Analyis of the Marketing Strategy of LG

This is a study to analyse the Marketing Strategy of LG, one of the most popular brands

in Consumer Electronics, focusing specifically on its Television Products.

This study finds about the status of Consumer Electronic industry and its segmentation.

Then which part the industry the LG is targeting. Also some of the leading competitors

of LG like Samsung and Sony were discussed. Further the study offers Porter’s 5-forces

and SWOT analysis.

Finally a consumer survey was undertaken and based on its analysis and previous data

some recommendations will be offered.

Table of Contents

1. Introduction

Business competition is getting tougher year after year due to increasing globalization

and the progress of technology. The world has now become a one huge market where

you can buy and sell products all around it. Many companies try to properly satisfy their

customers in order to sell their products. They focus on this because a satisfied

customer is a loyal customer who will continue to buy the product from the same

company hence increasing the company sales and revenue. That is companies have to

sell their products effectively in order to get the necessary financial resource. Financial

resource can be used to develop new products so companies can survive in competitive

market and also expand their business. Marketing activities plays a very crucial role in

helping companies sell their product.

Philip Kotler states that “Marketing is the process of planning and executing the

conception, pricing, promotions, and distribution of goods, services, and ideas to create

exchanges with target groups that satisfy customer and organizational objectives”.

Marketing activities can help companies to sell their products at the right time, the right

place, the right price, and also appropriate with customer needs. Marketer’s

fundamental aim is to satisfy and forge good relationship with their customers (Kotler

1994, pp.13-14).

This report aims to critically analyse the Consumer Electronics industry primarily

focusing on Television products and its key players especially LG (Lucky Gold star),

South Korea’s 3rd largest conglomerate. Further the report then will analyse the LG’s

Target Market for Television& their Marketing Strategy especially in Singapore. In the

last part, some recommendations will be offered for the improvement of the LG’s

marketing strategy.

1. Description of Industry

Industry Structure

Consumer electronics are electronic products which are used by everyday people.

Consumer electronics usually find application in entertainment, communications, and

office productivity.The global consumer electronics industry is dominated by Japanese

and Korean company. The world consumer electronics market value from 2004 to 2008

can be seen in figure 2.1 (Consumer Electronics, 2010).

Figure 2.1 World Consumer Electronics

Source: Enterprise One Business Information Services, 2009

LG’s Competitive Strategy

LG’s competitive strategies are (LG Electronics 50-Year History 2008, pp. 197-199):

Focusing on boosting ROIC (Return on Investment Capital) instead of simple growth.

LG targets to achieve ROIC 15%, it means company have to improve gross margin. LG

will decrease indirect costs and switch to high-profit products.

Optimizing the portfolio.

The company increase its profitability, strengthened its brand in the market, use

external resources (alliances) to expand the business in order to optimize the portfolio.

Counter measuring the market bipolarization.

LG develops the products based on customer needs and identify potential needs of the

target segment based on STP (Segmenting, Targeting, and Positioning) strategies.

Technology innovation and design differentiation.

LG focus on technology innovation and design differentiation through R&D process

based on customer needs.

Strengthening brand investments.

Repositioning LG’s brand identity and reorganize brand communication by developing

“Life’s Good” slogan and new futuristic logo (Our Brand, 2010).

Reinforcing global competencies.

LG advance all internal and external resources for the organizational competencies by

hired the best people to create the best human resources pool in the world.

Adopted from: LG Electronics, 2010

Direct Competitors and the Strategies

LG TV’s direct competitors are Samsung and Sony with market shares which are shown

in figure 3.9.

Figure 3.9World TV Market Shares 2009

Source: http://www.bloomberg.com/apps/news?

pid=newsarchive&sid=aPC4aW2cZE.M

Samsung

Samsung Electronics vision for the new decade is “Inspire the world, create the

future.”With the ‘TOP plan’ and sponsorship strategies, Samsung has become the top

brand in the world. It has become the world’s leading brand in electronics and digital

industry. This achievement is mainly due to the strategies followed as explained below

(The top brand in the world, 2010):

1. Sponsoring Strategies

Samsung has associated its name to the ‘TOP plan’ which is called the ‘The Olympic

Partner’ plan. It is this strategy which has made Samsung the TOP brand. Without this

strategy it will not have much effectiveness and efficiency. Samsung has been

sponsoring various activities in order to create brand awareness and enhance its

market position.Samsung was an official sponsor in wireless communication equipment

presented by the Wireless Olympic works.

2. Reposition of its products

Initially in 1990s Samsung was targeting the lower income groups with penetration

pricing. Later on it realized that it would be better to target the cream or skimmed

group of the population by increasing the price and improving the quality. It realized

that in upscale marketing, technology and brand are competitive means. Thus it

repositioned its products to upscale the market. To Samsung, higher price increases its

profit and it will also imply good quality.

3. Technology innovation

Samsung realized that digital is the future of the world and technology upgrades are

essential to sustain in the competitive market. They switched their core competitive

power from mass manufacture to high-end product supplier which is based on digital

technology. Samsung launched the industry design revolution to get rid of its image of

imitator. It employed world’s top designers to expand, differentiate and innovate its

product.

Sony

Sony is a Japanese company and key players in consumer electronics especially

television. The brand for Sony’s television is BRAVIATM. The strategies of Sony

Electronics are (Sony Electronics Inc., 2010):

The 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.

Broadband network area.

Sony is well positioned to bring new benefits for consumer by combining hardware,

software, content and services. Consumers can access information wherever and

whenever they want through cable, satellite, or internet.

Promoting a world class brand.

Sony conducts an advertisement campaigns to secure consumer attention and utilizes

world class public relations to enhance Sony’s value, reputation and brand image.

Communications campaigns are executed on both an individual product and strategic

platform basis which ensures exposure for the company’s fundamental products

including digital TV.

Brand values.

In the mind of consumers, Sony is one of the world’s greatest brands. Sony tries to

leverage its brand beyond the products and add the value to the brand by re-focusing its

brand outside the world.

LG’s Indirect Competitors and The Strategies

LG TV’s indirect competitors are computers and mobile phones. Computers and mobile

phones can be used as to watch movie. People can watch movie, news, online

programmes with using computers and mobile phones.

Computers

Some people prefer to watch the programmes that are available on the television but on

the computers especially laptops. This way they can watch movies, news, live

programmes, etc wherever and whenever they want.One of the best methods of getting

the programmes is to download or streaming from the Internet. There are millions of

movies, news, online programmes, etc which are available online through various

downloading sites and commercial streaming websites like Hulu, Youtube etc.(Watch

Movie Online From your PC or Laptop, 2008).

Figure 3.10Streaming from Internet

http://blog.worldvillage.com/computers/vlc_media_player.png

Source:http://worldvillage.com/heritage/computers/vlc_media_player.png

Figure 3.11 Watch Movies on Laptop

http://www.byteeoh.com/wp-content/uploads/2009/08/Gen-Y-laptop.png

Source: http://www.byteeoh.com/wp-content/uploads/2009/08/Gen-Y-laptop.png

Mobile phones

Some people prefer to watch movies and other programmes in mobile phones.Many

mobile phones can be used to watch programmes which are available on the television.

For example people can use Blackberry and iPhone to watch various movies, television

shows, news etc. Both mobile phones provide technology which can be used to watch

the many television programmes. Mobile phones are very handy and easy to carry

everywhere. People can use them any where such as gym, office, while travelling, etc.

(Watch Movie Online From your PC or Laptop, 2008).

Figure 3.12 iPhone

http://bp2.blogger.com/_cGA2amRH5MY/SE1mpnqlikI/AAAAAAAACFU/

1BS1fFbnaOc/s400/Watch+Movies+on+Iphone.JPGSource:http://3.bp.blogspot.com/

_cGA2amRH5MY/SE1mpnqlikI/AAAAAAAACFU/1BS1fFbnaOc/s400/Watch%2BMovies

%2Bon%2BIphone.JPG

Figure 3.13 Blackberry

http://www.pdaflix.com/images/tour.jpg

Source: http://www.pdaflix.com/

4.1 LG’s Porter Five Forces Model

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 (Porter-Five Forces

Model, 2009):

Figure 6.1 Porter Five Forces Model

http://kelas.files.wordpress.com/2009/10/porters-five-forces-model.jpg

Source: http://www.soopertutorials.com/business/strategic-management/3028-

porter-fiveforces-model.html

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 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.

SWOT ANALYSIS

LG SWOT Analysis company profile is the essential source for top-level company data

and information. LG Electronics, Inc. - SWOT Analysis examines the company’s key

business structure and operations, history and products, and provides summary

analysis of its key revenue lines and strategy

SWOT is the tool to see that where organization stands, which areas required

improvement, which areas required serious consideration, which would be the source

of growth, which things need avoidance and so on. The SWOT of LG will help to

understand the position of LG in the market.

LG SWOT analysis can be seen in figure 6.2 (New Research Report on Companies and

Markets, 2008).

Figure 6.2 SWOT Analysis

Source: New Research Report on Companies and Markets, 2008

STRENGTHS

LG is a multinational company and a recognize brand around the world. It has

successful established not only in developed countries but also in developing countries.

LG products are reliable, easy to use, and have simple designs which satisfy customers

that’s why LG have the advantage of having loyal customers.

LG Corporation the research and development has given greater importance because to

satisfy the customers and provide the customers what they want the research

and development id required. LG try to keep products innovative to attract the

customers and to capture more market share. LG is at its growing stage and its growing

quickly. It is producing solid products which rapidly satisfying the customers.

1 Strong Brand Image

LG enhances the life of its customers through its strong brand image and reputation.

Right now choosing LG has become a form of self-expression and a promise of

satisfaction due to its intellectual product features, intuitive functionality and

exceptional performance. The LG brand comprises of four basic elements namely values,

promises, benefit and personality. Nowadays customers take the pride of owning a LG

product and they take the comfort that they have made a smart purchase. “LG is the

brand that is delightfully smart.” They have created a separate logo and brand image for

LG. This surely adds on to the strength of LG (Brand identity,2010).

1. Strong Marketing Communication

LG wants to deliver synchronized communication messages worldwide to elevate their

profile and promote their brand identity. In order to increase consumers'

understanding of the LG brand and to differentiate the company's image, LG has set up a

single global brand under the theme ``Life's Good." To accomplish this, all brand

marketing communications from LG have a consistent look and feel, as well as

consistent messages (LG to Become Top-Level TV Maker by 2010, 2008).

Source: http://www.lg.com/sg/img/about/assets/20090210191407688H.jpg

http://www.koreatimes.co.kr/www/news/img/biz/081020_p5_LGtwo.jpg

Source: http://www.koreatimes.co.kr/www/news/biz/2010/04/263_33015.html

3Alliance Joint Venture

LG has made tie ups with highly successful business partners. This has made LG to be

one among the top players in their field in the world. Strategic associations between

companies existing in the same or related industry is a sign of prosperity and it can be a

vital means of growth of the existing industry as well as forging new ones. (Strategic

Alliances,2010)

Figure 6.4 Joint Venture

strategic_alliance_img

Source: http://www.lg.com/sg/about-lg/corporate-info/strategic-alliances/index.jsp

WEAKNESS

Product Line

On comparing LG televisions with its directed competitors like Sony and Samsung, it

lacks in producing variety of products and features. Comparatively, Samsung and Sony

have a wide product line offering different models of televisions. For example, LG only

has 29 types of TV, but Samsung has 102 types of TV. This deficiency in the product line

of LG is considered as a weakness.

Higher overall costs than its rivals

LG Television has a higher price than the competitor because LG offers premium

television. LG offers Television with stylish looks, sleek design, and smart technology.

OPPORTUNITIES

Marketplace. After all, opportunities are everywhere, such as the changes in technology,

government policy, social patterns, and so on. An opportunity is a major situation in a

firm's environment. Key trends are one source of opportunities. Identification of a

previously overlooked market segment changes in competitive or regulatory

circumstances, technological changes, and improved buyer or supplier relationships

could represent opportunities for the firm

1. Alliance or Joint Ventures

LG has alliance or joint venture with companies that have established a brand for

themselves in the market. It can further increase its market share and market presence

and increase its brand image, by having alliances and joint ventures with other

successful companies. This would also help in generating more revenues for them

(Strategic Alliances,2010).

2. Distinguish its Services from Competitors

The consumer electronic services are expected to grow in Singapore. As several

initiatives are being realised, it is found that would be integrated so that LG can

distinguish from its competitors. The consumer electronics industry in Singapore is

already thriving. So this would boost the performance of consumer electronic industry

in Singapore.

THREATS

No one likes to think about threats, but we still have to face them, despite the fact that

they are external factors that are out of our control, for example, the recent economic

slump in Asia. It is vital to be prepared and face threats even during turbulent times. A

threat is a major unfavourable situation in a firm's environment.

Threats are key impediments to the firm's current or desired position. The entrance of

new competitors, slow market growth, increased bargaining power of key buyers or

suppliers, technological changes, and new or revised regulations could represent

threats to a firm's success.

Because SWOT is such a familiar and comforting tool, many students use it at the start

of their analysis. This is a mistake. In order to arrive at a proper SWOT appraisal, other

analyses need to be carried out first. Since opportunities and threats mostly arise from

the environment, analysis needs to take account of the results of a full environmental

analysis.

It is impossible to gauge what an organisation's real strengths are until you have

assessed its strategic resources - in fact, strategic resources and strengths are the same

thing. There is a tendency for students to put down anything vaguely favourable that

they can think of about a company as strength. This temptation needs to be resisted -

strength is not strength unless it makes a genuine difference to an organisation's

competitiveness. The same is true of weaknesses. For example, look at Southwest

Airlines and Amazon.com. Both companies have important groups of potential

customers to whom they offer poor service.

 Southwest ignores business passengers, and will not accept transfers from other

airlines. Amazon makes people wait days to receive books that they can obtain instantly

from their neighbourhood bookstores, and pay a delivery charge for the privilege.

Surely, these are major threats. Southwest and Amazon have chosen not to give those

customers priority. Serving them would divert resources from the firm's core markets,

and dilute service to their main customers. Not serving them is certainly not a

weakness; in a paradoxical way, it may be strength.

The wizardry of SWOT is the matching of specific internal and external factors, which

creates a strategic matrix and which makes sense. It is essential to note that the internal

factors are within the control of organisation, such as operations, finance, marketing,

and other areas. On the contrary, the external factors are out of the organisation's

control, such as political and economic factors, technology, competition, and other

areas.

1. Aggressive Competitors

Looking at LG, it is found that Samsung and Sony are found out to be their aggressive

competitors. As consumers in Singapore are now becoming open to new technology,

they would try going in for the latest technology that is being adopted by them. So the

smaller chain brands are offering different products and are using different advertising

strategies to attract consumers.

Mature and Saturated Industry

LG is almost in a mature and saturated industry. LG has got a strong brand image and

reputation. They have a lot of competitors and they have to face lot of challenges. So

they need to protect their market position and competitive advantage.

Competitors with different Skills and Potent Brand Image

Looking at LG Electronics’ competitor, being Samsung and Sony, it is found that they

poses different skills with potent brand image as they were able to acquire a greater

market share by satisfying the needs and wants of the people. The reason being, they

have constantly come out with innovative products (SWOT analysis worksheet, 2009).It

is very important that every company considers its macro-environment before the

marketing process. The macro-environment consists of political (and legal) forces,

economic forces,

Figure 6.5 PEST Analysis

Source: PEST Analysis, 2010

PEST factors in LG are (LG Electronics 50-Year History, 2008):

Political factors.

LG Electronics has high import duty.

LG Electronics import 42-inch PDP (plasma TV) from Korean and sell those into other

countries. The problem is the high price after the import duty and freight cost. In order

to overcome high import duty, LG Electronics builds a local production plan for plasma

TV. The only way to avoid the high import duty, the local production has made been

possible.

Faithful tax payment.

LG Electronics is the leading enterprise in contribution in society and economy, creation

of employment, and faithful tax payment.

Economic factors.

Marketers need to consider the state of a trading economy in the short and long term

especially when planning for international marketing (PEST Analysis, 2010).

Singapore has small interest rate which Singapore benchmark interest rate stands at

0.06%. The rate is official interest rate which banks lend to one another (Singapore

Interest Rate, 2010). This interest rate should be considered by LG in order to state of a

trading economy in the short and long term.

Singapore has small inflation rate about 1% inflation rate. This inflation rate will effect

on the standard level of purchasing power. LG should consider this inflation level in

order to set up pricing strategy, identify purchasing power of LG consumer, etc.

(Singapore Inflation Rate, 2010).

Socio-cultural factors.

In response to intensifying global warming issues, LG Electronics is actively producing

eco-friendly products. LGE is actively developing eco-friendly technology to reduce toxic

material in products, and is also accelerating the development of reliable technology to

actively protect user safety.

LG Electronics also response to other social issues such as high oil prices and population

aging by developing new products including solar batteries and Health Care.

Technological factors.

LG develop new technology in order to create innovative product.

LG Electronics develops new technologies which enrich customers’ lives and provides

comfort and enjoyment. LG Electronics implements customer feedback, stylish design

&intelligent, state of-the-art functionalities in order to create innovative product and

increase customer value. R&D sector plays important role in discover creative ideas and

implement those ideas into products.

Improving technology in order to increase the quality standard of the product.

LG Electronics focuses its energy and resources in creating first-quality products and

technologies, quality indispensable for the global market competition.

Recommendations and Conclusion

LG faces stiff competition from the Market leader Samsung and closest rival Sony. It is

because they are not able to create reliable brand image among their customers. They

need to focus on developing their products that can give better experience to their

consumer.

From the survey, it is seen that LG is only able to somewhat satisfy their costumers from

their products. They need to create a great sense of joy in their customers by offering

unmatched product features and service that will make their customers loyal to the

brand and this will greatly help LG in increasing its market share.

LG’s product prices are in comparison with its leading competitors. The problem is that

consumers do not think that LG has that much value and hence prefer to buy other

brands. LG need to offer more competitive pricing and better promotions to sell their

televisions better.