Monday, September 28, 2009

Business Strategy

LG Display Co Ltd uses differentiation as its main business strategy by producing goods and services that are unique to the market. That is products that are used to experience new, rich life of digital display through a variety of TFT-LCD LG Display provides, such as the production and supply of thin-film transistor liquid crystal displays called TFT-LCD panels, principally used for televisions to provide slim and sleek design. It also provides large, wide and high performance screens for notebook computers and wider, brighter and crisper screens for desktop monitors. In addition, it provides TFT-LCDs for handheld products such as mobile phones, and lighter and slimmer products for industrial and other applications such as entertainment systems, automobile navigation systems, portable DVD players, digital photo displays and medical diagnostic equipment. The customers served by LG Display include manufacturers of notebook computers, televisions and desktop monitors.
The customer service center provides product repair and warranty services to customers in the Americas region, where the demand for LCD TVs is rapidly growing, especially in the United States, Canada, Mexico and Brazil. The service center features optimized facilities and analysis equipment to provide warranty services primarily for LCD panels that are 32 inches and larger. In addition, the Company has one sales subsidiary and four representative offices in the U.S. As part of their strategy to improve customer alignment; this enables them to better respond to the needs of their customers in a timely and efficient manner.

Michael Porter's Five Forces Analysis

In the industry LG Display operates, Michael Porter’s Five Forces Analysis is crucial in assessing the state of competition.

The Bargaining Power of Buyers

The bargaining power of buyers is moderate. There aren't many companies that offer the same quality of products as those of LG Display or have advanced as much technologically. The company’s televisions, monitors, notebook PCs and applications stand out among existing competitors. LG Display reduces the buyer power by designing its products in ways that appeal to and fit the needs of today's customers. Everything from the slim and sleek, wide view, portable and compact designs and display technologies make the products superior to the competing companies.

The Bargaining Power of Suppliers

As far as LG Display's bargaining power of suppliers, the power is on the lower end. The company forms information partnership to create cooperation among supply chain partners for mutual success. It enters into a cooperative relationship with its suppliers by becoming their shareholders. This allows LG Display to promote strategic relationships with equipment and parts suppliers, which enables a stable source of supply at competitive prices. The result is high-quality parts at a lower cost which is done through sharing product concepts with suppliers early in the product development cycle. This kind of cooperation with suppliers has lowered costs by 10% compared to the fourth quarter of 2008. LG Display stands apart from its peers in terms of market share, cost competitiveness and supply capacity.

Threat of Substitute Products or Services

The threat of substitute products is moderately low. Substitutes for LCD are LED (Light-Emitting Diode) and OLED (Organic Light-Emitting Diode), both are newer technologies currently developed by the company. As long as LG Display can maintain its current market share of a quarter percent for the newer products, substitute products would not be considered as threats. The company’s development of new products and technologies that can be differentiated from those of its competitors increases switching cost as well as reduces buyers’ propensity to substitute. In addition, its innovation technology is another switching cost for consumers.

Threat of New Entrants

The threat of new entrants is low in the flat panel display industry (TFT-LCD technology) due to its various entry barriers such as rapidly evolving technology, capital-intensive characteristics, brand equity, expected retaliation among existing competitors and the significant investments required by the economies of scale. In addition, the industry may not be as appealing to potential competitors due to its highly competitive nature. Existing competitors have already experienced pressure on their prices and margins due largely to additional industry capacity from other panel makers in Korea, Taiwan, China and Japan. Other entry barriers also include LG Display’s absolute cost advantage in its supply chain management and learning curve advantage with its years of experience as a leading player in the industry

Rivalry among Existing Competitors

Rivalry among existing competitors is on the higher end. Although the company’s market share increased to 26.4% in 2009 from 20.4% in 2007, there is still intense competition within the industry. Competitions are likely to remain intense not only due to the expected large demand for LCD panels in the market today but also due to additional industry capacity from other Asian LCD panel makers such as Samsung, AU Optronics and Sharp. However, the average selling prices may continue to decline as a result of technology advancements and cost reductions. In order to stay competitive, LG Display strives to differentiate itself with not only cutting-edge technology but also innovative designs. The BusinessWeek article "LG Bets Big on TV Design" clearly demonstrates this business initiative.

Major Business Initiatives & IT Advantages

As a major manufacturer of LCD and other types of electronics screens such as LED and OLED, the company needs to have a strong Supply Chain Management (SCM) system to ensure supplies are in place at the right moment when they are needed (Just-In-Time method). This way cost can stay down while profits rise. Although it is uncertain whether LG Dispaly has any SCM in place, the company employs Inter-Modal Transportation to move its supplies from origin to destination through the help of Supplier Collaboration System, an ERP system that tracks goods from when they are shipped to the various stores that sell the products. The Customer Relationship Management (CRM) system is another focus of LG Dispaly since differentiation is its business strategy. The company's Customer Collaboration System serves to strengthen customer collaboration through providing services such as engineering support and market information. The Multi-channel Service Delivery also allows customers to interact with the company by either email, phone or the website. Another initiative businesses are increasingly using is E-Collaboration, the use of technology to support workflow, knowledge management, social networking, e-learning and collaboration. LG most likely uses virtual teams since there are employees in various countries like South Korea, China, Poland and the United States. The integrated collaboration environments improves work performance and allows sharing and flow of information. Considering the immence amount of technology involed in its industry, LG may also be using knowledge managment systems and wiki to capture, organize collaorate and share information. Finally, a company this size has to have an Enterprise Resource Planning (ERP) system in place to help facilitate the business practices. For LG, this integrated software that controls the various departments in the company is the Supplier Collaboration System. It allows all suppliers, forwarders and customers to review shipment processing, import trade, electronic certification, price estimation and vendor information management.

The type of IT LG Display uses is the Top-down silo, where all the IT command and control are in the IT function. Although cuts down cost, this centralized approach discourages innovation. Fortunately, its philosophical approach of Early IT Adopters encourages the development and use of IT and allows employees to experiment with new and emerging technologies in hope of finding a few that can provide significant competitive advantage.


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