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 – supply chains are disrupted by pandemic , increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, technology disruption, increasing commodity prices,
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, 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 -
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.
Diverse revenue streams
– LG Electronics is present in almost all the verticals within the Audio & Video Equipment industry. This has provided LG Electronics a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
Successful track record of launching new products
– LG Electronics has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. LG Electronics has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
High switching costs
– The high switching costs that LG Electronics has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
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.
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.
Innovation driven organization
– LG Electronics is one of the most innovative firm in Audio & Video Equipment sector.
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.
Organizational Resilience of LG Electronics
– The covid-19 pandemic has put organizational resilience at the centre of everthing LG Electronics does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of LG Electronics | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of LG Electronics are -
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.
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.
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.
High cash cycle compare to competitors
LG Electronics has a high cash cycle compare to other players in the Audio & Video Equipment industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of South Korea, LG Electronics needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
High operating costs
– Compare to the competitors, LG Electronics has high operating costs in the Audio & Video Equipment industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract LG Electronics lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the Audio & Video Equipment industry, LG Electronics needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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.
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.
Compensation and incentives
– The revenue per employee of LG Electronics is just above the Audio & Video Equipment industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
LG Electronics Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of LG Electronics are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for LG Electronics to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for LG Electronics to hire the very best people irrespective of their geographical location.
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.
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.
Developing new processes and practices
– LG Electronics can develop new processes and procedures in Audio & Video Equipment industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Audio & Video Equipment industry, but it has also influenced the consumer preferences. LG Electronics can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
Manufacturing automation
– LG Electronics can use the latest technology developments to improve its manufacturing and designing process in Audio & Video Equipment sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. LG Electronics can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Audio & Video Equipment industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. LG Electronics can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. LG Electronics can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
Threats LG Electronics External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of LG Electronics are -
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.
Easy access to finance
– Easy access to finance in Audio & Video Equipment industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. LG Electronics can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. LG Electronics will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Shortening product life cycle
– it is one of the major threat that LG Electronics is facing in Audio & Video Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
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.
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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. LG Electronics needs to understand the core reasons impacting the Audio & Video Equipment industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for LG Electronics in Audio & Video Equipment industry. The Audio & Video Equipment industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.