LG Electronics Exits the Smartphone Business
Case Code: BSTR636
Case Length: 15 Pages
Pub Date: 2022
Teaching Note: Available
Organization : LG Electronics Inc.
Industry : Technology & Communications
Countries : South Korea
Themes: Business Failure, Organizational Crisis, Rise and Fall,Market Entry & Exit
Abstract Case Intro 1 Case Intro 2 Excerpts
The case discusses the exit of global electronics major LG Electronics (LG) from the global smartphone market. The South Korean major, which had been in the mobile handsets business for 26 years, shut down its mobile communications (MC) segment after facing losses for 23 consecutive quarters since the second quarter of 2015. The market share for LG’s global smartphone shipments fell from 10% in 2009 to 1% in 2021.
Despite being a late entrant into the mobile phone business, the company had launched some innovative smartphone models with features such as capacitive touch screen, Quad HD display, slow-motion video recording, wacky displays, dual screens, ultra-wide cameras, and gesture controls, to name a few. LG’s G series and V series smartphones were popular among customers. However, LG lost ground in smartphones with the global market becoming more saturated. Moreover, growing competition, consistent losses, chip shortages, software and hardware issues in the devices, and lack of aggressive marketing led to its downfall. It faced pressure from cheaper Chinese competitors in the low- to mid-end segment while being outmaneuvered by Apple and local rival Samsung Electronics in the premium part of the market.
Going forward, LG planned to focus on resources in growth areas such as electric vehicle components, connected devices, smart homes, robotics, artificial intelligence, and business-to-business solutions, as well as platforms and services. The company added that its withdrawal from smartphones would improve its competitiveness and financial status in the long term, although the decision could affect short-term sales.
The case is structured to achieve the following teaching objectives:
- Discuss the problems faced by LG in the global smartphone market.
- Examine the reasons that prompted LG to exit the smartphone business
- Understand the implications of leaving the lucrative smartphone market
Organizational crisis; Business Failure; Smartphone Business; Reorganization; Exit Strategy; Competition; Innovation; Global smartphone market
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