GENERIC STRATEGIES OF LG

Generic strategies are guidelines about what the content of a firm’s strategy should be. There are very limited choice of options, while others give a list of practices that are sustained to lead to higher performance.

Generic strategies for LG are as follows:-

(1)Cost Leadership Strategy

(2)Differentiation Strategy

(3)Focus Strategy

 

                                             

COST LEADERSHIP

Firms that endeavour to become the lowest-cost producers in an industry can be stated to as those following a cost leadership strategy. The firm with the lowest costs would receive the highest profits in the event when the competing goods are essentially indistinguishable, and selling at a standard market price. There are some companies which follow this strategy, which place importance on cost reduction in every activity in the value chain, LG practice this strategy to some extent but basically is following the differentiation strategy. Examples of companies following a cost leadership strategy include EasyJet, in airlines, Tesco, in superstores etc.

The threat of following the cost leadership strategy is that the firm's attention on reducing costs, even sometimes at the cost of other vital factors, may become so main that the company loses vision of why it boarded on one such strategy in the chief place.

DIFFERENTIATION 

When a firm differentiates its products and services, it is able to charge a premium price for its products or services in the market. Examples of differentiation may include better product performance, better service levels to customers etc., in contrast with the prevailing rivals. For a company like LG, employing a differentiation strategy, means there would be extra costs that the company would have to incur. Such additional costs may include high advertising costs to promote a differentiated brand image for the product. For example, McDonalds is differentiated by its very brand name and brand images of Big Mac and Ronald McDonald.

Differentiation results in providing many advantages for the firm which makes use of this strategy, just as in the case of LG. Moreover, successful differentiation strategy of LG has resulted in attracting different firm may to enter the company's market segment and copy the differentiated product.

FOCUS 

Focus can be deliberated as a mediator of the above two strategies. Some companies also employ this strategy by aiming on the areas in a market where there is the least amount of rivalry. Firms can also make use of the focus strategy by aiming on a definite niche in the market and proposing specialised products for that niche. This is why often the focus strategy is also denoted to as the niche strategy.

This strategy provides the company the possibility to charge a premium price for superior quality (differentiation focus) or by offering a low price product to a small and specialised group of buyers (cost focus). A company's failure to make a choice between cost leadership and differentiation implies that the company is trapped in between. Company stuck in the middle will result in poor financial performance and hence no competitive advantage.

LG ELECTRONIC’S GENERIC STRATEGY:-

Differentiation: High-end rather than low price. In spite of adhering to its previous strategy i.e low cost leadership, LG Electronics has chosen to focus primarily on a high-tech look and feel backed by high performance. This strategy has made it possible for LG to achieve a world-beating profit margin and to help nurture its brand image as a premium brand. In the high-end market segment, which is highly concentrated, LG needs to find effective means to differentiate itself from its key competitors so as to succeed in the fierce competitive environment. Given this scenario, LG’s excellence in industrial design will play a key role in the company’s short-term as well as long-term strategy. Innovative and cutting-edge design will be crucial for LG’s differentiation strategy by launching stylish handsets, perceived as unique by the community of mobile users.

In the low-end market segment (both developed and developing countries), consumer price sensitivity is one of the key drivers to be able to successfully compete. But at the same time, LG has to take advantage of its level of design differentiation from its competitors. LG’s innovation strategy for this specific segment will be supported by two of its elements: cost focus (price-based) and differentiation.