project on lg
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ACKNOWLEDGEMENT
It is indeed of great moment to pleasure to express my sense of profound gratitude and indebtedness too all the people who have been instrumental in making it a rich experience. I found it to be a challenging project that gave me a real practical exposure to the corporate world and it is almost impossible to do the same without the guidance of people around me. It would be difficult and almost impossible to achieve excellence without the blessing of Almighty God above and of elders.
Teachers are most respectable elder and worthy of highest esteem with surrounding echoes.
I am deeply indebted to Ms Praveen Bhatia, for helping me at various stages during the preparation of our project and giving me valuable suggestion and whole hearted co-operation for this dissertation work.
Thanks
RATUL CHANDEL
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CHAPTER 1
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INTRODUCTIONMarketing is the process associated with promoting for sale goods or services. It is considered a "social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and values with others." It is an integrated process through which companies create value for customers and build strong customer relationships in order to capture value from customers in return.
Marketing is used to create the customer, to keep the customer and to satisfy the customer. With the customer as the focus of its activities, it can be concluded that Marketing Management is one of the major components of business management. The evolution of marketing was caused due to mature markets and overcapacities in the last decades. Companies then shifted the focus from production more to the customer in order to stay profitable
The term marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions. It proposes that in order to satisfy its organizational objectives, an organization should anticipate the needs and wants of consumers and satisfy these more effectively than competitors.
PRODUCT INNOVATION
In a product innovation approach, the company pursues product innovation, and then tries to develop a market for the product. Product innovation drives the process and marketing research is conducted primarily to ensure that profitable market segment(s) exist for the innovation. The rationale is that customers may not know what options will be available to them in the future so we should not expect them to tell us what they will buy in the future. However, marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. When pursuing a product innovation approach, marketers must ensure that they have a varied and multi-tiered approach to product innovation.
CUSTOMER ORIENTATION:-
A firm in the market economy survives by producing goods that persons are willing and able to buy. Consequently, ascertaining consumer demand is vital for a firm future viability and even existence as a going concern. Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach.
In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.
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Marketing strategy:-The field of marketing strategy encompasses the strategy involved in the management of a given product. A given firm may hold numerous products in the marketplace, spanning numerous and sometimes wholly unrelated industries. Accordingly, a plan is required in order to manage effectively such products. Such decisions consist of the following decisions:
Should we (, i.e. the firm) enter a market/industry?
Should we increase funding for our product(s)?
Should we maintain funding for our product(s)?
Should we divest or cease production of our product(s)?
Evidently, a company needs to weigh up and ascertain how to utilize effectively its finite resources. As an
example, a start-up car manufacturing firm would face little success, should it attempt to rival
immediately Toyota, Ford, Nissan or any other large global car maker. Moreover, a product may be
reaching the end of its life-cycle. Thus, the issue of divest, or a ceasing of production may be made. With
regard to the aforesaid questions, each scenario requires a unique marketing strategy to be employed.
Below are listed some prominent marketing strategy models, which seek to propose means to answer the
preceding questions.
MARKETING MIX
In the early 1960s, Professor Neil Borden at Harvard Business School identified a number of company performance actions that can influence the consumer decision to purchase goods or services. Borden suggested that all those actions of the company represented a “Marketing Mix”. Professor E. Jerome McCarthy, at the Michigan State University in the early 1960s, suggested that the Marketing Mix contained 4 elements product, price, place and promotion.
PRODUCT : -
The product aspects of marketing deal with the specifications of the actual goods or services, and how it relates to the end-user's needs and wants. The scope of a product generally includes supporting elements such as warranties, guarantees, and support.
PRICING:-
This refers to the process of setting a price for a product, including discounts. The price need not be monetary; it can simply be what is exchanged for the product or services, e.g. time, energy, or attention. Methods of setting prices optimally are in the domain of pricing science. A number of modes of pricing techniques exist, which span
Elasticities (whether Price Elasticity of Demand, Cross Elasticity of Demand)
Market skimming pricing
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Market penetration pricing
PLACE;-
This refers to how the product gets to the customer; for example, point-of-sale placement or retailing. This third P has also sometimes been called Place, referring to the channel by which a product or service is sold (e.g. online vs. retail), which geographic region or industry, to which segment (young adults, families, business people), etc. also referring to how the environment in which the product is sold in can affect sales.
PROMOTION;-
This includes advertising, sales promotion, including promotional education, publicity, and personal
selling. Branding refers to the various methods of promoting the product, brand, or company.
These four elements are often referred to as the marketing mix which a marketer can use to craft
a marketing plan. The four Ps model is most useful when marketing low value consumer products.
Industrial products, services, high value consumer products require adjustments to this model. Services
marketing must account for the unique nature of services.
Industrial or B2B marketing must account for the long term contractual agreements that are typical
in supply chain transactions. Relationship marketing attempts to do this by looking at marketing from a
long term relationship perspective rather than individual transactions
In order to recognize the different aspects of selling services, as opposed to Products, a further three Ps
were added to make a range of Seven Ps for service industries:
Process - the way in which orders are handled, customers are satisfied and the service is
delivered.
Physical Evidence - is tangible evidence of the service customers will receive (for example a
holiday brochure).
People - the people meeting and dealing with the customers.
As markets have become more satisfied, the 7 Ps have become relevant to those companies selling
products, as well as those solely involved with services: customers now differentiate between sellers
of goods by the service they receive in the process from the people involved. Some authors cite a
further P - Packaging - this is thought by many to be part of Product, but in certain markets (Japan,
China for example) and with certain products (perfume, cosmetics) the packaging of a product has a
greater importance - maybe even than the product itself.
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EXECUTIVE SUMMARYThis Report will help us study the market potential of LG Electronics.
Indian Consumers durables market used to be dominated by few domestic players like Godrej Voltas.
But post liberalization many foreign companies have entered into Indian market dethroning the Indian
players and dominating Indian market the major categories being CTV, REFRIGRATOR, AIR CONTIONERS
and WASHING MACHINE.
India being the second largest growing economy with huge consumer class has resulted in consumer
durables as the fastest growing industries in India. LG, SAMSUNG the two known companies have been
maintaining the lead in the market with LG being leader almost all the categories. The rural market is
growing faster than the Urban Market, although the penetration level is much lower. The CTV segment
is expected to the largest contributing segment to the overall growth of the industries.
The rising income levels double income families and consumer awareness are the main growth drivers of
the industries.
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CHAPTER 2
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Goldstar Co., Ltd.
Lucky gold star marking 60 years in business:
They were the first to make cosmetics, toothpaste, radios, fans, telephones, black and white TV’s and washing machines in Korea.
Lucky goldstar was beginning as Lucky Chemical Industrial Corps. And God Star (Currently LG electronics).
THE PIONEER
The first product Lucky Chemical Industrial produced in 1947 was Lucky cream. It came in a brown container bearing the image of the Hollywood starlet Deanna Durbin and boasted such a sophisticated design that many people mistakenly thought it was imported from Shanghai. In 1951, the company entered the plastics business to make cosmetic containers and succeeded in developing less brittle kind of lid for them. The company ushered in the plastic age in Korea, introducing plastic combs, soap cases, toothbrush and tableware.
In 1954, it made Korea’s first toothpaste brand, Lucky toothpaste, and three years later, in 1957, it beat the U.S. brand Colgate to top the market in Korea.
Goldstar, the predecessor of LG Electronics, was founded in October 1958 and also became a pioneering firm. In November 1959, the company manufactured the first made in Korea radio, making a turning
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point in Korea’s electronics industry. Since then, the company also made the first fan, automatic telephone, refrigerator and washing machine.
In 1966, it introduced HiTi which later became a leading detergent brand. It innovative spirit led to interesting development. HiTi put an end to the need for Korean homemakers to beat cloths with washing paddles. The washing machine further lightened the load. When first introduced, the company black and white TV was so sought after that people formed long queues to buy it.
COMPANY HISTORY
Goldstar Co., Ltd. is the largest manufacturer of electrical appliances and consumer electronics in South Korea (Republic of Korea). It led domestic production of major appliances like televisions, refrigerators, and washing machines, and was also a major global supplier of semiconductors and liquid-crystal displays in the mid-1990s. With approximately $6 billion in 1994 sales, Goldstar formed the primary division of the giant Lucky-Goldstar chaebol, or business group.
Goldstar Co. was created in 1959 as part of the Lucky-Goldstar chaebol. Chaebols are massive groups of interrelated companies that dominate South Korean industry. Rising to prominence after the Korean War, South Korean chaebols were founded and operated by prominent, or "royal," families. Different chaebols generally concentrated on separate markets, such as those for chemicals or automobiles. Throughout the middle 1900s, chaebols were characterized by hierarchical, centralized control, which was usually exerted by members of the founding family. Chaebols traditionally had a central planning division, or secretary's office, which was directly subordinate to the chaebol chairman. The office would oversee all of the group's activities and was responsible for strategic management. In the early 1990s, the four largest chaebols--Samsung, Hyundai, Lucky-Goldstar, and Daewoo&mdashcounted for nearly half of Korea's total gross national product and about 40 percent of the country's total exports.
Formed in 1947, Lucky-Goldstar was the third-largest chaebol going into the 1990s. Formed by the Koo and Huh families, the chaebol started out selling face creams and quickly grew to become dominant in the national chemical manufacturing business. Like other chaebols, Lucky-Goldstar achieved strong growth during the 1940s and 1950s through extremely hard work. The chairmen and founders of the chaebols, in fact, were known for working relentlessly--even putting in 16-hour days for years on end without a vacation & mdashø make their business groups leaders in their respective industries.
As Korea's economy surged during the 1960s and 1970s, Lucky-Goldstar and other chaebols branched out into new industries, reflecting a national economic strategy of boosting exports and focusing on heavy industry. In 1958, Lucky-Goldstar became active in the electronics industry with the formation of Goldstar Co.
Goldstar Co. represented Korea's first foray into the electronics industry. The company started out assembling vacuum-tube radios locally, many of which were exported. In 1959, in fact, Goldstar became the first Korean company to build a radio. It rapidly expanded during the 1960s, branching out into the manufacture of appliances. It built the first Korean refrigerator in 1965, for instance, and the first Korean television in 1966. It subsequently began the manufacture of elevators and escalators, air conditioners, electric typewriters, and other electronic goods. Steady gains during the 1960s and 1970s were the result of low-cost operations matched with manufacturing and product innovations. Goldstar was the first Korean manufacturer to establish a solid toehold in electronics export markets, for example, supplying televisions to various U.S. companies, such as Sears and J.C. Penney. Those buyers sold the units under their own brand names. Goldstar gradually earned a reputation as a supplier of low-cost, high-quality electronic components and appliances.
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Goldstar's revenues continued to swell during the 1970s as it extended its reach into new industries and marketing channels. For example, it introduced its first product bearing the Goldstar name brand in the United States in 1977. The success of that 19-inch black-and-white television prompted it to export several lines of low-cost electronics during the late 1970s and 1980s that were sold under the Goldstar label. Importantly, Goldstar also began to advance into high-tech industry segments during the 1970s. For instance, it invested massive amounts of capital to establish its own semiconductor manufacturing division. Its initial goal was to produce microchips for use in its own electronic components. But Goldstar's long-term strategy was to use the semiconductor division to position the company to compete in the much more advanced electronics and telecommunications industries that were emerging.
By 1980, the Lucky-Goldstar group was boasting sales of more than $4 billion annually. Various chemical-related businesses still accounted for the majority of that revenue. Encouraged by the success of its electronics and appliance businesses, though, the chaebol decided to shift its focus away from chemicals. To that end, Lucky-Goldstar invested heavily in Goldstar Co. during the early and mid-1980s, boosting production capacity with both domestic and foreign production facilities. Goldstar even became the first Korean manufacturer to set up a manufacturing plant in the United States. Built in 1983, its Huntsville, Alabama, television plant was churning out more than one million color televisions and microwave ovens annually by the late 1980s. Goldstar augmented production efforts with a boost in advertising expenditures from $2 million in 1983 to $12 million in 1984.
In addition to overseas efforts, Goldstar launched an aggressive growth program at home. It expanded production capacity for virtually every one of its major products during the early and mid-1980s and broadened its product lines to include a number of high-tech goods. Most notable was Goldstar's construction of a new factory south of Seoul, in Pyongtaek. The plant, which opened in 1984, represented Goldstar's intent to become a leading global supplier of VCRs, personal computers, facsimile machines, and other relatively high-tech consumer and business devices. In fact, the company publicly announced a goal of deriving a full 40 percent of its sales by the mid-1980s from high-margin, advanced technology products, rather than from its traditional core of relatively low-tech, low-priced commodity goods.
Summing up Goldstar's basic tactic during the 1980s was one of its advertising slogans: "Expensive electronics without the expense." The strategy seemed to benefit the chaebol during the decade. Goldstar established a solid presence in domestic and international markets for microwave ovens and televisions, as well as for refrigerators, washing machines, and other major appliances. As a result, Lucky-Goldstar's revenues rocketed more than five-fold to $22 billion between 1980 and 1989. Much of that gain was attributable to electronics, which was supplying more than 30 percent of Lucky-Goldstar's revenue by the end of the decade, while 25 percent came from chemicals and 33 percent from various trade and financial services companies.
Although Goldstar's sales gains during the 1980s may have seemed impressive to the casual observer, its financial performance began to wane in the mid-1980s and the company experienced a series of setbacks. Goldstar's woes were the result of a variety of factors, including shifting global economies, labor strife, and greater domestic competition.
WHY GOLD STAR MARKET FAIED IN GLOBE
For example, Gold star’s dominance of Korea's domestic electronics industry, which it had enjoyed since the 1960s, was challenged by the Samsung chaebol, particularly beginning in the early 1980s. Samsung's electronics division surpassed Goldstar in both sales and profits by 1984 and continued to widen its lead throughout the decade. By the late 1980s, Goldstar's domestic market share had fallen from 45 percent early in the decade to just 36 percent.
Illustrative of Goldstar's difficulties during the 1980s was its reversals in the semiconductor business. In an effort to compete with rival Samsung, Goldstar had invested heavily to develop more sophisticated chip technology. Unfortunately, the semiconductors it developed had limited market applications and
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Goldstar had trouble mastering the production technology. The end result was that Goldstar was unable to achieve savings by producing its chips in-house, and it also failed to establish itself as a significant global chip manufacturer. Meanwhile, Samsung successfully transitioned into new semiconductor technology and eroded Goldstar's market share.
Adding to Goldstar's technology and competition woes in the 1980s were labor and economic setbacks. Because the Korean government restricted access to overseas financing sources, Goldstar was forced to fund much of its growth during the early and mid-1980s with loans from short-term domestic financiers. The unfortunate result by the late 1980s was that Goldstar was paying out more than 85 percent of its operating income to cover interest on its massive debt load. At the same time, Goldstar's primary export market, the United States, was maturing. Ongoing competition from Japanese producers exacerbated the export dilemma. To make matters worse, Goldstar lost much of its important low-cost labor advantage in the late 1980s when its workers rebelled. Frustrated union members went on strike, which ultimately cost the company $600 million between 1988 and 1990. They forced Goldstar to greatly boost wages, and as a result the company had to raise prices an average of eight percent.
But Goldstar's greatest problem by the end of the 1980s was that it was losing its reputation for quality. In 1990, for example, Consumer Reports ranked Gold star’s VCRs last in a comparison with 18 other brands. Part of Goldstar's quality problems stemmed from its reliance on outside suppliers--a faulty chip imported from Japan in 1987, for instance, nearly terminated Goldstar's American VCR operations. But it was also the result of Lucky-Goldstar's unwieldy organizational structure. By the late 1980s the chaebol was comprised of more than 30 different companies operating without cooperation. Research and development efforts were being duplicated in different divisions, and managers had lost touch with overall organizational objectives.
Quality and management problems, combined with a stronger won (the Korean currency unit), caused Goldstar's exports to the United States to crumble from $834 million in 1988 to just $535 million in 1990. That decline, along with plummeting domestic market share, caused Goldstar's net profit margins to drop by more than 100 percent during the period. The company was befuddled and had lost its focus. In 1984, for instance, management predicted that U.S. sales would top $1 billion by 1986. By 1990 that goal seemed like a foggy dream. Furthermore, Goldstar had fallen well short of its objective of generating 40 percent of its revenues from high-tech products--by 1990 only 12 percent of sales came from such goods.
The origin of many of Goldstar's problems in the late 1980s was the chaebol structure. Early in Lucky-Goldstar's history, the centralized, hierarchical structure of the chaebol had been an asset. The Koo family had made virtually all major decisions, and directives were regularly dispatched to executives from breakfast meetings over which the family presided. As the chaebolmushroomed in size, however, the authoritative nature of the organization became a liability. Importantly, the slow hierarchical decision-making process had become obsolete in the fast-moving global economy of the 1980s. Goldstar was still mostly family owned by the late 1980s and was run by the original founder's eldest son, Koo Cha-Kyung. "It would take days to make the most simple management decision because it [management] had to have the chops of everyone from the responsible manager right up to even the president at times," noted an industry analyst in the April 1991 Business Korea.
STRATEGY TO REENTER IN THE MARKET:-
Recognizing the urgency of the situation, the 62-year-old Koo took drastic measures beginning in 1989 to turn the ailing Lucky-Goldstar around. Most importantly, he handed control of Goldstar to Lee Hun-Jo, a 27-year Lucky-Goldstar veteran. Koo cemented Lee's independence when, in 1991, he gave a written guarantee of autonomy to Lee in a public ceremony. In a remarkable departure from chaebol tradition, Lee was allowed to run the company as he liked and was only required to report to Koo twice each year. Lee quickly reorganized Goldstar into two major groups: consumer electronics; and personal computers
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and office equipment. Products that did not fit into those divisions were spun off, distributed to contractors, or absorbed by other Lucky-Goldstar electronics companies.
During the early 1990s Lee virtually transformed Goldstar from a lagging electronics producer to a leading, global high-tech contender. Lee, who spoke both English and Japanese fluently, integrated proven Western and Japanese management techniques. His efforts permeated Goldstar's management and work force. "You have to transform human beings," Lee explained in Business Week in 1994. "If you can't change your people, you can't change your organization. If you can't do that, you can't reach your goal." Lee jettisoned entire layers of management and successfully forged an amiable working relationship between top management and labor. He also upped promotional spending in an effort to woo former customers, and reasserted Goldstar's plan to assume a lead role in high-technology markets.
BOUNCE BACK IN GLOBAL MARKET:-
Largely as a result of Lee's efforts, Goldstar staged a major comeback during the early 1990s. Sales vaulted from $4 billion in 1990 to more than $6 billion in 1994, and net income rose to a record $120 million after slumping to around $12 million. More importantly, by 1994 Goldstar had regained its number one position in the South Korean market for color televisions, refrigerators, and washing machines, and it had suddenly resumed its contention for global semiconductor market share. Among the company's pivotal breakthroughs was a unique new refrigerator, introduced in the early 1990s, which was designed to keep Korea's national dish, Kimchi, fresh and odorless for a long time. Likewise, Goldstar was achieving marked gains overseas by focusing on emerging markets like Russia and Vietnam while at the same time increasing North American sales through overseas manufacturing and partnerships with U.S. companies. In fact, Goldstar's U.S. sales jumped 17 percent in 1994 to around $1.2 billion.
Going into the mid-1990s Goldstar continued to streamline its operations and push into new geographic and product markets. For example, it was investing heavily to develop technology related to advance liquid-crystal displays, which were used in notebook computers, among other applications. To that end, Goldstar was building a $620-million factory in 1995 that would be capable of shipping one million of those units by 1997. Goldstar was also striving to establish a presence in the software industry, particularly in the gaming and interactive video segments. In 1994, Goldstar captured about 35 percent of its sales from home appliances, 25 percent from televisions, 13 percent from computer and office equipment, and the remainder from miscellaneous audio and video gear.
GrowingLG started its business in 1947 with a capital base of W3 million (US$1=W926).
That has grown to W7.565 trillion today, growth of more that 2.5 million times. Revenue has grown
2, 70,000 times from W300 million in its first year to W80 trillion last years. In the first year, 20 workers produced Lucky cream. Today the staff is 7,000 times bigger, numbering 1, 40,000.
Export has grown expontially, too, from 62 radios sold in the U.S. worth US$ 4,000 in 1962 to $40 billion in 2008.
Korea’s economic miracle would have been impossible without company like LG. the group hold several records, not only in statistic but also in the history of corporate management. In 1957, for the first time among the nation private firms, LG held an open recruitment to hire employees. The listing of Lucky chemical in 1969 was also the first initial public offering in Korea.
In 2003, for the first time among large conglomerates in Korea. LG launched a holding company, LG corp. The spin-off of the GS Group was also a landmark that smoothly ended the co-ownership of the Gu and Hur families that had lasted for 57 years. “The Company has been a pillar of the Korean economy over the past 60 years.
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Lucky Goldstar Enter Into Indian Market:
The company’s association with India began in 1993. It entered the market through a joint venture with the Delhi-based consumer electronics company, Bestavision, for selling color TVs under the name of Goldstar. But the venture faltered and was called off.
Lucky goldstar failure in India:
Many foreign companies have tried—and failed—to make a deep impression on the Indian market in recent years. LG's first attempt to enter it (in the early 1990s, as Lucky Goldstar) floundered as a result of difficulties the company encountered working with local importers. Because of the no Global exposure and Indian Govt. policy it failed on that time.
Market segmentation as geographical region in India was not very good, no any companies sustain in Indian market.
Factors for failure.
1. Low brand awareness about Lucky Gold star in India.
2. High import duty.
3. Competition from local players
4. Bad govt policies
5. Price sensitiveness of Indian consumers.
6. No Liberalization of the Indian Economy.
7. Company had no any New Innovative Ideas for Indian Consumers.
8. As 80% peoples of India are staying in rural sector, Company didn’t cover that much
area.
9. Company completely failed to attract the Indian customers.
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CHAPTER 3
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From Lucky Gold star to LG
By the 1970s Lucky Goldstar had become the first consumer electronics company to be listed on the Korean Stock Exchange. By the end of the decade it had also became the first Korean company in the home appliances segment to achieve exports of over US $2 billion (Rs. 9000 crore).
In 1995 the company changed its name to LG.That year, it tried to enter the Indian market through a joint Venture with the C K Birla group to manufacture refrigerators, TVs, audio and video equipment, washing machines and room air conditioners. This effort, too, did not succeed because of irreconcilable differences between the two regarding the business model to be followed.In the 1990s when India’s liberalization was flagged off and the Government of India began allowing multinationals to operate in India, LG established its own wholly owned subsidiary in the country. It re-launched itself as LG Electronics and used the brand name LG. It formally entered India in January 1997 and started its operations four months later.LG strives to enhance the customer’s life (and lifestyle) with intelligent features, intuitive functionality, and exceptional performance. Choosing LG is a form of self-expression and self-satisfaction. Our
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customer will take pride in owning the amazing and take comfort in knowing he/she made a smart, informed decision.
SLOGAN
“LIFE’S GOOD" REPRESENTS LG'S DETERMINATION TO PROVIDE DELIGHTFULLY SMART PRODUCTS THAT WILL MAKE YOUR LIFE GOOD.
Company slogan, 'Life's good' best expresses our brand's values, promises, benefits and personality. It is an ultimate expression for what our brand stands for and what we strive to deliver continuously. LG's delightfully smart products will make your life good.
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The LG Electronics Life's Good signature consists of the LG logo, seal, and the slogan, "Life's Good" set in Charlotte Sans typeface curved around the LG symbol. The curving of the slogan reinforces LG's personality and uniqueness. The consistent usage of this signature clearly establishes the unique identity of the company and unifies every division and product from LG Electronics across the globe.
Recent development : For LG, life doesn’t stop. The company is currently on a major expansion spree in the high-end display category (PDP and LCD). The communication is focused on how the XD Engine experience can draw customers to their home.LG is also planning to invest Rs. 900 crore (US$ 200 million) by 2008 in India to increase the capacity of its manufacturing plant in Ranjangaon, Pune. Of this total, Rs. 400 crore would be invested in setting up a DVD Writer manufacturing facility. This would be the first unit of its kind in India and the second largest in Asia. LG’s India target is to become a Rs. 45,000 crore (US$ 10 billion) company by 2010
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AbstractThe case discusses the entry and expansion strategies of LG in India and describes the measures
taken by the company to emerge as the market leader in the Indian consumer electronics industry.
The case describes in detail the marketing mix of LG including its product, distribution, pricing
and promotional strategies. It also puts forth the opportunities in the near future for LG and the
challenges faced by the company.
LG's Growth Strategies in India
India Challenges
1) Low brand awareness about LG in India.
2) One of the last MNC’s to enter India. (Samsung, Sony & Panasonic entered in 1995 &
LG in 1997)
3) High import duty
4) Competition from local players and other multinational companies in the consumer
electronics segment
5) Price sensitiveness of Indian consumers
Factors for success.
LGEI has overcome these challenges to emerge as one of the prominent brands in the Indian
consumer electronics and home appliances market by leveraging the success factors below.
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1. Innovative marketing strategies
2. Local and efficient manufacturing to reduce cost
3. Product localization
4. Regional channel strategy and wide distribution network
5. Promotion
Innovative Marketing Strategies
To make itself a known brand in the consumer electronics sector, LG has taken innovative
marketing and promotional initiatives:
• Launch of new technologies in consumer electronics and home appliances.
• LG was the first brand to enter cricket in a big way, by sponsoring the 1999 World Cup,
and followed it up in 2003 as well.
• LG brought in four captains of the Indian cricket team to endorse its products. LG
invested more than US$ 8 million on advertising and marketing in this sport.
• LG has differentiated its products using technology and health benefits. The CTV range
has ‘Golden Eye’ technology, air-conditioners have the ‘Health Air System’ and
microwave ovens have the ‘Health Wave System’.
Local and Efficient Manufacturing
To overcome high import duties, LG manufactures PC monitors and refrigerators in India
at its manufacturing facility at Noida, Delhi
LGEIL had already commissioned contract manufacturing at Mohali, Kolkata and Bhopal
for CTVs. This has helped LGEI to reduce costs.
LGEIL is implementing a “digital manufacturing system” (DMS) as a cost-cutting
innovation.
Product localizations
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Product localization is a key strategy used by LG.
LG came out with Hindi and regional language menus on its TV.
Introduced the low-priced “Cineplus” and “Sampoorna” range for the rural markets.
LG was the first brand to introduce gaming in CTV’s. In continuation of its association
with cricket, LG introduced the cricket game in CTV’s.
Regional channel strategy and wide distribution network.
LG has adopted the regional distribution model in India. All the distributors work directly
with the company. This has resulted in quicker rotation of stocks, and better penetration
into the B, C, and D class markets.
LG also follows the strategy of stock rotation, rather than dumping stocks on channel
partners.
LG has over 46 branch offices and another 110 area offices across the country.
India’s IT Advantage for LG
LG Electronics has awarded a contract to develop IT solutions to LG Soft India (LGSI).
The project involves development and support for ERP, SCM, CRM and IT-enabled
services for LG Electronics’ 60 overseas subsidiaries and manufacturing facilities
worldwide.
LGSI has offices in San Jose, London and Seoul with over 300 professionals in the
development facility at Bangalore. All its offices are networked for swifter
communication and decision making.
Distribution
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In its initial years in India, LG realized that it was important to have a good distribution
network to reach far-flung towns and the semi-urban markets.
To increase brand awareness among consumers, LG sent vans across India covering a
distance of 5000 km every month. The company focused on building a strong dealer
network.
In the late 1990s, when the trend was to give a credit period of 45 to 90 days to dealers, LG
did not offer any such schemes to attract dealers.
It instead asked them to pay in advance for its products. This ensured that the dealers
pushed the brand in the market to keep their own cash from being blocked. At the retail
and trade level, as the volumes grew faster, LG pushed its dealers towards selling products
at lower margins and focusing on quick rotation of stocks...
LG’s Product Line
Since its initial years in India, LG has focused on bringing out new models regularly in its product
range. In its first year of operation in India, LG launched 70 models across a range of products. In
1997, it introduced its Golden Eye Technology TV, which had a light sensitive natural algorithm
'eye.The 'eye' responded to the changes in lighting in the room, accordingly and adjusted color
sharpness, brightness, contrast, tint and balanced them automatically.
ProductIn its very first year of operations, LG showed off its technological superiority by launching the Golden Eye TV.The ‘eye’ responded to changes in lighting in the room and adjusted colour, contrast, sharpness, tint and balanced them automatically. LG has also continuously striven to localise its products. The best example of this initiative is probably the ‘Sampoorna’TV, designed especially for rural customers. It also launched the first colour TV with an on-screen display in Hindi. In 2004 LG launched Ballad Flat TV for customers in South West India who prefer a big bass output.The TV boasted 2000 watt speakers. In 2005 the company Introduced the ultra luxurious Xcanvas plasma TVThus, LG showed that it cared for customers' health through its products. LG's concern for health of customers was its unique selling proposition (USP) in the Indian consumer durables market.Similarly, LG positioned its refrigerators as the 'preserve nutrition system' refrigerators. In 1998, the company launched air conditioners as Health Air ACs...
Computers and Mobile Phones
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In September 2002, LG announced that it would launched Linux based PCs named 'My-PC' for the
home segment. Industry analysts expressed concern that LG was taking a huge risk by opting for
the lesser known Linux operating system. They said that even though Linux was being promoted by
bigger companies aggressively, it was relatively less known than Windows in the desktop market...
Business Areas & Main Products
Category Main Products
Consumer ElectronicsLCD TV , Plasma Display , Display Panel, Color Television, Home Theatre System, Music system, DVD Recorder/Player, MP3 & MP4 Player
Home AppliancesRoom Air Conditioner, Commercial Air Conditioner , Refrigerator, Washing Machine, Dishwasher, Microwave, Vacuum Cleaner
Computer ProductsLaptop, Personal Computer, LCD monitor, CRT monitor, Optical Storage Devices
Mobile PhonePremium trend setter phone , Camera Phone , Music Phone , Color Screen GSM Handset
Pricing strategy
When LG started its operations in 1997, it sold products that were imported. Hence, its
products were priced high and were equivalent to other foreign (Japanese) products.
Industry analysts felt that this strategy was adopted to make local consumers feel that LG
products were by no means inferior to Japanese products in performance or in quality
However, in 1998, LG launched 'Sampoorna,' its first low priced TV for rural consumers,
and followed it with 'Cineplus.' According to Kim, as the Indian customers wanted the best
products at reasonable prices, LG started introducing quality products in the economy
range.
In the first few years after its entry, LG did not get into price wars. Unlike other players, it
did not offer any exchange schemes or discounts.
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LG officials said that they believed in an 'honest pricing policy' and its message to
customers read 'No scheme, no gimmick, great products and honest prices.'...
Promotion
As a company LG has always believed in reaching out to people. Creating maximum awareness about its products was fundamental in making further inroads into the minds of the Indian consumer. That’s why it has laid great emphasis on its promotion and advertising activities. Unlike other competing companies that advertise seasonally, LG advertises all year round. Apart from cricket-based promotions and the use of cricket stars as brand ambassadors, LG has used Bollywood star Zayed Khan as its brand ambassador for its entire range of home appliance products. Its promotions have been extremely effective.
The finest example of this is probably the way it has promoted the Golden Eye technology. It completely focussed on the fact that this technology significantly reduced eye strain; it helped break the category barrier that TV viewing was injurious to eyes. It pushed the category out of inertia and gave consumers a reason to choose LG over others.Multi-media advertising heavily backed the launch of the Golden Eye technology. Starting with five TV commercials in the early days, LG increased the number to 30 commercials on different channels by 2002.Since TV was a mass consumer durable, LG has always aimed at gaining market leadership by investing across genres with high frequencies – news (Aaj Tak, Star News), music (Channel V), movies (HBO, Star Movies), Mass Entertainment (Zee, Sony) and regional channels to reach South Indian audiences.To add to the mass appeal the brand invested in cricket events with the highest ratings.
LG gave immense importance to its promotion and advertising activities. In 2004, the
company spent nearly Rs. 1.3 billion (5% of its revenues) towards advertising. Analysts
commented that LG's promotion and advertising of its durables segment were similar to
that of an FMCG company. Unlike many Indian brands which advertised seasonally (2-3
months during the festival season i.e. September, October and November), LG advertised
all round the year.
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CHAPTER 4
INDIAN Market
LG – the name itself brings to mind a world of cutting-edge technologies and top-end features. Consistently pushing the frontiers of innovation ever since it began its operations in this country LG has revolutionized the way Indians watch television today. LG was a late entrant into the Indian electronics goods market. In fact, this was a market that was gaining a great deal of attention worldwide. The result of this was that several leading international players from around the world – most in the Fortune 500 listing – had made a beeline for this last, great frontier. On the face of it the color TV market appeared to be saturated with a plethora of Indian andInternational brands happily ensconced in it. But the market of the early 1990s was very different from the market of the early 1970s when the government had first opened television manufacture to Indian
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companies. More than 100 licenses had been issued and by 1974 several scores of companies had commenced production. Marketing and distribution channels had been set up and in the next few years brands had carved up territories amongst themselves. 1982 was a historic year for India; it was in this year that color broadcast became a reality. This event also led to the sifting of brands, with many tying up with international companies and many simply going under. By the late 1990s only the strongest brands had survived, making the competition extremely intense. Indian brands like BPL, Onida and Videocon and international brands such as Sony, Panasonic, Thompson, Samsung and Akai amongst others were vying for a slice of the growing pie. It was in this milieu that LG arrived. As one of the last multinational companies to enter the Indian market, LGDiscovered that it had priced its TVs at the extreme top end at par with Sony. Every other brand was touting catch phrases about how their products delivered true-to-life pictures and sound. It was a cacophony of noises and it appeared that LG was just another brand –albeit at the top end – which was peddling its wares.Clearly, it made no sense to be simply another brand offering another colour television model. LG had to; therefore, adopt a unique marketing strategy to overcome the hurdles it faced from competitors. The philosophy that it worked around was ‘don’t challenge other brands; challenge, instead, the market paradigm’.This philosophy would be reflected strongest in 2002. This year was marked by brands suffering from tremendous sales pressures as a result of steadily falling prices. Most brands tackled the situation thinking along lines of least resistance. Promotions appeared to have become the flavour of the season. LG, however, had an unrelenting ambition and saw an opportunity of gaining leadership by not cowing down to the challenge of market pressures or resorting to exchange schemes, discounts and promotions. LG’s Golden Eye technology turned out to be the critical market differentiator that would help propel the company to the top by creating what its managers called “a superiority perception” of LG TVs.During the first few years of its entry, LG did not get into price wars. LG officials followed what they termed ‘an honest pricing policy’. Their message to customers read: “No scheme, no gimmick, great product and honest prices.” But by the early 2000s LG had modified its India market strategy. It began manufacturing productswith innovative features that were priced competitively. As a result of this, sales volumes began to climb.
Big plans for India
On September 06, 2005, India's largest consumer electronics and home appliance company - LG
Electronics India Private Ltd. (LG), announced that it would invest Rs. 9 billion3 by 2008 to expand
its manufacturing plant in Ranjangaon, Pune.
Of the total investment, Rs. 4 billion would be invested in setting up a DVD4 writer manufacturing
facility. This facility will be first of its kind in India and the second largest in Asia.
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The remaining amount would be used for expanding the Pune plant which produced most of LG's
product range (Refer Exhibit I for LG's product range).
According to LG, the plant would start producing DVD writers by mid 2006. The company planned
to make India a major export hub of DVD writers to European countries by 2010. By 2008,
production of DVD writers was expected to reach 33 million units.
Commenting on the major investment being made in India, Kwang-RO Kim (Kim), Managing
Director of LG said, "Prompted by our success in India, we have announced a major expansion at
the second production unit at Rajangaon. It will give us an edge over other players in terms of
production and subsequent market share."
After its entry in India in January 1997, LG established its first manufacturing plant in Greater
Noida, Uttar Pradesh in 1998 with an investment of Rs. 5 billion. In its first year, LG recorded a
turnover of Rs. 1.25 billion, and by 1999, its turnover increased to Rs. 10.56 billion (Refer Table I
for LG's turnover between the years 1997 and 2004).
By 2001, LG became India's fastest growing electronics, home appliances and computer Peripherals
Company. By the end of 2003, LG emerged as the market leader in consumer electronics and home
appliances. Innovative and customer friendly products, along with competitive pricing and vast
distribution network enabled LG to become market leader in its business.
To meet the growing demand for its products, LG started its second manufacturing plant in Pune in
October 2004 (Refer Table II for LG's market share as of 2004).
By the end of 2004, LG had more than 50 million customers and its turnover was more than Rs. 65
billion. LG started manufacturing GSM6 mobile phones in early 2005 in its Pune plant. In
December 2005, LG announced that it would also start producing CDMA7 mobile phones.
The company planned to invest Rs. 1.3 billion into R&D in India by 2010. LG aimed to increase its
revenues from US$ 2 billion (approximately) in 2004 to US$ 10 billion by 2010.
According to Francis Xavier, Managing Director, Francis Kanoi Marketing Planning Services8,
"LG has taken a share from everyone to be the number one in virtually all the consumer electronics
and appliances fields.
LG India Today
Today LG is one of the top rated electronics company in India, and its products are widely used by all sections of consumers in India.
LG India’s annual turnover was 10700 cr in 2008,which is an indication of tremendous growth of the company, since the day it was launched.
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The Future
Analysts felt that there were other factors that had contributed to LG's success in India. The
company imports only the basic technology from South Korea, while its own R&D facility in India,
where LG has been investing Rs. 2 billion per annum, accounts for 90% of the innovations.
The parent company gave its Indian subsidiary full independence of decision making. LG India had
to consult its parent company only on major decisions like where to establish manufacturing plant.
However, decisions regarding equipment required for the plant were taken by the Indian subsidiary
itself...
AchievementsLG’s history in India is studded with a whole gamut of prestigious achievements. In its rapid ascent to the top LG first ousted BPL to become the market leader. Its u awareness had increased from 34% to 67%, ad recall moved from 17% to 41% and brand preference had jumped from 11% to 18% in 2002 (Source: ORG Retail Audit). This was barely five years after it had entered the Indian market. Recognition and awards followed rapidly: Best Designer award by Business World and the National Institute of Design; Best Value award byDigit Magazine; Gold Rating for Environmental Performance from CII;Techies award for Best Flat Screen Monitor by Computer World; 2004 Business Today award for IT Innovation.
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CHAPTER 5
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INNOVATIVE IDEAS FROM LG ELECTRONICS:-
Though telecommunication service providers, mobile phone retail shops and some supermarket chains offer the possibility of returning used mobile phones and their accessories for reuse or recycling, it is not a common practice in today's society. LG Electronics plans to make it much easier for consumers to return their end-of-life or used phones.
In India, the draft rules for E-waste (Management and Handling) Rules 2008 have been notified by the Central Government. Though the said rules have not been finalized as yet, but since
5th June 2009, LG has voluntarily and pro-actively made available 50 mobile phone drop-off points and are expanding the Country level accessibility of take-back channels to all of our customers. To maximize resource efficiency through mobile phone recycling, LG Electronics works closely with all mobile phone supply chains including telecommunication service providers, distributors, merchandiser’s customers, and the recycling industry.
Guidance for the disposal of End of Life Products:-Consumers could contribute to resource conservation and prevent potential environmental problems by a simple action — the proper depositing of their old Mobiles. Electronic waste is to be collected separately from the general waste stream via designated collection facilities appointed by the government or the local authorities as per the said draft rules.
Mobile Phone Voluntary Take Back:-As you are no doubt already aware, the responsibility of the environment protection has accelerated the expansion of end-of-life product take-back regulations throughout the country. At present, many company in various regions are trying to finalize their own take-back policy. LG Electronics India has been involved in the process of establishing such policy much ahead of the draft rules being finalized and has appreciated the introduction of take-back systems by the Central Government.
Recycling Mobile Phones:
Many customers might think that end-of-life mobile phones are worthless, but they still contain many reusable or recyclable materials. This means that leaving old phones in your desk drawer is a huge waste of valuable resources. Let's see how all parts of mobile phone could be recycled.
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1) Valuable metals are used as component materials for the circuit board, LCD module, and camera module.
2) During the smelting process, valuable metals such as gold, silver, and copper can be retrieved from these electronic parts
3) The metals that are retrieved can be used for new electronic parts or can be sold separately on their own.
1) Plastic materials are used for structural components such as the
case and cover.2) The plastic materials that have been collected are recycled as
energy resources after going through a heat recovery process. Alternatively, they can be used as a form of recycled plastic once they have been broken down and processed.
3) Recycled plastic can be used to produce products such as traffic cones, plastic fencing, and car bumpers.
1) It is important to collect batteries separately, given the variety
of batteries that are used. Li-Ion batteries are frequently used in mobile phones.
2) Cobalt can be collected once the batteries have been pretreated to avoid the risk of explosion during the recycling process.
3) It is possible to sell the cobalt that is collected or use it as a raw material for products such as padlocks and speakers.
1) Paper is the main component used in packaging.2) Paper can be recycled.3) It is then used as recycled paper or in products made of paper
LG National Take Back Recycling Program:
To protect the environment LG Electronics India has partnered with Attero Recycling. Attero is an authorized e-waste recycler recognized by MoEF. Let us save the environment for a better tomorrow. We urge you to join us and convert your e-waste to e-goods.
R&D Potential
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India at Bangalore and is in the process of setting up another at Pune. Both the units carry out R&D work for the domestic market as well as for the parent company. It also does customized R&D for specific countries to which it exports products.
Rs 2 billion per annum, accounts for 90% of the innovations.
Conclusion
The following information tells us that proper marketing skills and strategies are immensely important for any company to build and maintain its stand in a widely diversified country like India where customer satisfaction comes at a high cost.
LG has proved its mettle by providing its customer with value for money, along with maintaining and at times increasing its profit.
LG is surely the perfect example for other MNC’s who want to set their foot in India.
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YEAR WISE PRODUCT LAUNCH:-
1958GoldStar (today’s LG Electronics) established
1959Korea’s first radio produced
1962Radio exported to the US and Hong Kong as Korea’s first
1965Korea’s first refrigerator produced
1966Korea’s first black & white TV produced
1968Korea’s first air conditioner produced1969Korea’s first washing machine produced1974GoldStar Communications went public1977Color TV produced
1978Exports surpassed US$100 million, a first for Korea’s electronics industry
1980First EU sales subsidiary in Germany (LGEWG) established
1982Color TV plant established in the US
2000LG Information & Communications merged The world’s first Internet-enabled refrigerator launched Global sales of refrigerators reached the number one position
2001Asynchronous IMT-2000 equipment commercialized The world’s first Internetenabled washing machine, air conditioner,and microwave oven launched LG.Philips Displays, a joint venture with Philips established
2002Under the LG Holding Company system, the Company spun off to LG Electronics (LGE)& LG Electronics Investment (LGEI) The first home network system commercialized in the global market2003World’s first synchronous-asynchronous IMT-2000 mobile phone developed The world’s first 76-inch Plasma TV developed CDMA mobile handsets took the largest share in the US and world CDMA market Launched the world’s first Super Multi DVD Rewriter2004EVSB, the next-generation DTV transmission technology, chosen to be the US/Canada DTV transmission standard by the US ATSC All-in-one LG 55-inch LCD TV, the world’s first and largest among LCDTVs, commercialized The world’s largest and first 71-inch Plasma TV commercialized The world’s first terrestrial DMB phone developed Developed Wireless Speaker
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in Huntsville, Alabama
1984Sales surpassed 1 trillion Won
1986European-standard VCR plant established in German
1989Sales subsidiary and a joint production subsidiary established in Thailand
1990Ireland-based design technology center established
1993With the establishment of Huizhou subsidiary in China(LGEHZ), marketing in China took full swing
1995Company name changed to LG Electronics and US-based Zenith acquired
1997 40-inch Plasma TV and the world’s first IC set for DTVs developed India production subsidiary (LGEIL) established
1998World’s first 60-inch Plasma TV developed
1999LG.Philips LCD established
Home Cinema System2005The world’s first DMB notebook commercialized The world’s slimmest TV commercialized The world’s largest102-inch Plasma TV developed LG and Nortel Networks agreed to establish a joint venture for telecommunication network equipment Satellite-based DMB phonecommercialized The largest share seized in the global CDMA market
2006Launched the LG Shine, the second handset in the Black Label Series Globally launched the steam washing machine and interactive TV refrigerator Developed theworld's first 100-inch LCD TV Launched the world's largest Full HD 102-inch Plasma TV (1080p) Developed the world's first dual-format high-definition DiscPlayer& Drive
2007 Launches the industry's first dual-format, high-definition disc player and drive Launches 120Hz Full HD LCD TV Demonstrated the world-first MIMO 4G-Enabled technologies with 3G LTE Won contract for GSMA's 3G campaign
2008 Introduces new global brand identity: "Stylish design and smart technology, in products that fit our consumer's lives."
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CHAPTER 6
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MOBILE PHONE [Market Share]
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LG ELECTRONICS MARKET SHARE:-
LG PLASAMA TV MARKET SHARE:-
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