In the world of technology there exists a constant rat race with every company vying for the number one spot. Samsung Electronics (SSNLF, Financial) and LG Electronics (LG, Financial), two South Korean companies both specializing in the development and manufacture of a wide range of consumer electronic equipment and products have always been in stiff competition with each other. While Samsung is leading the way so far, the question is will LG be able to surpass Samsung?
The Path till now
To gauge the strength of a company it is important to delve into its roots. Every company has a unique and different growth story attributing to its success. Samsung was incorporated in 1938 as a small export business in Taegu, Korea. It began as an exporter of dried Korean fish, vegetables, and fruit to Manchuria and Beijing. It was only in the 70’s that Samsung went on to manufacture electronics. Since then the company has steadily grown and is committed to making life better for all its consumers. Samsung now stands as the world's leader in the development and manufacture of consumer electronics.
LG, a relatively younger company was established in 1958 as Goldstar. It was the first in Korea to manufacture radios, TVs, refrigerators, washing machines, and air conditioners. The company was renamed LG in 1995 when it acquired US based Zenith. Among its series of firsts, LG was the first company to develop and introduce CDMA digital mobile handsets as well as the world's first 60-inch plasma TV among its other achievements. LG today cannot be ignored when it comes to consumer electronics and has managed to establish itself as one of Samsung’s strongest competitors within Korea and across the world.
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The competition between the two companies has been around for decades now with Samsung and LG competing when it comes to almost every consumer electronic product in the market, from dishwashers, dryers, televisions and air conditioners. Although both companies have evolved as global market leaders Samsung has managed to stay ahead so far.
Today the smartphones market is the fastest growing in the consumer electronics segment and a Company’s market share in this segment is a clear indicator of its overall growth. As of 2014, Samsung has secured itself as the clear leader in the worldwide smartphone market and has fought to stay at the top by constantly developing all their products. However, due to stiff competitive pressures, Samsung’s’ volumes have declined from their previous years’ record highs. Shockingly, the third quarter of 2014 saw Samsung numbers slump by 60% compared to its profits for the same period in the previous year. At the same time LG saw huge success with their profits up by WON 167 BN with its shares rising by 4.3% for the same period.
LG, who had been lagging behind successfully managed to accelerate their sales and market share with their competitive pricing strategy and the introduction of their range of low-cost smartphones. In the last year LG was able to push its total volumes past the 15 million unit mark for the first time in the company's history. The introduction of LGs low cost range of smart phones fetched a warm reception within both emerging and developed markets. At the same time so as not to dilute its brand positioning in the high end segment, LG released its flagship G3 with features at par with the Samsung’s’ Galaxy range. It is noteworthy that as of the last quarter of 2014, LG found itself grabbing market share away from Samsung. Together both the companies have managed to give Apple Inc. (AAPL, Financial) serious competition, but against each other the two are and always have been arch rivals battling for 1st place.
LG gearing up to go beyond Samsung
It is clear that as an international manufacturer of consumer electronics LG is on an upward projectile and has a fighting chance at getting ahead of Samsung in the coming years. A number of factors have attributed to LG’s success in the last year. For one the competitive pricing strategy adopted by LG in the low cost smartphone bracket filled a void in the market for cost efficient good quality smart phones. Secondly, the fact that Samsung’s earnings for the same period, i.e. the last quarter of 2014 saw a huge drop cannot be ignored as a factor attributing to LGs growth. Samsung’s’ Galaxy series started losing its popularity and also Samsung was suddenly faced with stiff competition from Chinese companies such as Xiaomi, Lenovo (LNVGY, Financial) and Huawei who started eating into their market share.
While Samsung has spent its energies rivaling the bigger fish like electronics giant Apple Inc. and LG, their competitor at home and around the world, they have lost out to players from China who has slowly and steadily snuck ahead much like the tortoise got ahead of hare. While Samsung has an undeniable brand image and market position it must keep up with its competition in order to stay ahead of the game.
