In the West, SONY and other Japanese electronics companies are losing customers to Korea's Samsung and LG. Inside, Korea, the battle between the two companies is very interesting.
I read this article today in The Economist (a business and foreign-affairs magazine).
The article is written at a higher level of English than most newspapers.
Many Japanese readers will be shocked to learn that these 2 companies outperform all Japanese electronics companies in LCD television/display and mobile phone sales.
LG v Samsung Looking Good?
Jan 22nd 2009 SEOULFrom The Economist print edition
LG Electronics is optimistic about 2009. Samsung, its larger rival, is not. In a meeting room next to the office of LG Electronics’ technology chief, Paik Woo-hyun, a copy of the film “Good Night and Good Luck” sits beside one of the company’s flat-panel TVs. Mr Paik is no stranger to showbiz, having won an Emmy award for his digital-TV research. The film’s title sums up the way in which South Korea’s second-biggest electronics firm, a division of the giant LG Group, hopes to leave its rivals behind. Despite the economic crisis, it sees 2009 as an opportunity to grab market share. LG hopes to boost its share of the global mobile-phone market to 10% from below 8% last year. (By some estimates it has just overtaken Motorola to become the industry’s number three, behind Nokia and Samsung, its local rival.) It also wants to boost its share of LCD TV sales from 10.2% to 14.5%, as strong sales in the MiddleEast, Brazil, India and China overcome slumping demand in Europe and America. Samsung Electronics, the corresponding unit of the rival Samsung Group, is much less bullish. After more than ayear of intense scrutiny in the wake of corruption scandals involving its controlling family, the humbled conglomerate said this month that its executives would take a 20% pay cut this year. It has also consolidated its various units and reshuffled its management in order to speed up decision-making. Analysts predicted that itwould report its first ever quarterly loss on January 23rd. LG’s own results, announced on January 22nd, show that it too is hurting as demand for electronic gadgets slackens. Sony, Japan’s electronics giant, is expected to report a record loss for the year to March. Only Apple,the American maker of the iPod, which reported strong results on January 21st, is bucking the trend. Despite reporting its first net loss for seven quarters, LG Electronics says it has no plans to reduce pay, reshuffle managers or cut jobs. It is older than its larger rival, having been founded, as Goldstar, in 1958, more than a decade before Samsung entered the electronics industry. Samsung went on to become South Korea’s best known brand and a magnet for the brightest graduates. LG has repeatedly insisted that it will regain the upper hand. In 1996 it pledged that by 2005 it would be number one “in quantity and quality”. Yet its sales in 2007 were $44 billion, comparedwith $105 billion for Samsung Electronics. Today Samsung is the world leader in flat-panel TVs and the number two in mobile phones. Mr Paik says Samsung’s success is largely due to its memory-chip business, which “worked as a cash cow for them.” LG soldits own chip unit in 1999, after the Asian financial crises. LG also made much less of an effort than Samsung to promote its brand, focusing instead on improving its manufacturing efficiency. Plunging memory-chip prices mean that Samsung can no longer rely on its cash cow, however. And last year the group’s patriarch, Lee Kun-hee, resigned after being charged with tax evasion and arranging for shares in Samsung subsidiaries to be sold to his son at artificially low prices in an effort to transfer control to his heir. This took the shine off Samsung’s brand. LG’s corporate structure is more transparent. The Koos, its controlling family, were among the first to establish a holding company for their conglomerate, in 2003. Since 2004 LG Electronics has been run by professional managers. Yong Nam, the chief executive since 2007, has hired non-Koreans to run marketing andprocurement, and proclaimed English as LG’s working language. He likes to ask everyone, from secretaries to division heads, what they think of LG’s products. Will his firm’s optimistic view of its prospects prove to be farsighted,or rose-tinted?
