LV Thạc sỹ_Repositioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam

Chapter 1: Theoretical background of competitive positioning Chapter 2: The current situation of Flat Panel Display business Chapter 3: Repositioning strategy to recover No.1 market share for LG’s Flat Panel Display in Vietnam Chapter 4: Difficulties and challenges, and recommendation in the process of implementation Conclusion

RESEARCH DISSERTATION

“REPOSITIONING STRATEGY FOR LG’ FLAT PANEL DISPLAY

TO RECOVER NO.1 MARKETSHARE IN VIETNAM”

Author: Nguyen Xuan Truong Program: MBA

Subject: Re-positioning strategy for LG’s flat panel display to recover No.1 market share in Vietnam

INTRODUCTION

1 Rationales of the research:

In recent years, consumer electronics market has been keeping on fast growing, especially, the

rapid increasing of high-tech products such as flat plane display (OLED TV, LCD TV, Plasma

TV) With the effects from WTO joining and AFTA, price of most categories becomes more and

more competitive, it results by increasing of audiovisual demand during the time

Flat panel display (FPD) market demand has been booming up since 2007 and has a compound

average growth rate (CAGR) to be 129% in 2007-2009 period and continuously over 30% in

2009-2012 period This category not only has a fast growth, but also it brings a big potential

profitability to manufacturers

LG Electronics Vietnam (LGEVN) had been No.1 position for flat panel display products in the

period 2001~2006 Since the aggressive marketing re-enforcement from Samsung and Sony,

LG’s losing No.1 position and be backwarded from these competitors in the market

The question is that although LG’s FPD products line-up is quite good about quality, design,

function and the price is competitive, but currently LG’ FPD products are No.3 in terms of

market share by 15%, going after Samsung (32%) and Sony (20%)

Therefore, I want to find the solutions for these problems and try to design a new re-positioning

strategy through:

Because of these reasons, I choose the dissertation: “Re-positioning strategy for LG’s Flat PanelDisplay to recover No.1 market share in Vietnam”

2 Research objectives:

The objectives of the research are:

- To understand the current situation of consumer electronics market

- To deeply explore the market insight through analyzing competitors and customers

- To specify the strengths, weaknesses, opportunities, and threats of LG brand in consumerelectronics market in general and flat panel display in particular

- To identify the reasons leading to backward of LG’s FPD in the market

- To re-design marketing strategy based on analyzing bottlenecks and challenges in the process

of marketing strategy implementation

- By working arts in LGEVN’s marketing department (2004-2009) and applying the knowledgelearnt from CFVG, I will make some recommendations for re-positioning strategy for LG’s FPD

3 Research methodology:

In order to make research, I use the below methods:

- Colleting the data:

 Direct interview the dealers, retailers in the consumer electronics business

+ Secondary data:

 The data from customer research from AC Nielsen and market insight from Gfk

 The data from LG about sales performance, channel structure analysis…

 Refer the information from many resources: magazines, internet…

- Analyzing the data by the method:

5 Research structure:

Introduction

Chapter 1: Theoretical background of competitive positioning

Chapter 2: The current situation of Flat Panel Display business

Chapter 3: Re-positioning strategy to recover No.1 market share for LG’s Flat Panel Display inVietnam

Chapter 4: Difficulties and challenges, and recommendation in the process of implementationConclusion

TABLE OF CONTENTS

INTRODUCTION Page

1 Rationales of the research -07

2 Research objective -08

3 Research method -08

4 Research scope -09

5 Research structure -09

CHAPTER I: THEORETICAL BACKGROUND OF COMPETITIVE POSITIONING 1.1 Product positioning -12

1.2 Brand positioning -13

1.3 Channel positioning -15

1.4 Pricing positioning -18

CHAPTER II: THE CURRENT SITUATION OF FLAT PANEL DISPLAY BUSINESS 2.1 Introduction of LG Electronics Vietnam Company -20

2.1.1 Overview of LG Electronics Vietnam company -20

2.1.2 Overview of LG’s flat panel display business in the recent years. -21

2.2 Business environment analysis -22

2.2.1 Economic and industrial environment -22

2.2.2 Market analysis -25

2.3 Competition analysis -28

2.3.1 Product -28

2.3.2 Price -30

2.3.3 Place (Channel) -31

2.3.4 Promotion -32

2.4 Customer analysis -33

2.4.1 Key buying factor -33

2.4.2 Communication tools -34

2.4.3 Lifestyle -34

2.5 Company Analysis -36

CHAPPTER III: RE-POSITIONING STRATEGY TO RECOVER NO.1 MARKET SHARE FOR LG’s FLAT PANEL DISPLAY IN VIETNAM 3.1 Vision of LG Electronics Vietnam in Flat Panel Display market - 39

3.1.1 Marketing objectives -39

3.1.2 Sales Objectives -39

3.2 Segmentation, Targeting and Positioning -39

3.2.1 Customer segmentation -39

3.2.2 Target to segmented market -40

3.2.3 Positioning to targeted market -41

3.3 Strategy Re-positioning -42

3.3.1 Product Strategy -42

3.3.2 Price Strategy -43

3.3.3 Channel Strategy -46

3.3.4 Promotion Strategy -48

3.3.5 People Strategy -50

CHAPTER IV: DIFFICULTIES/CHALLENGES & RECOMMENDATION -54

4.1 Difficulties and challenges in the process of implementation -54

4.2 Recommendation -55

CONCLUSION -56

LIST OF ABBREVIATIONS

First of all, I would like to express my special thanks to my tutor – Ph.D Doan Hoang Minh – forall the guidance and support that he has given me through the course of this dissertation Hissuggestions regarding the framework and review of the thesis have been greatly appreciated andacknowledged I truly appreciate his efforts in spending valuable time reading and correcting thenumerous drafts of this thesis

I would also like to thank my college – Mr Nguyen Xuan Chau – marketing manager of LGElectronics Vietnam His effort in spending valuable time supplying the related data andsuggestions despite his heavy workload is highly appreciated

CHAPTER I:

THEORETICAL BACKGROUND

Generally, in marketing, positioning means the process by which marketers try to create an

image or identity in the minds of their target market for its product, brand, or organization Itsobjective is to occupy a clear, unique, and advantageous position in the consumer’s mind

Furthermore, Re-positioning involves changing the identity of a product, relative to the identity

of competing products, in the collective minds of the target market

Question: What sets your product, service and company apart from your competitors? What

value do you provide and how is it different from the others?

Competitive positioning is about defining how you will “differentiate” your value in the market

It is about carving out a spot in the competitive landscape and focusing to deliver value with thatstrategy A good strategy analysis includes

 Market profile: size, competitors, stage of growth

 Customer segments: groups of prospects with similar wants & needs (characteristics)

 Competitive analysis: strengths, weaknesses, opportunities and threats in the landscape

 Positioning strategy: how you’ll position your offering to catch opportunities in themarket

 Value proposition: the type of value you’ll deliver to the market

When your offering is clearly different from that of your competitors, it is easy to build newprospects and attract customers to purchase Without differentiation, it will take more time andcost more persuade customers to choose you; as a result, you often end up with competing byprice – a tough situation to sustain over the long term

Your competitive positioning strategy is the foundation for your business’s future – it is the firstthing you should do if you are going to launch a new company or product It is also importantwhen you are expanding or looking for a new edge

Profile your market

 Finding the sizes of your market and major competitors, how their positions are

 Determine whether your current stage is introductory or growth or mature or declining inthe market This “lifecycle stage” affects your holistic marketing strategy

Segment your market

 Understand the problems that your business is facing in the market Talk with prospectsand customers, or conduct research if you have the time, budget and opportunity.Uncover their true wants and needs – you will learn a great deal about what you candeliver to solve their problems and beat your competitors

 Group your prospects into “segments” that have similar problems and can use yourproduct in similar ways By grouping them into segments, you can efficiently market toeach group

Evaluate your competition

 List your competitors Include any competitor that can solve your customers’ problems,even if their solutions are much different from yours – they are still your competitors

 Rate your own company and your direct competitors on operational efficiency (price),product leadership and customer intimacy It is easy to think you are the best, so be asimpartial as you can

Stake a position

 Identify areas where your competition is vulnerable

 Determine whether you can focus on those vulnerable areas - they are majoropportunities

 Identify products/services you can offer to meet the true needs of your market in a newand better way

Define your value proposition

 There are three core types of value that a company can deliver: operational efficiency (thelowest cost), product leadership (the best product), or customer intimacy (the best

solution & service) Determine which one you are best equipped to deliver; your decision

is your “value proposition.”

Product positioning

Question: What is your product? Which factor of product such as design, technology, function,

etc, is offering to customer?

Product positioning is what the customer percept about your product’s value, features, andbenefits; it is a comparison to the other available alternatives offered by the competition Thesebeliefs tend to based on customer experiences and evidence, rather than awareness created byadvertising or promotion

Marketers manage product positioning by focusing their marketing activities on a positioningstrategy Pricing, promotion, channels of distribution, and advertising all are to gear up thechosen positioning strategy

Generally, there are six basic strategies for product positioning:

 By attribute or benefit - This is the most frequently used positioning strategy For a lightbeer, it might be that it tastes great or that it is less filling For toothpaste, it might be themint taste or tartar control

 By use or application - The users of Apple computers can design and use graphics moreeasily than with Windows or UNIX Apple positions its computers based on how thecomputer is used

 By user - Facebook is a social networking site used exclusively by college students.Facebook is too cool for MySpace and serves a smaller, more sophisticated cohort Onlycollege students may participate with their campus e-mail IDs

 By product or service class - Margarine competes as an alternative to butter Margarine ispositioned as a lower cost and healthier alternative to butter, while butter provides bettertaste and wholesome ingredients

 By competitor - BMW and Mercedes often compare themselves to each other segmentingthe market to just the crème de la crème of the automobile market Ford and Chevy neednot apply

 By price or quality - Tiffany and Costco both sell diamonds Tiffany wants us to believethat their diamonds are of the highest quality, while Costco tells us that diamonds arediamonds and that only a chump will pay Tiffany prices.

Positioning is what the customer believes and not what the provider wants them to believe.Positioning can change due the counter measures taken at the competition Managing yourproduct positioning requires that you know your customer and that you understand yourcompetition; this is the job of market research not just what the entrepreneur thinks is true

Make product positioning strategy decisions

 Decide on new revenue growth and profits

 Decide on new product development

 Decide on price

 Decide on sales force, distribution, service

 Decide on customer psychological factors, not features and benefits

 Decide on product promotion

1.1 Brand positioning strategy

Question: What is a brand? Is it a logo? A name or slogan? A graphic design or color scheme? Your brand is the entire experience your prospects and customers have with your company It is what you stand for, a promise you make, and the personality you convey? While

it includes your logo, color palette and slogan, those are only creative elements that convey yourbrand Instead, your brand lives in every day-to-day interaction you have with your market:

 The images you convey

 The messages you deliver on your website, proposals and sales materials

 The way your employees interact with customers

 A customer’s opinion of you versus your competition

Branding is crucial for products and services sold in huge consumer markets It is also important

in B2B because it helps you stand out from your competition It brings your competitive positionand value proposition to life; it positions you as a certain “something” in the mind of your

prospects and customers Your brand consistently and repeatedly tells your prospects andcustomers why they should buy from you.

Think about successful consumer brands like Disney, Tiffany or Starbucks You probably knowwhat each brand represents Now imagine that you are competing against one of thesecompanies If you want to capture significant market share, start with a strong and unique brandidentity or you may not get far

In your industry, there may or may not be a strong brand However, when you put twocompanies up against each other, the one that represents something valuable will have an easiertime reaching, engaging, closing and retaining customers A strong brand strategy can be a bigadvantage

Successful branding also creates “brand equity” – the amount of money that customers arewilling to pay just because it is your brand In addition to generating revenue, brand equitymakes your company itself more valuable over the long term

Develop your brand strategy around emotional benefits

 List the features and benefits of your product / service A feature is an attribute – a color,

a configuration; a benefit is what that feature does for the customer

 Determine which benefits are most important to each of your customer segments

 Identify which benefits are emotional – the most powerful brand strategies tap intoemotions, even among business buyers

 Look at the emotional benefits and boil them down to one thing that your customersshould think of when they think of you That is what your brand should represent

Define your brand

 Think of your brand as a person with a distinct personality Describe him or her, and thenconvey these traits in everything you do and create

 Write positioning statements and a story about your brand; use them throughout yourcompany materials

 Choose colors, fonts and other visual elements that match your personality

 Determine how your employees will interact with prospects and customers to convey thepersonality and make sure your brand “lives” within your company

1.2 Channel positioning strategy

Question: How do you sell to your end-users? Do you use a direct sales team? Resellers? A

 Direct/internet: Selling through your own e-commerce website

 Wholesaler/distributor: A company that buys products in bulk from many manufacturersand then re-sells smaller volumes to resellers or retailers

 Value-added reseller (VAR): A VAR works with end-users to provide custom solutionsthat may include multiple products and services from different manufacturers

 Consultant: A consultant develops relationships with companies and provides eitherspecific or very broad services; they may recommend a manufacturer’s product or simplypurchase it to deliver a solution for the customer

 Dealer: A company or person, who buys inventory from either a manufacturer ordistributor, then re-sells to an end-user

 Retail: Retailers sell directly to end-users via a physical store, website or catalog

 Sales agent: You can outsource your sales function to a company that sells differentmanufacturers’ products to a group of similar customers in a specific territory

Distribution is one of the classic “4 Ps” of marketing (product, promotion, price, placement a.k.a.distribution) It is a key element in your entire marketing strategy — it helps you expand yourreach and grow revenue

To create a good distribution program, focus on the needs of your end-users

 If they need personalized service, you can utilize a local dealer network or resellerprogram to provide that service

 If your users prefer to buy online, you can create an e-commerce website and fulfillmentsystem and sell direct; you can also sell to another online retailer or a distributor to offeryour product on their own sites

 You can build your own specialized sales team to prospect and close deals directly withcustomers

Wholesalers, resellers, retailers, consultants and agents already have resources and relationships

to bring quickly your product to market If you sell through these groups instead of (or inaddition to) selling direct, treat the entire channel as a group of customers – and they are, sincethey are buying your product and re-selling it Understand their needs and deliver strongmarketing programs; you will maximize everyone’s revenue in the process

You can evaluate a new distribution channel or improve your channel marketing at any time It isespecially important to think about distribution when you are going after a new customersegment, releasing a new product, or looking for ways to grow aggressively your business

Evaluate how your end-users need to buy

Your distribution strategy should deliver the information and service your prospects need Foreach customer segment, consider

 How and where they prefer to buy

 Whether they need personalized education and training

 Whether they need additional products or services to be used alongside yours

 Whether your product needs to be customized or installed

 Whether your product needs to be serviced

Match end-user needs to a distribution strategy

 If your end-users need a great deal of information and service, your company can deliver

it directly through a sales force You can also build a channel of qualified resellers Thesize of the market and your price will probably dictate which scenario is best

 If the buying process is fair straight forward, you can sell direct via a website/catalog orperhaps through a wholesale/retail structure You may also use an inbound telemarketinggroup or a field sales team

 If you need complete control over your product’s delivery and service, adding a channelprobably is not right for you

Identify natural partners

If you want to grow beyond the direct model, look for companies that have relationships withyour end-users If consultants, wholesalers or retailers already reach your customer base, they arenatural partners

Build your channel

If you are setting up a distribution channel with one or more partners, treat it as a sales process:

 Approach the potential channel partner and “sell” the value of the partnership

 Establish goals, service requirements and reporting requirements

 Deliver inventory (if necessary) and sales/support materials

 Train the partner

 Run promotions and programs to support the partner and help them increase sales

Minimize pricing conflicts

If you use multiple channels, carefully map out the price for each step in your channel andinclude a fair profit for each type of partner Then compare the price that the end-user will pay; if

a customer can buy from one channel at a lower price than another, your partners will rightfullyhave concerns Pricing conflict is common but it can jeopardize your entire strategy, so do yourbest to map out the price at each step and develop the best solution possible

Drive revenue through the channel

Service your channel partners as you would service your best customers and work with them todrive revenue For example, provide them with marketing funds or materials to promote yourproducts; run campaigns to generate leads and forward them to your partners

1.3 Pricing positioning strategy

Price is one of the classic “4 Ps” of marketing (product, price, place, promotion) Yet in manyB2B companies, marketers are not necessarily involved in pricing strategy.

Pricing is a complex subject – there are many factors to consider, both short- and long-term For

example, your prices need to

 Reflect the value you provide versus your competitors

 Consider what the market will truly pay for your offering

 Enable you to reach your revenue and market share goals

 Maximize your profits

When you offer a truly unique product or service with little direct competition, it can bechallenging to establish your price Put together a strong strategy and competitive analysis soyou can see:

 What your prospects might pay for other solutions to their problems

 Where your price should fall in relation to theirs

When your price, value proposition and competitive position are aligned, you are in the bestsituation to maximize revenue and profits For example, here are three scenarios that show therelationship between these elements

It is best to create your brand strategy and identify your distribution channels before you developyour pricing strategy By doing so, you will ensure that your pricing reflects your valueproposition and reinforces your brand; you can also minimize pricing conflicts with your channelpartners

Match your pricing strategy to your value proposition

Your price sends a strong message to your market – it needs to be consistent with the value youare delivering

 If your value proposition is operational efficiency, then your price needs to be extremelycompetitive

 If your value proposition is product leadership or customer intimacy, a low price sendsthe wrong message After all, if a luxury item is not expensive, is it really a luxury?

Understand your cost structure and profitability goals

Companies calculate these costs differently, so verify the exact calculations your company usesfor:

 Cost of goods sold (COGS): the cost to physically produce a product or service

 Gross profit: the difference between the revenue you earn on a product and the cost tophysically produce it

In addition, understand how much profit the company needs to generate You will be far moreeffective when considering discount promotions – you will know exactly how low you can goand still be profitable

Analyze your competitors’ prices

Look at a wide variety of direct and indirect competitors to gauge where your price falls If yourvalue proposition is operational efficiency, evaluate your competitors on a regular basis to ensurethat you are continually competitive

Determine price sensitivity

A higher price typically means lower volume Yet you may generate more total revenue and/orprofit with fewer units at the higher price; it depends on how sensitive your customers are toprice fluctuations If they are extremely sensitive, you may be better off at a much lower pricewith substantially greater volume

Estimate how sensitive your customers are to fluctuations – it will help you determine the rightprice and volume combination More importantly, you can estimate how a price change canaffect your revenue

CHAPTER II:

THE CURRENT SITUATION OF FLAT PANEL DISPLAY

BUSINESS

2.1 Introduction of LG Electronics Vietnam

2.1.1 Overview of LG Electronics Vietnam Company

LG Electronics, Inc is a global leader and technology innovator in consumer electronics, homeappliances and mobile communications Established in 1958, LG is the first–ever electronicscompany in Korea Through many phase of unceasing development, thanks to great and non-stopefforts, LG Electronics has become a global company with more than 75 000 employees working

in 77 subsidiaries around the world LG Electronics is pursuing the vision of becoming a trueglobal digital leader, attracting customers worldwide, through its innovative and design Thecompany’s goal is to rank among the top 03 consumer electronics and telecommunicationscompanies in the world by 2010 To achieve this, LG embraces the idea of “Great Company,Great People”, recognizing that only great people can create great company

LG Electronics Vietnam, found in 1995, has one factory in Hung Yen province, which specialize

in assembling brown goods such as TV, DVD player, monitor, optical storage device, mobilephone with capacity is 550 000 sets per year for all and other factory is located in Hai PhongCity which specialize in assembling white goods such as air conditioner, refrigerator, washingmachine, microwave oven, vacuum cleaner

So far, LG Electronics Vietnam is considered as the pioneer producer as well as among marketleaders in Vietnam with leading product including flat TV, DVD player, monitor and airconditioner…

In 2009, LG Electronics Vietnam set turnover target with 250 million dollars and set compoundannual growth rate (CAGR) at 30% It wants to consolidate the current No.2 position in Vietnammarket and hope to be No.1 position in near future Beside the traditional products such as Flat

TV, air conditioners, washing machine, and refrigerators, LG Electronics Vietnam focuses onfast-growing products such as mobile phone and flat panel display

2.1.2 Situation of LG’s flat panel display business in the recent years

Since 2000, flat panel display products appeared in Vietnam market with Japanese brands such

as Sony, Pioneer, and JVC The price was around 8 000~10 000 US dollar for 42 inches, that wasthe reason why demand of LCD TV and plasma TV was still small and they were considered asluxury and premium products at home

Knowing that flat panel display demand would increase in the future and these products wereused to enhance brand image, LGEVN launched flat panel display products since 2001 With theadvantage of competitive price, LG’s flat panel display products occupied market share fromother competitors and to be number one position in this market from the period 2002~2006.However, the tough competition happened since market demand increased due to sharp pricedown trend and the aggressive marketing activities from Samsung in 2006 and Sony in 2007.That was actual difficult period for LG Electronics Vietnam due to limited marketing budget, un-flexible policies, non-innovated products…That were the reason why LG lost the number oneand number two market share in 2006 and 2008, comparatively Now it also got the challengesfrom other competitors such as Panasonic and Toshiba

Chart 01: LCD TV market share in period 2004~2008 (1)

To realize the current situation, in the recent years, LG has been trying to innovate productdesign and technology, to reduce costs to make price competitive, to re-structure channels, and tofocus more on marketing activities

2.2 Business Environment Analysis

2.2.1 Economic and industrial environment

 Macro economic factors

In the present economic background, Vietnam is considered a success country The economicgrowth rate is putted at 6.5%; inflation has reduced sharply in the year-end months; the budgetdeficit and trade deficit have decreased against the estimation and social welfare has beenimproved The political and social situation continues to be stable The Government’s solution tostabilize the macro economy has obtained important results; particularly the monetary policy hasmade a positive contribution to reducing inflation and trade deficit However, the economicsituation started to have more difficulties from the fourth quarter of 2008 A strong decrease ofexport in November results in increasing trade deficit

The strongest impact due to the financial crisis is on Vietnam’s export, which has occupied 65%

of its GDP Foreign Direct Investment (FDI) has made not so strong impact because of thecountry’s large domestic saving of GDP’s 30% In other words, FDI has contributed only onefourth of the economic growth It is forecasted by World Bank that Vietnam’s growth rate is put

at 6.5% in 2009 However, if the Government can quickly deploy its domestic stimulus package,its economic growth rate could be able to reach 6% and higher in 2010 Inflation in 2009 will beabout 10% and increase a little bit in 2010 Trade deficit is estimated at GDP’s 17%; the overallbalance of payment deficit could be higher than 2008 Therefore, the actual pressure onincreasing the foreign exchange rate is stronger Bad debt rate is estimated not over 5% Thestock market could continue to be sluggish in early months of 2009 and recover slowly in theremaining months of the year The real estate market could emerge from its rock bottom in thelast months of 2009

In the end of October, the Government has just extended the first stimulus package up to the firstquarter 2010 and launched the second stimulus package With this action, Vietnam wouldattempt to attain a higher economic growth next year while still curbing high inflation risks,ensuring social and political stability and improving people’s lives

 Industrial Environment

With the affecting of joining WTO, price of most categories became more competitive, thuspushing consuming industry demand during the time In the consumer electronics industry,telecom and information technology has been increasing fast and cover nearly a half, in themeantime, home appliances and consumer electronics showed stable and still cover theremaining half of consuming industry

Chat 02: Market Portion of CE Industry (Jan ~ Sep 2009) (2)

Currently, TV still covers the main market of consumer electronics products with LCD TV andCRT TV In 2009, consumer electronics retail market witnessed transitioning time and showedrapid increase of flat panel display products (40.2% up to 59,5%) and the sharp decrease oftraditional CRT TV (47% down to 26.2%)

Look at the chart A below, we can see that CRT TV now in matured period and now has adowntrend Although the price was down, market demand still decreased sharply However,LCD TV and Plasma TV show the diverse trend Market demand has increased remarkably due

to sharp price down in recent years

Chart 03: Consumer Electronics Market Growth (Sep ’08 to Sep ’09) (3)

The chart below shows value share of 11 regions included: Central Highlands, Danang, Hanoi,HCM City, Mekong River Delta, North East South, North Central Coast, North East, NorthWest, Red River Delta, and South Central Coast In general, the order of regions is similar to lastyear; HCMC and Hanoi are two largest cities, which heavily contributed more than 40% in valueshare of total CE market Beside, the regions, which are currently evaluated as potential markets,are North East South, Mekong River Delta and North.C.Coast Those regions are considered ashaving good economic growths while other regions with different geographical features alsohave potential purchased market

South.C.C 6%

Red.R.D 8%

North West 2%

North East 9%

North.C.C 6%

N.E.South 7%

C.Highland 4%

Mekong.R.D 9%

Hanoi 16%

Danang 5%

HCM 28%

Chart 04: Consumer Electronics Market Pie by Region (1H.09) (4)

For the development trend of television broadcast, Vietnam television broadcast still depends onanalog TV However, Vietnam has been investing and deploying digital TV in the recent years.The digital TV such as cable TV, DTH, satellite is growing fast in cities such as Hanoi andHochiminh city and now expanding to other cities and rural areas In the 2010~2012 period,Vietnam will try to end analogue TV in big cities, retransmit DTH to remote areas, and developlow cost for set-top box project Vietnam continues to expand digital TV to nationwide in the2012~2015 period and plan to stop analog TV in 2015

With the trend of television broadcasting development, the technology for digital TV also showsanother trend, that is resolution technology Before the year 2002, the SD resolution (852 x 480pixels) was popular for flat panel display but it moved to HD resolution (1,366 x 758 pixels) in2002~2008 Now, Full HD resolution (1,920 x 1,080 pixels) is actually new trend

Chart 05: Roadmap of Digital TV implementation in Vietnam (5)

2.2.2 Market Analysis

 Yearly Market Demand

Actually, market demand of FPD has been booming up since 2007 Market price of theseproducts down fast, which was partly due to AFTA Route and touch competition from mainplayers such as Samsung, LG, Sony in the market The figure in Chart 6 shows that marketdemand increase over 900% from 2006 to 2008 and continues increasing in 2009 with the

remarkable growth rate (200%) Market demand is forecasted to be increasing in the followingyears and will achieve 900,000 LCD TV sets

Chart 06: FPD Market Demand by Yearly (2006 – 20012E) (6)

 Market Demand by Inches

In general, 32” LCD TV is popular size with the biggest sales portion (around 65%) because ofthe best fit for average Vietnamese house size The second and third biggest pies are 40”-42” and37” respectively Demand for small size show a downtrend and move to bigger screen size

Chart 07: LCD TV Market Trend by Screen Size (2009) (7)

 Market Demand by regions and channel

Same as above CE market pie, market demand of LCD TV is also divided into 11 regions.However, there is a big difference between CE demand and LCD TV demand The differencewas come from the specific characteristics of this product The high technology and high price isthe main reason explaining why almost market demand focuses on high-income families in somebig cities: Hanoi and Hochiminh city These main cities now occupy over 70% of FPD marketdemand The emerging markets belong to other regions such as Danang, Red.R.Delta…

Red.R.D 7%

Mekong.R.D 5%

Hanoi 28%

Danang 5%

HCM 42%

Chart 08: LCD TV Market Pie by Regions (1H.2009) (8)

Although the demand for 02 big cities: Hanoi and Hochiminh city still increase, the demand ofthese products in provinces will grow very fast in the following years Especially, the mentionedabove regions such as Mekong River Delta, Red River Delta, Danang, and North Central Coastwill be develop further The market demand in provinces will be forecasted up to 42% in 2012

Chart 09: Market Demand Trend by Region (9)

The consumer electronics market focuses mainly on 02 channel types: modern channel andtraditional channel Modern channel is the channel aiming directly to consumers, therefore, theynormally have some characters: located at crowded urban, large floor for product display, display

diversification, availability of floor salesmen, after-sale-service, and marketing oriented In theother side, traditional channel follow the traditional method, which sales products throughdistributors and retailers, hence, their characters include: located in the small urban, small shop,

no after-sale-service, price oriented

There is a trend moving from traditional to modern channel In 2007, modern channel just cover42% and mainly appear in big cities such as Hanoi and Hochiminh city However, it is forecasted

to increase up to 80% coverage owing to the expansion of key shops The change of purchasingbehaviors also pushes up the transitioning progress Almost consumers want to buy a productfrom the place where they can get more information, consultant, full services and competitiveprice Therefore, many traditional small retailers have to close because of no competitiveness

Chart 10: Market Demand Trend by Channel Type (10)

2.3 Competitiveness Analysis

Currently, there are 04 main competitors, which cover over 80% market share of LCD TVmarket included: Samsung, LG, Samsung and Panasonic In the meantime, Plasma TV markethas 03 main players: Samsung, LG and Panasonic These players are also occupying over 90%market share of this market Therefore, I just focus on analyzing the competitiveness about 4Pamong these competitors

2.3.1 Product

As shown in table A, Samsung has strongest product competitiveness thanks to advancedtechnology and wide range of products In additional, in the LED market, while Sony andPanasonic have each only 01 flagship model to show-off innovative technology, Samsung has 03

series of LED TV by B6000, B7000, B8000 series These models are not only to show-offSamsung’s LED technology, but also to sell commercially due to affordable price At this time,

LG are one-step behind competitors about innovative technology due to late LED TV launching.However, LG still shows wide range of products for LCD TV and plasma TV Sony alsowithdraws from plasma TV market owing to be worried about the development of plasma TV inthe future

Product Grade Fuction LG Samsung Sony Panasonic

High-end LED, Full HD, 200Hz B8000 ZX1 Z1 High-end LED, Full HD, 100Hz B7000

High-end LED, Full HD B6000

High-end Full HD, 200Hz LH50 B750 Z550 High-end Full HD, 100Hz LH70 B650 WE5 G10V Mid-end Full HD, Power Saving LH35 B550 W550

Table 01: Product Line-up Comparison in 2009 (11)

Full HD shows a developing trend when most brands launch and line-up wide range of Full HDmodels They are also classified by Hertz (Hz) such as 100Hz/200Hz to show high technology

50" F.HD 1 3 2

Table 02: Number of Model by Inches in line-up 2009 (12)

In the table 02, it is clearly shown that Samsung and Sony both have wide range of line-up in bigsize screen segments by 40", 46", 52", and 55” Nevertheless, in case of LG, although it has agood line-up in 42” and 47” segments, but it does not launch any model in 52/55” segments yet.Beside of that, Panasonic does not have advantage in big size LCD segments; it just focuses onbig size of plasma TV In small size screen segment, while LG has strong product line-up, Sonyand Samsung each have one model for each segment and Panasonic does not have any model.2.3.2 Price

In general, average LCD retail price down around 30% compare with last year The gap betweenJapanese and Korean brands is narrowed LG retail price keeps positioning at lowest level due tolower brand awareness However, Samsung has been following closely whenever LG adjustedprice Meanwhile, Sony still posits their price high above other brand thank to good brand name

In addition, Panasonic now wants to gain market share due to reasonable price but Japanesebrand

(12) Source: websites (Samsung, Sony, Panasonic, LG), October 2009

Chart 11: Price Trend of Volume Model (Jan ’09 ~ Sep ’09) (13)

In spite of tough price competition, it is heard that Japanese brands could not price down moreand will adjust their price up in the end of this year due to big loss from LCD TV sales Koreanalso keeps the current price positioning and may launch some promotion program at peak season

to attract customers

2.3.3 Place (Channel) Analysis

As analyzed in the channel trend part, modern channel will strongly develop in the followingyears However, the development progress of modern channel has some differences between bigcities and provinces In the big cities such as Hanoi and Hochiminh city, the key shops in modernchannel now nearly spread by opening more number of electronics centers and cover 75%, in themeantime, some big retailers in provinces are trying to modernizing by conversing to electronicscenters It is predicted to be up to 65% market pie in 2012

2008 2009 2012E

2012E 2008

HN/HCM

Provinces

2012E 2008

Instore Sales Store <20%

Good Relationship, Instore

Sales Store >20%

2008 2009 2012E

2012E 2008

HN/HCM

Provinces

2012E 2008

Instore Sales Store <20%

Good Relationship, Instore

Sales Store >20%

Chart 12: Channel trend and current Situation of electronics business by brands (14)

The traffic light symbol shows the current situation of electronics brand in this market Theserious threat for LG is that the flat panel display demand now is increasing in provinces, from

(13) Source: Retail Price Report from LG’s Promoter Girl, October 2009