Marketing Assignment LG electronics

Báo cáo môn Nguyên lý marketing, công ty LG electronics, viết bằng tiếng anh

HANOI UNIVERSITY

FACULTY OF MANAGEMENT AND TOURISM

Principles of Marketing Assignment LGE’s Marketing Plan in Viet Nam

Tutor: Mrs Pham Thi Phuong Students: Dao Thi Phuong Dung

Phan Thi Hoang Yen Vuong Le Thu Tra Nguyen Phuc Toan

Tut: Tut 5 CN2

May 10 th , 2012

Table of contents

Table of contents I

Executive summary II

I Introduction 1

II Situation analysis 1

1 Company analysis 1

1.1 Mission statement 1

1.2 Company objective 1

2 Environmental analysis 2

2.1 Economic .2

2.2 Demographic .3

2.3 Natural .4

2.4 Technological .4

2.5 Social/Cultur al 4

2.6 Legal/Politica l 5

3 Competitor analysis 5

3.1 Direct competitors 6

3.1.1 Samsung 6

3.1.2 Toshiba 7

3.2 Positioning map 7

4 Customer analysis 8

4.1 Customer segmentation 8

4.1.1 Demographic 8

4.1.2 Psychographic 9

4.1.3 Behavioral 9

4.2 Decision type .10

5 Brand analysis 10

5.1 Product life cycle 10

5.2 Marketing strategy using the 4Ps strategy 10

5.2.1 Product 10

5.2.2 Price 11

5.2.3 Place 11 5.2.4 Promotion 11

6 SWOT analysis 12

6.1 Strengths .12

6.2 Weaknesses .12

6.3 Threats .12

6.4 Opportunities .12

III Conclusion 13

References 14

Executive summary

Established in 1958, LG Electronics has the main office in Seoul, South Korea The company has become an international corporation in the field of electronics with many kinds of product such as home entertainment, home appliances, mobile communication devices, air conditioners, and multiple products for use in businesses

LG’s target is using the most advanced technology and the most prime design to offer many amenities for people all over the world to enjoy a better life LG always tries to understand customers’ needs, dominates the market with superior products against competitors LG is committed to preserving the natural environment and creating consumer-optimized products

In the era of science and technology, competition among electronic companies is much fiercer With many smart and effective market strategies, LG has set a solid position in customers’ mind Before entering any market, company does research carefully about native economic conditions, customers’ tastes, then set up specific promotion plans LG appears to be a successful trademark globally

I Introduction

In the Asia Pacific area, Vietnam, with high economic growth rate, is currently considered as an attractive market for many international companies With the population of more than 85 million people, Vietnamese market is extremely attractive for electronic producers The country also possesses several strengths to electronics production such as cheap and hardworking labor This leads to the fact that many foreign investors coming to Vietnam to set up businesses

LG Electronics has offshoot companies all over the world As one of the most famous trademark in Korea as well as worldwide, after 10 years running business in Vietnam market, up

to the moment, LG’s products have occupied a respectable position in Vietnam market

We choose washing machine in general, and washing machine LG WD – 9990 in particular as

an example of the whole company LG because it is one of the most popular product of LG and is also widely known in Vietnam This study is a brief overview about the situation, which consists

of company analysis, environmental, competitor, customer, brand, and SWOT analysis The company profile will be presented to be able to give a clear perspective about the market which the firm belongs to

II Situation analysis

1 Company analysis

1.1 Mission statement

LG Electronics set its mid- and long-term target to rank among the top 3 electronics, information, and telecommunication firms in the world by 2010 Therefore, they embrace the philosophy of "Great Company, Great People" and pursue two growth strategies involving "fast innovation" and "fast growth" Similarly, it strives to secure three core capabilities: product leadership, market leadership, and people-centered leadership

It provides high quality and regularly updated products to further ensure its success as a top electronics manufacturer As a worldwide corporation, LGE seeks to "make its customers happy through its innovative digital products and services" With the motto of supplying the best customer service and focusing on warranty system, LG has really made the difference in the field

of electronics and appliances

LG improves the quality of everyday life of users with innovative household appliances combining style and technology excellence while leading the industry in green technology Also, its research and development efforts are specifically concentrated in the area of technological capabilities and developing new growth products LG is always leader of technology with luxurious, unique design

1.2 Company objective

LG Electronics determined its home appliance business strategies for 2012 that LG’s primary goal this year is to strengthen its business foundations so that it can achieve the top position in their home appliance category by 2014 So as to reach this objective, LG plans to enhance its competitive advantage in the refrigerator and washing machine segments and make strong

investments in smart appliances In spite of the global economic recession, LG aims to achieve double digit sales growth rate this year (LG, 2012) In its first quarter financial report in 2012,

LG reported that although sales of the company reached 10.78 billion, reduced by 7.1% and 11.5% over the previous quarter and the same period last year, but profits increased and reached 214.3 million (cited in GsmArena 2012)

In addition, LG will continue to provide upgraded premium lines of the company’s representative energy efficient yet large-capacity refrigerators equipped with LG’s Linear Compressor and washing machines equipped with the Inverter Direct Drive™ motor, raising the bar for the value-added products market In 2012, LG aims to be the top selling washing machine brand in the globe for the fifth consecutive year, as it has done since 2008

Moreover, the company invests in research with one clear purpose: to improve the quality and efficiency of its products through scientific innovation According to report released by the South Korean LG Group, in 2010, LG invested about 15 trillion won (13.35 billion U.S dollars) on the basis of research and development (R & D) (cited in Thanh 2010)

And finally, LG’s success in history has been its ability to meet the diverse needs of consumers in different regional markets In developed markets, LG will adhere to the energy standards of the North American, European and other developed markets by introducing washing machines equipped with the Inverter Direct Drive™ motor that consume less energy compared to conventional LG models

2 Environmental analysis

As any other companies, LG is strongly affected by macro environment factors which are mentioned here as economic, demographic, natural, technological, social/ cultural and legal/ political factors Especially Vietnam is a new-emerging economy which is developing dynamically after joining WTO with numerous opportunities over the country Many economic issues bring both positive and negative affects for LG to develop in the household appliances market

II.1 Economic

The economic factor has strong effect on the household appliance industry As the fluctuation

of an economy can cause direct impact on consumers’ buying behavior and the input for the household appliance industry Economic factors always bring effects related to the demand, costs, prices, and profits With progress made by leaps and bounds, Vietnamese economy has got achievement: higher economic growth as well as higher standard of living

Vietnam is considered as one of the ideal markets in the world for international companies to enter With stable gross domestic product (GDP) growth averaging approximately 8.5 percent annual between 2005 and 2007 and 6 percent from 2008 to 2011, Vietnam is the second fastest-growing economy in the world next to China

Figure 1 Vietnam’ GDP growth rate from 2000 to 2011

At the beginning of 2012, because of world economic downturn, Vietnam economy and Vietnam's retail market are affected considerably High inflation rate in the first months of the year, signals of macroeconomic instability, increased interest rates, exchange rate VND / USD and gold price fluctuation, bleak real estate market , stock decline, business capital scarcity, production delay, unemployment increase have affected consumer confidence to the retail market Actually, Vietnam retailers have managed to cope with the big challenges since the beginning of this year However, Vietnam’s retail market is one of the five highest profitable markets In 2007, Vietnamese spent nearly 45 billion USD for consumption – a high number compared to about 40% in developed countries Economists predict that the period 2011-2015, average growth rate of Vietnam’ retail market would remain at 23% - 25% per year So Vietnam’s retail market is still destination of foreign distribution system once the barriers are removed (Quan 2008)

II.2.Demographic

Vietnam has a high population of around 87 million people by the year 2011, ranks thirteenth

in the world and third in Southeast Asia Vietnam has fast population growth speed with average

1 million people increased each year It is a big market of labor and consumption

According to a statistical report in 2009, urban inhabitants were 25,374,262, occupied 29.6% the whole population Urbanization will continue to be a long-term growth driver The United Nations forecasts the urban population will rise to more than 50% by the early 2040s On the other hand, on shifting from agricultural economy to industrial economy, rural residents still dominate in the whole country’s population structure with 60,415,311 people, occupied 70.4% the whole population (Central Statistical Office, 2009) When it comes to the geographic impacts, it is obviously seen that urban area’s people pay more attention to high-tech products rather than the rural area’s people People in towns and big cities are busier They have little time

to do housework In contrast, residents in countryside still have the habit of washing clothes by hands As a result, the company products are more preferred in urban area

In addition, most of Vietnamese have low and medium income with GDP per capita of

$1,300 in 2011 Calculating by purchasing power parity (PPP), Vietnam’s GDP per capita is about three fourth of Philippines or Indonesia, one third of Thailand and one fifth of Malaysia in

2010 Therefore, firms should carefully choose target customers and have suitable products and promotions toward many types of customers

Age and gender are factors both influencing household appliances purchasing behaviors Regarding age variable, there is a difference between the preferences of youngsters and elders Youth and elders have different concerns in terms of style, color and utility The research indicates that the younger groups, especially single person or newly married couple, are more likely to buy striking colors like red, green; small or medium sized washing machines Whereas older groups with higher purchasing power seek for higher quality products with more functions, big sized washing machines due to more family members

II.3.Natural

On entering the threshold of twenty first century, the world has to cope with serious pollution, shortages of raw materials, increased costs of energy and requires for practical actions

to improve the situation LG Electronics has accepted its responsibility as a global corporation and are proud to contribute a part of it by leading the programs to reduce greenhouse gas emissions and develop environment friendly products, while still performing energy, environment, safety and health management activities (EESH) which focus on environmental protection measures

II.4.Technological

In the global dynamic economy background, technology has developed more rapid than ever Improvement in technology made the electronic product cheaper and cheaper Gap between scientific findings and new product has been shortened Product lines also are completed and updated regularly LG has strongly focused on its quality For this reason, a great amount of money has been invested in technology improvement in company To survive and further win competitors, LG spends a great amount of fund on R&D LG is proud of associating with famous experts to serve the customers with the best quality and perfect products

II.5.Social/Cultural

In Vietnam, it is widely believed that price manifests quality of goods and services A sociological study has recently illustrated that a large number of Vietnamese accept a high spending level for expensive products High-tech products, electronic products, luxury goods are being consumed in Vietnam by a majority of customers with a desire to own world-famous brands, thus, it is an outstanding feature for huge corporations like LG to consider

Firstly, the number of white collar workers has risen substantially, however, still constitutes a small ratio in the whole population They can quickly adapt to development of science and technology Also, they want to experience new products Secondly, farmers account for a big rate

in Vietnam population With backward agriculture having lasted for hundreds of year, people

still hold many habits and customs that are very hard to give up Residents in countryside may feel difficult to operate some modern machines like washing machine or air conditioner

II.6.Legal/Political

Vietnam has economic sector diversity namely as state sector, collective sector, private sector, state capitalist sector and foreign investment With trade liberalization, especially after Vietnam joined AFTA (1996) and WTO (2006), many foreign companies has quickly adapted to Vietnam business environment Government support and incentives for investment are highly appreciated State also has lots of reforms to encourage more investment and encourage domestic investment in R&D

In Vietnam, entrepreneur law, business law still exist a lot of negligence that need to be fixed

in the future The government also have environment protection law and protection of

consumers’ rights to treat firms when they do things wrong to environment or customers Tariffs

on electronic components cut from 9.41% to 6.36% in 2008 but still is a high rate Many firms suggest that this tariff should reduce to 0-3% so that domestic companies could compete with imported products (Sean 2009)

Moreover, Vietnam is a large “grey” market for illegal and fake products Although Intellectual Property Law has been imposed since 2006, the implementation is not strict enough

In the open-economy condition, Vietnam is listed among countries with the most seriousness of the law violation

3 Competitor analysis

Competitor analysis in marketing is the process of assessing the strengths and weaknesses of

a firm’s current and potential competitors The goal of it is to understand: with which competitors to compete, competitors' strategies and actions, how the competitors might react to a firm's actions, how to influence the competitor using the firm's own advantages Competitor analysis helps the business itself creates marketing strategies that take advantages of competitors’ weaknesses and improves its own performance In the case of LG, an understanding

of the company’s specific competitors in Vietnam will be crucial to its survival and sustainable development

To begin with, LG has no big indirect (substitute products) competitors in Vietnam, since other methods for cleaning clothes are minor, and only hand washing can substitute for the use of

a washing machine when mentioning about washing clothes Therefore, it is even more important to consider about the direct competitors of LG in Vietnam

As the market of today has been globalized, there are many brands that offer same type of products and compete against each other to gain share in the market In the 2005 washing machine market, Sanyo has the largest share of 40%, LG has the second largest share of 18%, Toshiba owns 11% of the share, and the rest of the share belongs to Samsung, Panasonic, Daewoo and other brands (GFK, cited in Phuong 2005)

18.00%

11.00%

31.00%

Sanyo LG Toshiba Samsung and other brands

Figure 2 Share in Vietnam's washing machine market 3.1 Direct competitor analysis

It is such a tight competition that all of these brands have to try their best to attract and keep customers with them LG Electronics is not an exception In order to “win” in the competition, firstly, LG’s competitors should be identified As it can be clearly seen, LG’s major competitors

in the washing machine market are Sanyo, Toshiba, Daewoo, Samsung, Panasonic In the scope

of this report, two of the above mentioned brands, namely Samsung and Toshiba will be taken into account

3.1.1 Samsung

Mr Ko Tae Yeon – the general director of LG Vietnam has stated in an interview that Samsung is one of the main competitors of LG in Vietnam (cited in DDDN 2011 )

Samsung is known globally for its electronic products and it is one of the most successful brands in the electronic industry LG and Samsung have many features in common: they are both Korean electronic brands with advanced technology, their target customers are the same in various countries, etc

Strengths:

 Samsung is known for its technologically advanced products: washing machines that have bubble generators, Power Foam technology or larger washers, VRTÔ Plus which reduces noise from the machines, etc

 It attracts customers by offering new and innovative design through understanding the customers that which type of designs are suitable to customers and what they want or asked about