LG Electronics (66570) SWOT Analysis / TOWS Matrix / MBA Resources
Audio & Video Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for LG Electronics (South Korea)
Based on various researches at Oak Spring University , LG Electronics is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%,
banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that LG Electronics can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the LG Electronics, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which LG Electronics operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of LG Electronics can be done for the following purposes –
1. Strategic planning of LG Electronics
2. Improving business portfolio management of LG Electronics
3. Assessing feasibility of the new initiative in South Korea
4. Making a Audio & Video Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of LG Electronics
Strengths of LG Electronics | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of LG Electronics are -
Ability to recruit top talent
– LG Electronics is one of the leading players in the Audio & Video Equipment industry in South Korea. It is in a position to attract the best talent available in South Korea. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management in the Audio & Video Equipment industry
– LG Electronics is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of LG Electronics comprises – understanding the underlying the factors in the Audio & Video Equipment industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Innovation driven organization
– LG Electronics is one of the most innovative firm in Audio & Video Equipment sector.
High brand equity
– LG Electronics has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled LG Electronics to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Audio & Video Equipment industry
– LG Electronics has clearly differentiated products in the market place. This has enabled LG Electronics to fetch slight price premium compare to the competitors in the Audio & Video Equipment industry. The sustainable margins have also helped LG Electronics to invest into research and development (R&D) and innovation.
Training and development
– LG Electronics has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Learning organization
- LG Electronics is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at LG Electronics is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at LG Electronics emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the LG Electronics are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Highly skilled collaborators
– LG Electronics has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Audio & Video Equipment industry. Secondly the value chain collaborators of LG Electronics have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– LG Electronics is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Audio & Video Equipment industry. The technology infrastructure of South Korea is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Low bargaining power of suppliers
– Suppliers of LG Electronics in the Consumer Cyclical sector have low bargaining power. LG Electronics has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps LG Electronics to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of LG Electronics | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of LG Electronics are -
Increasing silos among functional specialists
– The organizational structure of LG Electronics is dominated by functional specialists. It is not different from other players in the Audio & Video Equipment industry, but LG Electronics needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help LG Electronics to focus more on services in the Audio & Video Equipment industry rather than just following the product oriented approach.
High dependence on LG Electronics ‘s star products
– The top 2 products and services of LG Electronics still accounts for major business revenue. This dependence on star products in Audio & Video Equipment industry has resulted into insufficient focus on developing new products, even though LG Electronics has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, LG Electronics has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Lack of clear differentiation of LG Electronics products
– To increase the profitability and margins on the products, LG Electronics needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Audio & Video Equipment industry
– because of the regulatory requirements in South Korea, LG Electronics is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Audio & Video Equipment industry.
Employees’ less understanding of LG Electronics strategy
– From the outside it seems that the employees of LG Electronics don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Need for greater diversity
– LG Electronics has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
No frontier risks strategy
– From the 10K / annual statement of LG Electronics, it seems that company is thinking out the frontier risks that can impact Audio & Video Equipment industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Products dominated business model
– Even though LG Electronics has some of the most successful models in the Audio & Video Equipment industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. LG Electronics should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, LG Electronics has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Audio & Video Equipment industry over the last five years. LG Electronics even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Aligning sales with marketing
– From the outside it seems that LG Electronics needs to have more collaboration between its sales team and marketing team. Sales professionals in the Audio & Video Equipment industry have deep experience in developing customer relationships. Marketing department at LG Electronics can leverage the sales team experience to cultivate customer relationships as LG Electronics is planning to shift buying processes online.
LG Electronics Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of LG Electronics are -
Learning at scale
– Online learning technologies has now opened space for LG Electronics to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects LG Electronics can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– LG Electronics has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, LG Electronics can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Use of Bitcoin and other crypto currencies for transactions in Audio & Video Equipment industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for LG Electronics in the Audio & Video Equipment industry. Now LG Electronics can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at LG Electronics can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Audio & Video Equipment industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, LG Electronics is facing challenges because of the dominance of functional experts in the organization. LG Electronics can utilize new technology in the field of Audio & Video Equipment industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for LG Electronics in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Audio & Video Equipment industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of LG Electronics has opened avenues for new revenue streams for the organization in Audio & Video Equipment industry. This can help LG Electronics to build a more holistic ecosystem for LG Electronics products in the Audio & Video Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, LG Electronics can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help LG Electronics to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– LG Electronics has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Audio & Video Equipment sector. This continuous investment in analytics has enabled LG Electronics to build a competitive advantage using analytics. The analytics driven competitive advantage can help LG Electronics to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– LG Electronics can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help LG Electronics to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Threats LG Electronics External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of LG Electronics are -
Technology acceleration in Forth Industrial Revolution
– LG Electronics has witnessed rapid integration of technology during Covid-19 in the Audio & Video Equipment industry. As one of the leading players in the industry, LG Electronics needs to keep up with the evolution of technology in the Audio & Video Equipment sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, LG Electronics may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Audio & Video Equipment sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– LG Electronics needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. LG Electronics can take advantage of this fund but it will also bring new competitors in the Audio & Video Equipment industry.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of LG Electronics.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for LG Electronics in the Audio & Video Equipment sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, LG Electronics can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate LG Electronics prominent markets.
Increasing wage structure of LG Electronics
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of LG Electronics.
Consumer confidence and its impact on LG Electronics demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Audio & Video Equipment industry and other sectors.
High dependence on third party suppliers
– LG Electronics high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Regulatory challenges
– LG Electronics needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Audio & Video Equipment industry regulations.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of LG Electronics business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of LG Electronics Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at LG Electronics needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of LG Electronics is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of LG Electronics is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of LG Electronics to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that LG Electronics needs to make to build a sustainable competitive advantage.
