Market Research Promotional Strategy for LG Electronics - Essay Example

Market Research Promotional Strategy for LG Electronics Case study: The company currently has a 7 percent market share of flat panel televisions in the US. The marketing objective is to increase overall market share in televisions and audiovideo equipment (DVD and Blu Ray Disc, Audio Receivers, Stereo Speakers) to 12 percent, over the next five years. To accomplish this goal, the marketing objective is to increase television market share by 6 percent to 13 percent, over the next 5 years. The pricing strategy is based on solid brand awareness with a reputation for quality and dependability, and consumer willingness to pay a slight premium for their products. Table of Contents Summary 3 1. LG Electronics – Company Background 3 2. LG Electronics – Mission Statement 4 3. Televisions and audiovideo equipment – target audience 5 4. Review of similar products of competitors 6 4.1 Sony 6 4.2 Panasonic 7 4.3 Samsung 8 4.4 Vizio 9 5. SWOT analysis 10 6. Business and market objectives 13 7. Media Plan 13 7.1 Promotion of the products through the TV 13 7.2 Radio 14 7.3 Magazines 15 8. Sales promotion strategy 15 9. Creative budget plan 16 9.1 Production Costs 16 9.2 Media Costs 17 10. Evaluation of the project 18 11. Conclusion 18 Bibliography 20 Appendix 21 Summary The development of strategic plans worldwide is based on specific criteria. Most usually, the targets set have to be feasible – in terms of the resources and the time required – while the potential failures need to be identified in advance in order to ensure the limitation of failures. On the other hand, not all organizational initiatives have the same characteristics; when the achievement of specific targets is attempted then the methods used have to be carefully chosen – a balance between the cost of a specific strategic project and the expected benefits of this project must be pursued by managers in modern organizations. Current paper focuses on the examination of the strategic plans required for the increase of the market share of the firm LG in a particular sector: the televisions and audiovideo equipment. The firm’s current pricing strategy is reviewed and evaluated in order to decide on the appropriate of the marketing plans used in relation with the specific marketing plan. It seems that the achievement of the specific target is feasible but specific measures will be required especially if taking into account the position of the firm’s competitors but also the challenges of the specific industry in all markets internationally. 1. LG Electronics – Company Background LG Electronics was first established in 1958 under the name ‘GoldStar’. Since the decade of 1960s the firm was actively involved in the production of radios and televisions – also of other products like the air conditioners. In 1995 the firm was renamed to LG Electronics. Through the years the firm was involved in other sectors, like the telecommunications while its performance is under continuous development (see Figure 1, Appendix). Currently, the firm’s employees have been estimated to 82,000 – working in about 82 branches of the firm worldwide. The firm’s achievements in its industry are many. We could indicatively refer to the development of the first ‘digital mobile handsets’ on 1997 as well as to the production of the ‘worlds first 60-inch plasma TV’ (LG History, online report). Currently, LG Electronics is among the most competitive firms worldwide – in terms of the range of its products but mostly of its financial performance. In accordance with the corporate website, the firm’s products can be categorized to the following sectors: ‘Home Entertainment, Mobile Communications, Home Appliances, Air Conditioning and Business Solutions’ (LG Electronics, corporate website, 2009). Not all aspects of the firm’s operations are examined in this paper. Only a particular series of products – televisions and audiovideo equipment – is examined and evaluated as of its importance for the firm’s growth. The potential improvement of the firm’s performance in relationship with the specific products – increase of the firm’s market share in televisions by 6 percent to 13 percent within the next 5 years - a fact that could lead to the increase of the firm’s market share in televisions and audiovideo equipment to 12 percent within the same period – is explored. 2. LG Electronics – Mission Statement The mission statement of LG Electronics is not clearly presented in the corporate website. However, the firm’s vision could be used as an indicator of the firm’s priorities and values. At a first level, it is made clear that the firm aims ‘to achieve a position as one of the top three electronics, information, and telecommunication firms in the world by 2010’ (LG Electronics, corporate website, 2009). Towards the achievement of the above target the firm has adopted an innovative philosophy named as ‘Great Company, Great People," whereby only great people can create a great company, and pursuing two growth strategies involving "fast innovation" and "fast growth"’ (LG Electronics, corporate website, 2009). The priorities that the company has set reflect the organizational culture and ethics; most important, they reflect the firm’s power to develop its position in the global market. Under these terms, the firm’s managers focus on the development of the following capabilities: ‘product leadership, market leadership, and people-centered leadership’ (LG Electronics, corporate website, 2009). The above issues can be used in order to formulate the mission statement of LG Electronics, as following: ‘The firm aims to offer to the public products and services of high quality respecting the ethical values of the local community; in the long term the firm aims to increase its market share; innovation and continuous communication with customers will be the values that will characterize the firm’s activities around the world’. 3. Televisions and audiovideo equipment – target audience The following parts of the population are expected to be the target audience of the firm’s products: The managers of stores that sell similar products. The distributors of audio-video equipment Researchers that work on the particular sector – development of technology used in audio – video equipment. Firms that operate in the media industry Managers in shopping centres – especially when cinemas operate inside. People that work in various art projects. Universities and other educational institutes – use of audio-video equipment for the presentation of projects and material taught. Managers in community centres – use of audio-video equipment for the development of various entertainment events. Employees/ practitioners in healthcare institutes – use of audio-video equipment in the presentation of medical history, of the results of medical exams and so on. 4. Review of similar products of competitors In order to understand the value of the marketing techniques used by LG Electronics for the promotion of its products, it is necessary to refer to the similar practices of its competitors. 4.1 Sony Sony was established in Tokyo. The firm is an important competitor worldwide regarding the audio – video communication products. The range of the firm’s products is significant including the ‘information technology products for the consumer and professional markets’ (Sony, corporate website, 2009). The firm’s power in the area of entertainment has led to the establishment of a series of firms like the ‘Sony Electronics Inc., Sony Pictures Entertainment Inc., Sony Computer Entertainment America Inc., and Sony Music Entertainment’ (Sony, corporate website, 2009). The performance of the firm in 2008 was significant reaching the 88.7 billion dollars. The firm’s employees around the world have been estimated to 180,500 (Sony, corporate website, 2009). The performance of the firm’s branch in the USA is significant: for 2008 the profits were estimated to 29 billion dollars. Sony is a major competitor in the area of audio-video communication. The specific firm can be a threat for LG Electronics – not only in the USA market but also globally. The practice of Sony to divide its operational activities by developing separate business entities is not easy to be followed by LG Electronics – a firm with different structure and vision. In this context, the ability of LG Electronics to compete Sony can be doubted. 4.2 Panasonic Panasonic, like Sony, is a Japan – based firm. The firm’s products are innovative – incorporating advanced technology, like in the case of the ‘award-winning VIERA High Definition Plasma’ (Panasonic, corporate website, 2009). The firm uses an aggressive marketing scheme promoting its products in most markets worldwide. The firm’s branch in North America is based in New Jersey. A series of business centres has been developed in order to support particular organizational needs. An indicative example is the ‘highly rated Panasonic Customer Call Center in Chesapeake, VA’ (Panasonic, corporate website, 2009). The number of employees in the firm’s branch in North America has been estimated to 12,000. Panasonic follows different strategic principles from their competitors; the development of the firm’s activities is not based on the establishment of branches for each one organizational activity; rather the development of the communication with customer is set as a priority. Panasonic was called to cover the needs of 2008 Olympics in Beijing. In fact, it is noticed that ‘all international video delivered from the International Broadcasting Centre (IBC) to the rights-holding broadcasters around the world was produced and distributed in High-Definition, using Panasonics DVCPRO professional video equipment and related technologies’ (Panasonic, corporate website, 2009). The policies of Panasonic could be used as guidelines by the managers of LG Electronics. In fact, the organizational structure of Panasonic is similar with that of LG Electronics; however, the former’s visions are more flexible – perhaps due to the firm’s culture – a fact that should be considered by managers in LG when developing the firm’s marketing plan on the televisions and the rest of audio-video products of LG Electronics. 4.3 Samsung Samsung was first established in Korea. Currently the firm’s operations worldwide have been expanded leading to the increase of organizational performance at high levels (see Figure 2, Appendix). Innovation and quality characterize the firm’s products. Customer service is also included in the firm’s priorities. As it is noticed in the firm’s website, the main vision of the firm can be described as the wish ‘to lead the digital convergence movement’ (Samsung, corporate website, 2009). The firm’s managers have set specific principles regarding the development of organizational performance: new products have to be launched by the firm periodically ensuring the retention of customers; the latter has also a major role in the firm’s strategic choices; these are developed in accordance with the trends of the market and the customer preferences – as they are captured through appropriately designed market research plans. The firm’s product range is significant including the telecommunications, the mobile phones and the computers. The firm’s vision and its principles could be used as indicators by the managers of LG Electronics when the strategic decisions of the latter have to be taken. In accordance with the organizational philosophy of Samsung the needs of the customer need to the key criterion for the development of strategic plans. These needs can be identified in the market trends but also in the performance of the firm’s products – customers’ preferences as reflected in the sales of the firm’s products. 4.4 Vizio Vizio is an American firm. The firm’s headquarters are in California. The specific firm could be characterized as the most important threat for LG Electronics – especially the audio-video products with a special reference to flat panel televisions. In accordance with the corporate website ‘VIZIO has sold more than 5-Million flat panel televisions in the U.S. alone’ (Vizio, corporate website, 2009). The firm has a significant range of similar products – it is noted that in 2008 the firm launched ‘new Full High Definition 1080p Plasma flat panel televisions and the first true consumer High Definition 32” plasma display’ (Vizio, corporate website, 2009). In the context described above, the competition between LG Electronics and Vizio is expected to be extremely difficult. Vizio offers high quality flat panel televisions – and supplementary equipment – in extremely competitive prices – a combination that is difficult to be faced. LG Electronics could compete Vizio only if adopting a specific strategic plan: continuous development of the technology used in its flat panel televisions and change of current pricing principles – the prices should be kept at low level as possible in order to gain a competitive advantage towards Vizio that has already established a unique strategic plan: continuous increase of technology used in the products offered to the public while prices are kept at low levels – a target difficult to be achieved. 5. SWOT analysis The SWOT analysis is used in order to offer a credible view on the firm’s position in its market – the role of competitors could be also evaluated with appropriate comments on their activity. Within the context of the SWOT analysis the following elements of the firm’s operations have to be examined: a) Strengths The firm’s strengths could be described as follows: The long term presence of the firm in the market. As noticed above, the firm was established in 1958 which could be considered as a competitive advantage towards the competitors, i.e. the firms that do not have such a long presence in the global market. The flexibility of the firm’s strategic decisions. It is proved from the issues highlighted above that throughout the decades the firm has being able to be adapted at specific market conditions and be alternated in order to serve different customer preferences. The global presence of the firm – branches in about 82 countries – is another advantage of the firm towards its rivals. Brand image. The firm’s name is well known by consumers worldwide. The quality of its products is not doubted. The power of the firm’s brand name should be used in order to support the increase of the firm’s market share in the specific sector – flat panel televisions. b) Weaknesses The firm has also weaknesses that need to be appropriately addressed: The activities of the firm are diversified. This fact could lead to the limitation of the performance of specific organizational sectors – while other sectors may be strengthened. As it was already noticed above the firm’s activities are divided into the following five categories: ‘Home Entertainment, Mobile Communications, Home Appliances, Air Conditioning and Business Solutions’ (LG Electronics, corporate website, 2009). An indicative example is Visio which focuses on specific parts of the market – Home Appliances and Air Conditioning for example are not included in its activities. As it was explained above, Visio has managed to achieve a significant performance in the flat panel television market – the fact that the firm focuses on the specific market seems to be an advantage. No appropriate support – training has been given to the firm’s employees regarding the development of the firm’s activities. The strategic alliances of the firm could be expanded – taking into consideration current market conditions In accordance with the above, the ability of LG Electronics to effectively compete its rivals in the audio-video sector and specifically regarding the flat panel televisions market could be doubted. c) Opportunities The firm’s managers could achieve the development of organizational activities using the opportunities offered in the particular market: Technology is continuously developed. Firms that operate in the specific sector could use the advances of technology in order to distinguish their products from the products of their competitors. This is a similar approach with the arguments used in the previous section. Managers in LG Electronics that are trying to develop the firm’s flat panel television market share should focus on the update of the technology used in the manufacturing of the firm’s products. Emerging markets could be regarded as potential destinations of the firm’s products – referring to countries where the competition is still not strong – at least regarding the specific sector. d) Threats The following threats should be taken into consideration by managers of LG Electronics when having to deal with the development of its marketing schemes: The audio – video market is quite fragmented. Competitors are many and are extremely powerful – see the cases of Sony, Panasonic, Samsung and Vizio presented above. The ability of LG Electronics to survive in this market should be reviewed; current policies would be alternated using the principles – guidelines suggested above. There is always the threat of new entrants. Managers in LG Electronics should review the firm’s existing vision and mission making sure that the organizational practices reflect the market trends and the customer preferences. 6. Business and market objectives Specific business and marketing objectives are related with the promotion of the firm’s flat panel televisions in the market. In accordance with the instructions provided for current case study, the marketing objective is to increase overall market share in televisions and audiovideo equipment (DVD and Blu Ray Disc, Audio Receivers, Stereo Speakers) to 12 percent, over the next five years – from the current market share which has been estimated to 7 percent. At a next level, it is made clear that an additional marketing objective is to increase the television market share by 6 percent to 13 percent, over the next 5 years. Within the above context, the use of an appropriately customized marketing method is necessary. It is already decided by the firm’s managers that media will be highly involved in the promotion of the firm’s products – referring especially to the flat panel televisions. Any marketing tool used has to be thoroughly considered taking into consideration available resources (employees, funds, and technology) but also the level of external support that would be probably expected (e.g. the funding of the relevant initiatives by sponsors). 7. Media Plan 7.1 Promotion of the products through the TV The use of television for the promotion of products and services is a common phenomenon in all countries worldwide. However, the terms under which this use is made tend to differentiate in each country in accordance with the local ethics and culture but also the relevant law rules – those related with the use of television as a marketing tool by firms operating in various industrial sectors. In the literature it is noted that ‘there is a positive relationship between impulse buying and television shopping exposure and a positive relationship between impulse buying and parasocial interaction’ (Park et al., 2004, 135). At a next level, it is made clear that ‘in most developed countries non-store retailing, especially shop-at-home television, has grown in importance and todays consumers have access to a wider and more diverse range of in-home shopping media than ever before’ (Walsh et al., 2009, 111). LG Electronics is a firm established in the market since 1958, i.e. for more than 50 years. However, the firm’s market share of flat panel televisions should be increased – at least up to 12 percent, a target set by the firm’s managers; the use of television is expected to support the above effort. However, the following issues need to be taken into consideration by the firm’s managers before developing such a marketing plan: a) TV advertising could be extremely costly; b) the terms under which the relevant advertisements are going to be presented to the public (time zone etc.) have to be clearly arranged, c) the advertisement used have to be appropriately developed – choice among different proposals, d) the expected payback period have to be set in advance - no major differentiations should exist between the amount invested on TV advertising and the firm’s benefits. 7.2 Radio Radio is used for the promotion of products and services especially when the firms involved cannot respond to the cost of a relevant advertising scheme through the television. In the case of radio, as in the television, the advertisement presented to the public needs to follow specific principles (Turner, 2000, 247) trying to focus not only on the quality of the information provided but also on the structure/ form of the advertisement employed (Kim et al., 2005, 42) – for instance the use of the voice of a well known actor is expected to lead a particular advertisement in success. Radio is often preferred as a marketing tool mostly because the cost involved in the advertising schemes promoted through the radio is limited – at least compared to the advertising of products and services through the television. 7.3 Magazines Magazines – and the press – could be considered as another alternative solution for the promotion of specific products and services in a particular market. Magazines can offer significant advantages over the radio – referring to the effectiveness of advertisements presented through these two marketing tools – especially when the targeted market is related with specific personal, professional, cultural or other characteristics. Under the above terms, products and services related with the needs of teenagers would be preferably promoted through relevant magazines – at least if the option of the use of television was not available because of the cost involved. 8. Sales promotion strategy The sales promotion strategies used by firms in various industrial sectors are depended on the targets set, the products involved and – most important – the resources available – human resources and capital – for the realization of the relevant plans. In accordance with the issues discussed above, the sales promotion strategy of LG Electronics regarding the firm’s flat panel televisions should be developed in the following stages: a) examination of market trends and customer preferences in relation with the targeted market, b) identification of the prices and the quality of similar products of competitors, c) design of the marketing plan in accordance with the firm’s capabilities and the resources available – at this stage a budget plan (including the production costs and the media costs) should be developed – as explained in the section that follows, d) seek for external support – if necessary – e.g. sponsorships, e) application of the marketing plan – in the case of the particular firm the use of television and the magazines has been considered to be an effective method for promoting the firm’s flat panel televisions. 9. Creative budget plan In order for the specific products to be effectively promoted it is necessary that the cost related with the development of the marketing plan used is precisely – as possible – estimated. In this context, a budget plan is required in order to ensure the ability of the firm to respond to the needs of current marketing initiative. The particular budget plan should refer to the following costs: the production costs and the media costs. Managers in LG Electronics should develop an appropriate budget plan before proceeding to the design and the use of a particular advertisement. Production costs and media costs related with the advertisement chosen should be carefully examined – in relation with the ability of the firm to respond to the relevant expenses – balance between investment and benefits. 9.1 Production Costs When referring to advertising, the term production costs is used to describe the funds required for the development of the marketing plan – covering the following stages: a) the compensation of the marketers that work on the design, the development and the monitoring of the particular plan, b) the operational costs of the firm under consideration, especially those made within the context of the design, the application and the monitoring of the marketing plan; if the advertisement used is designed and developed internally – difficult – then the operational costs will be costs like electricity, paper and ink used in printing and so on. If the advertisement used is developed externally, then the production costs will involve: transportation of the participants/ planners in the place where the marketing plan is developed, compensation of participants/ third persons, actors and so on. The production costs could also include any expense made by the firm’s employees or by third persons during the development or the monitoring of the marketing plan. Production costs are the expenses made for a particular marketing plan up to its presentation to the public. In fact, the assignment of a specific marketing promotion to a specific media leads to the differentiation of the type of cost involved; this cost is characterized then as media cost. 9.2 Media Costs Media costs are those expenses related: a) with the right of using specific amount of time in television for the presentation of a particular advertisement – in radio a similar explanation can be given, b) with the right of using the context of a specific emission or film for the ‘indirect’ promotion of the product to the public, e.g. the actor in a film drinks a specific beer. Media costs can be differentiated in accordance with the following factors: a) the time zone in which the specific arrangement involved – 9pm is expected to be more expensive than 6am for the promotion of a specific advertisement, b) the popularity of the media chosen, e.g. an advertisement in BBC is expected to be more expensive than the advertisement promoted through a regional channel. 10. Evaluation of the project The marketing plan required for the promotion of the flat panel televisions of LG Electronics is expected to be quite successful if the issues highlighted above are taken into consideration. The choice of television and magazines for the promotion of the specific product could be regarded as an effective marketing plan; however, additional measures should be taken in order to ensure that the particular product will be appropriate promoted. In this context, managers in LG should examine the following issues: a) has the use of television and magazines as a marketing tool helped the competitors to increase their performance in relation with similar products? b) are there any major problems (limitation of the firm’s cash flow in the short term and so on) that are expected to appear? and c) will the payback period (return on investment) be long? The potential engagement of sponsors in the specific marketing plan would be another option for managers in LG Electronics. 11. Conclusion The development of marketing plans for the promotion of specific products and services is a challenging task; most commonly, the success of these plans can be put under risk because of the lack of appropriate skills in their initiators or those involved in their monitoring. On the other hand, it is quite possible that the resources engaged in the design, application and monitoring of these plans are no longer available (or are decreased) when the relevant procedure is in progress. The termination of marketing initiatives because of the lack of funds for their completion is a common phenomenon in modern market. In the case of LG Electronics, the long term presence of the firm in the market could ensure the ability of its leaders to identify the potential business failures on time. However, in all business plans there is always the risk of unexpected turbulences and failures. Managers in the specific firm could minimize those risks by examining carefully all aspects of their strategic decisions before the beginning of any relevant activity. The suggestions made throughout the paper could be particularly helpful; additional measures would be possibly required for the limitation of the risks related with the specific marketing initiative. Bibliography Kim, D., Hwang, Y. (2005) Modeling Tourism Advertising Effectiveness. Journal of Travel Research, Vol. 44, No. 1, 42-49 Park, J., Lennon, S. (2004) Television Apparel Shopping: Impulse Buying and Parasocial Interaction. Clothing and Textiles Research Journal, Vol. 22, No. 3, 135-144 Taylor, T. (2007) The Changing Shape of the Culture Industry; or, How Did Electronica Music Get into Television Commercials? Television & New Media, Vol. 8, No. 3, 235-258 Turner, G. (2000) Talkback, advertising and journalism. International Journal of Cultural Studies, Vol. 3, No. 2, 247-255 Waisbord, S. (2004) Understanding the Global Popularity of Television Formats. Television & New Media, Vol. 5, No. 4, 359-383 Walsh, G., Gwinner, K. (2009) Purchasing vacation packages through shop-at-home television programs: An analysis of consumers consumption motives. Journal of Vacation Marketing, Vol. 15, No. 2, 111-128 Online Resources LG Electronics, corporate website http://www.lge.com/common/gateway/index.html Panasonic, corporate website http://www.panasonic.com/ Samsung, corporate website http://www.samsung.com/us/ Sony, corporate website http://www.sony.com/ Vizio, corporate website http://www.vizio.com/ Appendix Financial Highlights Financial Highlights 2005 2006 2007 KRW bn USD mn KRW bn USD mn KRW bn USD mn Sales 23,774 23,217 23,171 24,263 23,502 25,298 Operating Profit 915 893 535 560 565 608 Net Profit 703 686 213 223 1,222 1,315 Total Assets 14,036 13,707 13,230 13,854 14,338 15,434 Total Liabilities 7,874 7,689 7,091 7,425 7,127 7,672 Total Shareholders Equity 6,163 6,018 6,139 6,428 7,211 7,762 ROE 12.6% 12.6% 3.5% 3.5% 19.1% 19.1% EBITDA 1,726 1,685 1,239 1,297 1,253 1,349 Capex 1,322 1,291 821 860 985 1,060 *Unconsolidated (parent) results Figure 1 – LG Electronics – financial highlights (source, firm’s website, 2009, LG Financial Info section) Figure 2 – Performance of Samsung for the years 2003-2007 (source: Samsung, corporate website, Samsung profile, 2009) Read More