Institute of Business Administration (IBA)

Savar, Bangladesh

Term Paper: Why LG Failed

Submitted to:
Md. Mahabub Morshed
Lecturer, Marketing
Institute of Business Administration (IBA)

Submitted by:
Akash Ghosh Riaz Uddin Anwar
MBA Batch 7, Roll 06 MBA Batch 7, Roll 06
Table of Contents
1. Introduction
2. LG Mobile: A Brief Overview
3. Key Reasons for LG Mobile's Failure
o 3.1 Inconsistent Product Strategy
o 3.2 Poor Software Integration
o 3.3 Lack of Innovation
o 3.4 Ineffective Marketing and Branding
o 3.5 Strong Competitors
4. Financial Struggles and Market Exit
5. Lessons from LG Mobile’s Failure
6. Conclusion
7. References
1. Introduction

LG Mobile, once a formidable player in the global smartphone market, withdrew from the
industry in April 2021. The company was unable to maintain its competitive position,
despite early successes and several attempts to innovate. This paper seeks to explore the
multitude of factors that led to LG Mobile’s exit, dissecting both external market forces
and internal strategic missteps.

The fall of LG Mobile is a multifaceted case of product misalignment, poor branding, and
intense competition. We will analyze these factors in-depth to offer a comprehensive view
of why one of the world's most recognized electronics brands failed to succeed in one of
the most lucrative markets: smartphones.

2. LG Mobile: A Brief Overview

Founded in 1958, LG Electronics rapidly gained recognition in the electronics industry,

and by the early 2000s, it had expanded into the mobile phone market. Initially, LG Mobile
had notable successes. The LG Chocolate series, for example, became a style icon in the
mid-2000s, appealing to users with its sleek design and innovative features.

In 2006, LG partnered with renowned fashion brand Prada to introduce one of the world’s
first capacitive touchscreen smartphones—the LG Prada. This set the stage for LG to be
considered one of the early innovators in mobile technology. Following this, the LG G2 and
G3 models became highly regarded for their design and powerful features.

However, starting from 2015, LG Mobile’s market share began to decline. Despite the
company’s history of innovation, several key factors—including the rapidly evolving
competitive landscape, changing consumer preferences, and strategic missteps—resulted
in its eventual failure.

LG's journey in the smartphone industry offers critical lessons for businesses trying to
navigate the fast-paced world of technology, where even well-established brands can
quickly lose ground.
3. Key Reasons for LG Mobile's Failure

3.1 Inconsistent Product Strategy

One of the major issues that led to LG Mobile's decline was its inconsistent product
strategy. Unlike Apple, which maintained a strong product lineup with a clear focus on its
flagship iPhone, LG struggled to define its brand positioning. The company introduced a
large number of devices across various price points, which created confusion for
consumers. For example, LG's G Series, V Series, and later the Q and K series each targeted
different market segments, but the lack of a clear flagship model diluted brand loyalty.

Modular Phone Failure: A Case Study

The launch of the LG G5 in 2016 illustrates how inconsistent strategy played a role in LG’s
decline. LG G5 was marketed as a "modular phone" where consumers could swap out
components such as the battery, camera, and audio systems. While the concept was
innovative, it was also poorly executed. The modular parts were expensive, and the
swapping mechanism was clunky. This half-hearted execution hurt LG's brand image, as
consumers found the feature more of a gimmick than a value-add.

Other manufacturers, like Samsung and Apple, focused on streamlining their flagship
models, making iterative improvements in critical areas like camera performance and
battery life. LG, on the other hand, chased novelty, leading to a perception of inconsistency.

3.2 Poor Software Integration

While LG Mobile had a strong track record in hardware design, its software integration
left much to be desired. Over the years, one of the most persistent complaints about LG
devices was the company's inability to provide timely software updates. In an era where
software plays an increasingly crucial role in enhancing the overall smartphone
experience, LG’s failure to optimize its software environment made its phones less
attractive compared to rivals.
LG’s custom Android skin, known as LG UX, was regularly criticized for being bloated and
slow. In comparison, competitors such as Google’s Pixel phones offered a pure Android
experience, and Samsung significantly improved its software optimization over time. The
delay in rolling out new Android versions meant that LG users often found themselves
using outdated operating systems, which not only frustrated consumers but also exposed
them to security vulnerabilities.

Slow Update Cycle: An Industry Comparison

While companies like OnePlus, Samsung, and Google were pushing Android updates
within weeks of release, LG lagged behind by several months. According to a 2020 study
by Counterpoint Research, LG ranked near the bottom in terms of the speed and
frequency of delivering software updates. This gap significantly impacted consumer
satisfaction, particularly among tech-savvy users who placed a premium on software
performance and security.

3.3 Lack of Innovation

LG had a history of introducing features that were often ahead of their time. However,
while innovation was at the core of LG's strategy, many of its innovations failed to resonate
with consumers. For example, the LG G5’s modular design, as previously mentioned, was
a commercial failure. Other bold designs, such as the LG Wing with its rotating screen, and
the curved screen LG Flex, were unique but failed to gain traction in the market.

Innovation Misalignment with Market Needs

A major reason for LG’s failure in innovation was that its product concepts often didn’t
align with consumer demands. While competitors focused on improving essential aspects
like camera quality, battery life, and overall user experience, LG took risks that did not pay
off. The rotating-screen LG Wing, for instance, targeted a niche market with a complicated
user interface, which didn’t appeal to the mass market.

In contrast, Samsung’s foldable phones such as the Galaxy Z Fold offered consumers a
balance of innovation and usability, resulting in commercial success. LG’s innovation,
though bold, often felt experimental, and the lack of a clear benefit to the average user
limited its market appeal.

3.4 Ineffective Marketing and Branding

LG’s lack of strong, effective marketing contributed to its failure. Despite offering
technologically competitive products, LG struggled to communicate the unique selling
points of its phones to the public. While companies like Apple and Samsung invested
heavily in creating brand identities—Apple with its focus on premium design and user
experience, and Samsung with its emphasis on cutting-edge features—LG failed to build
a distinct and consistent brand identity for its smartphones.
Marketing Failures and Competitor Successes

In contrast to LG’s lackluster marketing, Samsung was a master of product placement and
consumer engagement. Samsung consistently invested in high-profile marketing
campaigns during major events, such as the annual CES and MWC (Mobile World
Congress). Moreover, Samsung’s sponsorship deals, celebrity endorsements, and
partnerships helped elevate its image as a premium, high-tech brand. Apple, on the other
hand, focused on delivering a minimalist yet aspirational image through its
advertisements, positioning its iPhone as a luxury product.

LG, by comparison, had fragmented marketing efforts. While it did sponsor events and
invest in some advertisements, the overall impact was limited due to inconsistent
messaging. LG failed to create a narrative that could capture the imagination of the
consumers in the same way Apple and Samsung had successfully done.

3.5 Strong Competitors

Perhaps one of the most significant external factors contributing to LG Mobile’s demise
was the intensity of competition. Apple and Samsung had already secured their
dominance in the premium smartphone segment, making it difficult for LG to carve out
its own space. Moreover, the rapid rise of Chinese manufacturers, including Huawei,
Xiaomi, and Oppo, introduced significant price competition in the mid-range and budget
segments.

The Rise of Chinese Competitors

Chinese brands like Xiaomi and Huawei employed aggressive pricing strategies that
offered high-end features at mid-range prices. For example, Xiaomi’s Mi and Redmi series
gained tremendous popularity in Asia, Africa, and Latin America due to their affordability,
without sacrificing too much on performance. Huawei’s P and Mate series offered
flagship-level performance with superior camera capabilities at lower prices than LG’s
offerings.

By contrast, LG’s pricing was neither competitive in the premium segment (dominated by
Apple and Samsung) nor in the budget segment (dominated by Xiaomi, Huawei, and
Oppo). This squeezed LG out of both ends of the market, leaving the company without a
clear target audience.
4. Financial Struggles and Market Exit
The years leading up to LG’s market exit were marked by financial difficulties. LG Mobile
reported losses for 23 consecutive quarters, from 2015 to 2020. This persistent
underperformance led the parent company, LG Electronics, to contemplate pulling the
plug on its mobile division. Despite multiple attempts to turn things around, including
restructuring efforts and investments in new technologies, the mobile division could not
return to profitability.

Exit from the Smartphone Market

In April 2021, LG officially announced its decision to exit the smartphone business. The
company’s losses had become unsustainable, with LG Mobile losing over $4.5 billion in
the six years leading up to its closure. The company cited "a fiercely competitive mobile
phone market" as one of the primary reasons for its decision.

This exit marked the end of an era for LG, which had once been considered a pioneer in
mobile technology. While LG continues to thrive in other areas such as home appliances,
smart TVs, and electric vehicle components, its failure in the mobile business stands as a
reminder of the risks associated with technological innovation and market competition.

5. Lessons from LG Mobile’s Failure

The collapse of LG’s mobile division offers several valuable lessons for businesses
navigating highly competitive markets:

 Consistency in Product Strategy: Consistent brand positioning and a focused

product lineup are crucial for long-term success. LG’s attempts to diversify too
quickly diluted its market position.
 Innovation with Purpose: Innovation must align with consumer needs. While LG
was highly innovative, many of its products were ahead of their time or lacked
practical usability, leading to commercial failures.

 Effective Branding and Marketing: Strong marketing and clear communication

of a product’s unique value are essential. LG failed to build a strong identity around
its smartphones, unlike competitors who effectively used branding to create
consumer loyalty.
  Competitive Response: Understanding the competitive landscape is vital. LG
struggled to adapt to the challenges posed by Apple, Samsung, and low-cost
Chinese manufacturers. Staying relevant in a competitive market requires agile
responses to competitors’ strategies.

6. Conclusion

LG’s exit from the smartphone business reflects the complex challenges of surviving in a
fast-paced, innovation-driven industry. While the company had many successful
innovations and strong hardware capabilities, inconsistent product strategy, poor
software integration, weak branding, and stiff competition contributed to its downfall.
The lessons from LG’s failure are a stark reminder of how difficult it can be to maintain
relevance in the global smartphone market.

As technology continues to evolve, companies that fail to adapt to market demands and
consumer expectations risk facing similar fates. LG’s experience demonstrates that being
first to market is not enough; success ultimately depends on how well a company can
execute on its innovations, build brand loyalty, and respond to competitive pressures.

7. References
 Lee, Y. (2021). "Why LG is exiting the smartphone business after years of losses."
Reuters.

 Kim, J. (2020). "LG’s struggles in the smartphone market: An analysis." The Verge.
 Smith, A. (2019). "How Chinese manufacturers disrupted the global smartphone
market." Forbes.

 Park, M. (2021). "The rise and fall of LG Mobile." The Financial Times.

 Statista (2021). "Global smartphone market share by vendor."

 Deloitte (2020). "The rise of 5G and its impact on the smartphone market."