, attractive designs, high screen resolution and
Ques
sound which are considered as most important factors by the customers and it is needed
that L.G should continue to emphasize on these factors.
its C
• Size is also considered as important factors by the customers and it is required that L.G
should improve more in these factors.
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• Price is least important factor in LCD segment and LG has scored the same as
competitors.
Issuenumber
• Analysis
IssueName
ISSUE NO: 01
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Due to innovative features in its products like Bluetooth and 3D etc the manufacturing cost of the
products goes high and customers have to pay high prices for new products which is against the
criteria of value + Cost, which customer wants.
In addition to this, high manufacturing cost may lead towards the elimination of CRT as Sony
has already withdrawn from CRT segment due to low margin in CRT segment.
ISSUE NO: 02
Another issue is that L.G does not have its own sales force in Pakistan. They have only 23
employees in all over Pakistan. L.G’s sales totally depend upon the distributor’s sales force.
These two distributors are including Mega and Allied distributors are also delivering same
services to Samsung and Sony. So it’s pretty difficult to make significant difference in market
share under such situation.
ISSUE NO: 03
The influx of cheap Chinese brands in Pakistani market is another major issue because it is
exploiting the market of CRT segment which is the volume builder for L.G. In addition to this
Chinese brands have also entered into the LCD segment. LCD segment is a growing segment and
LG is expecting more profits out of this segment but entrance of Chinese brands is a serious
issue for them.
ISSUE NO: 04
Although L.G has very strong global marketing but they are lacking in Local Marketing. Local
marketing is also a kind of support for local dealers to boost their sales.
ISSUE NO: 05
The increase in duties by the government on parts and CBUs is another major issue for L.G
because it has forced the TV industry to raise its prices due to high import duties.
• Vision Statement
LG strives to be the top three rank consumer electronic company in the world by 2010. With the
concept of “Great Company, Great People”, enhancing customer value with innovation &
design.
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• Mission Statement
LG mission is to focus on the premium segment of the market that fetches greater margin
opposed to volumes, and to utilize their core capabilities of product leadership, market leadership
and people leadership and enhance their corporate culture of team work and fun workplace to
become top three brands in electronic industry.
• Strategic Direction
LG Electronics set its mid- and long-term vision a new to rank among the top 3 electronics,
information, and telecommunication firms in the world. By embracing the philosophy of "Great
Company, Great People," whereby only great people can create a great company, and pursue two
growth strategies involving "fast innovation" and "fast growth." Likewise, LG seeks to secure
three core capabilities: product leadership, market leadership, and people-centered leadership
• Objectives:
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6. ACTION PLAN
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