LG Electronics: The Blue Ocean Strategy

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Themes: Strategy
Pub Date : 2006
Countries : South Korea
Industry : Home Appliances and Personal Care Products

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Case Code : BOS0010A
Case Length : 31 Pages
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LG Electronics: The Blue Ocean Strategy


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Global Consumer Electronics

The consumer electronics industry was very dynamic and ever changing impacting every aspect of modern life. The demands of the consumers were ever-increasing and the companies were using state-of-the-art technologies to stay in competition. The electronics sector held great potential not only for the new-entrants, but also for the existing industry giants. To stay ahead of competitors, companies constantly moved into new markets emerging around the world. To succeed in these global markets, consumer electronics companies ensured that their products were compatible with local infrastructure. User interfaces and embedded software were being localized, providing documentation and support systems to the needs, language, and culture of local users at the same time controlling costs and accelerating time-to-market.15

The consumer electronics market generated total revenues of $49.7 billion in 2005 with the growth of 11.9% representing a Compound annual growth rate (CAGR) of 10% for the five-year period spanning 2001- 200516. Sales from products like plasma and LCD television and other video segment had generated total revenues of $39.6 billion, equivalent to 79.7% of the market's overall value17.

 (Exhibit II) The increasing popularity of the digital music format like MP3 players, the sale of audio equipment also contributed significant revenues, with total sales of $6.2 billion in 2005, equating to 12.4% of the market&'s aggregate revenues.18 The Asia-Pacific region constituted 31.7% of the in global consumer electronics industry as global revenues with rising income levels in China and India stimulating consumer spending there.19 In the Asian region South Korea represented with 9.8% of market share which was small but held an important share in wireless, Internet services and applications and in the digital market20. (Exhibit III)

Korean industries were dominated by a small number of large, family owned companies called 'chaebols', which include the electronics giants LG and Samsung. Such chaebols typically traversed several industries and were exceptionally vertically-integrated within a given industry. Through such vertical integration, companies had full control of the supply chain, through which they could minimize costs and maximize efficiencies accordingly. Through their significant economies of scale and scope such Korean chaebols had become global household names within the consumer electronics industry.21

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15] "An Industry Insight to the World Consumer Electronics," February, 2005, www.theinfoshop.com/study/rnc27487_consumer_electronics.html,
16]"Consumer electronics in United States," June, 2006, https://210.18.104.227/cgi-bin/nph, 120025.cgi/010110A/http/dbic.datamonitor.com/industries/profile/?pid=5DF2CEF4-F6EA-49C7-BA6D-E4E93F1429C2
17] Ibid
18] Op cit., Ibid.
19] Op cit. "Consumer electronics in United States,"
20] "Consumer electronics in Asia pacific", https://210.18.104.227/cgi-bin/nph 120025.cgi/010110A/http/dbic.datamonitor.com/industries/profile/?pid=BFCD7905-5D0D-4697-9B4A-843385C260B2, June 2006
21] "Consumer electronics in South Korea", https://210.18.104.227/cgi-bin/nph- 120025.cgi/010110A/http/dbic.datamonitor.com/industries/profile/?pid=03652D9F-17A5-45F1-A700-015E7C21F7F9, June 2006