LG Electronics: The Blue Ocean Strategy

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2004. LGE’s LCD business grew 217% year-over-year, GSM mobile phones grew 62%, the PC division grew 38% in revenues.86 At LGE blue ocean strategy was achieved via product innovation which was aimed at localized markets. In Iran, LGE offered microwave oven with a preset button for reheating 'shish kebabs'__ a favorite dish. LGE roughly commanded about 40% of the Iranian microwave market87. A few of LGE's top-selling innovations include the Qiblah phone88, the world's first mobile handset with Qiblah indicator which points in the direction of Mecca, the TV refrigerator; and the bag-less range of vacuum cleaners. In the high-value product segment, LGE planned to focus its efforts on 15 inch, 17 inch and 20 inch LCD TV and monitor. The company had successfully launched its LG chocolate and black label series in May 2006. But in the GSM segment the company was facing difficulties to set up the distribution network.

The Road Ahead

"The growth associated with the 'Blue Ocean' initiative will not be accomplished in just one or two years - but is a multi-pronged effort that will firmly reinforce our position among the top three in the electronics industry."⁸⁹

LGE which was known for low-cost products faced competition not only from the home based Samsung but also from Japanese manufacturers., The CEO of the company had admitted that a lot of work had been left to make the company’s image as a premium brands in every part of the world.

Along with diversified operations the company had also been suffering low profitability. In the handset division it generated 3.1 US cents of operating profit in 2005 for every dollar of revenue compared with 5.7 US cents in 2004, while Samsung had increased its operating margins with 20% and Nokia averaged of 23% in 2005⁹⁰. LGE also faced a challenge to perform well in the key markets like in North America, where the company had grew only 0.4%. LGE’s revenues from Asian market decreased, by 13% in 2005⁹¹.

With a tough road ahead would LGE be able to achieve its target by 2010? Would it be able to make its competition irrelevant, especially Samsung the home rival?

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86]cs: US$1.4 Billion Sales in Middle East & Africa" , August 2006, http://displayblog.wordpress.com/2006/08/06/lgelectronics-us14-billion-sales-in-middle-east-africa-markets/
87]ElectroniElizabeth Esfahani , "Thinking Locally, Succeeding Globally" December 1 2005 http://money.cnn.com/magazines/business2/business2_archive/2005/12/01/8364622/index.htm,
88]Qiblah Phone which came with complete embedded compass, direction indication and prayer time alarm used in 500 citiesworldwide
89]"First half LG sales turnover in Mid-East and Africa", August 06, 2006, www.ae.lge.com/ir/html/ABboards.do?action=list&group_code=AB&;list_code=PRE_MENU&page=2&target... -
90]"LG eyes bigger GSM market share", 10 May 2005 http://english.peopledaily.com.cn/200405/10/eng20040510_142855.html
91]"LG Electronics", http/dbic.datamonitor.com/companies/company/?pid=E81333A5-8192-426E-BB11-ED6D09B879EF