LG, the South Korean multinational electronics company, has decided to bring a major change in its smartphone division. The reports flowing in suggests that they are ready to outsource lower-to-mid end smartphones. They are doing this reorganization to increase its efficiency and drive up the sales number which is really struggling for some years now. In fact, LG has reported operating losses reported for 22 consecutive quarters. That means, for the past five years, the company has failed to register an operating profit.
This downward trend has forced the management to wear their thinking caps and look for a new direction which has led them to the choice of Original Design Manufacturer (ODM). LG has a strong mobile division in the early 2010s. They were ranked No. 3 in the global smartphone market by Strategy Analytics in 2013. But it went downhill since 2015. Why? All due to the Chinese manufacturers who flood the market with their cheaper and effective handsets.
Chinese companies like Huawei, Xiaomi, Oppo, and Vivo took over the market by engaging in the price war. They underwent several marketing strategies to change people’s perception of Chinese mobiles. Earlier, people use to consider Chinese brands as someone who offers unreliable products. Now in 2020, it is they who are ruling the markets worldwide.
LG is planning to outsource the design and manufacture and sell the handsets under its brand name. Due to this, they have jettisoned some of its research and production members. They are also trying to fit other members according to the new business models. LG will use this new direction in their low-end and mid-end smartphones but will still rely on in-house research & development and production in their high-end smartphones.
Outsourcing will help them to reduce the cost and bring more efficiency. But, will that be enough? Can they ace the market with this new direction?
