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2018 Fall - Corporate Strategy / Firm Level Analysis ReportKi-Baek KIM (2013-12501)LG Electronics Corp., Ltd Group 1 – Smartphone Industry Ki-Baek KIM (2013-12501)
I. LG Electronics’ Position in the Smartphone IndustryLG Electronics Inc. (LGE) is one of the low performersamong the major players in the smartphone industry. Considering its reputation in the home entertainment (television) market and the home appliance markets, the fact that the company is struggling in the smartphone industry may sound contradictory. Nevertheless, the LGE’s Mobile Communication department has been suffering operating loss over fourteen consecutive quarters since the third quarter of 2015. LGE is one of the companies that is adversely affected by the technology shift from feature phones to smartphones. In contrast to the glorious days with the infamous CYON feature phones, LG smartphones gained notoriety for its continuous lagging performance and eventually lost faith from customers. The performance matrices illustrates a clearer picture of LGE’s current position.Table 1. 2018 3Q Smartphone Market Share by Shipment Units*SamsungAppleHuaweiXiaomiLGGlobal**20.0%13.2%14.7%9.1%3.3%<Major markets and regions>US25%39%******17%China1%9%23%13%****Europe31%19%22%4%1%Latin America37%4%13%-6%India22%--27%1%* Sony was one of the six focus companies but is excluded from the table as the firm has only produced approximately two million smartphones during 2018, and thus is not an appropriate subject of comparison. ** The global market shares are based on data retrieved from IHS Markit. The rest of the numbers are based on the data of Counterpointresearch.com*** Huawei, Xiaomi and other Chinese smartphone manufacturers are restricted from entering the U.S market. **** During the first quarter of 2018, LGE announced its exit from the Chinese market due to lagging performance. ***** The blank tables in the Latin America and Indian market implies that the players possess share below 1% The top three players of the smartphone industry are Samsung, Huawei and Apple. In terms of market share LG is positioned seventh behind the Chinese manufacturers – Xiaomi, Oppo and vivo – and slightly ahead of Motorola which took up 3% of the total market share during the third quarter. LG is underperforming in the existing markets as well as the emerging markets such as India. Even domestically, the company’s shares are behind Samsung and even Apple. The fact that LG has retained third position in the US market is a relief.
II. Internal Analysis – Why are people not buying LG smartphones?1) OverviewThe reasons behind LGE’s endless slump are straightforward. LG’s current position in the industry is the accumulation of their strategies and decision of the past. The snowball started to build up from the very beginning, when the company entered the smartphone market relatively late compared to Samsung and Apple. LG went through a “Dark Age” – from the time when the company released G3 until the launching of the G6. Serious defects were found in three (G3-G5) consecutive flagship phones during this period, and eventually inflicted severe damage to LG’s brand image. After