LG Electronics

Discovering “The 86% Solution.”

“The 86% Solution”

Prof Vijay Mahajan & Kamini Banga

The Essence of “The 86% Solution?”

(insert cover of the book The 86% Solution here)

86% of worlds population lives in the emerging and developing world – an invisible opportunity!

MNCs have traditionally focused on developed markets like NA and Europe, ignoring 86% of the world populace.

Branding and Marketing principles in emerging markets are quite different from developed markets.

Innovation is the key to success in emerging markets

LG History

A Quick Review

Early Beginnings as “GoldStar”:

Korea focused – Some Export to developed world.

1958GoldStar (today's LG Electronics)

established

1959 Korea's first radio produced

1962Radio exported to the US and Hong Kong

as Korea's first

1965 Korea's first refrigerator produced

1966 Korea's first black & white TV produced

1968 Korea's first air conditioner produced

1969 Korea's first washing machine produced

1974 GoldStar Communications went public

1977 Color TV produced

1978 Exports surpassed US$100 million as Korea's first in the electronics industry

THE 1950s

THE 1970s

THE 1960s

The 1980s: Global production centers

Initially in the developed world..

1980First EU sales subsidiary in Germany (LGEWG) established

1982Color TV plant in Huntsville in the US established

1984 Sales surpassed one trillion won

1986 European-standard VCR plant in Germany established

1989 Sales subsidiary and a joint production subsidiary in Thailand established

The 1990s: Entry into China & India.

Acquisitions & Joint Ventures

1990Ireland-based design technology center established

1993 With the establishment of Huizhou subsidiary in China (LGEHZ), marketing in China took full swing

1995 Company name changed to LG Electronics and the US-based Zenith acquired

1997 40-inch PDP TV and the world's first IC set for DTVs developed; India production subsidiary (LGEIL) established

1998 World's first 60-inch PDP TV developed

1999 LG.Philips LCD, a joint venture with Philips, established

The New Millennium:

technology & innovation

2000 The world's first Internet-enabled refrigerator launchedGlobal sales of refrigerators reached the number one position

2001 the world's first Internet- enabled washing machine, air conditioner, and microwave oven launched

2003 World's first synchronous-asynchronous IMT-2000 mobile phone developed; the world's first 76-inch PDP TV developed; CDMA mobile handsets took the largest share in the US & world CDMA market

2004 All-in-one LG 55" LCD TV, the world’s first and largest among LCD TVs, commercialized. The world’s largest and first LG 71" plasma TV commercialized. The world’s first terrestrial DMB phone developed

2005 World's first DMB (Digital Multimedia Broadcasting) notebook PC unveiled. World's first DMB Phone with Time-shift function developedNetwork solution joint venture of LG-Nortel launched CDMA mobile phones ranked first in the world in the 3rd quarter

LG Today

Global Revenue: US $ 35 billion (consolidated $ 45 billion)

72,000 employees working in 77 offices and marketing units worldwide.

World’s largest producer of CDMA handsets, DVD players, optical storage devices, air conditioners, canister vacuum cleaners and micro ovens.

Growth driven by globalization

Driven by Globalization

80% of Revenue from outside South Korea

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The Vision: Clear Global Aspirations

The LG India

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Has LG Applied

The 86% Solutions

In India?

1. “Don’t Build a Car, when you

need a bullock-cart”

LG India: Closely studied the local needs &

Adapted international technology

“Watching TV causes eye strain”

“Food in the fridge goes stale”

“Expensive clothes should not be washed in Washing Machines”

“ACs are for cooling so it is a luxury item”

“Golden Eye”

“Preserve Nutrition System”

“Fabricare”

“HealthAir System”

Discovering Key Category Barriers LG’s Innovation

Discover Local Insights:

“Fear that TV Viewing will spoil children’s Eyes”

2 X Golden Eye TVC

LG Invented products to meet Indian consumer’s needs

TV Signals don’t reach all over the country

World-cup Football Craze in 2002

Frost free refrigerators are unaffordable by masses

Agitators in washing machine can damage clothes

DTH TV(India’s first)

Football shaped TV

IntroducedSemi Frost Free

Introduced“Chaos Punch”

Local Market Insights LG’s Innovation

LG Innovated to meet

Indian consumer’s needs

Majority of Indian consumers don’t read English

Big audiences on TV sets + high ambient noise

Cricket is the second religion for most Indians!

Cricket is a second religion for most Indians!

Indian-languageOn screen instructions

Ballad TV2000 Watt output

Free Cricket gameWith TV in 1999

World-cupSponsorships

Indian Consumer Needs LG’s Innovation

2. “Connect Brands to the Market”

“Grassroots Marketing” – An LG India Invention

Widest distribution network – “covering India inch by inch!”:

51 branches72 regional offices61 central area offices112 district area offices to cater to rural markets100 remote area offices

SPEED to market: products reached 18 states within 3 months of launch.

SERVICE at the doorstep:1108 service centers24 hour, hassle free service

Not just Bottom of the Pyramid –

The WHOLE Pyramid!

Covers the width of categories from Home Entertainment to Household Durables to IT services to Mobile Phones.

Wide price range – cater the entire population of India.

Latest technology inventions in top end – world class products in the show rooms.

Keep refreshing the portfolio – 40 to 50 new models every year.

Visibility at the retail outlets – the real on-ground battle field.

3. “Think Young!”

LG India’s Strategy: Associate with Youthful Symbols

Capitalize the Youth Passions: Cricket and Bollywood.

Early sponsorship and association with Cricket since 2000.

Abhishek Bacchan: The latest craze amongst youth.

4. “Discover the Lands of

Opportunity”

LG India’s Strategy: Make “Impossible” possible

Have Faith in India’s Potential

Business Challenge: MARKET CREATION

New lifestyles = New Opportunities.

Innovate to meet local market needs and aspirations.

Greed for Speed!

Target the multiple consumer segments: The super rich, the middle classes, the youth, the poor and the rural.

Price right – not cheap.

LG India’s Strategy:

Invest in communication to realize your dreams.

Set “stretched” goals

Disproportionately higher Share of Voice

Continuous presence – to maintain salience and top of mind awareness.

Invest in sponsorships: ICC sponsor for test and one day’s in 2001, 2002, 2005.

Make presence felt at the street level.

LG India’s strategy: Empower for Speed

Markets will not wait!

Deep distribution structure for quick reach of products

Empowerment at grassroots level to ensure speedy decisions

At national level Product Group Heads on key categories – run their categories as effective CEOs

To

Sum Up

LG’s Global Success

Key Success Factors

Corporate ambition for Global Leadership – clearly enumerated for every stakeholder.

Belief in “The 86% Solution” principles and markets as engines of growth.

Focus on Growth and Innovation.

Speed a vital winning ingredient

Dream ‘impossible’ dreams; fuel those with adequate investment to convert dreams to reality.

“Have A Wall?”

A Global Ad from India

LG X Canvas TVC

The World Can

Be Yours!