Case Analysis Lg Electronics
INTRODUCTION
In order to stay competitive in an industry with an increasing number of players, companies have to be able to stay on top of their costs, as well as that of their competitors. Costing is a very tricky business in itself. Companies are wont to making costing mistakes by going with the wrong assumptions.
The case of Tork versus LG shows how Tork conducts its breakdown of competitor costs in order to come up with strategies that will eliminate the costing advantage of LG. Tork is also burdened by an additional dilemma of continuing to produce low-end units or buying from LG, as well as deciding whether to pursue a legal battle against LG for dumping - that is, selling its products below cost.
CASE CONTEXT
LG Electronics, a competitor of Tork Corporation in the air conditioning industry, has faxed a proposal to produce low-end units for Tork to sell under its own brand name. This proposal gave Stan Lerner, VP for
North American Operations at Tork, something to think about. This deal could potentially benefit T ork in reducing costs, thereby, increasing margins. On the other hand, it could help LG gain entry into the
North American market by its association with an already established brand name.
PROBLEM STATEMENT
In this analysis, we aim to present our recommendations to address the following issues that Stan Lerner is faced with:
Is Tork correct in its analysis of LG’s cost, especially with some based only on assumptions?
If, in fact, LG’s costs are much higher than their quoted selling price to Tork, should Tork go ahead with a lawsuit against LG?
Should Tork go ahead and buy from LG for its low-end AC’s?
What are the chances of LG gaining a competitive ground in the high-end models?
What strategies can Tork adopt to remain competitive?
These are only some of the apparent issues that the case presents. Tork has to get a better idea of the actual costs incurred by LG in order to come up with a more
In order to stay competitive in an industry with an increasing number of players, companies have to be able to stay on top of their costs, as well as that of their competitors. Costing is a very tricky business in itself. Companies are wont to making costing mistakes by going with the wrong assumptions.
The case of Tork versus LG shows how Tork conducts its breakdown of competitor costs in order to come up with strategies that will eliminate the costing advantage of LG. Tork is also burdened by an additional dilemma of continuing to produce low-end units or buying from LG, as well as deciding whether to pursue a legal battle against LG for dumping - that is, selling its products below cost.
CASE CONTEXT
LG Electronics, a competitor of Tork Corporation in the air conditioning industry, has faxed a proposal to produce low-end units for Tork to sell under its own brand name. This proposal gave Stan Lerner, VP for
North American Operations at Tork, something to think about. This deal could potentially benefit T ork in reducing costs, thereby, increasing margins. On the other hand, it could help LG gain entry into the
North American market by its association with an already established brand name.
PROBLEM STATEMENT
In this analysis, we aim to present our recommendations to address the following issues that Stan Lerner is faced with:
Is Tork correct in its analysis of LG’s cost, especially with some based only on assumptions?
If, in fact, LG’s costs are much higher than their quoted selling price to Tork, should Tork go ahead with a lawsuit against LG?
Should Tork go ahead and buy from LG for its low-end AC’s?
What are the chances of LG gaining a competitive ground in the high-end models?
What strategies can Tork adopt to remain competitive?
These are only some of the apparent issues that the case presents. Tork has to get a better idea of the actual costs incurred by LG in order to come up with a more