| Name | LG Electronics Inc. |
| Industry | Consumer electronics |
| Founded | 1958 |
| Headquarters | Seoul, South Korea |
| CEO | Koo Kwang-mo |
| Revenues | $ 56.45 Billion, 2020 |
| Profit | $ 1.9 Billion, 2020 |
| Competitors | Samsung, Panasonic, Philips. |
Company Overview:
Headquartered in Seoul, South Korea, LG Electronics was founded by Koo In-hwoi in 1958. LG is a multinational consumer electronics company, comprising of four major business segments: Vehicle components, Home appliances & Air Solutions, Mobile Communications, and Home Entertainment. It has a diversified global network, operating in more than 128 countries with above 75,000 employees (LG Group, 2021). In 2020, LG announced an excellent financial performance with an operating profit of $ 2.85 billion, which was 31.1% higher than the previous year driven by the higher sales of OLED TVs and premium home appliances (LG Newsroom, 2021).
Table of Contents
LG Strengths 2021:
- High Brand Equity.
LG is a renowned global brand, offering a variety of goods to its customers all across the world. According to Fortune (2021), LG has a market value of $ 23.3 billion with a ranking of 192 in the Global 500 companies in 2021. The higher brand value represents the long-term sustainability of the company.
- Strong Market Share.
LG is considered a market leader due to its diversified products and brand repute. Therefore, LG has higher operating profit margins than other companies operating in the same industry, such as Haier, Samsun, and Panasonic. According to Hosokawa (2020), LG has 8% operating profit margins in 2019, in comparison to 5.8% and 4.5% of Samsung and Haier.
- Sponsoring International Events.
LG has sponsored many international events, such as ICC Cricket World Cup, Formula One Racing Championship, Soccer tournaments, and so on. Such sponsoring allows LG to increase its brand visibility globally.
LG Weaknesses 2021:
- Discontinuation of Smart Phone Business.
Due to lower sales and a highly competitive market, LG has announced to drop out from the smartphone market and explained that they want to use their resources on other potential growth areas, such as robotics, connected devices, electric vehicle components, and so on. According to Richter (2021), LG only sold 24.7 million smartphone devices in 2020, which is 1.9% of the total market share. Such sudden discontinuation of the business segment has affected the brand repute all across the world.
- Limited Social Media Usage.
LG has limited usage of social media platforms to advertise its brand and products for attracting a large number of the public. A large number of people use social media in their daily lives, therefore LG can take benefit from it and promote its products as well as affiliate with big platforms, such as Amazon and Flipkart, in order to launch new products.
LG Opportunities 2021:
- Growing Market.
The global consumer electronics market is growing at a great pace due to pandemics, as people are now bound to work from home and need more entertainment opportunities to spend their time at home. According to GFK (2021), there has been an 18% increase in the first half of 2021 in the overall global consumer electronics market, showing that LG can get benefit from such growth opportunities, in order to further expand into the international market. - Strategic Alliances and Joint Ventures.
Strategic alliances and joint ventures can enhance the company’s market share by allowing it to expand in the market. Recently, LG Electronics has formed a joint venture with Luxoft, in order to allow consumer-grade experiences in automotive (Business Wire, 2020). This will help LG to become one of the most innovative automotive software engineering providers within the world’s leading innovators in home entertainment. Moreover, LG has a partnership with the Magna Sign, which will accelerate the e-drive component development for the company (GlobeNewswire, 2021). As a whole, such strategic alliances and joint ventures can support LG to enter into a new market. - Changing Lifestyle.
With the passage of time, a significant shift has been observed in the lifestyle of people, such as high migrations from rural to urban areas, technological advancements, rise in disposable income, and increasing urban population, which is also impacting the demand for home appliances and electronic goods.
LG Threats 2021:
- Price Wars & Competitions.
The consumer electronics and smartphone markets have become highly competitive, putting extra pressure on global manufacturers to keep on introducing new products for gaining a competitive advantage. Therefore, LG is in constant competition with the global giants, such as Samsung, Haier, and Panasonic as well as price wars go on to retain or gain market shares. - New Entrants Threat.
The smaller brands are entering the market with less prices and more advanced technology, such as Micromax, Sansui, and TCL. This has caused the giant companies of consumer electronics, such as LG, Samsung, and Sony, to cut down their prices by 15% leading to competitive prices and lower profit margins (Prabhu, 2017). - False Product Claims.
LG electronics was fined $350,000 for false advertising regarding the popular clothes dryer (Korean JoongAng Daily, 2021). Some customers compliant that the Tromm Dual Inverter Heat Pump became the clothes moldy and left moisture, and also it did not clear itself rather than the claim made in the advertisement. Such complaints and fines significantly affected the company’s repute among its customers. - Government Regulations.
Globally, environmental concern has been increased in the last few decades due to climate change. The government policies related to innovative technology for power and energy conservations are largely influencing the industry and forcing them to move towards renewable sources of energy.
LG SWOT Analysis Conclusion:
As a whole, LG is considered a leading consumer electronics company, operating all across the globe. It has managed to maintain a strong market share among the highly competitive electronics market and is further planning to move into other segments, such as electronic vehicles component development. Due to strong strategic alliances and joint ventures, LG is expected to increase its market share and presence among its customers. But the significant new entrant threat and strict government regulations have posed significant threats to the company’s operations.
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References:
- Business Wire, 2020. Luxoft and LG Electronics to Form Joint Venture to Enable Digital, Consumer-grade Experiences in Automotive.
- Fortune, 2021. LG Electronics.
- GFK, 2021. Global consumer electronics market: on the up or showing signs of saturation?.
- GlobeNewswire, 2021. LG and Magna Sign Joint Venture Agreement and Announce Leadership Team.
- Hosokawa, K., 2020. LG Electronics tops giant Samsung in white goods. AsiaNikkei
- Korean JoongAng Daily, 2021. LG fined for false claims about clothes dryer. Korean JoongAngDaily.
- LG Group, 2021. About LG Business.
- LG Newsroom, 2021. LG Announces 2020 Financial Results.
- Prabhu, A., 2017. LG, Samsung, Sony TV prices cut by 15%; face competition from Micromax, TCL & Sansui. Gizbot.
- Richter, F., 2021. LG Drops Out of the Smartphone Race. Statista.