Running head: LG OUT OF THE PHONE BUSINESS 1

LG Out of the Phone Business

Name

Institution

Date
 LG OUT OF THE PHONE BUSINESS 2
LG Electronics company to policy on leaving Smartphone business.

Executive summary.

LG Electronics was once a leading light of the mobile phone industry, but soon it will

exit the mobile phone manufacture business to focus on other critical business areas that will

enable it to meet its objectives. During the early 1990s to the year 2000, the company made

significant strides in mobile phone manufacture. Much of the technological advancement during

this early period was hardware-centric, and most mobile phones relied on features embedded in

them to meet customer requirements.

With the arrival of Smartphone, LG Electronics company did not anticipate the changing

market needs allowing Apple and Samsung to dominate the Smartphone manufacturing business.

LG electronics dominated the market by developing innovative products before the Smartphone

era. As the years progressed, the company's market share in the mobile phone industry

deteriorated due to increased competition and market saturation.

This policy brief evaluates the rules and regulations governing the LG electronics policy

to exit the Smartphone business. The company policy statement should consider all factors that

will enable the company to meet its objectives in the current and long run. This paper focuses on

the challenges faced by the LG electronics company in its business segment and factors the

proposed vital areas to be adopted upon exit from the Smartphone business. The policy statement

outlines the recommendations to be adopted by the policymakers to make the company meet its

objectives and the rationale for adopting such a policy change.

The rationale for leaving the Smartphone business.

On April 5, 2021, the board of governors of LG corporation convened a meeting to

discuss its prospects in the mobile business for the period of existence in the business segment.
 LG OUT OF THE PHONE BUSINESS 3
The board of governors' appraisal of the past performance of the business segment and the future

results of the business segment indicated that the part experienced stiff competition in recent

history. The sharp increase in mobile phone competition experienced by the company prompted

the shift in the mobile business to other strategic business segments in the LG business.

The sharp decline in the LG business sales in recent years makes it imperative to leave

this business segment for other lucrative sectors. The report indicative LG mobile segment sales

for the last five years indicate a downward trend in sales reports.

Even as these plans are in progress, The company administration is finding ways to

ensure that leaving this segment does not create adverse effects on the overall business

performance. The group decided to leave the business segment owing to the following challenges

experienced in this sector.

 Failure to make realize profits in 23 consecutive quarters since 2015.

 Failure to adapt to the evolving market environment.

 Stiff competition in the mobile manufacturing business.

Failure to realize profits in 23 consecutive quarters since 2015.

According to the company CEO, the LG Company has not realized profits for the last 23

quarters since 2015. The company accumulated operating losses for the previous seven years

amount to 4.4 billion US dollars making it inappropriate to work in such circumstances. The

efforts to revive the troubled company bore no fruits in the recent period, creating a necessity to

withdraw from the mobile business.

The company is set to exit the Smartphone business to focus on other growing business

segments. LG Electronics company is the third-largest mobile company in the US after Apple

and Samsung making up about 11 % market share.

 LG OUT OF THE PHONE BUSINESS 4
Failure to adapt to the evolving market environment.

The business community analyzed the LG business failure from the perspective of

product development. The LG Electronics company used to be the leading mobile phone maker

during the 2G era when mobile phones were essentially used for making phone calls; Apple

opened 3G and 4G mobile when people embraced Smartphone as an alternative to portable

computers in information exchange.

The failure to adapt to the new technology by LG Lead to its loss of market share to

Apple and Samsung mobile (Giachetti,& Marchi,2017). The company maintained dominance in

its 2G feature phones on the assumption that it would take long for apple and Samsung to

commercialize their Smartphone and gain entry into the market(Baran,2016). Mobile phone

technology is evolving rapidly, and players in this industry must respond appropriately to

changes in the market trends to remain in business.

Stiff competition in the mobile manufacturing business.

The entrance of Chinese companies into the mobile phone market brought more

competition into the business segment. Competition does not necessarily mean the existence of

too many players in the industry (Giachetti Lempel, & Pira,2017). The LG company target

market and the product pricing policy failed to address the underlying drivers in the market

segment. The LG manufactures flagship, which is suitable for the European and the American

market, which has an LG out of the phone business already taken over by Apple and Samsung

products. For Africa and the Indian market, most of the LG products face competition from the

low-priced Chinese products.

 LG OUT OF THE PHONE BUSINESS 5
The company is the third-largest seller in the USA market after Apple and Samsung.

The company owned about 10% of the market share in North America and about 2 % of the

global market share but failed to make profits for six consecutive years because of software and

hardware problems.

In parts of Africa and India, the company experienced challenges in marketing its

highly-priced phone brands compared to competitors like Xiaomi, Oppo Vivo, and other

Chinese brands. The Chinese phones have a low price advantage in Africa and India, where

most customers prefer affordable phones. The two incidences indicating the LG target markets

in North America, Africa, and India indicate how the pricing strategy failed the LG market

share in the global market.

The proposed policy options.

The company CEO has been restructuring the group portfolio to focus on its future

strategy to put resources on viable business divisions. Some of the key areas the company wants

to put its resources on include the manufacture of electric vehicle parts, concentrating its efforts

on core business areas like home appliances, home entertainment products like DVD

subwoofers, TVs, home theatres, and other devices.

LG home entertainment products.

The LG Electronics home entertainment company is a global leader in TVs, audio-video

systems, computer monitors, Video systems and personal computers, and other entertainment

devices. The company was the first to introduce a new era in the innovation of the TV market

and pioneering new technologies in home entertainment products. The company enabled

customers to experience full benefits of the latest technologies of superior products like the

Smart TV technology. LG Electronics Company has run a successful business in the home
 LG OUT OF THE PHONE BUSINESS 6
entertainment devices manufacture. The LG home entertainment division is the market leader in

the manufacture of home entertainment items like TVs, home theatres subwoofers, and DVD

players.

The company decided to leave the loss marking Smartphone manufacture as a strategic

move to allow it to put more focus on successful business divisions like the home entertainment

segment and other critical business areas. LG Electronics focuses on gaining business

momentum and future positioning by actively promoting its flagship of smart TV Line-up to

realize this vision. The company focuses on emphasizing the market penetration and dominance

of its OLED smart TV, making it the latest generation TV.

The LG Electronics Company aims to consolidate global manufacture and global sales

system dedicated to its OLED products in all parts of the world. The company is dedicated to

increasing its investment in these sectors and upgrading its facilities in all manufacturing areas.

Another notable area of concern that needs excellent attention is the company's pricing

policy on its products. The company aims to improve the price competitiveness of its OLED

TVs. The synergy created among the company affiliate companies is expected to improve

through the new policy adopted by the company. The company intends to improve its

manufacturing technologies to improve quality and bring down the cost of its products. In

addition to that, the company plans to increase supply to meet market demands and run an

aggressive market strategy through strategic alliances with major retailers of its products in key

regions across the world.

Manufacture and sales of auto parts in the USA market.

 LG OUT OF THE PHONE BUSINESS 7
The LG Electronics Company is reviewing its policies and dropping its market segment

in the mobile market manufacture to pursue and focus on the growing market in the automobile

business in the North American region and other parts of the world. The company is shifting its

focus to the electric vehicle auto parts business since it is a growing market with potential

revenue generation in many parts of the globe.

The USA market alone contributed $1.11 billion in 2020, making up 26 percent growth

from the year 2019. The sales of the North American market increased by 22% in the year 2020

compared to 10 % in the year 2019 in the same region(2021, March 9). The figures from the

results above indicate the efforts taken by LG company to grow its sales and market share in the

North American region in this business segment.

To boost this business segment, the company signed a deal in December 2020 with

Canadian auto parts maker Magna International Inc to introduce a $1 billion joint venture

business targeting the manufacture of E-motors, inverters, and onboard car chargers. The LG

partnership with Magna, which the world's three auto parts maker, is expected to prove beneficial

with the company objectives and give it an advantage in its moves in this industry. In addition to

that, LG Company has other affiliates involved in the auto parts business. The LG affiliate

companies in this sector include Display co LLC, LG Chem. ltd and LG energy solutions which

work closely with Tesla motors. Together with its affiliated companies, the company supplies

motors, battery packs, and other vehicle parts to GMS bolt EV and jaguar I-PAGE.

Overall, LG Electronics is streamlining and reengineering its global presence in all parts

of the world to benefit from emerging technologies. The company is closing its plants in most

parts of the world dealing in the phone manufacture business to focus on critical companies. The
 LG OUT OF THE PHONE BUSINESS 8
industry officials expect the LG business in the auto parts sector to swing to profits and become a

key driver in the market sector.

Focus on home appliances market share increase.

The global home appliances market has been growing steadily in most parts of the world

owing to the following factors: the growth in the middle-class economy, the improvement in

disposable income, increase in labor costs, and low-cost appliances available in the market. The

global sales figures for 2017 indicate sales of USD 174.07, while the sales are projected to rise to

USD 203.37 in 2023(2021, March 9).

The major players in this industry include; LG Electronics, Samsung electronics Conair

Corporation, and other players. The players in this industry undergo market dynamics in the

current and emerging technologies. It is often advisable to remain vigilant in any change in the

industry trends to remain in business. The LG Electronics decision to leave the smartphone

manufacturing business was meant to shift its focus on the electronics appliances manufacture

and stay competitive in this market segment.

Based on the product types, LG Electronics aims to focus its focus on manufacturing

Cooking appliances, Air conditioners, Laundry machines, water heaters, and other appliances.

The sales channels of these appliances are set to be improved by establishing sales channels in

major chain stores, Malls, small retailers, and online stores around the world.

To keep its pace in the home appliances business and maintain its market share, LG

Electronics, together with key players like Samsung Electronics, have advanced into the

manufacture of smart connected devices like refrigerators. These smart connected devices are set

to be sold in the developed markets to add features to electronic appliances. LG Electronics aims

to gain from the early adoption of this technology in the developed countries; since this
 LG OUT OF THE PHONE BUSINESS 9
technology is still in its early stages, it will take some time before attaining the full benefits of

this early adoption.

To tap into the benefits derived from the developing markets, LG Electronics is shifting

its focus in the Asia –Pacific home appliances market (Boccarossa, 2018). The smart appliances

market is expected to grow at a rapid rate in these regions. With developed countries like Japan,

Singapore, Hong Kong, and Indonesia, smart appliances in this region are expected to increase.

The move by LG Electronics to close its Smartphone business and put focus on profit-making

business segments is set to benefit this business segment in its primary market segments. The

market is changing rapidly with ongoing competition and expansion in the industry. The

technological advancement in this sector can provide the early adopters of technology with a

competitive advantage. LG Electronics has taken this initiative to comprehend the market pattern

movements and invest in the latest technology to strategize better. This process offers the

company an opportunity to move ahead of competitors and gain market leads ahead of

competitors.

Policy recommendations.

In this brief policy document, we have pointed to LG Electronics’ Company decision to

exit the Smartphone manufacturing business and the rationale for leaving the business segment,

and the proposed policy options for the company after the exit has been materialized. The

analysis underscores the LG electronics exit to broader challenges faced by the company and

practical strategies to be adopted for the company to remain competitive in the electronics

business. Much more needs to be done to ensure that the proposed policy to be adopted is made

in line with the company's overall objectives of becoming the successful market leader in the
 LG OUT OF THE PHONE BUSINESS 10
electronics manufacturing business. In this regard, we have the following recommendations for

the company policymakers.

Focus on profit-making business units.

First, I recommend that policymakers and the company board of directors focus on the

business's profit-making segments. This is because it is increasingly becoming imperative to

continue pumping capital in perfuming business divisions. At the same time, the company can

choose to specialize in areas where it has a comparative competitive advantage over other

players in the industry. In today's business environment, companies are known to specialize in

areas where they have adequate capitalization and resources. It is also essential for LG

Electronics policymakers to leave loss-making business areas and invest their resources in areas

where the company has a competitive advantage over other industry players.

Focus and enter emerging markets.

Secondly, LG Electronics policymakers should consider investing more resources in the

emerging markets. It pays to be the market leader in any industry. For this reason, the company

policymakers should consider investing their resources in the emerging markets to reap the

benefits derived from the industry. In the LG company line of businesses, the automobile

electronics accessories are an emerging market that the company executives and policymakers

should focus on in its business strategy formulation. This industry is growing rapidly, with the

North American market becoming the leading in the current market consumption. The Asian and

the African market is still developing, and it will take some time to reach its full potential. The

policymakers of the company should invest a considerable amount of resources in this segment

to outdo competitors and gain an early lead in all the current and developing markets.
 LG OUT OF THE PHONE BUSINESS 11
Consider investing in rising market zones.

We encourage the LG Electronics policymakers to consider investing adequately in

growing market segments. In this regard, the company should consider investing in the home

appliances business segment. This business segment has been growing steadily in most parts of

the world due to the growth of the middle-class economy and improvement in the disposable

income of the consumers. The sales figures in this segment have grown steadily for the last four

years, from 2017 to 2021. The policymakers of the company should consider adequate

investment in this business division to gain a sizable market share.

Adapting to the evolving market situation.

The LG Electronics company policymakers should adopt a policy that embraces the

adoption of new technological advancement. Today’s business environment is changing rapidly,

and policymakers need to adopt an approach that embraces these changes in technology. The

company lost its lead in Smartphone manufacturing due to its failure to adopt 3G and 4G

technology, giving Apple and Samsung a lead in Smartphone manufacture. The company

policymakers should be adaptive to changes in technological advancement to maintain market

leadership.

Conclusion.

The LG business policy consolidates theories, strategies, and practical methods to be

adopted to remain competitive and run a profitable business. The company policy statement

should embrace innovation and focus on those market segments that will enable its growth and

profitability. The key focus of any business is to make profits in the current period and maintain

prospects. The ability of the company policymakers to adopt the right policies will enable the

company to meet its objectives and meet the stakeholders' goals.

LG OUT OF THE PHONE BUSINESS 12
 LG OUT OF THE PHONE BUSINESS 13
References

Baran, T. (2016). Positions of Mobile Phone Brands on University Students' Mind. International

Journal of Sustainable Economies Management (IJSEM), 5(1), 18-28.

Boccarossa, L. (2018). Changes in leadership in the mobile phone industry: the case of Asian

handset firms catching up (Bachelor's thesis, Università Ca'Foscari Venezia).

Giachetti, C., & Marchi, G. (2017). Successive changes in leadership in the worldwide mobile

phone industry: The role of windows of opportunity and firms’ competitive

action. Research Policy, 46(2), 352-364.

Giachetti, C., Lampel, J., & Pira, S. L. (2017). Red queen competitive imitation in the UK

mobile phone industry. Academy of Management Journal, 60(5), 1882-1914.

The Korea Economic Daily Global Edition. (2021, March 9). LG electronics eyes growth

potential in the US auto parts market.

https://www.kedglobal.com/newsView/ked202103090009