To lose one head of mobile may be regarded as misfortune, but to lose two in just six months looks like carelessness. Crudely paraphrasing one of Oscar Wilde’s best known quotes is an apt summation of the state of affairs at LG. Warren Lewis, the manufacturer’s UK head of mobile, unexpectedly quit the business earlier this month just weeks ahead of Mobile World Congress.
His departure comes just months after that of Jim Michel, who left during the summer of 2011 after failing to wrestle greater autonomy for the UK business. LG has yet to confirm a replacement for Lewis but whoever it is faces a tough task.
‘It is the same problem all over again,’ said one well-placed source. ‘Losing another head of mobile does not inspire confidence in the team at LG or in its customers.’
Rivals are sympathetic to the plight of whoever is in charge of LG. One said: ‘The main problem is that LG is trying to run the business out of Korea. Clearly what they need to do is get a local person in of a high calibre and give that person the autonomy to turn it around and a viable window of time in which to do it.’
IDC analyst Francisco Jeronimo said Lewis and Michel were the victims of a clash of cultures. He said: ‘It is a tough job working for the Koreans at LG. They do not work to a long-term strategy. They seek short-term results and micro-manage. They do not give people the chance to deliver. It is a cultural difference.’
Canalys senior analyst Tim Shepherd agreed: ‘There isn’t a huge amount of autonomy and a lot of business is directed from South Korea,’ he said. ‘Marketing activity has been scaled back in the UK quite considerably. It has a small team responsible for the business but with strategy coming from South Korea amid a tough handset environment.’ A rival phone manufacturer said the UK’s understrength team and the fact that Lewis was working in several roles simultaneously did not help matters.
Analysts and manufacturers agree that LG has boxed itself into the squeezed middle, lacking the flagship high-end smartphones to compete with Samsung, Apple or RIM and unable to compete effectively with low-end upstarts Huawei or ZTE. One rival firm said LG has a convincing product pipeline for 2012 but lacks the resources to promote it properly: ‘They make compelling products but it is firmly in the middle ground. It is not bold enough to step away from it.’
Shepherd added: ‘The likes of Huawei and ZTE, even Alcatel, are being really aggressive at the low-end of the market. LG end up delivering products of a similar specification but it is effectively hoping operators and retailers will pay extra based on the strength of the brand.’
Lewis and Michel’s successive departures leave LG in a difficult position when it comes to hiring a replacement, claimed one rival. ‘It really is a poisoned chalice role as you have no autonomy whatsoever.’
LG is confident of the year ahead. A spokesperson said after Lewis’ departure: ‘We have a plan in place that will align with our priorities for 2012 and will confirm this in due course.’ Whoever is in place to lead the plan has a challenge on their hands.
Six steps forward for LG
1 Greater autonomy
IDC analyst Francisco Jeronimo said: ‘LG needs to follow Samsung and Huawei’s example and become more open to Western culture and local people taking charge. They need to trust westerners to run their business in the UK otherwise they won’t succeed. The Korean way won’t work in the UK.’
2 Reinvigorate the brand
Ovum principal analyst Tony Cripps said: ‘Brand is so important, almost more so than products, and the lack of a good brand can be the obstacle to maximising opportunity, particularly when it comes to high-end smartphones.’
3 Get out of the middle ground
CCS Insight MD Shaun Collins said: ‘It has to find a way of differentiating itself in a crowded marketplace and it is difficult to do that when the key vendors offer more than enough choice.’
4 Offer converged services
Ovum’s Cripps said: ‘The bigger picture is how do you join the dots between different devices and integrate content and services? As a diverse manufacturer, LG is in a position to do that.’
5 Realign product portfolio
Canalys analyst Tim Shepherd said: ‘It needs to be delivering credible flagship devices at the high-end of the product range and better devices at the lower-end.’
6 Take a leaf out of Samsung’s book
Ovum’s Cripps said: ‘Both [LG and Samsung] come from similar backgrounds and are in a way practically identical companies. But while Samsung has made a transition to become a real brand people associate with, LG hasn’t done that as effectively.’