Its operating profit ratio was 6.5% in second quarter...LG surpasses Whirlpool and Electrolux with its innovated products
LG Electronics is currently recording best operating profit out of major global household appliances businesses.
According to industry, LG Electronics’ household appliances business recorded sales of $3.75 billion (4.4853 trillion KRW), operating profit of $244 million (291.8 billion KRW), and operating profit ratio of 6.5% in last second quarter. Its operating profit ratio value greatly exceeds operating profit ratios of major global household appliances businesses and it is the best value after LG Electronics’ household appliances business recorded 7% in first quarter of 2010.
Whirlpool and Electrolux recorded operating profit ratios of 5.2% and 2.9% respectively in second quarter. Although Bosch did not show its performance level, its current operating profit ratios in 2013 and 2014 were 4.9% and 6.2% respectively. Samsung Electronics does not count its operating profit ratio in household appliances business separately. However its operating profit ratio in consumer electronics (CE) department including video display was 1.8% in second quarter.
LG Electronics chose H&A Business Headquarters’ Director (President) Cho Sung Jin’s innovated strategy that focuses on releasing new products as the reason why its profit ratio is skyrocketing. After he was appointed as the president in 2013, he introduced twin-wash washing machine that combines drum washing machine andTongdoli washing machine, water purifier refrigerator that makes ice, wireless vacuum cleaner and others in order. These are products that have not been released by any businesses yet. LG Electronics is also focusing on increasing sales of clothing care system called Styler globally after President Cho was appointed.
A person that is affiliated with LG Electronics said that President Cho has been implementing his strategy, which focuses on introducing innovated household appliances a step earlier than its competitors, according to LG Group’s perspective of ‘market leader’. Although President Cho is overseeing LG Electronics’ household appliances business, he has shown best results in washing machine department for many years. Hence people call him ‘Mister Washing Machine’.
LG Electronics’ washing machines are the best in the world. According to the U.S. market research company called Stevenson Company, market share of LG Electronics’ drum washing machine in first half in North American market is 24.3%. Market share of premium product line that costs $900 or more is 30.1%.
Household appliances business is very important to LG Electronics. Its other items such as TVs and Smartphones are still not showing any clear signs of recovery, and that is why household appliances business needs to maintain LG Group’s business until other items recover. Unlike Smartphone business, it is not easy for hugely successful products to come out suddenly in household appliances business. However unlike other businesses, it can be a stable and steady business once it reaches certain track due to high level of difficulty to enter this business.
President Cho Sung Jin is recently stressing the importance of ‘built-in’ and ‘oven’ businesses that are LG Electronics’ next choices of weapon. Built-in is pushing for a strategy that will increase shares in advanced countries’ markets such as the U.S. and Europe. By end of the year, LG Electronics will additionally introduce ‘personalized package’ that considers consumers’ characteristics per region.
Although oven market is considerably weak compared to other markets, it is an unknown market that reaches the size of $65 billion annually. Due to this possibility, it can stack up against washing machine (about $85 billion), home air conditioner ($40 billion), and refrigerator ($40 billion) businesses and has good operating profit ratio as many major businesses’ operating profit ratios reach double digit. After being appointed as the president, President Cho invested tens of millions of dollars just in oven business because his goal is to increase sales of ovens by 3 times.
Senior Reporter Kim, Seungkyu | seung@etnews.com