LG Electronics Developing New Strategy To Take On Chinese Brands After Record Quarterly Sales

LG Electronics Australian subsidiary is developing a new strategy to take on Chinese brands, which could see the South Korean Company move more to B2b and premium products next year.

South Korean Companies don’t like giving up market share especially in markets where they are strong such as TVs and appliances, and while Chinese Companies are buying up known brands in an effort to be taken seriously, LG is looking to go where most Chinese brands struggle, the premium market in an effort to grow sales.

The aggressive global market penetration of Chinese rivals especially in the TV market is causing problems for both Samsung and LG.

“Chinese firms have deviated from a low-cost strategy and are actively investing in each production region, while strengthening their products and brand power,” he said.

“In response to this, we are planning to come up with customized strategies for each country, comprehensively diagnosing the latest issues and firm’s competitiveness country-by-country,” he added.

ChannelNews understands that several key executives and buyers, retailers including The Good Guys, JB Hi Fi and Harvey Norman were recently flown to South Korea to see firsthand some of the new products that will be shown at CES 2024.

They were also given an insight into LG’s thinking for the future.

The leader in the production of OLED technology claims that management will decide on which markets to focus on, considering the resources available investment priorities, market size and the level of competition from Chinese firms in the market where LG competes, according to Kim I-kueon.

Locally both LG and Samsung are under pressure from Chinese brands in both the appliance and TV markets, TCL, Hisense in the TV market and Haier who also own Fisher & Paykel and the Hisense owned Asko in the affordable premium appliance market.

“Although it might not be easy to secure profitability from our existing home appliance business alone due to intensifying market competition … we will maintain the current level of profitability by upgrading our portfolio on fostering new growth engines, strengthening business-to-business segments, and promoting new businesses.” he said.

With the consumer market coming under pressure due to inflation concerns LG has also targeted the B2b market in the hope that they can generate US$29.5 billion in sales from its B2b operations by 2030.

LG’s business-to-business sales currently account for more than 30 percent of the total this year.

Several brands in Australia are discovering that the B2b market is less affected by economic uncertainties than consumer segments, the B2B sector can bring stable sales and profit, the home appliance maker, Kim said.

The strategy is based on transforming the Company into a “smart life solution company,” aiming to strengthen its core identity as a top home appliance brand.

Under the goal, the firm’s CEO Cho Joo-wan suggested “accelerating business-to-business connections” as one of the key transformation schemes, alongside “innovating its business model in the non-hardware sector and exploring new business areas such as digital health and electric vehicle charging.”

The company said it would continue seeking growth in sales for the rest of this year by expanding sales of its major home appliance products, especially during the upcoming holiday season. It also looks to focus more on the EV parts business, a promising future sector.

LG also said it would also target the heating, ventilation, and air conditioning (HVAC) business, supporting the push for decarbonization and electrification while continuing investments in the EV charging business.

“We will seize additional growth opportunities by focusing on promising business areas that have high future potential and can create synergies with our existing businesses, while accelerating investment and development,” an LG Electronics official said.

The Korean Herald reported that LG Electronics, third-quarter operating profit came to 996.7 billion won on a consolidated basis, up 33.5 percent from the same period a year ago. The figure was much higher than the consensus of 808.4 billion won projected by local analysts, provided by market intelligence firm FnGuide.

The firm’s net income jumped 44.2 percent on-year to 485.2 billion won over the three months. Sales fell 2.2 percent on-year to 20.71 trillion won, surpassing the market consensus of 20.46 trillion won. It was also close to the all-time third-quarter sales record of 21.18 trillion won last year.

The company attributed its solid performance to a more than doubled profit in its home appliance unit and a record-high profit of the future breadwinner vehicle component business despite the global economic slump.

LG’s home appliance and air solution unit logged an operating profit of 504.5 billion won, with quarterly sales of 7.46 trillion won in the July-September period.