Changes in the Global Mobile Market and New Challenges for LG Mobile

By Park, Namgyoo K.; Lee, Jeonghwan et al. | Journal of the International Academy for Case Studies, March 2012 | Go to article overview

Changes in the Global Mobile Market and New Challenges for LG Mobile


Park, Namgyoo K., Lee, Jeonghwan, Suh, Junghyun, Kim, Hyojung, Journal of the International Academy for Case Studies


CASE DESCRIPTION

The primary subject of this case study falls within the scope of strategy. The secondary issues examined in this case study include globalization, marketing, decision-making, growth management strategy, industry structure attractiveness analysis, and understanding competitive advantage. The case has a difficulty level of four out of five, and is appropriate for the senior level. The case is designed to be taught in one hour, and is expected to require three hours of outside preparation by students.

CASE SYNOPSIS

The global mobile phone market has long maintained a double-digit growth rate, and its total sales volume has reached 1.24 billion. Today, the global market is dichotomized into developed markets and developing markets; alternative demands dominate the former, and new demands dominate the latter. The rise of smartphones is one of the hottest issues in developed markets. Recent changes in the global market landscape, initiated by the arrival of smartphones, is bringing to an end the market domination by the top five companies--Nokia, Samsung Electronics, LG Electronics, Motorola, and Sony-Ericsson. The decline of Motorola and Sony-Ericsson, and the sudden rise of smartphone specialists such as RIM, Apple, and HTC are disrupting the market structure, and causing increasing uncertainty within the wireless business.

Despite increasing market uncertainty, LG Electronics (LGE) managed to become the third-largest global mobile phone manufacturer by 2009. However, it might be too early to celebrate, as no one can guarantee the sustainability of LGE's growth in today's highly uncertain environment. Inadequate distribution channels are preventing LGE from catching up with Nokia in the developing markets, and competition in the developed markets among high-end manufacturers is becoming fiercer by the day. Moreover, LGE lacks competitive advantage in the smartphone market, which is the only market with high growth potential. LGE's smartphone manufacturing capacity falls behind that of RIM and HTC, and LGE has to depend on Microsoft and Google for the operating system software. LGE's application store (app store) is still in a nascent stage, and its growth potential is yet to be proved. In this context, this case study will lead the discussions on how LGE can survive in this challenging new environment as a late mover in the smartphone market. Besides, with the app store--a disruptive innovation that is rearranging how digital contents are distributed--expanding its territory, discussions about LGE's strategies and its future prospects will provide meaningful suggestions not only for the mobile phone industry but also for other IT industries.

INTRODUCTION

LG Electronics will achieve global market share of 10% and sales of a hundred million units by the end of 2009. By 2012, we will become the second-largest mobile phone manufacturer in the world.

Mr. Seung-Kwon Ahn of LGE, at the Mobile World Congress in February 2009

In February 2009, when global economies were experiencing the aftermath of the financial crisis initiated by the sub-prime mortgage loans, the Mobile World Congress (MWC) of 2009 opened its first session at Barcelona, Spain. Mr. Seung-Kwon Ahn, the chief of the mobile communication division of LG Electronics Corporation (LGE), declared his future strategies with strong confidence to the attendants from all over the world. However, most of the audience was not convinced about the feasibility of his plans in the short term.

It did not take long to prove the detractors wrong. At the end of the fourth quarter of 2008, LGE claimed third position in the mobile phone market, and its market share exceeded 10% for the first time in its corporate history. These surprising performances in fact reflected the goals promised by Mr. Ahn nearly half a year earlier. The double digit global market share of the LGE mobile division gains even more significance since the global economy was yet to recover from the crisis, and LGE acquired only a few top mobile telecommunication carriers. …

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