Overview of Strategies of LG Electronics - Essay Example

? IP3 Overview of the Company LG Electronics, established in 1997, is a brand renowned for providing Home Entertainment appliances to millions of customers. Its main line of products consists of Plasma TVs, Audio Home Theatres, Refrigerators, Washing Machines, Air Conditioners and Vacuum Cleaners. Recently, it has included Mobile Phones with various specifications in its enriched product line up. The company’s annual turnover in the year 2009 has recorded 13089 crores (LG Electronics, 2012). In relevant to the company’s various products, the two divisions i.e. the home appliances and the electronics goods are located on the Boston Consulting Group Matrix (BCG) where the upper right quadrant is the electronics division and the lower left quadrant is the appliance division. The BCG Matrix introduced by Boston Consulting Group, is an instrument that allows the company to evaluate and to classify its products as well as services. Furthermore, it is a decision making tool that helps to balance the activities of an organisation related to the products that make profits and signify growth in order to sustain the future of the company. The matrix helps to implement the development policies of the company. The BCG matrix positions the products in two ways, namely, the rate of growth of the market and the market share of the product contrary to its competitors (Luxinnovation G.I.E, 2008). Findings The structure of BCG matrix consists of four quadrants namely, Stars, Question marks, Cash cows and Dogs. In this context, the two divisions of the company are located on the Question marks and Cash cows. In the question marks quadrant, the product grows rapidly while consuming hefty amounts of investments. However, the market share of the product is low thereby, generating less profit. Furthermore, the demand for liquidity is high which makes the company to decide about investing on improving the market share or stop the production (Scribd Inc, 2012). In relation to LG’s electronics products the introduction of smart phones has ensured numerous facilities with considerably cheaper prices. From the very beginning, the mobile phones have popularised throughout the global market but have generated low profits to the company due to its fewer profit margins. The company emphasised on capturing higher market share by sales maximisation. However, the presence of fierce competition due to a number of competitors such as Samsung which offers products targeted to the entire age groups and classes of society, barred LG from penetrating into new business markets and attaining higher share of the market. The cash cows quadrant consists of products that generate higher profits in a short period of time which need to be replaced because of the low growth in the future, as a result of that the investments are comparatively lower. Moreover, the products in cash cows should be profitable as they are able to finance other activities in the stars and the question marks (Scribd Inc, 2012). LG’s home appliances are its core products that the company is based upon. The 60 inch Plasma Display Panels were the world’s first, to be introduced by the company in the year 1998 (LG Electronics, 2012). In the following years, the company developed various creative and innovative products which ultimately raised huge market share and facilitated the company to generate huge profits. Its low cost features and maintenance free appliances have ensured the company’s products to be present in almost all the households thereby, satisfying and growing among its targeted segment, mostly the females in the family. Recommendations The smart phones introduced in the markets are required to go through a drastically innovative change that will allow the product to mark a presence in the market and compete against its rivals. It has been noted that the company priced its mobile phone devices at a comparatively cheaper prices in order to target the middle and lower class people. However, in following this strategy the company relied more on providing common features rather than introducing creative specifications. Thus, LG in order to grow its customer base in the consumer electronics segment should ensure that their products are more consumers oriented rather than market centric. They should develop mobile phones for the entire social class rather than focussing on the lower class society. Furthermore, the company should focus on implementing its unique products such as LED and Plasma screen in the mobile devices which will provide a competitive edge to the company. The incorporation of these specifications will allow increasing its market share as people using its home appliances products will get attracted to its new mobile devices due to the brand loyalty it has created over the years. In addition, the company can promote its valuable products through the application of Social Networking Sites that will permit the management to receive feedbacks from the end users. In response to the feedbacks, the manufacturing unit can customise the mobile devices that will ensure greater future sales. Although the company has a huge customer base in its home appliances, it must ensure that the new rival companies entering the segment can pose a threat to its huge market share. Therefore, LG should provide value to their products such as enhanced customer service and extended warranty that will allow the company to retain its customers and attract new consumers. The management of the company should employ more employees especially to support the customers 24/7. Moreover, the company can provide ‘digital set top boxes’ that have been recently seen as the complimentary products to the LCD and LED television sets. Additionally, the company can strengthen its customer base in the rural sectors by manufacturing cheaper televisions that will pose a barrier to the upcoming rivals. Moreover, the penetration into the rural markets will create a competitive threat to the local companies that intend to trade its broad variety of products only in the rural business markets. Measurements for Reinforcement In addition to the BCG matrix, a SWOT analysis of the company can be performed that will more accurately evaluate the strengths as well as the weaknesses of the company. The analysis will also ensure to identify the potential threats and opportunities where the company can decide to expand its business. Furthermore, the financial reports of the present year can also be evaluated that will help to compare both the divisions i.e. the appliances and the electronics and to find out whether the revenue generation results concur with the provided findings. In order to identify the potential threats to the market share of the appliances and to evaluate the opportunities for the mobile devices a SWOT analysis is being prepared. Strengths: LG is the market leader in the home appliances segment. It further enjoys tax incentives as its manufacturing units are built on such areas. Furthermore, the company in its home appliances segment has a variety of products targeted differently for the upper, middle and lower class society. Moreover, in this industry, LG is considered to have the largest distribution network (Scribd Inc, 2012). Weaknesses: One of the major weaknesses of the company is that the consumers’ predominantly compare its products with Samsung and not with any other brands. Thus, in context of the mobile phone segment, consumers feel that Samsung is more superior to LG whereas in comparison with other brands in the industry, LG is considered far more competitive in other segment (Scribd Inc, 2012). Opportunities: The company, LG has the opportunity to focus on the rural market with its low cost devices such as portable Televisions. Furthermore, it can develop its mobile phones by integrating them with LCD and LED screens that will give the mobile devices a unique stand alone feature and help to enhance its market share. In addition, the company should have a control over the appliances market as it can be evidently observed that it has quite a high market share. Thus, negligence in research and development department will lower the vision of innovative and creativity that the company banks upon (Scribd Inc, 2012). Threats: The fierce competitor for LG is Samsung which has developed a huge market for mobile devices throughout the world. Moreover, due to both the companies’ base in South Korea, price war between them exists predominantly. Additionally, the company is facing huge threats as many companies are focussing in moving into home appliances segment (Scribd Inc, 2012). References LG Electronics. (2012). Facts & figures. Retrieved from http://www.lg.com/in/about-lg/corporate-information/overview/facts-figures.jsp LG Electronics. (2012). History. Retrieved from http://www.lg.com/in/about-lg/corporate-information/overview/history.jsp Luxinnovation G.I.E. (2008). What is the BCG matrix. Retrieved from http://www.innovation.public.lu/en/ir-entreprise/techniques-gestion-innovation/outils-gestion strategique/080905-Matrice-BCG-eng.pdf Scribd Inc, 2012. BCG matrix on LG. Retrieved from http://www.scribd.com/doc/42327740/BCG-Matrix-of-LG#outer_page_13 Read More