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Strategy Marketing And Communications ÐŽV A Case Of Lg Electronics

Essay by   •  December 15, 2010  •  2,323 Words (10 Pages)  •  2,243 Views

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Introduction

Leading mobile phone companies such as Samsung, LG Electronics and SonyEricsson are rushing to introduce strategic handsets, aiming to win a larger chunk in the market. In the fiery competition space, LG Electronics has introduced its first black-label (premium label) mobile phone which called ÐŽ§ChocolateЎЁ for the competition, and tried to use its new marketing strategy for spreading into a new market place that no one has took up before. This report first of all will start from over viewing LG Company and its strategy by present. Secondly will go into specifically to analyze the strategy which on launch its ÐŽ§ChocolateЎЁ model and its competitors, and also to analyze the feasibility of its strategies through understanding its strength and weakness. Finally, the report will apply the key factor to its global capability, to discuss the further modification and development opportunity.

LG Company Overview

In 1947, LG Group founder Koo In-hoe established Lucky Chemical Industrial Corp. (currently LG Chemicals) in South Korea, LG initially manufactured a cosmetic called Lucky Cream. After 50s to the end of 70s, LG established its other business more widely into different areas. Now LG is a manufacturer which field in three main businesses which are Electronics, Chemicals, and Telecommunications & Services (LG official website). The company is based in Seoul, South Korea, they are operating around 130 subsidiaries around the world with around 120,000 employees in 2005. The company recorded revenues of KRW84 trillion during the fiscal year ended December 2005, an increase of 21.2% over 2004. The increase was primarily attributable to the increase in revenues from the telecommunication equipment and handset segment, and they plan to reach the sales of KRW92 trillion in 2006 (LG official website). For the LG Electronics aspect, that we are going to focus on in this report, according to its 2004 Annual Report, they represented they achieved KRW 9.5 trillion in total sales with an operating profit of KRW 636.2 billion. The total sales and operating income were up by 55% and 99% respectively over the previous year. The growth brings LG Electronics to become a global top four handset manufacturer.

Demonstrate an Understanding of Marketing Strategy at Different Levels (Corporate Mission, Corporate Strategy, and the Actual Marketing Strategy)

LG Electronics (LGE) is the world's leading manufacturer of CDMA handsets and the fastest growing manufacturer of mobile phones worldwide. The company provides a total range of wired and wireless technologies, and is rapidly establishing a global presence through international market share in 3G handsets (Dano, 2003). The initial strategy of LG Electronics was that of low cost by taking advantage of economics of scale and by leveraging subsidized cost of capital and low cost of labour in Korea. We can say here it liked every other companies were using Red Ocean Strategy to play the competitive rules of the game. The Red Ocean Strategy is competition-based strategy, it means companies can do promotions such as price cutting. However the market space easily to get saturation and the profits will reduce. Through this, a product can be a commodities and lose its worth, the market become a cutthroat killer to exploit the company bloodily just like its name-ÐŽ§Red OceanЎЁ (Kim & Mauborgne, 2005). However, the customers of Korea became quality conscious. As a result, LG started to change their strategy by focusing on quality products, it made them got 800% increase of their income in three years. Furthermore, to enhance its global competitiveness, LG continued to forge strategic partnerships with major players included Intel, Microsoft, Sony, Philips and Hitachi. LGE followed a differentiation strategy to concentrate on the high-end of the entire products segment it entered. It made the image of a leader in both technology and quality. It launched models with innovative features at regular intervals. Its technological superiority provided a cutting-edge to its marketing strategy. LGE recognized the merit of its employees and encouraged them by giving incentives like stocks. They were provided regular updating of their knowledge and were sent for management development programmes. This created an employee friendly atmosphere in the company (Bhatt, 2003). However, the market is still changing, LGE felt that still not enough to do only quality marketing, they felt them need something special and totally different to others. Thus they started to do the marketing in a brand new market space, which is Blue Ocean Strategy. In Blue Ocean Strategy, they describe the red ocean as where most companies compete, seeking customers from the same market as their competitors. Kim and Mauborgne (2005) suggest that companies break out of the red ocean of bloody competition by creating uncontested market space in the blue ocean that makes the competition irrelevant. The Blue Ocean Strategy focuses on non-customers and demand creation, also the opportunity for highly profitable growth. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. The term "Blue Ocean" is to describe the wider potential of market space that is vast, deep, and not yet explored (Layton, 2005). Their implications in 2005 are (LG Annual Report, 2004):

1. Enhancing product leadership in the 3G handset business.

2. Strengthening the competitiveness of convergence handsets, and in-house development of core components.

3. Early developing advanced technologies for high-end handsets.

4. Extending the application of innovative form factors and design

Followed these aspects, LGE introduced their first black-label (premium label) mobile phone, which called ÐŽ§ChocolateЎЁ to the market, the following paragraph will give it an analysis.

Critically Evaluate Competitive Strategies

The Chocolate PhoneÐŽ¦s success results from the combination of its excellent design, marketing and a proactive sales strategy. LGÐŽ¦s Chocolate phone got a touchpad navigation which made it different to others. We can understand more through Matrix analysis, Hooley and his colleagues (2004) stated that Matrix can help to classify the competitive environments that can coexist within industry. The Matrix analysis is applied:

As you can see, we picked four premium mobiles which can compare with Chocolate. There are Nokia N80, Philips 960, SonyEricsson W550i and Samsung

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