Analysis: LG's UK power vacuum

Analysis: LG's UK power vacuum
The departure of three top execs from LG Mobile over the last few months has left senior management fire power within the UK arm looking thin on the ground.

Although LG UK saw year on year growth to double digit share during 2009, it is understood the company had not hit the high targets set by its Korean parents.

Meanwhile, fellow Korean manufacturer Samsung is racing ahead, having overtaken Nokia's UK share several times last year.

Samsung has been doing a 'tremendous job', and there has always been intense rivalry between Samsung and LG, says CCS Insight analyst Ben Wood.

Now LG is looking to increase its global handset sales by 20% in 2010, with sources saying the manufacturer needs someone who is 'dynamic' and able to 'take the company to the next level', to rise to the challenge in the UK.

LG needs to grow its UK share, which is currently at around 10%. One source close to the company says: 'The global strategy is to be in the top three - for this, they need to be in the UK top three and they need someone who will make this happen.'

Last year, LG COO Ward Crawford was appointed to the newly created role as the manufacturer looked to give the UK local power and make it a stronger brand.

But that strategy seems to have changed. Sources said the three exits - Crawford, as well as sales and marketing director John Barton and head of marketing Jeremy Newing - may signify the Korean manufacturer pulling the power back to its home country.

Samsung and LG work similarly in that both businesses are controlled from a base in Seoul, South Korea rather than devolving responsibility out to the regions. The source adds: 'They [Korean LG base] had given up some control, but it is very much a market run outside of Europe.'

And Samsung's volumes are growing. Meanwhile, Strategy Analytics analyst Neil Mawston, says: 'LG's volumes are booming but their profits are dipping - they have been pricing down. I suspect most regions have been doing different things but globally, they have cut prices to gain share and that strategy may be reaching a head.'

Samsung's margins are also frozen, says Mawston, but LG is under pressure to keep up with Samsung and that is taking its toll.

This comes at a time when LG's mobile arm is rethinking its marketing strategy to gain share and consolidate its brands such as TV with mobile. The manufacturer is aiming to link its mobile product branding with other electronic goods, such as flat screen DVD players and music equipment.

It will also strengthen its smartphone range with 20 new models this year, targeting a double digit market share globally in the smartphone sector in 2012.

Releases for 2009 include the LG Mini GD880 and its first Android phone, the InTouch Max GW620, part of the InTouch Max range.

However, it has a tough time ahead, with Samsung's Wave already looking like a major 2010 winner. Samsung is also targeting smartphones this year.

Mawston says: 'LG needs to manage the structure. It feels like cost control measures are perhaps not as strong as they might be. Look at Nokia - it slashes prices year after year,
quarter after quarter. LG needs a structural tweak and a cultural change.'
Written by Mobile Today
Mobile Today


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