BCG Matrix

Marketing Management 251.
321 (3) / Individual Assignment 1
Ki-Baek KIM (2013-12501)
LG Electronics is one of the leading electronics company in the world. The firm is future-
oriented. It either develops new products with innovative ideas (clothing care) and it also adds
new technology to pre-exsiting products. The analysis of LG Electornics’ business units will
show the earning potentials of existing markets and new markets. Furthermore, the BCG Matrix
framework will give a guidline of allocating resources to a specific business unit.
The business units in the analysis are the products made by four divisions of the firm: Home
Appliance (both white goods and smart appliances), Smartphone, Automotive Telematics, and
Premium Television (TV sets over $2,500). The following BCG Matrix framework and takes
into account the performance of the business units in the global market during the year 2017.
Judgements will be based on the characteristics of the market and will be proved by the earning
releases of the first two quarters in 2018.
Market share
Market Relative Market Sales Revenue
Business units of biggest
share market share** growth rate*** (millions,KRW)
competitor
10.50%
Home Appliance 9.20%* 0.88 12% 19,226,042
(Haier Group)
21.90%
Smartphone 2.50% 0.11 3.10% 11,666,307
(Samsung)
16.20%
Automotive Telematics 26.30% 1.62 18% 3,489,105
(Continental)
36.90%
Premium Television 33% 0.89 47.40% 18,673,661
(Sony)
* The revenue in the earning releases of LG Electronics was divided by the total sales of the Home Appliance industry. Other
numbers are based on press releases of research centers. ** Median: 0.885 *** Median: 0.15
BCG Matrix
Star 60% Question mark
50% Premium
Television
40%
Market Growth Rate
30%
20%
Telematics
2 1.5 1 10% 0.5 0 -0.5

Home
Smartphone
0%Appliance
Cash Cow
-10% Dog
Relative Market Share
1) Home Appliance - Cash Cow (potential Star)
LG Electronics’ home appliance products should be considered as a cash cow. Even though
the products have a lower relative market share than the median, the firms’ refrigerators,
laundry machine and air conditioners took the second most market shares in 2016. During Q4
17’ the LG home appliance products surpassed the shares of Whirpool in the US white goods,
market which is the biggest market in the world. In the domestic market there is even a formula:
“Home appliance = LG.”
Moreover, the home appliance business unit has high earning potentials and could become a
Star in the near future. Although the market growth rate of the industry itself is low, there is an
increasing demand in premium home appliance market and the smart home appliance. In fact,
thanks to the firm’s high-end products (LG Signature) and innovative products (clothing care,
robot vacuum cleaner) the sales during Q1 and Q2 18’ continued to soar. The revenues from
home appliances could either be reinvested to the same business unit or to Premium TVs.
2) Smartphone – Dog
LG should allocate less resources to the smartphone segment. The industry itself is stalling.
Considering the product life cycle, smartphones reached its maturity. It has become more
difficult for firms to differentiate their products or add new features to the product. The sole
remaining potential innovation of the product is known to be the adoption of flexible/bending
displays. Meanwhile, LG is continuously launching new devices with “excpetional sound
quality”(the V series) which does not seem to attract customers. Obviously, their sales in Q1
and Q2 18’ plummeted.
3) Automotive Telematics - Star
The innovative telematics industry is expected to grow 18% every year and the firm
dominated the market shares since 2013. The revenues are smaller compared to other business
units because the industry is still in its introduction stage. Therefore, it is likely that the business
unit will remain a Star as long as LG continuously invest in R&D. Still, there are voices of
concern as the firm’s market share is continuously dropping since 2015, from 35% to 20.7%
today. Nevertheless, the drop in market shares doesn’t signify that LG is not competent. The
numbers show that there are more entrants and the market is growing bigger. LG stills is the
leading company of the industry.
4) Premium TVs – Star (potential Question Mark)
During the first half of 2017, LG was the first and only firm that produced OLED TVs, while
competitors produced LCD TVs. The OLED TV shipments rose from 723,000 in 2016 to 1.4
million in 2017 and the firm initially dominated the market with 92% of shares. However, there
is a possibility that the business unit could be a question mark as new entrants are penetrating
the market. In fact, LG lost its first place to Sony and Chinese firms are also rapidly threatening
LG’s market position. Still, considering that LG Display supplies the panel to Sony, the
Japanese firm’s entrance to the OLED TV market will actually increase the overall market
volume.

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Marketing Management 251.

321 (3) / Individual Assignment 1

Ki-Baek KIM (2013-12501)

2 1.5 1 10% 0.5 0 -0.5

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