Lg Had Launched A New Washing Machine

Published Date: 02 Nov 2017

LG had launched a new washing machine, Front Load F14TDS in a matured market. This is despite of the dominance of SLVWF0804 leader Samsung, having been able to compete because the offering combines exclusive features at a value-added price. This it is doing by targeting specific segments in the consumer markets, taking advantage of opportunities indicated by higher demand for easy-to-use, appealing design washing machine with larger capacity.

For LG may think where are we currently? Where do we want to be, and what are the ways in reaching that objective such as the LG’s mission. LG will try to see in ways of getting to its objective, through processes. The processes are purposely predetermined like now and the future. It’s based on the micro economy assumption of ‘ceteris paribus’, keeping all other factors constant. There is also environment analysis such as Macro environment which includes PEST Analysis and well as its competitor analysis using Porter’s 5 forces.

Segmenting, Targeting and positioning is a three stage process done by LG such as what kind of customers exist, select which ones are best off tying to serve and finally segmentation by identifying, meaningfully, different group of customers.

For LG to do its major marketing management decisions can be classified in the following categories Product, Price, Place, Promotion these variables are as known as the marketing mix, these variable that market managers in LG, can control in order to best satisfy customers in the target market.

My recommendations to LG is, they should try and target the low end segment more, as this may increase their market share. By coming up with a cheaper washing machine, which is affordable by the low end segments. Finally look into more into Promotion rather than the 3Kg Persil Pack.

Table of Contents

1.1 INTRODUCTION

"LG, the company was originally established in 1958, as Goldstar, producing radios, TVs, refrigerators, washing machines, and air conditioners. The LG group was a merger of two Korean companies Lucky and Goldstar, from where the abbreviation LG was derived. The HQ for LG is in Seoul and South Korea. LG, (2011).

Established in the year 1984, Hotpoint is located in a shopping mall in Nairobi which showcasing household items and appliances. In late 1990’s, Hotpoint Appliances was awarded the Sole Distributorship Agency for LG Electronics. Hotpoint, (2011)

During the late 1990’s, Hotpoint followed an aggressive growth strategy, quickly expanding operations into the provinces of Kenya. By 2002, Hotpoint had become one of Kenya’s largest retailers and wholesalers of Consumer Electronics and entertainment products with an elaborate distribution channel comprising of Independent Dealers, Hypermarkets, Hire Purchase Companies, Corporate Sales" Hotpoint, (2011)

Firstly, the biggest problem faced by LG is the competition, from Sanyo, Ramtons and its major competitor being Samsung, leading to price wars.

Secondly, Samsung imitates LG’s technology by identifying weakness in their products, and they take advantages by adding few features and launching into the market.

1.2 CURRENT MARKET SITUATION

Market Description

LG’s market consists of consumers and business users who need to conveniently wash and dry clothes without having to spend a lot of time. Specific segments targeted are hotels, families, guest houses, boarding schools and launderers.

Washing machine purchasers can choose between models based on two different functionality options, wash only, and wash and dry. Increased competition has resulted in lower prices and lower profit margins. Lower prices are increasing sales of washing machines in the lower end of the consumer market, but at the expense of gross margin. Customers with the older versions of washing machines are re-entering the market by buying newer, modern multi-purpose machines.

Product Review

The product, Front Load F14TDS offers the following standard features:

LG 14 spin white washing machine with fantastic ‘A’ energy efficiency grade, kg wash load and performance enhancing steam technology saving time and money, while consuming less energy. LG, (2011)

Competitive Review

Increased entry of established brand names has pressurised industry participants to continually add features and cut prices. Cheap labour from the so called `ayahs’ – house help is also another factor. Key Competitors include:

Samsung: - Perceived as the best-known maker of washing machines. As a result, it is priced from below KSHS 32,995 to more than KSHS 84,995. Through its huge kitty, it is able to advertise its products extensively. John, (2011)

Sanyo: - It enjoys excellent distribution with products being showcased in several electronic shops in major towns. Sanyo basic model is priced starting at KSHS 20,000. However, this machine is larger than other brand machines. New, slimmer machines are expected at regular intervals from this low-cost competitor as it tries to stay abreast with the competition.

Despite this strong competition, LG has managed to carve out a definite image from its slogan of `Life’s good’ and gain recognition among the targeted segments. The fact that products are manufactured in Korea, a critical point of differentiation for competitive advantage.

Distribution Review

LG branded products are distributed through a network of select store and non-store retailers in the in the Kenyan market. Among the most important channel partners being contacted are:

Major Supermarkets: - Nakumatt, Uchumi, Tuskys, Ukwala and Woolmart carry LG products in their supermarkets.

Electronic and Electrical shops: - Several smaller outlets also carry LG products.

Although distribution is restricted within major Kenyan towns and cities, plans are underway to expand, beyond the country’s borders, according to demand. Also there is major competition, and Samsung trying to look at LG’s limitations.

For LG may think in the lines, where are we currently? Where do we want to be, and what are the ways in reaching that objective such as the LG’s mission. LG will try to see ways of getting to its objective, through processes. The processes are purposely predetermined like now and the future. It’s based on the micro economy assumption of ‘ceteris paribus’, keeping all other factors constant. There is also environment analysis such as Macro environment which includes PEST Analysis.

1.3 LG VISION

"LG continues to pursue its 21st century vision of becoming a worldwide leader in digital that ensures customer satisfaction through innovative products and superior service". LG, (2011)

1.4 CORE COMPETENCE

Core competences are Product leadership, Market leadership, and People leadership.

LG is a product leader because it continuously offers the best and most innovative products in the industry.

LG has been the market leader being No.1 in front load laundry for 4 years running.

Finally, LG is a people leader because people are highly motivated and committed to the brand itself. LG, (2011)

1.5 COMPETITIVE ADVANTAGE

LG has a competitive advantage because it is very innovative, with advance technology such as the smart technology. It’s a development philosophy that embraces sensitive communication with customers in order to provide products that everybody wants to use, and easily can. This customer-oriented principle has become the most important development philosophy for LG, a result of collecting customer feedback and applying it to its products. LG, (2011)

1.6 PEST ANALYSIS

Political

The post election violence in Kenya (2007-2008), had a far reaching consequence, rising costs, disruption to distribution channels, the effects of which are still being felt to date. The future is also uncertain as the 2012 elections are looming.

Economical

The violence in Kenya has had serious economic ramifications, trade was at all time low, there was mass pull out of investor funds, this not only affected LG but the whole industry.

Due to the global economic recession, imports were reduced due to the high exchange rates.

Social

LG is contributing to the development of the society by providing employment, to the local people.

It also has in place a retired benefit scheme for its employees.

Technology

Improvements in technology process have made their products cheaper.

Newer software’s are continuously being developed to check the quality of the final product.

1.7 SWOT ANALYSIS

Strengths

LG is the market leader in home appliances.

It has a wide range of washing machines to serve all categories

Good after sales service and clinic offering free diagnostics. "The Clinic offers free service, 50% discount on parts, free gifts to all customers who bring in their products. Providing value added service and access to skilled technicians and spare parts for upcountry customers as well as huge transportation savings especially for large products as the service is taken right to the customer’s doorstep. This has proven to be effective in building brand awareness" Hotpoint, (2011)

Weaknesses

Increased cost: - This is a result of adding new features to the product, and the rising cost associated with R&D.

Opportunities

The high growth of washing machines shifting to rural areas will help LG maintain its market share.

Also, as a result of the above LG has an opportunity of launching new products very easily.

Threats

Downward pressure on pricing: - Close competitor such as Samsung are compared to LG, hence the price wars.

Increased competition: -This is from emerging brands such as Ramtons.

1.8 COMPETITOR ANALYSIS

The competitive forces model, developed by Michael Porter of Harvard University in 1980, had identified five forces that influence the nature of competition in an industry.

The threat of new entrants:-

This is where new firms coming into the market, have many barriers to entry such as high capital requirements, access to distribution channels, high capital requirements in R&D, making it very hard for the entrants to enter in the same field.

The threat of substitutes:-

The portable wonder wash is a light weight laundry machine that can clean around 2.2 kgs in just a few minutes. It packs easily in the car, requires no maintenance and costs around Kshs 3,200.00

Buyer Power:-

Customers aim to pay for the lowest price for services or products. Some of the buyer power is likely to be high when some of the following conditions favour them such as, number of brands, and when the cost of switching to different washing machine company is low or which requires little risk such as Samsung and Sanyo.

LG is trying its best to retain the customers by offering different products by being innovative.

Supplier Power:-

Supplier power is likely to be high, when customers lack alternatives of switching between washing machines companies, since the prices of the products are the same.

Competitive Rivalry:-

These are organisations which have the same products aimed at a certain group of customers. Rivalry is possibly high where competitive markets are competing such as LG Front Load F14TDS which has a capacity of 8Kg against Samsung’s SLVWF0804 8Kg.

Recommendation

In order for LG to retain its market share, LG should launch several models in very short time. This will give no room for Samsung to identify LG’s weaknesses.

2.0 SEGMENTATION, TARGET AND POSITIONING

"Market segmentation is a process by which a market is divided into distinct customer subsets of people with similar needs and characteristics that lead them to respond in similar ways to a particular product offering and strategic marketing program". (Hollensen, S. (2003))

LG is trying to look into the Kenyan market, in terms of its income and function. Function in terms of automatic, semi-automatic machine or washers.

As a recommendation, LG should look more into Kenyan’s income because not most of the Kenyans can’t afford to buy washing machine, as population below poverty line is 50%

TARGET

"Target marketing is the process of selecting one or more of these market segments and developing products and programmes that are tailored for each segment." (Hollensen, S. (2003))

LG tries to target Upper Segment, Upper Middle Segment, as well as they target the Low end Segment but a very mild scale. John, (2011)

I recommend they should look further into the Lower segment; this will help them to generate more revenue, and it will give an opportunity to the customers of possessing a washing machine.

POSITIONING

Upon the segmentation process it gives a clear picture of the market and the target marketing strategy has been selected. For it to be successful it requires a sustainable strategy that is differentiated from competitors. For it to be successful, the marketing mix has to be arranged so that it is unmatched by competitors Positioning is the process of creating in the mind of consumers and image, reputation or perception of the company and, or its products relative to the competitors. Positioning is actually the implementation of its strategies.

(Hollensen, S. (2003))

LG is positioning well both for the Global and the Kenyan markets, as they are making people’s life better and convenient. In the advancement of technology LG has come up with suds detection, whereby it helps you stay safe and healthy from suds allergy.

LG is also trying to improve the customer relation, by providing customer care unit, sales and enquiry units such as the Hotpoint Appliances.

John, (2011)

3.0 MARKETING MIX

The basic elements of the marketing mix are Product, Place (distribution), Price and Promotion, these are also called the controllable variables of marketing, because they can be controlled and manipulated by the marketer.

PRODUCT

This is the physical product itself, offered to the customer; this may also mean services that are part of the offering. Product decision may include Warranties, Appearance, Packaging of the washing machine and servicing. LG offers by providing high quality products with the latest technology.

PRICE

This is the actual price of the product; pricing decisions should take into account profit margins, and the pricing response of the customers. Pricing includes things such as discounts, list price and financing. LG is trying to use price strategy by marketing skimming, this is where by it is trying to set a high price for their high end products, such as the LG 9KG FRONT LOAD WASHER F1403RDS5 which is for about KSHS 101,000/=, it tries to get maximum revenue from the market before substitutes products appear, once they have succeeded doing that they will try to reduce the price drastically so as to capture the lower end buyers.

PLACE

Place decisions are those associated with the channels of distribution, which serve as the means for getting the product to the target market. LG is selling their products through Hotpoint Appliances, Supermarkets, and Electronic and Electrical shops.

PROMOTION

Promotion decisions are those related to communicating and selling to potential customers. Since this can add up to the production price, a breakeven analysis should be performed when making promotion decisions. LG in collaboration with Persil is also trying to do promotions such as 3KG of Persil Pack with every LG Front Loader Washing machine you buy. Such kinds of promotion are normally planned in Korea. Where the sales promotion offers are made by local dealers of every country. John (2011)

RECOMMENDATIONS

As a marketing student I have concluded on some of the factors such as:-

Since LG is improving on its technology such as improvement in power and water consumption, they should try to create a cheaper washing machine, with solar power which can help in the extreme low end buyer, where they can use in rural areas, where electricity is an issue, by targeting low end buyers, this will increase market share.

LG should use other methods of promotion rather than the 3KG Persil Pack as I personally think; they should get more than the 3KG Persil Pack may be an electric guard, with some washing baskets which can attract more customers.

In Kenya there are very few people who actually use washing machines, as they have the old trend of washing clothes with hands, LG should inform the customers on the added benefits of using washing machines rather than washing clothes with hands, by advertising methods.

LG should check on the pricing, as the customers normally tend to check the prices and the specifications of the other competitors.

CONCLUSION

LG is a well known company, and the future for the company is bright. LG should try selling its new washing machines, before the competitor’s starts manufacturing similar products.