LG Electronics has responded to the fierce pursuit of Chinese home appliance companies by restructuring customized strategies for each country. This is because Chinese companies using a low-price strategy are mobilizing their financial power to increase their market share in the global market, threatening LG Electronics’ position. LG Electronics is expected to continue its unfavorable business environment in the fourth quarter and plans to strive to improve profitability by focusing on the three driving forces of its future vision.
Kim Lee-kwon , managing director of LG Electronics, said in a conference call announcing third quarter earnings on the 27th, “Chinese home appliance companies have broken away from the low-price strategy and increased their market share in advanced markets such as North America and Europe through M&A (mergers and acquisitions).” He added, “Products are also available in Asia, including Greater China. “We are rapidly pursuing ( LG Electronics) by strengthening our brand and investing in production bases, ” he said.
Managing Director Kim said, “In the future, we will determine the global market to focus on by judging the market status and size of Chinese companies, and determine brand price and distribution coverage to advance short-term, mid- to long-term strategies for each country.” “It is difficult to secure profitability due to intensifying competition, but we will respond by continuing to strengthen B2B (corporate transactions),” he said.
Recently, there are concerns that demand for home appliances is decreasing in North America and Europe. Accordingly, Managing Director Kim said, “Consumption patterns are changing with the increase in cost-effectiveness-oriented essential products due to income polarization in North America, and demand stagnation is expected to continue in Europe as well,” adding, “However, the potential demand for replacement of old houses and the effect of economic stimulus measures “Remains, and growth is expected to be possible in the European region centered on entry-level, high-efficiency products,” he predicted.
Significant improvement in 3Q profitability… A standout ‘battlefield’Although LG Electronics’ sales decreased in the third quarter of this year , profitability increased and overall performance was solid. LG Electronics announced that it had sales of 20.7094 trillion won and operating profit of 996.7 billion won on a consolidated basis in the third quarter of this year. Although sales decreased by 2.2% compared to the same period last year, operating profit increased by 33.5%.
Although sales decreased in all core business areas, we succeeded in protecting profitability and operating profit margin improved significantly. LG Electronics’ H&A ( Home Appliance & Air Solution ) business division recorded KRW 7.4574 trillion in sales and KRW 504.5 billion in operating profit in the third quarter. Compared to the same period last year, sales decreased by 0.2%, but operating profit increased by 119.5%. The HE ( Home Entertainment ) business division , which includes OLED (organic light emitting diode) TVs , recorded 3.5686 trillion won in sales and 110.7 billion won in operating profit in the third quarter. Sales for the first year fell by 3.9%, but operating profit turned into surplus. Lee Jeong-hee , Executive Director of HE Business Management, said, “In the case of TVs , which are strongly entertainment products , product demand is affected by the economy, but ( LG Electronics) will see negative growth this year compared to the previous year because most OLED TVs are premium.” LCD ( “The transition from liquid crystal displays (LCDs) to OLEDs is accelerating, and a growth rate of mid-10% is expected after next year,” he said. Performance is clear in new business sectors such as electronics. LG Electronics’ VS ( Vehicle component Solutions ) business division recorded sales of 2.5035 trillion won and operating profit of 134.9 billion won in the third quarter of this year, up 6.7% and 40.37%, respectively, compared to the same period last year. The performance of PCs such as LG Gram has become sluggish. LG Electronics’ BS ( Business Solutions ) division posted 1.33 trillion won in sales and 20.5 billion won in operating loss in the third quarter. Sales decreased by 6.9% and the operating deficit widened. Lee Dong-cheol , managing director of BS Business Management, said, “Demand for laptops and PCs is at a low point this year, and will recover from the end of the year and enter a growth trend next year. We plan to closely monitor changes in market conditions and respond promptly, so in the future we will focus on hardware-centered product sales. ” “We will go beyond this and discover new business models that meet the needs of various customers and markets,” he emphasized.
Securing future competitiveness… “Additional investment in Vietnam and Poland”LG Electronics plans to overcome the recession with the three future growth engines previously announced in July. At the time, LG Electronics굿모닝토토 도메인 announced that it would improve profitability through B2B , securing new businesses, and using a non-hardware ( non-HW ) business model.
In fact , LG Electronics defended its operating profit margin by increasing the proportion of its B2B business this year. First of all, in the home appliance business, we are expanding our strides through cooling, heating and air conditioning in line with Europe’s decarbonization and electrification trends. LG Electronics is expanding its lineup to include ventilation and outdoor air conditioning ( DOAS ), rather than existing home heating and cooling products. The company also plans to participate in a project to supply 6 million heat pumps by 2030 in collaboration with the U.S. state government of California. Through this, LG Electronics plans to increase B2B sales to more than 40 trillion won by 2030. Applying a non-hardware business model that combines content, service, and subscription concepts to
TVs and home appliances also had an impact on improving profitability. Previously, the company generated one-time sales and profits by selling home appliances and TVs , but now the paradigm has shifted to a structure that generates continuous sales and profits targeting LG Electronics customers around the world.
They also announced that they will continue to invest in new business areas such as battlefields to strengthen competitiveness. Kim Joo-yong , managing director of VS, said, ” We began mass production of auto products at LG Magna’s new plant in Mexico in September, and we also have plans for continued expansion and investment to respond to OEMs in North America. We are focusing on mass production of parts ordered by GM for electric vehicles. “We plan to make additional investments in Vietnam and Poland in the future in response to GM ’s North American OEM orders and electric vehicle supply to Asia next year,” he explained .