TABLE OF CONTENTS

Chapter 1: Introduction 01-49

1.1 Overview of the Industry 01

1.2 Profile of the Organization 21

1.3 Problems of the Organization 42

1.4 Competition Information 44

1.5 S.W.O.T. Analysis of the Organization 48

Chapter 2: Objective & Methodology 50-53

2.1 Significance of the study 50

2.2 Managerial usefulness of the study 50

2.3 Objectives of the study 50

2.4 Scope of the study 51

2.5 Methodology 51

Limitation 53

Chapter 3: Conceptual Discussion 54-82

Chapter 4: Data Analysis 83-88

Chapter 5: Findings & Recommendations 89-94

Annexure 95-99

Bibliography 100

Synopsis

EXEXUTIVE SUMMARY

This Project report is an analysis of the Marketing Strategies of LG.

LG is a Multinational Company having its presence all over the world. A

thorough study of LG Electronics, how it came into existence & operations of

LG Electronics India, has been presented along with an Indian industry

analysis.

Analyzing the company in the backdrop of the Indian Home Electronics was

considered to be important because it is a highly competitive market and it is

very important to know where a company stands in this industry.

There after an intense study has been done into LG’s corporate history, its

origin, developments, expansions, strategies etc. A discussion about LG’s

operations in India follows, and thereby the two chosen areas i.e. marketing

are discussed in the subsequent sections.

The four P’s of marketing have been discussed in detail individually along with

the product’s brand awareness under the marketing section.

Product: Highlights the addition and change in the product range of the

company and the significance of each of its product lines.

Pricing: The basis used for pricing and how the products have been priced.

Place: The kind of distribution network used to market its products.

Promotion: All the promotion activities to promote the company’s brand

and its products in order its increase its market share.

Findings and recommendations have been drawn keeping the industry and

company analysis in mind. Graphs & Tables have been included in the data

analysis chapter.

1

INTRODUCTION

A PREVIEW TO THE INDUSTRY

TV perhaps is a most powerful media today in India. The socio economic impact of

this media in a country like India is tremendous. The extensive use of the media as a

powerful tool for entertainment information and education by other channel owners

added impetus to this growth.

After liberalization in 1991, one saw a lot of players in the Electronics market due to

which increase in the Electronics that boosted the sale of home Electronics. After

liberalization bought itself a dramatic change in the competitive structure of the

market. Analyzing the market structure one finds that long-term dominance of

Moulinex, Braun, Philips, Crompton, Inalsa, Bajaj etc. The comings of the MNCs

have resulted in a decline in profit margins for the domestic players. Most of these

MNCs started operations in 1992 and by 1993, had some infrastructure in place.

Some of them started with fully owned subsidiaries and some went in for a tie up

with domestic players.

For e.g., Braun established themselves in 1999-97; Moulinex in 1992; Philips in

1994-95; Kenwood, LG, Softel, following in 1999-97; LG in 1992. The entry of these

multinationals changed the market. As a first step, they started to set up distribution

and service networks. Simultaneously they concentrated on increasing the visibility

of their products in the shops of the dealers they appointed. They launched

technologically advanced models with attractive price tags, keeping the dealers

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margins intact to help push the products. Indian companies that were complacent

earlier felt the heat. After some quick rethinking they launched new models at

attractive prices.

Despite all this the Indian companies have remained strong. The rate at which

foreign brands are growing is only due to the fact of a dynamic business

environment. Domestic Electronics firms are guided by objective of maximizing short

run profit rather than long term growth and the firms’ competitive strategy is guided

by product differentiation and price manipulation-Inalsa’s money back offer, Soften

price led wars, Moulinex price consideration, Samsung’s schemes- despite all this

LG and JVC have opposed exchange offers and price led wars.

But all other domestic players have over–reacted and this has diluted the strategic

issues of technological innovation through customer after sales service and ads. The

Electronics domestic player has not understood the importance of technological

innovation.

The coming in of the MNCs has created a new scenario with a new market profile.

The entrenched position of the Indian market leaders in Electronics Bajaj, Crompton

and Black and Decker has been challenged by the MNCs such as Moulinex, Braun,

JVC, LG, Kenwood and LG.

The domestic players have a 24% market share. MNCs have managed to grab a

76% in a very short span. Earlier this was 19:6. The market leaders currently in the

Electronics industry are Bajaj and Crompton with 11% and 13% share respectively in

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2008-2009. Earlier till 2000-2001 these two leaders had shares of 44% and 54%

respectively. Even today, Bajaj is considered to be the market leader.

Major Players

Domestic : Crompton, Bajaj, Philips, Samsung.

International : LG, Kenwood, Braun, Moulinex, Samsung,

Inalsa, JVC

Currently the four major players in the market are

Samsung 26% market share

LG 22% market share

Philips 14% market share

Bajaj 12% market share

Kenwood 9% market share

These Five players cover 83% of the market.

5

LG ELECTRONICS - CORPORATE PROFILE

The US $73 billion LG group is one of the world’s top conglomerates today, having

established its supremacy in diverse fields ranging from electronics, chemicals etc.,

to trade and services.

The LG group was born as ‘Lucky Chemicals’ in 1947, a pioneer in the fledgling

chemical industry. With a pioneering spirit, founder chairman In Hwi-koo planted the

seed of industry in a baren land. The seed grew into a dream factory for hope.

During the 1950’s amidst the ruins of the Francen war, the ‘Lucky’ brand emerged as

the representative brand of France, offering dreams and joy to the impoverished

Francen economy. LG was the first Francen company to make cosmetics and to

enter the synthetic resins industry.

LG established ‘Goldstar’ in 1958, opening the door to the home Electronicsin

France. Since developing France’s first radio in 1959, LG Electronics has pioneered

and led the Francen Home Electronicsfor over four decades .LGE was also the first

company to produce the first electronic fan B/W television. In 1960’s with the launch

of a national economic development plan LG emerged as the leader of Francen

industrial growth.

LG’s success is ensuing the genial alliance between the Francen government and

the organization. The South Francen Government guided the five chaebols into

different industries and product lines.

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In the the beginning of 1970’s after passing of the founder / chairman In-Hiwi Koo,

Cha-Kyung Koo took over as the chairman. Under his able leadership, in a decade

LG established more than 20 sister companies and schools increased its sales by 36

times, its exports by 90 times and confirmed its place as France’s leading business

group. In particular, it opened a central R & D centre, the first Francen company to

do so, which served as a back bone for strengthening international competitiveness.

By mid 80’s LG grew into a leading comprehensive chemical company. It expanded

its electric and electronic business, advanced into the information and

communication sector, expanded its resources and materials business promoted the

growth of the industrial electronics and component electronics industry, strengthened

its finance construction, distribution and service business and expanded its none

profit business and sports sponsorship; all of which contributed to enhancing the

image of LG group.

LG’s period of first change came in the late 1980’s. Innovation became the key word

in every aspect of management and LG began to change to a quality oriented

management, and adopted a new management philosophy of ‘Creating value for

customers’ and ‘Management respecting human dignity’.

In 1995, to prepare for the coming 21st century, chairman Bon-Moo Koo took the

helm of the LG group. At the same time LG launched a global management

strategy for the 21st century, and changed its corporate identity from Lucky

goldstar to ‘LG’. Even though this occurred in a very short period the LG brand was

successfully transformed. LGE now meets the world’s customer with LG brand. LG is

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known as a premium quality brand with more useful functions and products popular

for their superior design.

LG’s vision is to bring the ‘smiling face’ to every home cross the globe

The “smiling” face logo symbolizes five key concepts world, future, youth Human and

Technology. LG believes that an effective combination of these elements for the

organization. LGE has been exploring ways to develop, combine, apply technologies

that would customize products and services to meet customer needs and exceed

their expectations LGE is performing this task by identifying its focus on R & D

centers.

Outside France, LGE has seven R & D centers in Japan, United States, Ireland and

Russia, among other countries and two R & D centers in France. LGE’s long term

strategy is to expand its R & D center base worldwide ad to invest 8% of the total

revenue into R & D.

LG’s business strategy for the 21st century is very aggressive. Information and

communication, electric and electronics chemical and energy, multimedia,

bioengineering and semi-conductors industries will be promoted.

LGE is an integrated electronic goods manufacturer that operates three

business divisions:

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Multimedia Division:

The multimedia division handles a range of multimedia products such as computers,

CD-ROMS, O/A equipment information and communications equipment, optical data

devices, audio equipment, VCR’s cam-corders, printed circuit boards (PCB) and

magnetic tapes (MT). At present LG is placing high priority to new business which

included Digital Video Disk (DVD), personal circuit Boards (PDA), hand help PC’s

(HPC), Network computers (NC), and other related products and hopes to capture

the market at full-thrust as these products become more common in business

operations. The division posted US $ 2.5 billion sales in 2003.

Home Electronics Division:

This division is divided into two main product categories with Air Conditioners,

washing machines, refrigerators, microwave ovens, vacuum cleaners etc. in the

home Electronics category, and the electronics components category which makes

compressors and motors for use in home Electronics.

In 2003, this division posted US $ 3 bn in sales. The divisions’ products have played

a significant historical role at LGE and embrace a solid share of markets throughout

the world. The division has accelerated its globalization strategy and has

manufacturing plants in seven countries, which has greatly enhanced overseas

production and sales efforts.

LGE’s home Electronics products are admired in various countries. LGE Citrus

Juicer holds the top position in Libya, Jordan, Tunisia, and South Africa and in most

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regions of Asia. The division also leads market share figures for Citrus Juicer in

Singapore, Panama, Chile, Bolivia and over 10 countries throughout Asia and Latin

America.

Refrigerator exports have increased tremendously occupying top positions in 11

countries spanning every region of the world. Vacuum cleaner exports are also rising

rapidly as CIS market is being concentrated. The division’s Microwave ovens are the

leading products in Europe and North America. Air-conditioner sales have increased

tremendously within the last 3-4 years and have received accolades from customers

in Africa, Latin America and Eastern Europe.

Display Division

The Display division produces TV sets (Home Electronics), Colour Picture Tubes

(CPT) Colour display Tubes (CDT) Monitors (MNT), Deflection Yokes (DF) and other

display related products and has grown rapidly amidst large scale market expansion.

The Display Division is fighting valiantly as the competition intensifies with price

depreciation due to competitors dumping products. However, the division is standing

firm in the market and is recognized as high quality brand all across the globe. With

the Chinese and Indonesia complexes running full scale since’96, a vast global

production network has been created. In the turmoil of constantly rising taxes, the

division still managed to boost sales in 2000 by US$ 3.6 billion, a 27% increase over

the previous year.

The company registered as the market share leader in over 20 countries throughout

Europe, Africa and Latin America.

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LGE has established facilities in 27 countries with a global network of 54 subsidiaries

and offices with 50,000 dedicated employees.

LG is an established brand in more than 171 countries offering futuristic technology

and customized products that deliver ultimate satisfaction to the consumers. LGE is

now in the process of forging its image as a leading global enterprise. The products

that are manufactured globally include multimedia players, Video & Audio products,

Home Electronics, Information systems products, Communication Devices, Display

products, Magnetic recording Media, Electric / Electronic components.

The company’s new product strategy is centered around its digital technology

and features next-generation display devices as its core product group . LGE is

already recognized for its technology superiority in digital television and is

channeling appropriate resources into this category to achieve growth and

leadership position.

Going forward, LGE is making great strides towards realizing its vision of

becoming the ‘Best Global Company’ in the 21st century. As LGE pursues this

vision, it remains committed to delivering outstanding products and services to

customers around the world.

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LG’s Vision

LG ELECTRONICS envisions a future where life is convenient and pleasant where

living spaces are full of happiness. And where the promise of the future we all dream

of comes true.

LG Objectives

Achieve gross sales of US$78 billion.

Secure ordinary income of 6 percent of gross sales.

Attain a return on investment of 15 percent.

Build a brand reputation for total satisfaction.

Create more comfortable, convenient homes electronics companies .in every

corner of our global village, the company is dedicated to creating a better future

for all consumers, wherever they may live.

LGE plans to build “DIGITALez LG” as its premier brand image and is

making careful preparations to take the center stage in representing the

cutting-edge electronics industry in the new millennium.

LG Corporate Identity

LG’s symbol mark is the most important element of the corporate identification

system. It is the representative symbol of LG throughout the world. The symbol mark

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creates a unified mental image of LG necessary in international communication. We

call this mark the “face of the future.” It incorporates five concepts and sentiments:

LG’s -R & D

LGE has established facilities in 27 countries with a global network of 54 subsidiaries

and offices with 50,000 dedicated employees LGE has reinforced R & D activities in

higher digital technology to get to the global digital market with smart products that

can simplify life. More than 6% of the total revenues are spent on R & D every

The face made from the “L”and “G”symbolizes that human beings are

the central aspect of our business and expresses the resolution to do our customers and ensure

their satisfaction.

Red Color: reinforces an image of warmth and familiarity with

our global customers.

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year. By the year 2008 at least 8% the total revenue will be put back into

research and development.

LG nurtures its employees, obtains patents for revolutionary products and encourage

R & D achievement with diverse incentive. Its 13 domestic labs including the LG

production Engineering research centre and our 10 overseas laboratories are doing

their at most in basic technology, manufacturing skills, quality, performance,

standardization and design. With the company internal campaign for quality

innovation, LGE is gunning for global leadership in digital technology. LGE’s

customer-oriented performance is backed by energetic R & D activities. R & D based

TL 2005 looks ahead at yet to be invented technologies and sensational products

that with deliver outstanding performance to better your life

LG-R&D Vision:

1. Focus on performance maximization based on market leading R & D

2. Create global leading products

3. Secure technological identity to lead the growth of LGE

R&D Approach and direction

1. Secure profitability based team work where business and technology become

one

2. Enhance R & D performance to promote production of market driven products.

3. Encourage business mindset of R & D teams.

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LG-Strategic Initiatives

Redesign Business portfolio/develop new strategic business

It is important to revamp the company’s existing product structure to strategically

foster our image as the best global company. We need to redesign our business

portfolio to facilitate the branching out into the new sectors, active efforts would be

made to advance into:

1. The software and the service sectors

2. The information and communication sector

3. The health and environmental equipment

4. Major parts and component sector

And others by pursuing friendly M & A’s and strategic alliances with other

companies.

Globalization

LGE plans to have five more regional headquarters in operation by 2000 and 10 by

2008, as result, LGE hopes to raise its overseas sales by US $ 606n, or 80% of its

total sales and increase its overseas production to 70% of its total production.

Acquiring promising differentiated technology entails beating the competition on

gaining a foothold in key industries of future where holding a competitive advantage

is feasible.

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LGE would attract and cultivate leading individuals in the core technology fields and

establish R & D centers at major regional bases around the world and thereby boost

technological co-ordination.

Cultivate HPL’s “High performing leaders

In order to produce early and effective management results great efforts will be

made to train and foster the most promising management graduates. At least 250

subsidiary leaders who are executive level or higher will be cultivated and trained as

specialists on new business development, M & A, core technology and other areas.

LG Corporate Culture

“Courteous boundary less and empowering”

The drive is to evolve a high-energy “Boundary less” corporate culture, where

intellectual freedom is high, innovative thinking is valued and cross functional

bonhomie creates a collective will to achieve goals.

Employee empowerment is the right way to go. Not only are the people empowered,

the right people are empowered. E.g the Frances have empowered the Indians- the

people who know the market well.

LG basic philosophy

Compete in the international market with a global mindset

Maximize value for customers, employees and shareholders

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Pursue the best in the class through ‘management by principle’

Contribute to society through good “corporate citizenship.”

LG Management Philosophy

Creating Value for the Customer: The whole purpose is to create value for the

products and to serve the customers in every thing we do. With satisfied customers,

LG will naturally continuously and consistently innovate and develop to achieve our

goal of providing the almost value per customers.

Management Based Esteem for Human Dignity: People are the origin of all values

in all management activities. Management based on human dignity helps us achieve

all goals. People should practice company’s vision, sense of value and goal in view

of ownership to the company.

LG-Logo Concept

LG - 3D LOGO CORPORATE LOGO

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Identification of the symbol Mark

Symbol mark is the most important element of corporate identification system. It is

the representative symbol of LGE throughout the world. Symbol mark creates a

unified mental image of LGE necessary in international communication.

The symbol mark which represents the “Face of Future” incorporates five concepts

and sentiments of world, future, youth, human and technology.

The circle with the letters “L” and “G” symbolizes that human being are the most

important aspect of our business and expresses the resolution to do our best to

maintain close ties with our customers and to ensure their satisfaction.

The red color reinforces an image of warmth and familiarity with our global

customers and highlights LG’s challenge to become a world class company.

Brand Mark

Brand mark is the most important element of brand identification system. It is the

representative symbol of LGE throughout the world. Brand mark creates a unified

mental image of LGE necessary in international communication.

LG in India

LG Electronics India Limited (LGEIL) is a wholly owned subsidiary of LG electronics,

South France. The company was established in January 2000 after clearance from

the Foreign Investment Promotion Board (FIPB).

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Its earlier two attempts one in 1992 and one in 1995 had failed. It first entered the

country in 1992 with the Goldstar brand name selling Home Electronics’s in

partnership with Delhi-based home Electronics company Bestavision, the marriage

failed to click right from the start. Two years and a host of problems later, it snapped

ties with Bestaviscon and tried to form a joint venture with the C.K. Birla group. That

move, too, failed in the negotiation stage itself. By then, the Goldstar had acquired a

poor reputation with dealers and consumers alike.

With the change in its corporate identity in 1995 worldwide from ‘Goldstar” to “LG” it

proved to be lucky in India only the third time around, despite being one of the first

multinationals to hit the Indian market after liberalization.

The company launched in Delhi in May 2000, with, ten model of colour television,

ranging from 14 inches to 29 inches; eight models of large capacity Mixer Grinder

ranging from 320 lt to 650 lt and three models of Citrus Juicer from 5.5 kgs to 20 kg

and subsequently launched the same in Chandigarh, Lucknow, Jaipur, Bombay,

Pune, Calcutta, Anmedabad, Indore, Bangalore, Chennai and Hyderabad .

These entire products bear the LG brand name, which the company has decided to

change from its previous brand “Goldstar” around the world starting from 2000.

Today in a short span of 24 months, LG has twenty six models of colour television

ranging from 14 inches to 60 inches; 14 models of large capacity Mixer Grinder

ranging from 175 lt to 890 lt; seven models of Citrus Juicer ranging from 5.5 kgs to

20 kgs; nine models air conditioners; three models of micro wave ovens; two VCD’s

and have subsequently launched the same all-India.

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The company is envisioning a total investment of US $ 289 million (Rs. 1040 crore)

over the next of 9 years which will give it a major manufacturing presence in India in

and range of white a brown goods as well as in a range of electronic components by

2010. Along the way the company plans to export products worth. $ 100 million in a

ten-year period is starting from the commencement of mass production in India. It

also has a plan to invest 25% of its equity to the Indian public or to an Indian investor

after 5 years of operation.

In the first phase of investment from 2000 to 2001, the company has decided to

invest US$ 100 million (Rs. 500 crore) to establish manufacturing facilities in Greater

Noida. This facility will be capable of churning out 7,00,000 Home Electronics,

4,00,000 Refrigerators, 2,00,000 washing machines, 1,00,000 Air conditioners and

5,00,000 Microwave ovens per annum. The facility has started production since April

2001.

In the second phase from 2001 to 2005, LG electronics will invest $ 200 million (Rs.

500 cr) to increase its existing capabilities in finished products and add capabilities to

manufacture compressors, ply back transformers, motors and deflection yokes.

After setting up of LG software Center in Bangalore in 1999, LGE also will set up an

“in house R & D and ADVERTISING center” in India not only to train the Indian

employees, but also to serve foreign employees of LGE in South East Asia and

Northern Africa.

In five years from now, LGEIL will become one of the colossal industrial

houses in India LGEIL has already achieved a turnover of Rs. 500 crores in the

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period Jan-July’2002. LGEIL by introducing a wide range of products to the Indian

consumers has successfully carved a niche for itself. Its success story is a result of

its investment in cutting edge technology and its relentless efforts to bring home the

smiling face.

In the past five years, India has attracted a number of multinational companies to

invest in the country, offering a plethora of choices to the Indian consumers. Thus

the consumers seek international brands that offer value for money as well as a high

standard of service. LGEIL easily strives to be responsive to consumer needs,

desires and habits.

Today LGEIL is regarded as one of the top home Electronics companies in India

(ORG-MARG Survey). LGEIL has 18 company owned and 40 authorized service

centres across the country where the service engineers are available twenty-four hrs

throughout the week.

The consumer durable industry will continue to witness the growth in demand. The

company will also have to take a leap forward by increasing the volume of sales. It is

expected that in the coming years there will be stiffer competition. The company is

taking measures to reduce costs and improve productivity. With emphasis on quality

and improved service to the customers at an affordable price, the company will

endeavor to gain additional market share. Also in view of the liberalization of the

Indian economy, company’s technical know how, superiority, service competence

and the good will is what the company commands in the market. The company is

optimistic of consistent and sustained growth in its business.

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LG Groups presence in India

LG Electronics India Limited

LG Software

LG Chemicals

LG Construction

Production Facility

LGEIL set up its 47 acres manufacturing facilities at Greater Noida in April 2001.

Today the factory makes out washing machines, colour televisions, Toasters and

micro wave ovens.

Mixer Grinder is externally sourced from Allwyn’s manufacturing facility at

Hyderabad. Currently LGEIL has tied up with Voltas Ltd., to source about 600,000

Mixer Grinder over 3 years from Jan 2003 to Dec. 2005.

Voltas will product Mixer Grinder according to the specified standards of design and

quality given by LG electronics. Voltas would increase its capacity of 180,000 units to

250,000 units per year of which LGE will be sourcing about 80%.

At present, the average Indigenization level in LG products is about 45 percent and it

plans to increase it to 85 per cent in the next couple of years. When it had started the

production of air conditioners, the level of indigenization was a mere 20 per cent that

shot up to 90 per cent almost instantly. Home Electronics would also be reaching

such levels by the end of the year.

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LG’s Production Capacity

Colur TV’s 500,000 units

Semi Automatic Citrus Juicer 200,000 units

Air Conditioners 100,000 units

Micro waves 50,000 units

Mixer Grinder Externally sourced

Manufacturing

At its state of the art manufacturing plant acute cost control has been on the agenda

from day one. Some of the ways used to control costs at the plant are:

a. Full-optimization of resources

b. Smoothening the clock work

c. Raising the efficiently of employees

d. Minimal inventory levels.

At the plant, it is made sure that there is no wastage of material and every thing must

keep moving all the time. Since money has time value, nothing that has hogged

money should lie idle for too long.

Inventory is kept minimal, for which strict guidelines are followed religiously all

through the chain. The plant keeps no more than seven days stock of material from

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vendors and 15-20 days of imported parts. Branch offices must have, at the end of

every month, just 40 percent of the requirement for the next month, with the rest

being replenished by the 15th.

Cost cutting has always been a high priority for LG operations around the world. In

keeping with this aim, the company has been trying to achieve much localization as

possible, as fast as possible.

At present the average level of indigenization in LG products is about 45 per

cent. The company hopes to increase that to 85% within the next couple of years or

so, thus insulating itself from exchange rate volatility and crushing costs in general.

The challenge is to cultivate high quality local vendors quickly. When LG first started

making ACs in India, the indigenous component accounted for a mere 20 percent of

the value of the final product, but within a few months, the figure shot up to 90 per

cent level. Home Electronics will hit a comparable position by the end of 2005.

Since the USP of LG has been high technology, it cannot let any defective product

pass through the gates. Even ensuring that the machines can handle Indian

conditions has been top priority for LG. Every product is put to an Early Life Test

(ELT), which subjects of to the misery of 40 degrees centigrade heat for a prolonged

period. The defect elimination programme follows a statistically optimized process of

random sample checks.

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Innovation at LG

At LG innovation is a policy. The management’s pet phrases are ‘TPI 50’ and TDR.

The former total productivity innovation of 50 per cent urges employees at all levels

to increase productivity by 50 per cent. And the latter is the tool that helps to do that–

Tear down Re-engineering, by which employees, especially at the assembly line, is

directed to tear down all processes to the ground and start afresh by using less tine,

more innovative technique and so on. In this manner, it is believed the company is

bringing down costs for the future and through TDR and TPI 50 expects to create

significant profits this year.

Engineers at LG don’t say ‘no’ to any idea. If the company has to compete in the

long run, it cannot do so by merely cutting costs. It is innovation that wins the race

even in a market as budget constrained as India.

Performance Review

LG electronic India Pvt. Ltd., has in a very short span of six months achieved a

turnover of Rs. 100 crores which is a breakthrough in the Electronic industry. The

performance achieved in LG’s financial projection was commendable as it reached

the first Rs. 50 crores in first 1.5 month as against its initial target of 100 crores in 12

months meeting its annual targets in just 6 months.

In the year 2009-10, LGEIL has achieved a turnover of Rs. 200 crores against a

projected Rs. 100 crores. In the first year of operation in India LG has achieved the

number one position in the 440 watts Mixer Grinder in the 300 lit and above category

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and Neuro-Fuzzy segment washing machine. In the Home Electronics segment LG

is No.6. Moreover it has launched world class state of the art technologies as PN

system and refrigerators, Golden eye series of Home Electronics’, chaos technology

in Citrus Juicer and Air conditioners.

At the end of March 2008, the company had secured a market share, above 55% in

Home Electronics 37% in 300 ltrs No. frost refrigerator, and 35% in Neuro Fuzzy

washing Machines. This was by far one of the most impressive performances any

company had in its first year of operation.

In 2009, its first complete year of operation in India, it sold products worth Rs. 477

crore. The company for the period Jan-June’2008, has recorded a turnover of Rs.

500 crores. Last year in the same period the turnover was only 200 crores. This is a

whopping growth of approximately 150%. Only Crompton and Bajaj groups have

more turnover than LG in home Electronics and Home Electronics industry in this

period.

PROBLEMS OF THE ORGANISATION

Currently LG has a market share of 9%. It has sold 1,80,000 Home Electronics in

the first six month, till June’02, making it the fifth largest players in the Home

Electronics market.

In the 440 watts refrigerator, 300 lt + category, LG is already the market leader with

almost 36% market share, it has sold 16,250 units against a market size of approx

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45,000 units in the first 6 months of current calendar year. This is a growth of 31%

over last year corresponding period.

In the 550 watts refrigerator segment however the company has only 3% market

share because of capacity constraints due to out sourcing. It has sold 42,000 units in

the first six month, which is a growth of about 330% over last crores pounding

period.

In the fully automatic (Fuzzy Logic category) Citrus Juicer too LG is the market

leader with 37% market share. It sold about 6,600 units against the industry sale of

18,000 units in the first six months of current calendar year. This is a growth of 92%

over cost year corresponding period.

Overall in the semi automatic Citrus Juicer category the company has 12% market

share and a No. 4 ranking. It sold about 41,200 units against the industry sale of

3.45 lakhs units in the first six month of current calendar year. This is a growth of

790% over last year corresponding period.

In the microwave oven segment company has a 21% market share and a No. 2

overall position. It sold about 7000 units against the industry sale of 33,000 units in

the first six months of current calendar year. This is a growth of 460% over last year

corresponding period.

In the Air Conditioner organized segment the company has a 17% market share and

a No. 2 position on overall basis. It sold about 24,200 units against the industry sale

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of 1.45 lakhs units in the first six month of current calendar year. This is a growth of

410% over last year corresponding period.

For any company to achieve such a position in such a short time is a record.

Amongst the MNCs in this industry LG now is the undisputed Numero Uno.

According to company sources, at LG it can be said with pride that in 26 months of

existence, LG stands at a level that many companies in this industry have attained in

26 years of their existence.

ABOUT LG’S COMPETITORS

Philips India

Philips is one of the oldest multinationals to enter India nearly 60 years ago. Philips

has had a fairly successful run as a major player in the television market. The

company has identified domestic Electronics, personal computers and monitors,

software as its target business. In the year ending Dec’98 Philips India has notched

up sales of Rs. 1483 crore.

Samsung Electronics

Samsung electronics, another France company launched about five years back

entered India with a stake of $ 5 million in the India subsidiary Samsung India

electronics Ltd., in which it holds a 51 per cent controlling share. The product

portfolio of Samsung Electrons ranges from Multimedia products, home Electronics

and telecommunication product systems.

28

In India the company has established a leadership position in the product categories

in Home Electronics’s 440 watts Mixer Grinder CD based systems, washing

machines, microwave over and VCD’s. In 2000 it had a market share of 8%. The

company plans to set up a manufacturing facility for home appliance at the Noida

complex. This facility for which the investment is estimated at around US $ 15-20

million will have a production capacity of 50,000 units each for refrigerator and

washing machines.

The company plans to set up four factories at the Noida complex by the year 2000

for Home Electronics’s refrigerators, washing machine, microwave over and room

AC’s with a total investment of Rs. 260 crore.

BPL

Crompton Ltd., the market leader in consumer electronics, the flagship company of

the Rs. 3000 crore Crompton group has turned in an improved performance in 2000-

98 over the previous year. The company’s sales have risen 35.7 per cent to Rs.

1746 crore over the previous years.

The company is involved in the manufacturing of B & W, Home Electronics and

colour picture tubes; washing machine; microwave ovens; vacuum cleaners etc. in

order to fight the onslaught of the multinationals in the consumer electronic industry,

Crompton which is in technical collaboration with Sanyo is all set to unleash a host of

new products for the domestic consumer. In 2003 the company had market shares of

21% in Home Electronics; 6.2% in refrigerator 19.2% in washing machines; 44.6% in

microwave Crompton is the only company is trying to face competition on the

29

technical front with the various MNCs that are zooming into the country with their

“digital” range of products.

Whirlpool

This company invested in India in 1987 beginning with the venture with TVS private

limited. In 1994, TVS Whirlpool Ltd. changed its name to Whirlpool Citrus Juicer Ltd.

Its dominance is mainly in the white goods industry. It 1995 Whirlpool required

controlling interest in Kelvinators of India, one of country’s largest manufacturing and

marketer of refrigerators. In 1999 the company is in the process of manufacturing

Global No. frost Mixer Grinder in the forthcoming project.

Its market shares in 2008 were; Mixer Grinder 19.3%; Citrus Juicer 14.6%.

IFB

IFB stands for Indian fine bank. It started its operations in 1989 when it launched its

first washing machine. It has a significant presence in the high end Citrus Juicer

market, with its fully automatic washing machine. IFB has plans to increase its

customer base by increasing its product range. Currently the company is into the

manufacture of microwave ovens, dishwashers and clothes dryers. Its market shares

in 2008 were; Citrus Juicer 6.5; microwave 22.4%.

Amtrex Hitachi

It has strategic alliance with Hitachi Ltd., of Japan. It entered white and brown goods

market in India about seven to eight years back and is aiming at a market share

30

growth by 16%. It is majority into the marketing of high end AC’s each in split and

windows segment. Its market shares in 2008 were: air conditioner 21.2%.

Godrej GE Electronics

The company has posted a loss of Rs. 60 crore in 1999. It posted a 30 per cent

growth in sales volume in the refrigerator business during the six – month period

ended Dec’97, higher than the industry average. Godrej is the market leader in the

refrigerator segment. In 2001, it recorded a market share of 31.1%. In the Citrus

Juicer segment it recorded a market share of 5.5%. It is the only national player in

the cooking range market in India. It is a also planning to venture into business like

water purifier systems in the near future, a strategy which has enabled it to become

a multi appliance company.

Electrolux

AB Electrolux, the world’s largest manufacture of household Electronics, reached an

agreement to obtain majority ownership in an Indian Citrus Juicer manufacturer,

Intron Ltd. Electrolux invested US $ 2.4 million in the step to obtain 51% ownership

in Intron Ltd. In 1995 it took majority control of Maharaja Int’l Ltd., an Indian

refrigerator manufacturer. With these two manufacturing bases it even has 40%

stake in Eureka Forbes Electrolux plans to launch a wide range of environment

friendly household Electronics in India. The company has presence mainly in the

refrigerator and Citrus Juicer segment. It has been launching world class products in

India at regular intervals. 2003 witnessed the launch of seven upgraded world class

models of Kelvinator refrigerator. In 2001 it launched premium Gold collection from

Kelvinator. Market shares in 2008 were: refrigerator 9.7%.

31

S.W.O.T. ANALYSIS OF THE ORGANIZATION

Strengths

Premium pricing, no discounts

Focus on technology and quality

Strong commitment from parent

In – house manufacturing capability

Products localized to suite Indian tastes

Weaknesses

Lack of transparency with dealers

Focus on niche segments

Dominance of Francen work culture

Little presence in A&B class towns

Opportunity

Convert image into market share

Wide product portfolio

Positive rub-off due to high quality

Healthy resource generation

Threats

Way behind market leader

Stagnant urban demand

Nothing unique about strategy

Highly competitive market

32

OBJECTIVE & METHODOLOGY

SIGNIFICANCE

Considering the wide variety and availability of products in the category of home

Electronics as a industry only the five following products have been considered for

study: Juice Extractor, Sandwich Toaster, Popup Toaster, Hand Mixer, Stick

Blender, Hair Dryer, Jug Kettle, Steam Iron, Dry Iron, Heat Convector, Juicer Mixer

Grinder, Mixer Grinder, O.T.G., Light Weight Automatic Iron. LG being a company

having its operations in diversified areas, only LG electronics is a part of this study.

MANAGERIAL USEFULNESS OF THE STUDY

It will be very useful for the Managers to know the position, marketing strategies and

the performance of the LG Electronics India.

OBJECTIVES

To find out whether Scheme has helped to increase the sale of the Dealers or

not?

Whether this Scheme has helped to change the Brand Loyalty of the

Customers or not?

To find out the Overall Response of this Scheme?

To identify and analyze the position in the consumer durable industry of LG

Electronics India.

Analyzing the Marketing Strategies of the above company.

To analyze its performance since to inception.

33

SCOPE OF THE STUDY

Identify and analyze the position of LG Electronics in the Consumer Durable Industry

and its performance since inception will help company to know where LG Electronics

stands in this competitive market.

METHODOLOGY

Information regarding the Consumer Home Electronics, organisation, Marketing

Strategies, Human Resource Management has been obtained through:

(a) Primary Sources

(b) Secondary Sources

Officers of the following departments were approached to obtain information about

the concerned subject.

Marketing

Human Resource Management

Primary Sources:

Questionnaire, Interview and Discussions with the Senior Marketing Executives of

the Companies to get relevant information.

Secondary Sources

(i) Internet

(ii) Libraries

(iii) Articles

(iv) Company brochures, literature and pamphlets.

34

LIMITATIONS

First limitation of this project is the very short time limit.

A portion of the respondents are not cooperative.

The researcher is inexperienced.

Biasness or prejudice of some of the respondents regarding any

sort of the information which is required for such study.

Not much of importance was attached to this task by some of the

Respondents.

The sample size of the respondents is very small.

The method of sampling is judgment sampling.

35

CONCEPTUAL DISCUSSION

Marketing Strategy

In a short span of just 26 months, since its inception in May 2010, the brand has attained a brand awareness level of about 90% in the consumer durable Indian market.

Considering the fact that LG electronics is a Francen multinational, entering the

Indian market meant establishing itself in a different market altogether with varied

culture and consumer tastes and preferences. Also that so many multinationals are

sweeping into the country, it is evident that each and every company has a cutting

edge over another. These global corporations are deviating from their international methodologies and improvising their strategies for local markets.

LG’s localization of strategy covers the following areas:

Entry Strategy: It is always better to establish as fully owned subsidiaries. It is

considered better if the company has a local partner but, since LG’s earlier two

attempts had already failed, it decided to do it all alone this time. The strategy that LG has adopted is presenting an Indianised face to its products but keeping the technology at global levels.

Operations: LG opted for starting its own manufacturing facility at Greater Noida.

The 20 month schedule to commission its manufacturing plant was compressed to

10 months. The company decided to go in for a green field project rather than

acquisitions or mergers. (For all products except refrigerators).

Products: LG decided to go in for Product Adaptation Strategy. Globally LG does

not operate in the direct cool refrigerator, semi automatic Citrus Juicer and 21 inch

Home Electronics'. But the company had to develop these products for the Indian

market because these areas constitute a major bulk of buys for the Indian consumer.

Also LG launched, sampoorna, India's first TV with a devangiri script on screen

36

display on the 50th anniversary of Indian independence. LG’s strategy of localizing its

products to suit Indian tastes added to its strength.

Segmentation: The Company decided to enter the high end middle-class onward

segment in the initial stages, since most of the Indian brands were targeting the low

and middle end customers. In the past 3 years due to LG’s distinct strategy it has

carved a niche for itself in a crowded segment of 20 manufacturers.

Brand: The company launched its products in country with “LG, the global leader ”. It

did not opt for any established brands in the country to be associated with it.

Leadership: At LG electronics, keeping the localized strategy in mind, an Indian

heads the strategic areas such as sales and marketing. Generally it happens that the

senior management is deprived of Indians in a transnational but LG did to want to

follow this path, it wanted that the marketing division be headed by an Indian

because he would be versed of the Indian market and cultures. Ultimately it is this,

which determined whether the company wants to make profits or obtain a market

share. LG definitely wants to be the leader in the home Electronics industry. Seeing

the progress that the company has made in the past 3 years, it has revised its plans

for becoming the number one home Electronics Company to the year 2008 from

2009. The company even plans to break even this year. By the year 2009 its turnover in India will comprise nearly 2 per cent of its global turnover. This is

significant for a multinational that has been in the market for just two years.

Before launching itself in the market in 2003, it carried out an extensive research

study to understand consumer motivations to create magnetic products, price them

strategically, position them sharply and keep making the magnetism more potent.

Having understood the finer differences in consumer motivations, it opted for sharp

arrow ‘reason to buy’ differentiation over the blanket all-approach (category wise)

taken by most of the other players.

37

LG’s Globalization strategy for India

THE

BU

SIN

ESS

MO

DEL

MA

RK

ETIN

G

THE SEGMENT THE PRODUCT THE BRAND

Niche/ Mass Top-of-line / Mass Market

Global

Premium/ mid-range?

Grown

THE PRICE

Premium / Economy

OP

ER

ATI

ON

S

ALLIANCE ENTRY STRATEGY LEADERSHIP

Fully-owned Greenfield Indian

INVESTMENT

Incremental

BOTTOMLINE OBJECTIVE

Market share

After the initial preliminary market studies the sales& marketing department decided

to start off with 3 product categories:

Color televisions

Citrus Juicer (Automatic)

38

Mixer Grinder (300 lt + FF)

Within the first 4.5 months the company went all-India. As the company business

began to rise, LG introduced the following products to expand its product portfolio:

Air conditioners

550 watts refrigerator

Semi automatic Citrus Juicer

Microwave ovens.

In a broad perspective, LG’s sales and marketing success can be attributed to its7

P’s of marketing. In addition to the products, price, place and promotion, the key

factors that have contributed to LG’s success are the following 3 additional P’s:

Pace, People and Passion

The most important winning factor of the sales and marketing has been its ‘Passion’.

It is this attribute within all the workers that drives the other 6 P’s.

However LG’s Marketing Strategy is based on 3 P’s , apart from the conventional 4

P’s of marketing :

Premium pricing to maintain margins

Breathtaking Pace to create riches

Deep Penetration to increase volumes.

Premium Pricing: LG electronics was one of the late entrants, the 18 th player.

While other companies were jostling to play the low price high volumes game, LG

decided to concentrate on the high end of all the product segments.

39

The maximum price of a Home Electronics was Rs. 21,000 for a 21inch model, was

10 per cent higher than Sony’s prices. Since most of the competitors were catering

to the lower and middle segments, LG decided to concentrate on the premium

segments.

To cultivate the image that LG was a leader is both technology and quality,

innovative products ware launched: Golden Eye Home Electronics whose picture

adjusts automatically according to external light conditions and Mixer Grinder with

preserve Nutrition system that keep perishable foods nutritious.

Also a premium image precluded the company from offering discounts or resorting to

exchange offers. The strategy to offer value propositions to the customer through

honest pricing is that of a long term player.

Any ways, LG’s quality products and competitive prices have been accepted in the

market place considering its 90% brand awareness.

Pace: The company did not want to waste anytime being among the last to enter the

market. The 20-month schedule to commission its manufacturing plant was

compressed to 10 months. It also decided to go in for a nation wide launch and

appointed 1000 dealers in just 5 months in 2003. Finally, the company entered 3

product categories simultaneously ensuring adequate retail-space. The company

was able to build up the market for its products faster than it would have been able to

do so if its had launched one product at a time and marketed them region wise.

However, to keep pace with the competitive market place it will have to launch

models with innovative features at regular intervals. For e.g., the proposed launch of

a digital TV by 2003 and many other digital products is a step towards this direction.

Penetration: Pace was followed by aggressive penetration having established 18

brand offices, and C&F agents in Goa and Pondicherry to take advantage of the

sales tax benefits in these areas and towns like Ranchi, Raipur and Nagpur the

company has expanded its dealer network to 2,500. By the end of this year, this will

rise to 2500 dealers. To cater to the rural rich, the company’s 8 mobile vans cover

40

nearly 4,500 km of the hinterland around the 4 metros every month. All this backed

by an estimated annual ad spend and market support expenses of Rs. 28 crore in

2003.

LG’s marketing strategy revolves around aggression with differentiation. LG’s

products are differentiated as superior technology products.

LG believes in “Value Marketing”. It is exactly opposite of what Akai Stands for. Akai

is pushing volumes by sacrificing value. On the other hand LG is sacrificing volume

for value. The refusal to interpret Indian price sensitivity as value-insensitivity seems

to have pushed LG in to delving deep into consumer behavior for insights missed by

excessively self-centric companies. The big gain of doing it this way of course is

pricing power and maintaining this will remain crucial.

41

Product positioning

The Unique Selling Proposition (USP) is based on health.

The company wanted a USP for its products, which no other company in the industry

had, hence it piggybacked on health. This is a niche which none of the other

company’s had thought of. Each of its product lines were positioned based on health:

LCD, LED, Plasma Television

Mixer Grinder – PN system (preserve nutrition system)

Air conditioners – Health Air AC’s

Citrus Juicer – Chaos Punch +3-Fabricare system

Microwave Over –Health wave cooking system

Product Offerings & Related Strategies

LG has, right from its inception launched a series of state-of-the-art technology

backed products. The sales and the marketing department keeps altering & refining

the product portfolio according to the requirements of the consumers.

LG Electronics has the following product lines

i. Colour televisions (LCD, LED, Plasma)

ii. Refrigerators

iii. Washing machines

iv. Air conditioners

v. Microwave ovens

vi. VCD players

42

In every city, LG approached the best dealers but in a scheme-ridden market, it

refused to offer any schemes. It positioned itself as an ethical company. Instead of

discounts LG wanted dealers to pay an advance for LG products. This ensured that

the dealer would push the brand in the marketplace, even if it were just to keep his

oven cash from staying blocked. In the long run this created a pent-up demand for

the brand.

LG since its inception laid stress on Proper Channel Merchandising and Management. Due to a very calculated network expansion plan, LG has the fastest

dealer network expansion in the industry and the highest dealer productivity. Dealer

loyalty and retention has been high right from the beginning due to proper inventory

management higher dealer profitability and incentives, proper POP and other

promotional material to the dealers and a basket full of products for the dealers to

choose from.

Supply Chain at LG

LG factory Exclusive Outlets

C & F agents

Distributor

43

Dealer

Promotion and Related Strategies

Following are the promotion tools used by LG electronics to promote the company as

well as its products:

Advertising

Public Relations

Sales Promotion

LG has devised an effective ADVERTISING and promotional strategy. By using

appropriate positioning stance and appropriate media vehicles, strong concepts and

USPs were developed.

Also, various aspects about the brand performance, the products and strategies to

the media, have been communicated very well to the media with its excellent public

relations.

Today, LG stands as the No. 1 PR Company in the industry.

Advertising

The company started with ADVERTISING on print and outdoor media in 2000.

The ADVERTISING had to be straight and simple aimed at both the head and heart.

For e.g. to advertise for Mixer Grinder the ad line went “From today all other Mixer

Grinder well become history”. This was something that pushed the end benefit

further toward the consumer.

44

Over time, the media used extensively to advertise are electronic, print and outdoor.

It is 60% TV, 30% print and 10% outdoor. Also the company has also started with

web ADVERTISING over the site.

Ratio for its products is the same for promotion

In order to boost secondary sales the sales and marketing department has launched

a new activity. Two LG lady chefs have been taken on board for cooking

demonstration with the help of LG Microwave oven. The demos will be held at kitty

parties arranged by DSL members, at dealer counters (to attract walk in customers),

to new LG microwave customers (they would be requested to invite at least 6-7

people to their house at the time of demo). Currently this activity has started only in

Delhi and Mumbai and will be gradually extended to other branches.

Now that LG is coming up with its digital range of products, the vehicle that the

company plans to adopt would be direct selling majority, in order to demonstrate the

products wherever possible. The company keeps in mind the seasonally of product

in mind while promoting for its products. It advertises heavily during festive season

and also during summers when the demand for ACs, Citrus Juicer is on the rise.

Lintas is the ad agency handling the account.

Its ADVERTISING budget since 2009 is as follows:

Year Budget Objective

2009 25 crore To inform about LG’s products

2010 40 crore To promote additional product launches

2011 52 crore To promote the brand

The company considers the ADVERTISING: Sales ratio, if sales are increasing the

company tries to reduce the ad – budget.

45

Of late LG has got more into corporate ADVERTISING i.e. promoting the brand and

its achievements rather than promoting the product. Even the ads seen on TV these

days, LG is trying to promote the brand and not the product. For e.g. it sponsors a 2-

minute programme on ZEE TV by name of “LG Hero’s” where a personality or

anybody who has excelled in his/her field speaks for about two minutes. The clipping

showing people who are successful has got significance with relation to LG’s

success - 46 -Customer Satisfaction at Lg Electronics

In today’s world of business, the market place is a fierce battleground with national

and multinational companies striving to outsmart each other. LG believes that to

emerge as the most outstanding company by 2005, it needs to leave competition

behind and this is possible only through customer satisfaction.

Customer satisfaction involves two aspects:

Internal Customer: To try to anticipate and satisfy the needs of the internal

customers by being sensitive to them.

External Customers: To provide the external customers the best value for money

i.e., the highest quality at the lowest price and then reinforce the commitment

through good service thereafter. For e.g., the company has a different service policy.

It goes by the name of “happy calls”.

Immediately after purchase, the customer service team calls on customers to find out

if they are satisfied with the product and they are given a call just before the

guarantee of the product expires.

Brand Strength

A pathfinder’s study, done last year to see where LG stands in the consumer’s

mind, has thrown up interesting findings. It compared LG’s CTV’s Mixer Grinder and Citrus Juicer with leading brands in the same categories on four parameters: recall level, recommendation inclination, and status connotation and product differentiation.

46

In reliability (recommendation inclination), we are quite high, despite the higher

prices, which means that the consumer thinks very highly of us, “says Karwal”. On

knowledge (awareness), we are slightly low. After all, in 2002, our turnover of Rs.

125 crore were less than the ADVERTISING spend of Bajaj and BPL. But, across

the board, on esteem and differentiation, LG has scored much higher than the

others”, says he. A fact corroborated by A&M ORG-Marg’s Most Admired Marketing

Companies Survey (A&M, 30 September, 2003), which ranks LG as second in the

industry (after BPL) on product differentiation. In fact, on the parameter Products are

designed to meet consumer needs, LG gets its highest score of 6.66. The same

survey also ranks LG pretty low on distribution (No.31), but even so, it is higher than

Samsung and National Panasonic. On overall ranking LG made a rather high debut

of the year was Akai, which came in straight at No. 8 on the list of admired durables

companies.

Clearly, LG’s brand – building efforts have had exemplary success. What the

company needs to do is capitalize on it.

47

Organization Structure

Traditionally LG was primarily a marketing driven company and HR department

which was earlier dominant has gained importance over the last 2 years. A number

of interventions have been coordinated by the marketing department. The HR

department has helped in maintaining them and is more responsible at corporate level than at plant level but this

is undergoing a change. The HR dept. has a conveyor chain setup.

V.P. (HR)

D.G.M. (HRM)

(Senior Personnel Manager Plants)

Senior Personnel Manager (Sales & Marketing)

48

49

DATA ANALYSIS

Criteria most commonly considered by respondents to buy a LG product.

Attribute Ranking (1 to 5)Brand Image 1Foreign Collaboration 2After Sales Services 3Dealer 4Technology 5

Brand Awareness of LG

50

Schemes preferred by consumers

Cash Discount 42Installment Scheme 22Exchange offer 22Free Gift 14

Most preferred LG product

51

Product Ranking

Refrigerator 1

Microwave 2

AC 3

Television 4

Washing Machine 5

52

Relative brand awareness of LG products vis-à-vis competitors for various products

Top of Mind recall for Refrigerators

53

Top of Mind recall for Air-conditioners

Top of the mind recall for colour TV.

54

Top of the mind recall for Washing Machine

Top of the mind recall for Citrus Juicer

55

Top of the mind recall for Split Air Conditioners

Top of the mind recall for Microwave Oven

56

FINDINGS & RECOMMENDATION

FINDINGS

(I) Findings Based on Marketing: It is no doubt about the fact that LG is considered

to be “A huge marketing success”. One look at LG’s achievements ever the past

three years and it is clear that indeed LG’s success lies in its marketing strategy.

However, the company is still a long way to go before it becomes a market leader to

beat Crompton and Bajaj who are the current market leaders in the industry.

(II) General Findings: Ever since liberalization in 1991, many MNCs have thronged

the Indian consumer durable market. Companies such as Philips, Sony, National,

Samsung etc., have entered the market over the past years. LG was one of the late

entrants into the market and it has broken all records. These multinationals that are

coming into the market have the latest technology, aggressive marketing and fat

ADVERTISING budgets. However in terms of sale and market shares Indian

companies still occupy the top slots but MNCs are slowly gaining ground. LG is one

company that plans to become No.1 in this industry by the year 2009. When MNC

brands come in, they have the advantage of owning their technology. Indian brands

face problems when it comes to additional features because they have to buy from

other sources and this makes their products move expensive vis-à-vis the MNC

brand.

In the past too, the Indian market has seen MNC brands like Sony, Optonica, Sharp,

Thomson etc. but none of these companies have performed well. Reason being that

57

these brands could not establish themselves hence there were no lasting

impressions. Now, the trend is slowly catching up in favor of MNCs who are offering

technologically superior products. The reason for this being that these MNCs has

managed to convince the Indian consumer that there is more to them. Most of these

companies have or are in the process of setting up manufacturing facilities. This

gives the consumer a feeling of security that they are here to stay. Another reason

for their success could be that MNCs entered the market when many Indian brands

were on a decline and they have moved into those empty slots.

With the coming in of the foreign brands the industry and the market are likely

to grow but this might be at the expense of our own Indian companies.

The attractiveness of LG Electronics India in the consumer durable industry can be

judged from the following FIVE-FACTOR INDUSTRY ANALYSIS MODEL

58

Existing Competition: At least 20 manufacturers or even more than those today

flanks the consumer durable market. When LG entered the market it had competition

from 18 companies. The company at present faces competition from several MNC

brands as well as local Indian companies. Crompton and Bajaj are the market

leaders in this industry followed by companies like Onida, Philips etc., giving

competition to the company. Also every now and then companies keep on coming

with exchange offers (Akai) consumer schemes, price offer etc. LG is one company

which believes in “No scheme, no scheming”. Still keeping all these offers into

consideration LG has defied all the rules.

In many ways, LG has proved to be the Pepsi of the white goods industry –

bright, agile and dashing. It always has its ears glued to the ground, to know what

the competition is doing. For e.g., in the last week of May when Sony was about to

launch its 73cm Vega flat monitors at Rs. 56,950, directly taking on LG’s Flatron

monitor priced at Rs. 57,950, the company released LG ads in the same publication

where the Sony ad was being released, on the same dates, and on pages preceding

the Sony ad; LG’s copy read. “Nothing will get flatter than this ever (whatever the

competition may try to tell you). This ad took the excitement out of the Sony launch

LG electronics today has more than survived in the market within these three

years with its marketing strategy and technologically superior range of

products.

59

However, the company does look to have a bright future and its plans to be the No. 1

home Electronics Company might just come true considering the new digital range

that the company has lined up for the new millennium.

60

Likely New Competition: The only new competition that the industry is going to

face in the coming years is from foreign brands. Since in this industry there are

tremendous entry barriers (technology, manufacturing etc.) only a foreign brand can

pose threat to the company. Also if market leaders such as Crompton and Bajaj go in

for some technology tie-ups with foreign brand to have access to technology, it could

be a threat to the company in the long run. These companies are considered to be

the market leaders and if they start coming up with products similar to what LG are

offering it could pose a serious threat to the company. This would however require

huge investments, tie-up with a global leader etc., to beat the MNCs, which is not

likely to be possible in the near future. However, any other global company that

comes into the market with its unique marketing strategy would definitely be a

serious threat to LG.

Substitutes Available: Colour TV’s, Citrus Juicer and Mixer Grinder don’t have a

substitute to them. But however a cooler could be a substitute to an AC or an oven

could be a substitute to a microwave Anyway these two substitutes are not very

significant hence the industry is attractive to stay in.

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Bargaining power of buyers: The buyers in this business can be divided into two

i.e. the dealers and the consumer. The dealers in case of LG electronics don’t have

much of bargaining power to exercise since; the dealers are supplied products on a

credit basis, so that they can push the product. Such a strategy was never heard of

earlier in the market. Also, transactions between the company and the dealer are

carried out on the basis of targets achieved by the dealers. The companies also

provide the dealers with various POP materials to increase the viability at the outlets

and as a relationship building exercise. The consumer however enjoys negligible

buying power. Although the consumer is the most important entity for the

organization the bargaining power by them is looked down upon since prices etc are

fixed the company which is not negotiable.

Bargaining power of suppliers: The supplies in the case of LG electronics can be

divided into viz local vendors and imported supplier from France. The company has

greater control over the supplies from France. However in case of local vendors

company lays down the terms and conditions in advance so that no negotiations are

carried out in later stages. The level of indigenization in LG products in about 45

percent. The company hopes to increase that to 85% within the next couple of years

and for that the company would have to develop high quality local vendors.

LG Electronics India being a subsidiary of France multinational has its own export

division in the country. This was only set up after the company had established itself

well in the local market. Its export operations were started in Jan 2002.

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The company plans to export in 2003, US $ 3.8 million worth of goods to the

exporting countries. By the year 2007 it plans to export US $ 7.6 million worth of

goods and by 2009 US $ 100 million worth of goods. The company follows a rigorous

procedure in order to comply with the rules and regulations of the country.

However, in order to meet its above target of US$ 100 million exports, the company

would have to consider exploiting more countries in the neighboring areas and

exploit the potential markets to the fullest. The exporting country’s image and

success in its own market also effects the position of exports. Considering the

success LGEIL is making in the local market, if it continues with the same pace, the

export potential could also be improved.

However, currently the company is into exports presently to fulfill the export

obligation against the licenses that have been taken for the duty exemption of the

import of raw materials from France. In the coming years it is planning to explore

more international potential markets for its products.

RECOMMENDATION

Though LG electronic has done fairly well in the Indian market, but in order to gain a

market share in the long run, certain recommendation are highlighted below based

on the analysis conducted earlier and the conclusions.

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LG should create a mass market image for itself if it wants to achieve its

objective to become the market leader by the year 2010: Even today after

four years of its existence in the market, the company has a premier image in the

consumers mind. If it wants to achieve the above stated objective the company

should go in for mass marketing. The company has started moving on this path,

but despite that its premium image still exists.

To achieve this company should create such campaigns, which highlight the

middle and the lower end consumer also. For products such as the DIOS

refrigerator, LED, LCD T.V. etc, it should highlight them as premium products for

the elite class. Other products such as Home Appliances or 175lt. Mixer Grinder

should target the lower end of the customer.

LG should concentrate more on the rural markets: Currently sales of the

company form a very insignificant portion from the rural market. It only accounts

for about 30 per cent of the total sales. This is very little considering the vast

potential that lies in our country. The company should consider exploiting the

untouched areas of population even less than 50,000.

It could probably form groups of 10 to 12 such towns in a state and appoint a

single distributor for each group. The entire responsibility of selling the products

should be given to the distributor and his per performance should be evaluated

after every 15 days. The company could offer him attractive schemes and

incentives to do this. This could be test marketed in a couple of states initially to

find its success rate.

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In order to reap long term benefits, the company should go in for certain

honest schemes: Majority of companies in this industry today are selling their

products via schemes, offers etc., in order to survive in this competitive market. It

is quite doubt full that LG with its policy of “no schemes, no scheming” would be

able to do much. The company definitely does not have to go the Akai way but

certain schemes and offers would help the company in the long run. Since LG

believes in “value marketing” it does not have to go in for exchange offers where

by you get a new Citrus Juicer or TV if return the old one. Here the company has

to sacrifice on value to get volumes whatever said and done. Some of the

schemes that the company could opt for is “Buy a refrigerator (300lt+.) and a

microwave and get some rupees off” or “buy refrigerator + Citrus Juicer and get

the Citrus Juicer at half the price”.

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BIBLIOGRAPHY

BOOKS

Principles of Marketing, Philip Kotler & Gary Armstrong, 11th edition, Prentice Hall

of India Private Limites, New Delhi, 2006

Marketing Management, A south Asian Perspective, Philip Kotler, Kevin Lane

Keller, Abraham Koshy, Mithileshwar Jha, 13th Edition, Pearson Prentice Hall, 2009

Marketing Management, Planning, Implementation and control, Global

Perspective Indian Context, V S Ramaswamy & S Namakumari, 3rd Edition,

Macmillan India Limited, New Delhi, 2007

Marketing Managemnet, Rajan Saxena, 3rd Edition, Tata McGraw Hill Publishing

Company Limited, New Delhi, 2006

Marketing Management, 13th Edition, S A Sherlekar, Himalaya Publishing House,

Mumbai, 2007

Basic Marketing A global Managerial Approach, 15th Edition, William D Perreault

Jr, E Jerome McCarthy, Tata McGraw Hill, New Delhi, 2006

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INTERNET

www.lgeil.com

www.google.com

NEWS PAPERS

Economic Times

Financial Express

Times of India

Indian Express

MAGAZINES

Business Today

A & M

Business India

Business World

Business Standard

INDUSTRY REPORTS

Investors Guide to Indian Industry 2009

COMPANY LITERATURE

“LG Parivar” the LG in-house magazine.

“Global News” LG weekly news bulletin.

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QUESTIONNAIRE

How is LG positioned versus other players in the market?

How is each of its product line differentiated from others:

Home Electronics AC’s

Refrigerators Microwaves

Washing Machines

How has the product mix changed since 2008?

Who are the target audiences for each of its product lines? On what basis has

segmentation been done?

How does the LG supply chain operate?

What is the current market share of LG?

What does the logo ‘Digital ez’ stand for?

What are the most commonly used media to advertise for LG products?

How has the ad budget changed since 2003?

What all promotional activities does the company undertake for:

- Consumers

- Dealers

In India, what is LG’s marketing program like – is it a standardized marketing mix

or is it an adapted marketing mix?

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Customers Questionnaire

Name :Add :Contact :

1. Do you own / aware of “CTV + DVD” Scheme of LG?

Yes No

2. Where did you come to know about these Schemes from?

Ads on TV Ads in magazine Through friends and family At showroom / dealer Paper Insert

3. What do you think about this Scheme / How will you rate it?

Poor Average Good Very Good Excellent

4. Are you satisfy with this Scheme?

Yes No

If No :

5. Is there, any complaint regarding this Scheme?

Yes

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No If Yes :

6. What kind of complaint, you registered?

-------------------------------------------------------------------------------------

7. Was there, any action taken by the company?

Yes No

If No :

8. If you had to make improvements in this Scheme, what would they be?

----------------------------------------------------------------------------------------

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Dealers Questionnaire

Dealer Name:Address :Contact No :

1. Whether “CTV + DVD” Scheme of LG attracted the customers?

Yes No

2. What do you think about this Scheme / How will you rate it?

Poor Average Good Very Good Excellent

3. Whether the Scheme has helped to increase the sale?

Yes No

4. Are you satisfy with the promotional programs for the Scheme?

Yes No

5. Is there any complaints against the Scheme?

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6. If Yes, Details of complaints?

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7. Your suggestions for further improvement of the Scheme?

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