PROJECT SUBMISSION
GROUP 9
VIDISH VERMA
ANURAAG BISWAS
CHANDER JEET SINGH
KAPIL DEV
ABHAY PATADE
PGP/19/297
PGP/19/248
PGP/19/251
PGP/19/263
PGP/19/274
LG Electronics
INDUSTRYS DOMINANT FEATURES:
1. Market growth rate and size
The market growth rate was very high at its early maturity but now it is on
it maturity stage so the growth is steady but the size of market is much
expanded due to global competition.
2. Scope of competitive rivalry
There is big scope of competitive rivalry because the big companies in this
industry has already doing business globally its mean they are already
mature at their parent country so the competitions in this country will
increase.
3. Number of rivals
There is several numbers of rivals in this industry because there are lot of
global regional and local companies is in this industry.
4. Learning and experience curve
The existing companies was available in the market from-1980s so they
are more experienced and skills as compare to new rivals. They improving
their R & D and cost efficient through learning and experience curve.
5. Economies of scale
All of the major home appliances manufactures were heavily engaged in
renovating and building production facilities improve quality and reduced
Labor and material cost to gain Economies of scale.
6. Pace of technological change
Pace of technological change was very high companies were competing
through technology they introduce SMART products.
7. Product innovation
U.S appliances manufactures were moving towards a stronger productoriented market. They designed there product for customer satisfaction
and as per the need of customer. They introduce energy saving
appliances. Whirlpool, GE, Maytag and other company design their product
as energy saving and efficient and uniquely differentiated. A survey of 500
residential found that roughly 25% of the population said that they would
be willing to pay 15% to 25% above the standard price for higher energy
saving appliance.
8. Production Capacity
Production capacity not effecting the prices and the profits because as
they increased to produced energy saving products and cost efficient
products, customers more attracts towards these attributes.
9. Buyers needs and Requirements
US buyers needs sophisticated machinery which they can present in their
small threats, they also need full kitchen solution which is filled by the
Global companies.
10.
Degree of Product Differentiation.
As this Companies Focus on Differentiation, Then there technology became same
and they lost their differentiation and the price competition increases.
11.
Vertical Integration
AB Electrolux, Siemens, Whirlpool, form the B2B electronic market place for
European Households Appliance maker, Distributor and retailers for the
convenience of Dealers.
DRIVERS OF CHANGE:
1. Product Innovation
In 2002 U.S appliances manufactures were moving towards a stronger productoriented market. They designed their products for client satisfaction and as per
the necessity of the clients. They introduced energy saving appliances.
Whirlpool, GE, Maytag and different companies styled their products as energy
saving and economical and unambiguously differentiated. A survey of five
hundred people found that roughly a quarter of the population aforementioned,
might be willing to pay higher than the normal value for higher energy saving
appliance.
2. Technological change and manufacturing process innovation
In 2002 manufacturer were introducing SMART appliances with progressively
subtle electronic controls and self-diagnostic options. Smart Appliances were
being connected to the web. These appliances may involve services, transferring
programs, contact security suppliers just in case of gas leaks or fireplace, pay
utility bills, and be programmed remotely to start out and stop whenever
required.
3. Changes in cost and efficiency
The basis for effective competition had been manufacturing the less basic parts
within the most effective plants. Though individual styles would possibly vary,
the parts within the appliances were turning into universal components and were
being created extremely automatic plants, computer-integrated producing
method. Fewer components mean easy producing and fewer likelihood of break
down. The result was lower producing value and better product quality.
4. Regulatory influences and government policy changes
With the dawn of twenty first century, major household appliance makers looked
at a brand new set of certification standards on the rise the ISO 9000 series. It
handled quality management system, ISO 14001 certified environmental
management systems (EMS). Some international markets like global organization
may need certification as a necessity for doing business.
5. Globalization
This industry diversified globally in 2002, the Korean and Japanese company
were are available the business they were broadly speaking heterogeneous and
well established globally and U.S markets become extend.
THREAT OF NEW ENTRANTS
Factor
Comments
Economies of scale
Its difficult to any domestic company to compete with these
global companies because they capture 90% of the market
share and increase competition through cost efficiency.
Capital required
Capital required is increase so it is difficult to any new entrants
to enter with a large capital in competition with these global
companies
Access to
distribution
channels
Its difficult for any new entrant to grab distribution channels
because the market leaders have very strong impact on
distributions channels.
Expected
retaliation
Former companies retaliate through diversification and
globalization so it is difficult for new entrant to compete with
these global players.
Differentiation
Its difficult for any new entrant to adopt technology pace and
create differentiation in this highly competitive industry.
Brand loyalty
All global companies have very good brand positioning in
customers mind so it is difficult for new entrants to create
brand loyalty.
Experience curve
Any new entrant could not get experience curve he has to
spend some time in industry.
Govt. action
Govt. launches new certification in industry to regulate
manufacturing and environment.
EXIT BARRIERS
Factors
Comments
Specialized assets
There are no such specialized assets in this industry so it is
easy to exit from the industry so it is easy to exit.
Fixed cost of exit
There is no such fixed cost associated to exit from the
industry so new entrant can easily exit.
Strategic
interrelationship
They have strong strategic interrelationship with suppliers
and distributor so its difficult to exit.
Govt. barriers
There are no govt. barriers so its not difficult for any
company to get out of its business.
COMPETITIVE RIVALRY
Factors
Comments
Composition of
competitors
The compositions of competitors are equal in size because the
main rivals are belonging to global market.
Market, growth
rate
Growth rate is stable because the industry is in maturity
Scope of
competition
It is global because the industry is competing with
diversification strategy
Fixed storage
cost
It is neutral because these type of products dont have expiry
dates but they have a threat of getting old in terms of
technology, model, design and other features.
Capacity
increase
We rate it neutral because in US home appliance industry
competition is very high due to technology & product
Innovation but at the same time they do more work on Quality
And renovation to control Labor and Material cost.
Degree of
differentiation
It is high because the companies are competing in the industry
with differentiation and all the company has their own degree
of differentiations
Strategic stake
It has low rating because this is not a bread or butter for these
companies because these companies are already well
established globally.
POWER OF SUPPLIER
Factors
Comments
# of important
Suppliers
They have very few suppliers that is why the application of
new technology and product process is totally one way
from the companies.
Switching cost
Switching cost is high because there is no more buyers and
the companies make alliances with their suppliers.
Availability of
substitutes
There is no such substitute of home appliances.
Threat of forward
integration
There is less fair of forward integration because the major
raw material is steel and it is not commonly produce
material.
Importance of
Buyer industry to
suppliers profit
We take it as neutral because the presence of powerful
buyers reduce the profit of the industry overall.
Quantity
purchased by the
industry of
suppliers
product
It is high because there are no such suppliers so the whole
industry should rely on these few suppliers.
Suppliers product
an important
input to the
buyers business
The suppliers product is highly important in
manufacturing of the product and it designing also.
the
POWER TO BUYER
Factors
Comments
Number of
Important buyers
We take it as neutral because there is no such buyers in the
industry there are few important buyers in the industry.
Threat of Backward
integration
It neutral because the major distribution channels of US home
appliances are two contractual & retail. But most famous is
contractual.
Product supplied
The product supplied is Special.
Switching cost
It is rated 4 because after the independent retail stores most of
the companies switch over to it.
% of buyers cost
It is high because the market is very competitive in terms of
distribution channels.
Profit earned by
buyer
The sales were increasing through the channels of distribution
diverse so the profitability is also increased.
Importance to final
quality of buyers
purchase.
It is very high because the competition is very high so the
quality of final product is also getting high and costumer
expectation is also high.
THREAT OF SUBSTITUTE
Factors
Comment
Threat of
Obsolescence of
Industrys product
No threat, There is no substitute product.
Aggressiveness of
substitute products
in promotion
No Aggressive Marketing because there is no substitute product
available.
Switching Cost
No switching cost because there is no other product.
Perceived price/
value
Perceived price is lower than hiring servants
RECENT TRENDS IN THE INDUSTRY
Consumer physics rebounds from economic recession. Consumer durables
sales in 2010 rebounded well and showed very little ill-effects from the
world economic recession from the previous year. The trade was
catapulted by sturdy sales growth amongst tablets, E-readers, OLED TVs
and smartphones, amongst others.
China
replaces
USA,
becoming
the
largest
C.E.
market. a signal of Chinas growing economic power. It is being projected
to overtake the USA in retail sales by value of C.E. products in 2011
Western
New world order as
Europe and North America
falter.
Whereas market
growth is anticipated
to be moderate at the very best, the
projection shifts in regional sales contribution. Among the developing
markets, South American countries can attain the highest growth, driven
by a burgeoning middle class. An outsized proportion of low earning
customers still does not participate in the market and represent an
outsized potential client base.
Asia Pacific is currently the largest C.E. market, with growth primarily
driven by China and India. The region additionally has the highest
demographic dividend, and results in adults hungry for electronic gadgets.
Western Europe and also the USA can still be hampered by economic woes
and low customer confidence. Socio-demographic factors tied to C.E.
product sales.
SWOT ANALYSIS OF THE CONSUMER ELECTRONICS SECTOR IN INDIA
Indian Electronics (Consumer) market has been witnessing sustained above 10%
growth rate within the past few years. Increasing product awareness, cheap
evaluation, innovative product and also the high disposable incomes have
assisted the sturdy growth in this industry market in India. Speedily shrinking
replacement cycle for consumer goods is being noticed as sustaining demand in
urban markets. The present low penetration rates and also the increasing usage
of consumer goods have catapulted rural India to the high demand generating
phase. The C.E. market in the subcontinent is characterized by technological
advancements, innovative product introductions, value fluctuations and intense
competition.
Strengths
Weaknesses
Opportunities
Threats
Presence of
established
distribution
networks in both
urban and rural
areas
Seasonal demand
and particularly
high during
festivals
In India,
penetration of
white goods is
low compared to
developing
countries
High import
duties on raw
materials
Presence of Giants
Demand is very
much dependent
on good GDP
growth
Rural market is
still not exploited
Low tariffs on
imports from
ASEAN or China
SWOT ANALYSIS OF THE HOME APPLIANCES IN INDIA
Demand in urban markets is likely to increase for products such as LED TVs,
laptops, split ACs and, beauty and wellness products. In rural markets, durables
like refrigerators as well as other home appliances are likely to witness growing
demand in the coming years. The rural market has recently experienced
around 30 per cent growth rate in demand for electronics and home
appliances. Urban growth is likely to be driven by new technology/innovative
products, lifestyle products and replacement demand.
Penetration levels
Refrigerator has the highest penetration in India of 31%
Air Conditioners
The Indian AC market accounted for sales of 3.6 million units in 2013. ACs are
perceived as high-end products; current penetration stands at 6.8 per cent
including Window and Split AC. The segment had a 13.0 per cent share (2013) in
the consumer appliances market. High income growth and rising demand for split
ACs are the key growth drivers. The room air-conditioning market represents
approximately 50% of the total market, with the other 50% comprised of central
and specialist air-conditioning systems. The room AC market can again be
divided into two sub-segments. On the one hand the residential segment which
now constitutes a majority 60% market share and on the other hand the
commercial segment which represents a smaller 40%.
Market sizes and growth rates
Washing machines
Washing machines are the second largest contributor to the consumer
appliances market (after refrigerators); in FY 2013 total sales was around 7.5
million units. Fully automatic washing machines are garnering an increasing
share of the market due to reduction in prices and higher disposable incomes.
LG Electronics continued to be the leading player in home laundry appliances in
India with a share of 25% in 2013, followed closely by Samsung Electronics
(23.2%). The major chunk of this growth is expected to be driven by newer
households purchasing washing machines, as well as a greater number of
households replacing their semi-automatic washing machines with fully
automatic washing machines. 6-9.9 Kg is the most popular category in India with
72.2% share in the total sales.
Microwave ovens
Due to the convenience of mobility and ease of operation, freestanding
microwaves continue to dominate the Indian market in 2013, accounting for
almost all volume sales. LG Electronics continued to be the market leader in
2013 with a volume share of 32%. Samsung Electronics ranked second with a
22% share followed by Whirlpool with just over 11% and Bajaj Electricals with
10%.
Refrigerators
Refrigerator sales stood at ~14.0 million units in 2013. This segment makes up
18.0 per cent of the consumer appliances market. The market share of direct
cool and frost free segment is 76.3 per cent and 23.7 per cent respectively. Key
growth drivers are lower prices and rising demand for frost-free refrigerators.
Fridges with a capacity range of 142-340 litres dominated fridge sales over the
review period, representing 74% of total volume sales. In fact, the 165-litre
fridge was the standard in almost all households until the arrival of competition
and the need to differentiate, coupled with economic development, which led to
the development of higher capacities. Over the review period, fridges with 341540-litre capacities continued to gain momentum to account for 20% of total
fridge volume sales in 2013. Market share of LG is 24.50% and Samsung is
20.60% in 2013.
Strengths
Weaknesses
Opportunities
Threats
Organized
sector has
been slowly
gaining share
in the market
relative to
unorganized
sector
Poor
infrastructure
Rapid
increase in
urbanization
Concessions on imports
under trade tariffs which is
threat to the local
manufacturing
Various
finance
possibilities
Consumers
low
purchasing
power parity
Increase in
the
disposable
income of
consumers
Poor infrastructure; Bad
power supply hampered the
growth in the market
COMPANY OVERVIEW AND STRATEGY
LG Electronics Inc. is a South Korean multinational electronics company
headquartered in Yeouido-dong, Seoul, and a member of the LG Group,
employing 82,000 people working in 119 local subsidiaries worldwide. With 2014
global sales of USD 55.91 billion (KRW 59.04 trillion), LG comprises four business
units: Home Entertainment, Mobile Communications, Home Appliance & Air
Solution, and Vehicle Components. CEO of LG Electronics is Bon-joon Koo, who
assumed the role of vice chairman of LG Electronics on 1 October 2010. In 2011,
LG Electronics was the world's second-largest television manufacturer
2000present
In order to create a holding company, the former LG Electronics was split off in
2002, with the "new" LG Electronics being spun off and the "old" LG Electronics
changing its name to LG EI. It was then merged with and into LG CI in 2003 (the
legal successor of the former LG Chem), so the company that started as Goldstar
does not currently exist.
LG Electronics plays a large role in the global consumer electronics industry. LG
launched the LG Chocolate mobile phone in 2005 and is the second-largest LCD
TV manufacturer worldwide as of 2013.By 2005, LG was a Top 100 global brand,
and in 2006 LG recorded a brand growth of 14%. Its display manufacturing
affiliate, LG Display, as of 2009 was the world's largest LCD panel
manufacturer. In 2010, LG Electronics entered the smartphone industry. Since, LG
Electronics continued to develop various electronic products, such as releasing
the world's first 84-inch ultra-HD TV for retail sale. On 5 December 2012, the
antitrust regulators of European Union fined LG Electronics and several other
major companies for fixing prices of TV cathode-ray tubes in two cartels lasting
nearly a decade. In 2014, LG Electronics used a new typeface for the "LG" in its
logo.
Products
Televisions: LG Electronics launched an OLED TV in 2013 and 65-inch and 77inch sizes in 2014. LG Electronics introduced its first Internet TV in 2007,
originally branded as "NetCast Entertainment Access" devices. They later
renamed the 2011 Internet televisions to "LG Smart TV" when more interactive
television features were added, that enable the audience to receive information
from the Internet while at the same time watching conventional TV
programming.
Mobile devices: LG Electronics manufactures a wide range of smartphones and
tablet devices. Other than the G3, LG officially unveiled the curved smartphone,
G Flex, on 27 October 2013. LG has released it in South Korea in November 2013,
and later announced releases in Europe, the rest of Asia, and North America
Tablet computers: In 2014, LG revealed three new additions to the G series
of tablets, which each include LG's Knock Code feature, allowing users to unlock
devices with a series of taps. The tablets also feature Q Pair which allows tablets
to sync up with a smartphones, and for phone calls and text messages passed on
to the tablet in real time. LG and Google announced the Android Wearbased smartwatch, the LG G Watch, which was in June 2014. In August 2014,
the LG G Watch R that has a round face (similar to the Moto 360) was
released. The LG Watch Urbane that LG's third Android Wear-based smart watch
has released in April 2015.
Rolly keyboard: In 2015, LG announced the first Bluetooth keyboard that folds
up along the four rows of keys that can be tossed in a purse or pocket. The Rolly
keyboard is made of solid plastic. Two tiny plastic arms fold out from the end of
the keyboard to support a tablet or smartphone, and it can toggle between two
different Bluetooth-connected devices at a time. Battery life is an expected three
months on a single AAA battery.
Home appliances:
LG manufactures and sells home appliances such as refrigerators, washers and
dryers, vacuum cleaners, kitchen appliances, and air conditioners. In June 2014,
LG Electronics also announced the launch of its smart appliances with HomeChat
messaging service in South Korea. HomeChat employs LINE, the mobile
messenger app from Korean company 'Naver', to let homeowners communicate,
control, monitor and share content with LGs smart appliances. Users can send
simple messages, such as "start washing cycle," in order to control their washing
machines.
Marketing and public relations
In August 2013, it was announced that LG Electronics would sponsor
German Bundesliga club Bayer 04 Leverkusen for the next three years with an
option to extend for one more year. In the U.S., LG Electronics' brand and product
advertisements can be seen in Dodger Stadium of the Los Angeles Dodgers and
Great American Ball Park of the Cincinnati Reds. LG sponsors the International
Cricket Council, the world governing body for cricket, and also sponsors ICC
Awards. LG also sponsors two Korean professional golf players Ja-young Kim and
Bomi Lee.
From 2009 to 2013, LG Electronics sponsored Formula One for 5 years as a
Global Partner and Technology Partner of Formula One. Until 2013. LG was also
an official supplier to Virgin Racing and Lotus Racing team, plus engine
manufacturer Cosworth from 2010-2012.
LG Electronics sponsored the English football club Weyside Rovers (Guildford)
from 2000 until 2002 and the English football club Fulham F.C until July 2010. LG
sponsored the Brazilian football club Sao Paulo FC from 2001 to 2009, during
which time the club were the winners of the 2005 FIFA Club World Championship.
LG currently sponsor the Australian Football League team Fremantle Football
Club, the Costa Rican football club Liga Deportiva Alajuelense, the
Australian National Rugby League team Cronulla Sharks, and the Argentinian
club Boca Juniors. LG also sponsors London Fashion Week and the LG Arena in
Birmingham.
During the period 20012003, LG sponsored the snooker Grand Prix. During
these years the tournament was known as the LG Cup. In 2008 LG became
sponsors of the Extreme Sport 'FSO4 Freeze' festival. LG sponsored the LG Mobile
World Cup texting competition.
Slogans
"LG, Future's Technology" (19971999)
"LG, Digitally Yours" (19992004)
"LG, Life's Good" (2004present)
PEST Analysis of Global Home Appliance Industry in U.S.
POLITICAL AND LEGAL FACTORS
US Department of Energy (DOE): Needs energy conservation enhancements for
refrigerators and freezers & garments washers.
Impact: All the industries need invest heavily within the Engineering (Process)
R&D to stay up with this demand. This may not solely mean rise in price of
producing these appliances however conjointly carry on innovating new ways
that to avoid wasting energy and be additional competitive within the Appliance
Market.
Common world standards: Standards set for safety/environmental, energy
efficiency and testing procedures, like BSI, JISC, AFNOR, DIN, CSA, UL, IEC, ISO,
CANENA, ISO 9000, ISO 14001 and EMS. 2000 update to the ISO 9000.
Impact: These standards can function as entry barriers for not solely new
entrants to enter within the appliance market as a result of matching these
needs would mean investment heavily in method R&D and state of the art plants
to manufacture such appliances, however. for the present U.S.A. companies UN
agency are on the lookout for new avenues like Asia and African markets as a
result of U.S.A. and Canadian appliance markets having matured.
ECONOMIC FACTORS
Real value growth 1.6 %
Consumer price inflation 1.6 %
The U.S. unemployment leaped from 5.7 to 6% in the month of April, 2002,
consistent with the Bureau of Labor Statistics (BLS). it is the highest rate since
August 1994 when it was the same, however trending downward.
Impact: On the Manufacturer side: price of capital is high because the interest
rates are rising which will lead to increase in the costs of production once the
trade at its maturity stage which will shrink the profits of the entire industry as
whole
Buyers Impact: On the buyers side, the price of retail financing is increasing
because of exaggerated interest rates, additionally, individuals won't be ready to
purchase high priced products like refrigerators, freezers, laundry machines etc.
due to essential rise in unemployment levels throughout 2002.
SOCIO-CULTURAL FACTORS
Change within the demographics: Age of the folks is dynamical.
Impact: The aging of the baby boomers and therefore the increase of two-income
families has favored the high profit, high end, high-profit segments of the
business, creating a solid base for Niche promoting for the appliance trade.
Change within the Life style: increase within the financial gain level folks voters
has resulted in exaggerated demand for additional fashionable and dear options
and these appliances once accustomed be thrown within the basement however
currently US voters area unit requesting good, compact and trendy appliances
that they will keep them in their kitchens.
Impact: trade players can need to return up with the swollen product lines that
emphasised quality and options. the most effective thanks to attract younger
generation X is to supply new and distinctive merchandise.
TECHNOLOGICAL FACTORS
Advanced mobile appliances coordinated for internet: Online marketing and
promotions.
Impact: this ending up bringing about the need for e-commerce in the industry.
R&D: Organizations had been contributing intensely in R&D so as to possess new
engineering designs which builds efficiency, viability & additionally diminish
those creation expense, also getting innovated results so as should increase
competitive advantages.
Impact: This has made organizations to replace present engineering and
production capabilities for much superior technology so as to get an edge over
the competitors. Organizations need to invest several millions of dollars every
year into R&D since nobody producer can realize the gains from their innovation
for more than a year. This is the real purpose behind Contributing so vigorously
deteriorating and R&D brought about a reduction to the companies bottomlines.
LOCALIZATION IN US
LG entered into an alliance with GE to produce and market bottom-mount fridges
(Maytag might have been the only renowned producer till that point). GE
possessed learning of the market, analyzed demographic patterns (aging,
evolving household composition), social and purchaser trends, home trends,
nourishment trends, customer segments toward an aggregation style as well as
profit segments.
Subsequently, LGs electrical appliances business, which offered front-loading
washing machines and dryers, likewise expanded dramatically and were much
appreciated for their splendid shade schemes, which contrasted with the
competitions boring white.
DISTRIBUTION IN U.S.
The organization likewise began paying 30 percent for its bargains to distributors
as opposed to the standard 25 percent. An alternate advanced strategy had been
giving holistic training to staffers of the retailers and other incentives so that
these individuals might be less averse with suggesting LG to the purchasers and
in this way overcoming thier past low-image recognition. In the start, they didnt
pick markdown retailers along these lines as they can likewise discolor their
brand.
Distributing through Wal-Mart and Sams club might have been off-strategy in
the right on time 2000s, the companys change set this channel on-strategy in
2010 to the point when LG products started showing up on the racks at Wal-Mart
as well as Sams Club. This might have been an acknowledgement about buyers
distinguishing that LGs electronics is a high-end good whose competitors trailed,
as their resultant life cycles were at their end.
CSR
LG has started promoting recycling waste phones. Their campaign entailed that a
rock band shall visit and perform at the school that has gathered the most waste
electronic products. During 2006-2012 their sales increased almost 20 percent a
year from $5.6 billion to a staggering $13 billion. 95% regard LG as a premium
brand in consumer electronics
