LG's $100 mil charge apes Samsung tack

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By this time next year, most Americans will know LG Electronics. That is, if the global consumer-electronics company has its way.

LG has sold products under other companies' names in the U.S. for years, but is now stepping out from behind the scenes with an aggressive $100 million-plus marketing push offering quality products at a lower price, along with innovation for sustainability.

That's exactly the strategy LG's fellow Korean company Samsung pursued relative to Sony Corp. a decade ago and Sony to American manufacturers such as Zenith and Magnavox a decade before that.

The formula (which worked for foreign automakers as well) goes something like this: Create a quality product at a lower price point. Allow consumers to begin to accept the brand as one of quality. Meanwhile, innovate cutting-edge features and products to stimulate demand.

"It's what Samsung did, and is still doing, to Sony in consumer electronics, and what [Samsung is] doing to Motorola and Nokia in the mobile-phone space," said Alex Slawsby, senior analyst at IDC. "LG is just at the beginning of its renaissance. It's going to be a while before they're really taking share from Samsung, but they are definitely on that road."

LG is second in Korea only to Samsung. And like Samsung, LG Group is a giant family-owned conglomerate that produces products that range from surface-launched defense missiles to financial services to escalators and toothpaste. Its electronics division includes digital appliances, digital TV sets and computer monitors, DVD players, mobile phones and large wireless telecommunications equipment. The company began in 1958 as GoldStar, and became known in Asia as Lucky GoldStar. The company shortened its name to LG in 1995 to broaden its appeal worldwide. LG Electronics first opened a North American headquarters earlier this year.

Most Americans have probably already used an LG Electronics product, but the name on the product was Gateway, Dell, Apple, IBM or Verizon. LG also owns the Zenith brand, which it bought in 1995.

"LG is the No. 2 company in Korea-it's a huge brand there-and well-known in the rest of the world," said Chris Neff, LG Electronics director-marketing. "In the U.S. we're relatively unknown, although we've been a manufacturer for others here. We've decided there's no reason why we shouldn't be a huge brand in the U.S. as well. "

top three

That push, which the company plans to continue to support by spending $300 million over three years, includes TV, print, Internet and outdoor advertising, including a billboard in New York's Times Square and sponsorship of Las Vegas' Fremont Street Experience. WPP Group's LG Ad, Seoul, South Korea, created the launch work, using the tagline "Life's Good."

LG executives in Korea have said they are committed to becoming a global top three electronics and telecommunications company by 2010. It's 2003 worldwide sales total was $17 billion, with the U.S. accounting for more than one-fifth of that. Company executives have said they hope for growth of 20% in the U.S. this year. So far, mobile phones have been its biggest U.S. success. It has reached a 25% share of the market for phones that use CDMA, which is the dominant U.S. technology, through partners such as Sprint PCS and Verizon. LG ranks fifth worldwide in the wireless-phone market, according to IDC.

catching up to samsung

"LG wants to take the position that Samsung has now, as Samsung moves into being more equal with Sony," said Paul O'Donovan, principal and analyst at Gartner Dataquest, London. "In terms of innovation, LG is coming fast on [Samsung's] heels. For LG to be No. 3 is a realistic goal over the next several years."

Innovation will be an important part of the LG strategy. Already this year the company introduced first-in-kind products including a refrigerator with a TV in the door, and home-theater equipment that can record in high definition. "They've been bringing out innovative products as much as possible and using that to drive recognition," said Tim Bajarin, president of consultancy Creative Strategies.

Even though competition in consumer electronics is intense, so is its growth in the U.S. Analysts believe that growth will mean plenty of room for several big players. "The battleground in consumer electronics is certainly the U.S. which is really growing quickly and will continue to be big over the next five years at least," Mr. O'Donovan said. "No one is going to drop out."

Yet, there may not be much time for LG to rest on its accomplishments. Hungry competitors with strategies just like it are already on the move. "Chinese companies are already trying to do the same thing. Once they figure out quality issues, we expect them to be more of a threat," Mr. Slawsby said.

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