lg tv report

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Term Report: Strategic Analysis of LG and TV Industry

1. BUSINESS SCOPELG 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

LG is targeting in all cities in Pakistan including:

TIER

NO: 01KARACHI LAHORE ISLAMABAD FAISALABAD

PESHAWA

R

OTHER

BIG CITIES

TIER

NO: 02 GUJRANWALA

HYDERABA

D QUETTA WAHACANTTSIALKOT

OTHER

SMALLCITIES

1.2. What Customer Wants?

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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.

1.3. Functions / Applications

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.

1.4. Customer & Users

LG has targeted its market on the basis of the product that they are offering to the consumer.

They are targeting:

Upper Upper Class

Upper Middle Class

Middle Class

1.5. Added Value

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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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 ones needs. New Year slogan of Samsung

is Turn on tomorrow be ahead in innovation.

1.7. Intended Business

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 targetmarket. LG future consideration is SOLAR SYSTEM segment which gives great opportunities to

LG in future.

1.8. Competitors and Their Businesses

LG major competitors in Television industry are:

Sony provides complete range of product i.e. BRAVIA LCD.

Panasonic is another major competitor of LG which also deals in LCD, LED & CRT T.Vs.

Samsung is a major competitor of LG in the television industry. Its major products are LCD,

LED and CRT T.V

1.9. The Business In Which LG Is Not In:

In PakistanLG basically providing electronics related product but in which they are not catering:

o Camera & Camcorder

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o Printers & Peripherals

o Play Stations, X-Box

2. EXTERNAL ANALYSIS

2.1. Market Structure

TY companies in Pakistan are offering their products basically to following three

segments:

i. Status Conscious Segment

ii. Style Conscious Segment

iii. Price Sensitive Segment

Some TV models of major players in TV line are following:

Status Conscious Style Conscious Price Sensitive

LG Extra smart 3D LG PG-61 Plasma TV 42PG61UR LG Golden Eye

Samsung LED 9000LG XCanvas Time Machine

42LC2RR LCD TVLG Sound Max Plus

Sony-ready edge-lit LED Samsung LA40A610 LCD TV

Sony's KV-24FS120 24-inch

WEGA TV

LG 42SL9000 42" LEDSony BRAVIA KLV-46X350A 46-

inch Full-HD LCDSamsung CS-29Z50 CRT TV

Smuggled Chinese CRT TV

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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 theirpersonality 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 LEDTV market.

2.2. Distribution Channels

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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.

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

Increasing inflationary rate in Pakistan Decreasing purchasing power of price sensitive

segment.

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New technology Increasing competition, product innovation

and improved quality

Imposed taxes on importing electronic

items in Budget 2010

Increase in cost of doing business

Smuggled cheap Chinese Televisions Decline in sales

Worse law & order situation Distributors are reluctant to cover northern

areas of Pakistan

3.4. Market Size

Market growth rate in terms of units (Past)

Market

segment 2006-07 2007-08 2008-09 2009-10 Growth Rate

Status

Conscious- - 85 110

4%

Style

Conscious78,500 80,000 81,500 82,500

3%

Price Sensitive 825,800 875,000 910,000 945,000 6%

Total Growth

rate5%

Market growth rate in terms of Rs. in millions (Past)

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Market

segment 2006-07 2007-08 2008-092009-10 Growth Rate

Status

Conscious- - 17,000,000 22,000,000

4%

Style

Conscious3,925,000,000 4,000,000,000 4,075,000,000 4,125,000,000

3%

Price Sensitive 16,516,000,000 17,500,000,000 18,200,000,000 18,900,000,000 6%

Total Growth

rate5%

Average Selling Prices for Last Four Years:

Status Conscious LED = Rs. 200,000

Style Conscious LCD = Rs. 50,000

Price Sensitive CRT = Rs. 20,000

Assumption for Growth:

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 LEDs 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, thats why its market is also showing increasing

growth rate by 3%. Other reasons behind growing market of LCD are:

o LCDs 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 growth rate in terms of units (Future)

Market

segment2009-10 2010-11 2011-12 2012-13 Growth Rate

Status

Conscious110 135 155 185 3%

Style

Conscious82,500 84,000 85,500 86,500 2%

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Price

Sensitive945,000 948,000 950,000 952,000 2%

Total growth

rate2%

Market growth rate in term of Rs. in millions (Future)

Market

segment2009-10 2010-11 2011-12 2012-13

Growth

Rate

Status

Consciou

s

16,500,000 20,250,000 23,250,000 27,750,000 3%

StyleConsciou

s

3,300,000,000 3,360,000,000 3,420,000,000 3,460,000,000 2%

Price

Sensitive14,175,000,000 14,220,000,000 15,500,000,000 16,545,000,000 2%

Total growth

rate2%

Average Selling Prices for Last Four Years:

Status Conscious LED = Rs. 150,000

Style Conscious LCD = Rs. 40,000

Price Sensitive CRT = Rs. 15,000

Assumption for Growth:

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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CRT

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. LGs LCD and LED segments are present in

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: LGs 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.

3.7. Distribution Structure

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In (%)

Television Market

2009 2013

Whole sellers 8 4

Brand Show Room 4 12

Retailers 85 75

Hyper Market 3 9

Total 100 % 100%

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.

Retailers: 75% turnover is expecting from retailers in future.

Hyper Market: 9% turnover is expecting from hyper market in future.

Market Coverage (2009)

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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 positiveeffect 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.

3.8. Driving Forces

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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3.9. Top External Trends and Their Impact

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TREND

Introduction of

3. INTERNAL ANALYSIS

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3.1. SWOT Analysis

STRENGTHS WEAKNESSES

Strong Global Marketing

Strong Brand image

LG has the wide distribution

system in Pakistan

Strong R&D

Focus on innovation and new

product development

Catering localized needs

Cost/Price

Don not have own sales force.

High dependency on distributors

OPPORTUNITIES THREATS

Shifting to the rural market

Manufacturing units in China

Grasping more elite customersthrough 3D T.V

Incremental duties

Entrance of cheep Chinese brands

in Pakistani Market

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.

EFFECTIVE LOCAL TVs: Currently there is no TV commercial that promotes LG

TV; it should be emphasized to attract more number of customers.

Growing LCD Market: LCD market is growing rapidly which is a great opportunity for

LG to cash its LCD technology.

Innovation: The introduction of blue-tooth technology in Televisions is a great

opportunity for LG and the company is endeavoring hard to grasp this opportunity. In

addition to this the 3D technology is also expected to become LGs strength.

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Factors

Analysis

The most important factors considered by the consumers are Innovative Features, High

Resolution Screen, Durability, Sound and Affordable Price.

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.

Rating Against Customer Buying Criteria (Evaluation Table)

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QUALITY ANDNON PRICE

CUST

PRODUCT-REL 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,

Samsungs prices are high and Sonys 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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Samsung and LG focused on upper and upper middle class. But now LG is focusing on lower

and middle class as well thats why LG is focusing on low cost strategy.

Customers Buying Criteria: Price..%, Quality Attributes..%

Analysis Of Consumer Buying Criteria (LCD Segment)

L.G is focusing on innovative feature, attractive designs, high screen resolution and

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.

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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Customer complaint service is considered as another important factor by the customers

but not at top priority of customer in LCD segment but L.G has scored good marks than

its competitors.

Price is least important factor in LCD segment and LG has scored the same as

competitors.

3.3. Impact of Issues on Strategic Profile

Issue number

Analysis

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.Gs sales totally depend upon the distributors sales force.

These two distributors are including Mega and Allied distributors are also delivering same

services to Samsung and Sony. So its 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.

4. VISION AND MISSION STATEMENT

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:

To expand the LED/LCD/Plasma TV business in Pakistan and to achieve at least 30%

market share in LCD TV and 50% market share in Plasma TV by the end of 2011

To support the sales by launching attractive TVC by the end of September 2010

To make LG a premium brand by focusing on innovation and customizing their products

according to the needs of customers

Reinforce premium strategy market centering on customer value, promote alliances and

outsourcing in non-core sectors, strengthen soft capabilities (brand, design, key technology)

and pursue top tier level operations

To minimize the cost of products by 2% to 3% by importing parts from china instead of

Korea

To strengthen the relationship with distributers by offering more incentives so, that they can

focus more on LG brands

5. KEY ISSUES

According to our analysis, we have found some key issues with LG which have major impact on

their business.

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