LG Electronics: The Blue Ocean Strategy

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LGE was No. 1 in global sales of all optical storage products CD-ROMs and DVD-ROMs for eight consecutive years since 1998, including of DVD recorders (since 2005) and also secured 29% market share67. In the home theater segment LGE became a leading player in countries like Italy, the Czech Republic, Hungary, Australia, and South Africa with a global market share of 16%68. Through converging various devices and technical resources, LGE kept improving home theater combo systems with diversified designs, for instance, the DVD Recorder Home Theater Combo and the Home Theater System with wall-mount Flat Panel Speakers built-in flat speakers. In the DVD player segment LGE enjoyed the biggest market share of 10% since 2003 for three consecutive years. New markets and New Segments With sales of $ 23.2 billion in the year 2005, 19% of which was from the Asia-Pacific region, especially China,69 the Asian consumer electronic market grew at 10.5% annually.70 In the digital products segment, specifically the flat and digital TV the Asian market was open to new segments

LGE China.

"In China, there is no future competing in 'red ocean' markets, so we must focus on the 'blue ocean' segment and penetrate high-end sectors. As part of its new strategy, we had chosen China as one place where it wants to create a "blue ocean" market. "⁷¹

S.S.Kim, CEO, LGE

LGE entered China in 1993 by establishing local subsidiary with Huizhou and in 1994 started manufacturing of cathode ray tubes, air conditioners and microwave ovens. Most of the products they manufactured were lower-priced, thin-profit-margin household electrical appliances which aimed at Chinese domestic market⁷². Realizing that China would probably overtake the US to become the world's largest market for DVDs, LG choose to create blue ocean market for its high end products and also set up DVD player production facilities with and annual capacity of 2 million units in Shanghai manufacturing plant.

With the investment of $2.5 billion and with the workforce of 38,000 employees the company was able to generate the sales of $10 billion in the year 2005. With brand awareness of 46% in China LGE stood at no.4 position household appliance⁷³. In China, a total 78 million units of mobile handsets were sold in 2005. CDMA handset constituted 6.84 million units of which LGE enjoyed market share of 18.71%⁷⁴and ranked second. (Exhibit XV) In the GSM handset market, the company faced stiff competition from Nokia, Samsung and Motorola

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67] www.lge.com
68]http://www.lge.com/download/ir/archive/-850967273LGE(CLSA2005).pdf, LG electronics, September 2005.
69]Ibid
70]"Consumer electronics in Asia pacific", https://210.18.104.227/cgi-bin/nph120025.cgi/010110A/http/dbic.datamonitor.com/industries/profile/?pid=BFCD7905-5D0D-4697-9B4A-843385C260B2, June 2006.
71]"LG looks to make splash in Blue ocean", 14 April, 2006, www.china.org.cn/english/BAT/165585.htm,
72]CHOI chang-hee, "The china strategies of Korea's winning companies", 1 August 2003, www.nri.co.jp/english/opinion/papers/2003/pdf/np200367.pdf,
73]"LG eyes bigger GSM market share" , 10 may 2004, http://english.peopledaily.com.cn/200405/10/eng20040510_142855.html
74]Ibid