STRATEGIC ANALYSIS

STRATEGIC ANALYSIS

Executive summary

The vital role in strategic decision-making process has strategic analysis. It often carries the significant evidence on assessment and growth of environment inside and outside the company and tells likely opportunities and threats that need to be consider in strategic decision-making. Any organization depends of a given strategy to survive in the industry. The role of strategic management is to guide an organization based on unique elements of business to be able to have its goal (Heath, 2018). Strategic business analysis on the others hand is a tool for a business as it is key in developing the specific understanding of the key business aspects. It helps an organization to have a complete and comprehensive understanding of both the business environments with key understanding of what business elements needs adjustments. For a business to achieve the elements of sustainability and competitive advantages the analysis is needed to elaborate on the weaknesses and the business strengths (Levinthal et al, 2018). This report examine the role of strategic analysis of LG Company.

Introduction

. LG electronics is a core company of the south Korean Conglomerate LG group alongside the LG Chem. The company was founded in 1958, LG electronics has led the South Korean electronic industry since its early days as the first manufactures of the radios, TVs among other appliances. The company has its headquarters in Yeouido, Seoul, South Korea. It controls over 40% of the South Korean market share (David et al, 2016).   Currently, the company is the second largest one after Samsung. Although the company is the second after Samsung, LG is closed competent of the leading electronics company, Samsung, in other electronics such as TVs, washing machines, and refrigerators at home and in other countries globally.  The company today engages in the manufacturing of display devices, home appliances, multimedia goods, electronic parts, and develop software (Heath, 2018).

The company’s affiliated companies like the LG display and the LG Innotek produce the liquid crystal display panels and electronic parts. Amid the ever-increasing competition with its Chinese competitors in consumer products, LG electronics aims to boost sales of the electronics parts outside the group (Levinthal et al, 2018). LG set up a division specialized in research and development and the supply to the key auto-makers. It operates through various areas including, home entrainment, energy solutions, mobile communication, home appliances, and monitors, among other products. The company has managed to become a big name in the electronic industry due to the key strategies that the organization uses in its entire operation (Kim, & Yoo, 2017). LG business scope currently has improved to have the company produces some of the most household and industrial electronics. It ha managed to become a significant producer and manufacture of electronics with an estimated market value of over $70,000 billion.  The growth can be attributed to the dynamic and the effects of internals and the external business environment that this company has kept overtime in its operations.  LG has over 72,600 employees globally, and this has promoted the organization’s quality of service delivery, making it the market leader today (Levinthal et al, 2018).

Externals analysis

This PESTEL analysis is wholly dealing with some of the challenges that the LG Company can come across, and basically how these several forces are able to impact on its business in the global market. These forces include the political, economic, socio-cultural, technological environmental, and legal issues. These are vital forces that are likely to have an indirect or direct bearing on the LG trade (Miller, 2017).

Political

The government and the legislative regulations of a business can have a very strong effect on its profitability; the political environment of a country usually bears a straight relationship with the economic climate of the nation. The political stability level that a government has in recent years carries a logical political risk that the LG group is likely to be exposed to. The politicians’ integrity and their possibility to take part in corruption acts may lead to resignations or impeachments of high-level government workers. The regulations that are enforced by a nation like a contract and bond law, as they dictate the LG Group status and what it is never permitted to organize and do (Hasan, 2013). The high taxation levels would also deactivate the LG Group from exploiting their profitability; the army invasion risks in some hostile and unstable countries may also cause divestment from LG projects. However, a slight minimum wage would mean enormous profits and higher probabilities of LG existence (Smith, 2017).

Economic

Economic factors can have a direct impact on the LG profitability; the rate of the nation’s GDP growth is likely to affect how quickly the LG Group is likely to breed shortly. The country’s interest rates can significantly affect how much people will be eager to invest and borrow. According to Hasan, 2013, higher prices would mean better investments and, as a result, more growth and development for the LG Group. The profitability of the LG Group would be impacted by the exchange rates in a country it operates mainly if it engages in the international trade, the currency stability is even more critical for LG (Smith et al, 2017).

Social factors

The population demographics, their respective genders, and ages would determine whether a particular LG product may be traded to them, the population class distribution is of chief importance, the company would not endorse a premium product if the population is of a lower economic class, they would entirely depend on actual niche marketing. The LG Group, therefore, should solely be alert of what level of health standards, responses to annoyance and harassment statements and environmental protection importance succeed in the industry

Technological

Technology has nowadays become a crucial factor of competitiveness and profitability and part of operations, in the marketing area, too, LG Group has made extensive use of the technology to reach its consumers and followers. It has also substantially invested in innovation and is ahead of several companies on several fronts.

Environmental

The existing weather situation may considerably impact the capacity of the LG to manage and achieve the transportation of both finished products and resources. Climate change is also likely to render some of the LG products useless, LG also may be required to manage and accomplish their environmental habits which may place some financial stress on LG. However, the company has invested in environmental awareness as part of its sustainability and the CSR program (Hasan, 2013). Apart from sustainable operations, the brand has significantly invested in the promotion of sustainable economic growth and providing training to the employees on sustainable business practices.

Legal

Law affects business globally, from other companies and taxes; there are several that can affect the company, including the environmental laws. Discrimination laws are often put in place by government administration to guard the workers and confirm that everybody in the LG Group is fairly treated and granted equal opportunities, irrespective of their age, gender, religion, or disability (Hasan, 2013). Therefore, compliance is a significant focus area and can often lead to higher operational costs for a significant global brand like LG (Ketokivi et al, 2018).

Conclusively, this analysis has provided valuable insight into the operational challenges that LG is facing in the industry. The LG overall landscape will prevent entrepreneurs and investors from partaking in any risky ventures if the risks arise out. The significance of each factor may be diverse to different kinds of industries, but it is imperative to any policy a business wants to advance and develop.

Porter’s Five Model Analysis of LG

The threat of New Entrants

The technology used in consumer electronics is continuously evolving; this makes it hard for new players. However, besides the entry obstacles, several organizations have entered the industry successfully and capturing the small markets, the threat is, therefore, of a medium level (Ketokivi et al, 2018).

Bargaining power of Suppliers

There are a significant amount of suppliers compared to buyers in the industry in which the LG Group functions; the suppliers, therefore, take little control over the prices, and consequently, the bargaining and trading power of the suppliers is considered a weak force. These suppliers offer fairly standardized products with small switching costs; that makes it relaxed for the LG to shift to suppliers. According to Audu et al, the suppliers also do not contend with extra products inside the industry, this implies that there are not any other alternates for the product other than the ones supplied by the supplier. The bargaining power of suppliers is a frail force (Rauter et al, 2017).

Bargaining power of Buyers

Buyers often take a wide range of options to select when purchasing consumer electronics. The switching cost is usually low for buyers, the consumers have rare firms to choose from and do not have control over prices, and this, therefore, marks the bargaining power of the purchasers a weaker force in the industry (Kim et al., 2017). The worth of the products is often essential to the purchasers, and they create numerous purchases, these purchasers are fewer prices sensitive, this also marks the bargaining power of the buyers a weaker force.

Threats of substitutes

There are always actual few available substitutes for the products that are made in the business in which LG functions. They do not have alternates in the market, making substitute’s threat very low for the LG Group; therefore, LG does not worry about some of its products getting substituted (Miller et al, 2017)..

Rivalry among existing firms

There is a small number of players in the consumer electronics trade; competition is consequently not intense. Some of these are also huge; the companies in the business will not make moves and changes without getting noticed. This makes the rivalry and competition among current firms a weaker force inside the market. The industry that LG grows yearly and is estimated to continue and stay for many years in the future. A progressive industry development means that challengers are less likely to involve in completive activities since they do not want to capture a market segment from one another. This marks the rivalry amongst the current firms, a weaker force (Kim et al., 2017).

Conclusively, the strengths of all these forces vary transversely from trade to trade; this implies that every industry is diverse concerning profitability, productivity, and the attractiveness. LG can make a significant improvement in the economies of scale that it is having inside the business and fight off new competitors and entrants (Rothaermel, 2016)

Internal environmental analysis

The LG Company, which did start its journey by the production of the radios and the electric fans, has slowly diversified into other segments such as refrigerators, air conditioners, black and white televisions, and washing machines. The company has grown at a great place, and in 1997, the organization stood at the third position among the Korean electronic industry. The organization is primarily known as the manufactured of the low-cost appliance, boast with a total of 77,000 employees globally. Due to the strategic position of its operation, the organization has managed to become a market leader in the industry. These various strategies which stem from LG’s strengths and opportunities have enabled the organization to be able to get sustainable competitive advantages in the very competitive market (Hasan et al, 2013). .

To be able to gain global prominence and sustainable competitive advantage, LG embraces the philosophies of the “Great Company” “Great People.” It also pursues growth strategies such as fast innovation and the rapid growth in keeping with higher competition. As such, just in the same way to be able to gain a larger market share, it started concertation of the contemporary strategic decision, which made the LG Company launches the Blues Ocean segment. The key sustainable competitive advantage of the company can be illustrated by the SWOT analysis of the organization below.

Summary

The role of strategic management is to guide an organization in achieving the set goals based on specific strategies. For LG the key strategy of it operation is based on the element of both internal and external environments which are strategically managed to ensure an effective operation and to achieve the key goal of sustainable completive advantage. From the analysis of both internal and the external environment of the LG Company, it is clear that LG has kept business strategies which favor both the domestic and the external environment for its operations (Rauter et al, 2017). The company has plan to develop critical operational policies and method which has to enable it to gain a sustainable competitive advantage on one of the industry which in the recent days become very competitive. From the internal analysis of the company, the key strengths and opportunities which have been instituted by the strategic management plans of the company are key in the overall growth and success of LG. The management of the organization has established various key strategies key including the “Blue ocean” strategy, which is helping it in the development of the best market penetration methods and the overall sustainable competitive advantage in the market (Rothaermel, 2016)

From the externals analysis of the company also reveals that LG has been able to maintain a sustainable competitive advantage due to the active and robust business strategies that help it to conquer various markets and expand as fast as possible to the other virgin market that keeps on emerges day by day (Hasan et al, 2013).  The principal competitive factors of the LG are associated with the ability to stimulate its growth to the various markets through the element of pricing and development of unique products that meets the demands of the different markets. The organization’s position, which is based on the aspect of offering one more and setting the users free, has made it possible for the company to expand and develop a relatively significant customer base. The key recommendation for LG Company is that it should focus further on the element of product diversification and differentiation to be able to create a whole different market niche to increase its competitive advantage in the global electronic market, which is almost occupied with developed and well-established companies such as Samsung and Sony.

Conclusion

The role of the key strategic analysis of any organization of SBU is that it offers a clear understanding of the means of the measure that an organization is applying to manage its existence in the market. For LG from the internal and external analysis, the strategic analysis reveals that the company’s product differentiation and the element of valid pricing of its products, which are also unique is the first drive to the organization’s overall success. The business which has moved into the production of other product which it did not specialize in before. From the strategic analysis, the element of the recommendation for the organization can be developed through a closer examination of challenges that the organization is currently faced with. b

Suitability of the current strategy

The current strategy of the LG Group operational in electronics and appliances industry makes its products existing in the market through local and national distributors. The company’s presence throughout the world and their objective of the LG Brand makes it a market leader and is much achievable through the innovative technologies it has put in place. Taking a look at the long-term and the mid-term visionary planning strategies, the company aims at achieving the point of one of the top three electronics, information and telecommunication organizations of the world following the two development plans ‘fast innovation” and ‘fast growth’.

The suitability of its strategies has seen the company making all the stakeholders happy and prosperous with the founding spirit of providing top value for every customer. The spirit has been a long driving force to develop devices that would basically enrich individuals’ life and leading-edge technology that would definitely change the world. Its strategies has led to the sponsorship of several sporting events in order to mark a real brand call for increased consciousness which definitely result to in the developed brand value for the company. The company has enabled to employ more than 223000 workers globally out of which 83000 are loyally working for LG electronics business. This huge labor force has enabled the company in allocating the offerings through the network of wholesalers, suppliers, organization whole sales crew in case of corporate sales, e-commerce sites and authorized retail outlets.

The strategies have enabled the company make a strong product portfolio, advanced revenue share and good growth vision in the developing markets. It has therefore received numerous awards and extensively recognized by several associations and organizations which has been communicated to the users which has played a significant role in the perception of its brand value from the customer point of view.  k

References

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