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MBA 5th Semester 2010

Final Report: Strategic Management of LG and TV Industry. Prepared By: Zahoor Ahmad.

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 positive effect 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. 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


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MBA 5th Semester 2010

Final Report: Strategic Management of LG and TV Industry. Prepared By: Zahoor Ahmad.

Economic Forces
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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

The strict import policies by the government and imposition of Excise Duty of around 40 to 60 percent have also affected the imports of electronic parts. Companies import their components

MBA 5th Semester 2010

Final Report: Strategic Management of LG and TV Industry. Prepared By: Zahoor Ahmad.

from South Korea to assemble them in Pakistan at their factory located at Lahore. However, due to the recent economic meltdown and increasing competition, Companies have decided to cut their costs by shutting down the plant operations.

Bargaining Power of Customers

The increasing competition from Sony, Samsung, Philips, Panasonic and Chinese TV products have led to the increasing customers bargaining power. Philips, Panasonic and Chinese products are giving LG tough time as they are providing people CRT TV to the huge local market at the attractive and economical price along with the same shape, look, size and design. On top of that the Chinese products are providing customers with more than 80 percent price differential in CRT TVs if compared to others CRT. LG, Samsung and other known brands provide the 21 inch CRT TV at the price range of Rs.22000 to Rs.25000, whereas the same featured Chinese CRT is available at around Rs.5000 to Rs. 8000 in the local market.

Industry Trends

PORTERS FIVE FORCES

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1. COMPETITORS

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There are many competitors of LG in the market which includes Sony, Samsung from the same country Korea, Philips Panasonic, Electrolux and low cost Chinese

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Strategic LG TV Report

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from the same country Korea, Philips Panasonic, Electrolux and low cost Chinese of 31 competitors. The major player in the LED and LCD segment are Samsung at first, LG at second and Sony at Third. The Philips and Panasonic are major players in CRT TV but not in LCD and LED.

LG, Samsung and Sony compete in LED and LCD segments with almost similar offering to their customers. There are high exit barriers because this is high-tech industry which needs heavy investments it is not easy to exit. Cross company rivalry increases the chances for decreased profitability for one company and increases for other one; because companies want to grab higher market share.

MBA 5th Semester 2010

Final Report: Strategic Management of LG and TV Industry. Prepared By: Zahoor Ahmad.

2. BARRIERS TO ENTRY

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Search High Capital investment is a barrier to entry in such a high tech industry. Search History: Government Regulations, policies and economic down turn are also proved to be Searching... the barriers to entry. Result 00 of 00 00 results for result for
3. SUBSTITUTE PRODUCTS

p.

There is no such Substitute of TV for the purpose of entertainment via picture display.

4. CUSTOMER POWER

Customer demand and preferences push pressure on the company for price down, new features and durability and a high level of service. Due to many competitors providing similar sort of product customer may switch to competitors product.

5. SUPPLIER POWER

Good relations with the suppliers can create cost advantage while poor supplier relation may increase the cost of production. Few suppliers are also a threat they may become a threat in increasing the cost of components. LG and other brands have shifted to import components from china rather than Korea due to costly components.

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3.9. Top External Trends and Their Impact

MBA 5th Semester 2010

Final Report: Strategic Management of LG and TV Industry. Prepared By: Zahoor Ahmad.

TREND
Introduction of
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3.

INTERNAL ANALYSIS

MBA 5th Semester 2010

Final Report: Strategic Management of LG and TV Industry. Prepared By: Zahoor Ahmad.

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 OPPORTUNITIES

Cost/Price Don not have own sales force. High dependency on distributors

THREATS

Shifting to the rural market Manufacturing units in China Grasping more elite customers through 3D T.V

Incremental duties Entrance of cheep Chinese brands in Pakistani Market

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LG LED TV

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Strategic LG TV Report
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