Food Processor

ACKNOWLEDGEMENT

Getting a project report ready requires the hard work and effort of many people. First

of all, I gratefully acknowledge the continuous assistance and inspiration given to me

by the Faculty of

Special thanks to ______________________ for her invaluable support and guidance

during my training period and supervising my work.

Also I would also like to thank all those who have contributed in completing this

project report.

Finally, I would like to thank my family for providing me monetary and non-

monetary support, as and when required, without which this project report would not

have been completed.

TABLE OF CONTENTS

Chapter 1: Introduction 01-35

1.1 Overview of the Industry 01

1.2 Profile of the Organisation 16

1.3 Problems of the Organization 31

1.4 Competition Information 32

1.5 S.W.O.T. Analysis of the Organization 35

Chapter 2: Objective & Methodology 36-37

2.1 Significance of the study 36

2.2 Managerial usefulness of the study 36

2.3 Objectives of the study 36

2.4 Scope of the study 36

2.5 Methodology 36

Chapter 3: Conceptual Discussion 38-64

Chapter 4: Data Analysis 65-70

Chapter 5: Findings & Recommendations 71-75

Annexure 76-77

Bibliography 78

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Chapter – 1 INTRODUCTION

1.1 A PREVIEW TO THE INDUSTRY

Food processor 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 coming 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

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

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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

2005-2006. 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, Black and Decker.

International : LG, Kenwood, Braun, Moulinex, LG, Inalsa,

JVC

Currently the four major players in the market are

LG 11% market share

LG 8% market share

Philips 19% market share

Moulinex 12% market share

Kenwood 11% market share

These Five players cover 61% of the market.

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Market shares in the 3,000,000 units market (2006) are:

Current Scenario: The recent help age extempo has spurred a sudden growth in the

Juicer Mixer Grinder segment.

The segment grew by 44% in August 2005 over the same period last year. August

2005 also saw the highest sales during the one-year period April 2002 to August

2006. The world help age extempo have been a trigger but, underlying this boom is

the story of marketing techniques by the MNCs.

The new MNC Home Electronics brands are on a roll armed with latest technology,

aggressive marketing and advertising budgets. These companies are capturing a

significant share of the Indian Home Electronics market. In terms of sales and market

share Indian companies still occupy the top slots but MNCs are slowly gaining

ground.

These MNCs have positioned themselves by offering superior technology and

discounts, rather than old technology that the Indian companies failed to do so.

3

Home Electronics market shares, May 2005 (Post extempo)

According the latest survey conducted by ORG-GEK for July 2005, the help age

extempo driven spurt in Home Electronics sales appears to have spilled over to

July’05.

Top 3 brands for July’06 were

LG 22%

Philips 28%

Moulinex 17%

Seeing the figures for May’2006 LG was number 2 with 22%.

TV market shares – July’06

Philips 16% Kenwood 7%

Moulinex 8% Inalsa 19%

LG 9% Crompton 4%

Bajaj 6.5% Others 12%

LG 9%

Braun 7%

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TOSTERS

India has been one of the rapidly expanding markets for Toasters for the past couple

of years. The Indian market has considerable demand potential for this product.

This attracted most of the major multinational players. The entry of players such as

LG, Moulinex and Braun had the effect of galvanizing the industry. The industry

players as a consequence are gearing up for both the customers and the competition.

The Toasters industry can be broadly classified into 4 segments:

a. Cool body c. Bag Body

b. Sheet metal d. Pop-up-toasters

Cool body, Bag body, Sheet Metal are Sandwich toasters and pop-up-toasters are use

for Crisping.

The Cool body and Pop-up-toasters segment is the largest in terms of value,

accounting for an estimated Rs.14 crores. This segment has been the fastest growing

amongst the lot, with a growth rate of 15% or so in 2004-05.

The world over, sale of Cool body dominates the total shipments. In India, however

the sale of pop-up-toasters accounts for a larger share.

However this phenomenon has been changing in the past couple of years. The demand

for pop-up-toasters and Sandwich toasters mainly comes from house holds. House

holds are estimated to account for around 82% of the total demand.

The demand from the hotel sector though it accounts for a smaller portion, is the

fastest growing segment. Also, a large portion of the demand from this segment-

around 16% relates to buyers of second units.

The demand for Toaster is generally restricted to major cities and towns. Eight cities

which include the four metros are estimated to account for 72% of the total household

demand. Delhi and Mumbai alone is estimated to account for one-third of the total

industry sale to households.

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The major players in the market for Sandwich Toasters are Bajaj, Moulinex, Braun,

Philips, Kenwood, Inalsa, LG, Crompton. There are also a host of other smaller

players such as Black and Decker, Sujata, Usha etc.

The Sandwich toasters segment is however dominated by Usha, Laxman Slyvania

though LG is making a large headway into this segment too.

The Pop-up-toaster market is dominated by Philips.

Market shares in the 80,000 units market (Retail) 2006

WHITE GOODS (Mixer Grinder & Citrus Juicer): A PREVIEW OF THE

INDUSTRY

The white goods industry is witnessing dynamic changes. Acquisitions of units by

some, exits by a few others, marketing tie-ups, capacity expansions, booming volume

growth in the first six month of 2005-06 all these changes are the characteristics of the

industry.

Mixer Grinder: Mixer Grinder accounts for the largest segment in the white goods

industry. It can be classified into:

a. Domestic Mixer Grinder i. Three attachment with 440 watts

b. Industrial Grinder i. Three attachment with 550 watts

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Domestic grinder industry with a turnover of 40 crores is dominated by the organized

sector.

The size of the industry is about 2.5 mn units. This industry has benefited from the

consumers buying preferences. After a TV and Toasters, the most likely product on

the buying list would be a Mixer Grinder. This has resulted in a higher penetration

level for Mixer Grinder.

After a good year in 2005, the size of the Mixer Grinder segment contracted in 2001.

This trend has reversed in 2004-05. In the first six months of 2004-05, the volume

growth was in double digits i.e., 20%.

The Grinding market consist of 440 watts and 550 watts models which has the

following demand:

440 watts- 15% of the demand for refrigerators.

550 watts –85% of the demand for refrigerators.

The action is slowly moving towards 550 watts models of the grinding segment.

Companies are steadily upgrading the economy models capacity from 440 watts to

550 watts.

The 550 watts Mixer Grinder segment has been growing faster than the 440 watts

segment in recent past. The slower rate of growth of 440 watts models forced

Crompton to finally launch 550 watts models in Oct’96. Both Usha and Philips made

significant inroads in 2003.

Philips and Inalsa continue to be the market leader in the 550 watts segment although

its market share has come down. In the 440 watts segment, Crompton continues to be

the leader.

However the year 2004 saw the entry of many France and Korean companies. All

these companies have entered in the 550 watts and above capacity niche segment that

can be imported in fully assembled form and where margins are higher. The entry of

these giants has opened up an entirely new and technically superior segment

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comprising 440 watts Grinding. The global giants like Inalsa, Moulinex, Braun,

Philips, LG have entered the Indian market with their international range of products.

There has been significant expansion in capacity in this industry. Inalsa, plants at

Haryana and Moulinex plants were commissioned recently with capacities of 30lacs

& 15 lacs units respectively.

The excess capacity in the Mixer Grinder industry has deterred players such as Usha,

Bajaj and LG from going ahead with their plans. This has led to certain marketing tie-

ups which Usha, Bajaj, Sujata and LG have taken advantage of. Both LG are

outsourcing Mixer Grinder from Polar manufacturing facility, while Moulinex and

Braun are sourcing Mixer Grinder and Citrus juicer from China respectively.

Market shares in the 80,000 units market (440 watts + 550 watts), in per cent

2006.

Citrus Juicer : The size of the Citrus Juicer industry is small compared to the Mixer

Grinder industry, at around 44,000 units.

The psyche of the consumer who looks at Citrus Juicer as a luxury product and the

infrastructural problems such as the non-availability of electricity has been the major

hindrances for the growth of the industry.

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After a good year in 2004, the size the Citrus Juicer segment contracted in 2005. The

trend has reversed in 2005-06. In the first six months of 2005-06, the volume growth

was in double digits i.e., growth of 15%.

There are two types of Citrus Juicer in this segment:

a. Half ltr

b. One ltr

Philips has market share of 55% in 2006, dominating the market. The demand for the

above types in the market is:

c. Half ltr 22%

d. One ltr 78%

Philips is the leader in both half and one ltr. Segments. The company’s position in the

One ltr. segment is under serious attack by a range of technically superior foreign

models which are also available in large capacities. Currently almost all-foreign

companies are operating in large capacity one ltr segment.

Major contenders-LG, Moulinex, Braun, Kenwood.

Currently since the level of indeginisation is very low for the foreign machines, the

high price charged in a major stumbling block for the first time shoppers of Citrus

Juicer. As long as companies can not justify the premium pries to customers, low

prices of domestic brands of Citrus Juicer will continue to dictate the purchasing

decision of majority of buyers.

The capacity utilization levels are still quite low in the industry. The situation is

expected to improve significantly in the future, with the number of working women

on the rise and the difficulty in availability of domestic help the market is expected to

grow by over 30% in the next few years from the present growth rate of 6%.

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Market share in the 44,000-unit market (half ltr + one ltr) in per cent (2006).

Jug Kettel: The size of the Jug Kettel is large compared to the Citrus Juicer industry,

at around 79,000 units.

The psyche of the consumer who looks at Jug Kettel as a luxury product and the

infrastructural merits such as the low consumption of electricity have been the major

advantages for the growth of the industry.

After a good year in 2004, the size the Jug Kettel segment inflated in 2005. The trend

has reversed in 2005-06. In the first six months of 2005-06, the volume growth was in

double digits i.e., growth of 28%.

There are two types of Jug Kettel in this segment:

a. With cord

b. Cordless



c. With cord 12%

d. Cordless 88%

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Philips is the leader in with cord and Cordless segments. The company’s position in

cordless segment is under serious attack by a range of technically superior foreign

models, which are also available in large capacities. Currently almost all-foreign

companies are operating in large capacity cordless segment.

Major contenders-LG, Moulinex, Braun, Kenwood.


high price charged in a major stumbling block for the first time shoppers of jug Kettel.

As long as companies can not justify the premium pries to customers, low prices of

domestic brands of Jug Kettel will continue to dictate the purchasing decision of

majority of buyers.


expected to improve significantly in the future, with the number of working men and

women on the rise and the difficulty in availability of domestic help the market is

expected to grow by over 34% in the next few years from the present growth rate of

8%.

Market share in the 79,000 unit market (with cord + cordless) in per cent (2006)

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Hair Dryers: The size of the Hair Dryers industry is higher compared to the Citrus

Juicer industry, at around 68,000 units.

The psyche of the consumer who looks at hair dryers as a luxury product and the



After a good year in 2004, the size the hair dryers segment inflated in 2005. The trend

has increased in 2005-06. In the first six months of 2005-06, the volume growth was

in triple digits i.e., growth of 52%.

There are two types of Hair dryers in this segment:

a. Three K – More power

b. Four K – low power

National has market share of 48% in 2006, dominating the market. The demand for

the above types in the market is:

c. Three K – More power 64%

d. Four K – Low power 36%

National is the leader in both Three K and Four K segments. The company’s position

in the three K segment is under serious pressure by a range of technically superior

foreign models which are also available in large capacities. Currently almost all-

foreign companies are operating in large capacity Three-K segment.

Major contenders-LG, Braun, Moulinex, Philips, Kenwood, National, Sony,

Panasonic, Bajaj.


high price charged in a major stumbling block for the first time shoppers of Hair

Dryer. As long as companies can not justify the premium pries to customers, low

prices of domestic brands of Hair Dryer will continue to dictate the purchasing


12





Market share in the 68,000 unit market (Three K + Four K) in per cent (2006).

Iron: The size of the Iron industry is largest industry, at around 2 lacs units.

The psyche of the consumer who looks at Iron as a all class luxury product and the



After a good year in 2004, the size the Iron segment inflated in 2005. The trend has

increased in 2005-06. In the first six months of 2005-06, the volume growth was in 10

time’s i.e., growth of 80%.

There are four types of Irons in this segment:

a. Steam Iron

b. Dry Iron

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c. Light weight Iron

d. Heavy weight Iron



e. Steam Iron 52%

f. Dry Iron 24%

g. Light weight Iron 14%

h. Heavy weight Iron 10%

Philips and National are the leader in both Steam Iron and Dry Iron segments. The

company’s position in the Dry Iron segment is under serious pressure by a range of

technically superior foreign models, which are also available in large capacities.

Currently almost all-foreign companies are operating in large capacity Dry Iron

segment.

Major contenders-LG, Braun, Moulinex, Philips, Kenwood, National, Bajaj, Usha,

Crompton and Kenstar.


high price charged in a major stumbling block for the first time shoppers of Hair Dry

Iron. As long as companies can not justify the premium pries to customers, low prices

of domestic brands of Dry Iron will continue to dictate the purchasing decision of

majority of buyers.





Stick Blender: The size of the stick Blender industry is medium industry, at around

28,000 units.

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The psyche of the consumer who looks at Stick Blender as a all class luxury product

and the infrastructural merits such as the low consumption of electricity & high speed

work have been the major advantages for the growth of the industry.

After a good year in 2004, the size of the stick blender segment inflated in 2005. The

trend has increased in 2005-06. In the first six months of 2005-06, the volume growth

was in twice i.e., growth of 24%.

There are two types of stick blender in this segment:

i. With attachment – with chopper

ii. Without attachment –without chopper

Moulinex has market share of 38% in 2006, dominating the market. The demand for

the above types in the market is

i. With attachment

ii. Without attachment

Philips, Braun, Moulinex, is the leader in both with attachment & without attachment

segments. The company’s position in the without attachment segment is under serious

pressure by a range of technically superior foreign models which are also available in

large capacities. Currently almost all-foreign companies are operating in large

capacity.

Major contenders-LG, Braun, Moulinex, Philips, Kenwood, National, Bajaj, Usha,

Crompton and Kenstar.


high price charged in a major stumbling block for the first time shoppers of stick

blender. As long as companies can not justify the premium pries to customers, low

prices of domestic brands of stick blender will continue to dictate the purchasing




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Remarks: Domestic companies will have to gain access to latest technology from

outside, launch new products in quick succession, leverage their strong dealer

network and promote their products effectively to remain competitive in this

extremely competitive market. The strategy used by the MNCs is ‘technology’ and

they have positioned themselves by offering superior technology, which the Indian

companies have failed to do so. Foreign brands hence are expected to gain the mind

space of the price discerning Indian consumer in not very distant future.

1.2 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 worlds customer with LG brand. LG is

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 centres.

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

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

strategy is to expand its R & D centrer 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:

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 cricuit 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.

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

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

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,

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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.

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.

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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

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

year. By the year 2000 at least 8% the total revenue will be put back into

research and development.

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

R & D achievement with diverse incentive. It’s 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 (2000)

2. Create global leading products (2000-2002)

3. Secure technological identity to lead the growth of LGE (2002-2005)

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.

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

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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

2005, 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.

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 highenergy “Boundryless” 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 Francens have empowered the Indians- the

people who know the market well.

23

LG basic philosophy

Compete in the international market with a global mindset

Maximize value for customers, employees and shareholders

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

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.

24

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).

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 .

25

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.

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 period Jan-

July’2002. LGEIL by introducing a wide range of products to the Indian consumers

26

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 ceasely 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.

LG Groups presence in India

LG Electronics India Limited

LG Software

LG Chemicals

LG Construction

27

Production Facility

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

Today the factory chuns 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 Indigenisation 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 indigenisation 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.

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

28

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

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.

29

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, are

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 2005-06, 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 lt and above category

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’s, chaos technology in

Citrus Juicer and Air conditioners.

At the end of March 2005, 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 performance any

company had in its first year of operation.

30

In 2006, its first complete year of operation in India, it sold products worth Rs. 477

crore The company for the period Jan-June’2004, 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.

1.3 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

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

lacs 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.

31

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 of

1.45 lacs 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.

1.4 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.

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.

32

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

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 2004 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

33

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

2004 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

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

windows segment. Its market shares in 2004 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 2004 were: refrigerator 9.7%.

34

1.5 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

35

Chapter – 2 OBJECTIVE & METHODOLOGY

2.1 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.

2.2 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.

2.3 OBJECTIVES

To identify and analyse 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.

2.4 SCOPE OF THE STUDY

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

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

stand in this competitive market.

2.5 METHODOLOGY

Information regarding the Consumer Home Electronics, organisation, Marketing

Strategies, Human Resource Management has been obtained through:

(a) Primary Sources

36

(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.

Conclusions and recommendations have been thereby given.

Thus in my opinion, this was the best method, that could have been used which

included the use of both the primary and secondary sources since only the secondary

or the primary sources could not have provided such an in-depth and detailed

information.

37

Chapter – 3 CONCEPTUAL DISCUSSION

Marketing Strategy

In a short span of just 26 months, since its inception in May 2006, 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

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

products to suit Indian tastes added to its strength.

38

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 2004 from 2006. The company

even plans to break even this year. By the year 2006 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.

39

LG’s Glocalisation strategy for India

TH

E B

US

INE

SS

MO

DE

L

MA

RK

ET

ING

THE SEGMENT THE PRODUCT THE BRAND

Niche/ Mass Top-of-line / Mass Market

Global

Premium/ mid-range? Grown

THE PRICE

Premium / Economy

OP

ER

AT

ION

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)

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

40

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.

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.

41

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 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.

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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:

Golden Eye television- Ensuring wrinkle free viewing

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

ii. Refrigerators

iii. Washing machines

iv. Air conditioners

v. Microwave ovens

vi. VCD players (not all that popular).

Initially in 2006, the company had launched only 12 models of Home Electronics, 8

models of Mixer Grinder (300 lt + frost-free) and 3 models of fully automatic

43

washing machines. Gradually as the company showed signs of profitability it

expanded its range of products in its portfolio.

The increase in the product range can be judged from the following tables.

Product range (2004-06)

Year CTV’s Refrigerators Washing

Machine

AC’s Micro VCD

FF DC FA SA Oven

2004

2005

2006

Number of models (2004-06)

Year CTV’s Refrigerat

or

Citrus

Juicer

AC’s Microwav

e oven

VCD

FF DC FA SA Split

2004 12 8 3

2005 14 8 3 7 4 2 2

2006 16 9 3 3 3 7 4 3 2

Terms used :

FF.- Frost free

DC – Direct cool

SA – Semi Automatic

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FA-Fully Automatic

Product features of any company product are the competitive tool for differentiating

the company products from other products. The features of LG’s products are

discussed in detail in the following subsections.

i. Colour Television

When LG launched its range of Home Electronics in 2003, it was caught amidst at

least 18 competitors all over India in the industry. What it needed was a USP to its

range of Home Electronics apart from competition.

It launched its TV with the “Golden Eye” range (this was a simultaneous global

launch) which it positioned as the right set for wrinkle free viewing.

With this differentiating strategy, today LG-is at number five positions in the

CTV market with a market size of 9.23 percent.

In order to meet the needs of the Indian rural market, LG launched on 15 th August

2001” sampoarna” television, India’s first TV with a devanagri script on –screen

display. This TV was affordable, consumer friendly and designed for the rural

market.

Following are the range of TVs offered:

LG golden Eye.

LG Roving Eye TV

Home Cinema

LG Super Flat wide vision

LG Flatron

LG Golden Eye: It is considered to be the world’s first television that provides

wrinkle free viewing. It consists of a light sensitive natural a LGorithms ‘EYE’ and an

advanced circuit developed by LG. The ‘EYE’ automatically adjusts colour,

brightness, contrast, sharpness tint and white balance in response to any change in

45

ambient light conditions. This ensures that one enjoys unmatched picture quality

without straining the eyes.

Unique features of a LG T.V.:

Super flat TV: The features of the completely flat screen picture tube designed

by LG’s own technologies are: reduced outer light refection, better focus from

screen centre to corners and quick start electron gun.

Multi windows PIP: This function displays 9 or 4 sub screens on the TV screen

with 3-second updates. Any of these can be selected for main screen viewing at

the touch of a button.

Colour status memory: This feature allows users to enjoy picture with their

preferred colours.

Channel scan: This is very useful when users want to see which program is

showing on each channel. Just by touching a button one can see every channel for

a while.

Game mode: This is an existing in built 3 level electronic game ‘Power Ball’

which one can play when ever one does not feel like watching a TV program.

Auto Volume leveller: The sudden changes in volume (different sound levels of

each broadcasting centre) which is experienced when you switch channels are

automatically eliminated with the help of a smart circuit to ensure a comfortable,

uniform sound level across all the channels.

Multi Language OSD Menu: Gives users an option to have the entire on screen

display of the menu in English, Hindi, Marathi, Tamil and Bengali.

3 Band Graphic Equaliser: Allows to tailor the sound quality according to

personal choice.

Turbo Search: Searches and memorizes channels 12 times faster than other

ordinary TVs.

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LG claims, that none of the features cited above are available in the competitor

products.

LG Roving Eye: TV with a built in security system. It has a door ringer with an in

built security camera. Once put on the door, the camera can be connected to the TV

any time a caller presses a ringer at the door, the TV indicates through a beep and a

live visual of the caller appears on the screen.

LG has launched its “Flatron Television” by the year 2000. It has already starting

publicizing for this TV and has made advance bookings open.

The unique features that this TV would offer vis-à-vis competitors are:

100% flat picture tube: Nil light refraction for clearer and most realistic screens

images.

Digital 100 Hz: For flicker free viewing because of double scanning speed than

ordinary TVs

Digital Eye: To create wrinkle free viewing

Picture-in-picture: Displays sub screens on the TV.

Picture-out-picture: Compress the main picture of the screen while sowing PIP

pictures too.

LG has models ranging from 14 inches to 43 inches wide screen. Following is the

range:

14” inches 3 models





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The company has more variety in the 21” inch segment because the Home Electronics

market is dominated by regular 21inch sets.

ii. Refrigerators

In the domestic Grinding segment there are two types:

a. 550 watts: This Mixer Grinder cool through the direct contact of air with the

cooling coils bound around the freezer. This system has several drawbacks: Ice

forms frequently around the coil-reducing cooling efficiency and creating the need

for manual defrosting. Additionally, also the temperature distribution is uneven

with the various compartments.

b. 440 watts refrigerator: is designed to overcome the drawback of conventional

refrigerators. Hence the cooling coils are located outside the stroke area. No frost

even forms inside these, thus giving high cooling efficiency and maximum storage

space all the time.

LG entered the refrigerator market with 300lt. 440 watts models. It introduced 8

models initially and now it has a 9 models in the 440 watts type and 3 in the 550 watts

type. After establishing itself as the market leader in the 300lt. plus 440 watts Mixer

Grinder with a share close to 37 percent in 2005, LG is now targeting the 550 watts

segment which is the fastest g rowing category among refrigerator in India (nine out

of every 10 models of fridge’s sold in India are 550 watts inside). At present its

market share in this category is one 3 percent.

In 2002, it launched three new models of DC Mixer Grinder in 175 litre, 210 litre and

250 litre.

LG has the following models of refrigerator available:

i. 3 models in 550 watts: 175 litres, 210 litres and 250 litres.

ii. 8 models in 440 watts: 330 litres, 360 litres, 380 litres 400 litres, 410 litres, 460

litres, 570 litres, 640 litres.

iii. DIOS 730 litre model: Deluxe Intelligent Optimum Silence.

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From the above three categories, category (i) is catering to the middle class segment,

category (ii) is catering to the middle upper and upper class whereas category (iii) is

catering exclusively to upper elite class who are seeking the trendy and rich lifestyles

of the west in India.

LG’s Mixer Grinder have been positioned as a nutrition preserver via its PN

system.

PN system (Preserve Nutrition system): The PN system comprises the F.I.R. Lamp,

the moisture controller and the Deodorizer. The three work together to counter factors

that cause unpleasant odors, degeneration and staleness of food. This maintaining the

natural flavour, freshness and nutritive value of food.

The unique features of a LG refrigerator are:

Super cooling system: if one wants to cool lots of food in a short time for a party

for instance), the super cooling systems HI-speed fan will let out cool air much

faster and more powerfully.

Focused cooling system: When a new item is placed anywhere in the refrigerator

a built in neuro fuzzy control system detects the item and chills it instantly by

concentrating cool air on it. It is the best and the most efficient cooling system for

refrigerators.

Neuro Fuzzy control system: With the help of various sensors and a micro

computer this system provides behavioral control functions. It calculates the least

used moments for defrosting, automatically adjusts the refrigerator temperature

when there is a change in the room temperature.

Environment friendly: LG has converted its entire 300 FF range to CFC free

compressors. The CFC (Chloro flouro carbons) free gas does not deplete the

ozone layer and does not add to global warming.

Active carbon filter: Effectively absorbs unpleasant odors from onoons, stale

milk etc.

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Moisture Controller: Maintains the humidity at an ideal level, keeping fruits and

vegetables nutrition last longer.

Dios Refrigerator (Deluxe Intelligent Optimum Silence): This 730 lt. refrigerator

was launched in August 2002. It is considered to be the first refrigerator of its kind

in the country, DIOS has the world lowest noise level and lowest power consumption.

It is a super premium product launched in the top four metros. The company has taken

a focused approach towards this product because these are the markets, which will

prove instrumental in the success of such state of the art technologies.

The target audiences are the top end customers who are seeking the trendy and rich

lifestyle of the west in India. Foreign diplomats, NRIs and top executives constitute

this segment.

LG is confident that with 440 watts Mixer Grinder doing well in the Indian market,

the future for such super premium category Mixer Grinder is bright.

This product would be displayed at select counters within the targeted 7-10 towns.

The company feels that the successful campaign of its PN system Mixer Grinder in

the FF segment is bound to have a spillover effect on this new segment.

This refrigerator is directly imported from France and a team from France extensively

trains the service engineers for this product.

The unique features of this product are:

Worlds lowest noise level

World lowest power consumption

CFC free

Uniform Ice making dispenser with one touch system

Built in home bar.

Tempered glass shelves

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Unique electronics temperature control system.

LG Fresh Master

550 watts Mixer Grinder come under this category. They give more space along with

better value for money. The interiors are extremely flexible to comfortably adjust

shelves and accommodate all the food.

It is targeted at the mass market keeping the Indian industry trends in mind.

Unique features:

Versatile and convenient

Unerring efficiency

Great looks

Strong compressor for cooling

iii. Citrus Juicer

In the Citrus Juicer category there are two types of machines:

a. Semi Automatic: User has to transfer clothes between the washing and drying

compartments manually.

b. Fully automatic: washing and drying is done in the same unit.

LG has about 6 models of Citrus Juicer available in the market out of which three are

fully automatic and three-semi automatic.

The company introduced Citrus Juicer in the market in 2001. The company has

entered the semi automatic segment because bulk of Citrus Juicer bought are semi

automatic. World over the company does not cater to this category.

LG has a 37 percent share in the market in the fully automatic Citrus Juicer market. In

the semi automatic category it has a 12 per cent share.

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Product positioning: LG’s Citrus Juicer are positioned as machine that cares for

the fabric” via its fabricare system.

The technology used in its products in the Chaos punch +3.

Chaos Punch +3 wash: a water punch that detangles clothes before washing them

(efficiently). The punch propels water through every pore of the fabric and ‘+3’ are 3

additional pulsates (technology used by LG).

LG’s Citrus Juicers are available in the following models:

i. ‘Punch wash’ semi automatic : 2 models of 6 kg capacity

ii. ‘Clean master’ semi automatic: 7kg capacity.

iii. ‘Turbo Drum’ fully automatic: 3 models in 5.5kg, 6 kg and 10 kg.

Fabricare system

LG has introduced this system to its range of washing machines. It is a distinct

principle that helps preserves life of the fabric. Whenever clothes are rubbed

against hard surfaces like agitators to remove dirt, the fabric wears out. A clothes

gets tangled and are stretched out of shape. Excess detergent and improper rinsing

makes fabric loose its original feel and colour.

The fabricare system has a washing action that creates powerful water currents and

water Punch, to give clothes a cleaner, more effective and tangle free wash.

‘Punch wash’ semi automatic:

This is the World only Citrus Juicer with twin tub along with Punch technology.

Just within a 3 months of its launch in May’98, the LG Punch wash became the

largest selling semi automatic Citrus Juicer in the 6 kg and above category, in

towns and cities across the country. Since then it has sold about, 94,840 machines.

The single most important factor that contributed to the success of Punch wash is

the fact that it is designed on the basis of a deep understanding of consumer needs.


52

Punch technology: The gushing upward movement of water removes directs

effectively. Creates water whirls to wash clothes much better than other types of

conventional washers. Prevents damage to the clothes by using water rather than

friction to clean.

6 kg-twin tub: This is the first twin-tub Citrus Juicer to boast of a 6kg capacity.

Tough wash tub: made of a high impact resistant material called polypropylene

that makes it longer lasting. Unique water dynamic pulsates that’s designed to

give the cleanest wash.

Spin tub: The capacity of spin tub matches with the wash tub such that all the

clothes that have been washed can be dried in one go.

‘Clean Master’ semi automatic

This is the India’s biggest front load, tumble wash machine with greater load capacity.

Its washing action involves an extra rinse option and a suds free system ensures that

every bit of detergent is washed away from your clothes.

The unique feature s of this product are:

Jumbo drum (7 kgs)

Powerful dual filter

Economical water consumption

Low noise level

Suds free system

‘The Turbo drum’ fully automatic

This Citrus Juicer provides with features that are unique to LG. The drum and

pulsators rotate in opposite directions, creating multiple water whirls inside the

machine.


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The turbo drum

Pulsators

Triple water punch

Triple water fall system

Low power consumption

4 wash programs.

iv. Air Conditioners

LG’s Toasters were launched in phase II in Jan’98. It launched its Toasters as “Health

Air ACs”

There are two types of AC sold by the company :

a. Split type

b. Window type

On the whole there are about 9 models of ACs available in the market.

Health Air System: This system guards against heat, dust and pollution with its

unique anti-bacteria filter, it drives air borne germs out of the boundary. Its de-

odorizing filter does away with unpleasant odors. And the anti-fungus electrostatic air

purification unit traps dust particles as little as 0.01 microns and even smoke. Its

‘Chaos’ Logic airflow system creates natural air currents, and cools in gentle puffs

rather than with blasts of wold air. Thus it prevents any unhealthy, abrupt drops in the

body temperature.

The unique features of LG Toasters are:

Unique air purifying filters: The filtering system utilizes two filters. The

electrostatic filter removes the finest dust particles as small as 0.01 mm and even

tobacco, smoke and pollen. The de-odorizing filter removes unpleasant odors,

especially those caused by airborne fungi.

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World’s first ‘Chaos’ logic AC’s: The most pleasant airflow for the human body

can be found within nature. Countless data and verification have resulted in the

application of the new ‘Chaos’ theory to LG AC’s. This is a technology that

reviews more natural air by controlling the angle and speed of the movement of

the vane.

Worlds quietest AC’s: To provide a comfortable pleasant and well balanced

environment, LG AC’s utilized a streamlined air fan and a unique design which

create smooth air flow from the air conditioner so that it operates under the lowest

noise level with the best structure for the air path. The amount of friction has been

decreased providing the quietest Acs in the world.

Following is the range of models:

i. Split AC’s – 1.0T, 1.5T, 2.0T, 2.5T

ii. Window AC’s –0.75T, 1.0T, 1.5T, 2.0T

LG is launching the Digital Plasma AC for the new millenium. This AC has a Digital

Laser Sensor that detects hot areas in the room being cooled and focuses air on those

areas thereby providing uniform and efficient cooling.

Digital plasma AC: Air Clean + De-odorization + Allergy Prevention

The unique features of this AC are:

Anti-Bacteria filter: It removes dust in the air as well as inhibits bacteria

proliferation, making the indoor atmosphere healthy. LG AC would be 98.5%

bacteria free.

Neuro Fuzzy Control: According to the temperature, air volume and air velocity

the sensor will automatically operate creating a more pleasant atmosphere.

7-Hour on/off Timer: this function allows setting the timer from one hour to a

maximum of 7 hours.

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Child Lock Function: This function presents children or others from tampering

with the control buttons on the unit. All the buttons on the indoor display panel

can be locked. The unit can then, only be controlled by remote.

v. Microwave oven

LG launched microwave ovens in the second phase in 2001. The company initially

introduced two models of microwaves and now it has launched some models in

different colors.

Product positioning: LG’s ovens have been positioned as “Health wave cooking

system”

LG’s microwave ovens have gone beyond the status symbolism and practical

versatility that other brands have tried to use. The market for microwaves was at

65,000 units in 2001 and this is one area that the company wants to explore.

In 2005 it plans to sell about 70,000 units, which is almost equal to the entire market

in 2006.

Health wave cooking system: LG’s healthwave system has “Multiwave technology”

which other microwaves don’t have. This feature creates multiple emissions that helps

to ensure that the entire dish is cooked amazingly, evenly and fast. It has a twin source

of emission from the top and the bottom making it far more efficient than any other

microwave.

Due to double emission technology, there is a higher microwave interaction with the

food, which results in faster and even cooking, right to the core of the food, with no

cold spots.

There are two types of models available:

a. Microwave – for general working (Non-grilling)

b. Microwave + Grill + Combination

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Unique features of a LG microwave:

Worlds only one-touch Indian cooking system: The LG health wave has the

worlds only one touch Indian cooking system. All vegetables and dishes can be

cooked at the touch of a single button.

Family size oven: 28lt cavity size of oven gives more space for Indian utensils

and suits Indian family sizes.

Health wave technology: Unique twin source technology emits waves from top

and bottom resulting in faster and even cooking without destroying nutrients.

LG has plans to introduce a microwave oven with pre-set Indian menus.

It also plans to launch India’s first Digital infrared microwave. The Digital infrared

sensor in the microwave oven detects the temperature of food and then automatically

regulates the flow of microwaves for faster and uniform cooking.

Pricing And Related Strategies

LG believes in “Ethical Pricing”. The company has made various players in the

industry no compromise on the price front despite the cutthroat price war existing

amongst various players in the industry.

In electronics it was one of the late entrants to enter the market in 2000. While other

companies that time were playing the low price high volumes game, the company

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

When the company entered the market, Baron international (Akai) was on a rampage

then, with the Akai television exchange scheme. Price offs were in and the trade was

enjoying credit periods of any thing between 45 and 90 days.

LG believes in value marketing. It is exactly opposite of what Akai stands for. Akai

is pushing volume by sacrificing value. LG is sacrificing volume for value. The

refusal to interpret Indian price-sensitivity, as value insensitivity seems to have

pushed LG into delving deep into consumer behavior for insights missed by other

companies. The big gain of doing it this way is pricing power and maintaining this

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will remain critical. The company when it entered the market in 2000 was targeting

the premium end consumer. For example:

a. In the refrigerator category it entered the 440 watts 300lt. + Segment which forms

a very little portion of the entire refrigerator market. Its 330lt. refrigerator was

priced at Rs. 26,000. On the other hand Godrej and Crompton were offering FF

Mixer Grinder any thing between Rs. 16,000 to Rs, 20,000.

b. LG’s basic 21 inch model of Home Electronics is priced at Rs. 15,500. This price

is higher than Sony’s comparable model (Rs. 14,500). LG holding a price higher

than Sony is something that is unheard of in other markets.

c. LG’s microwave ovens are nothing less than Rs. 12,500, IFB & Crompton

(Market leaders for microwaves) are selling them for less than Rs. 10,000 also.

However the company after three years in the market, has come down to mass

marketing. Now it is targeting all the segments in the market. It is even concentrating

on the rural areas now. It has a refrigerator for as low as Rs. 9,300 and a T V for as

low as Rs. 9000.

Distribution And Related Strategies

LG is currently selling its products in 1800 towns and cities with population of one

lakh and above. It has 186 branch offices, 40 distributors and 2,000 dealers all over

the country.

By the end of 2002, the company plans to reach another 7000 towns with a population

of 50,000 or more. In this process it will add on to 60 distributors and 1000 dealers.

To achieve this sends eight vans to crisscross the country covering 5000 km every

month, to familiarize the trade and the customers with LG products.

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

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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

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

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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.

i. 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.

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

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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 2006 is as follows:

Year Budget Objective

2004 15 crore To inform about LG’s products

2005 30 crore To promote additional product launches

2006 30 crore To promote the brand

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

company tries to reduce the ad – budget.

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

in the country.

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.

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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. The survey was conducted in the five metros and four other cities

(Lucknow, Ludhiana, Ahmedabad and Jaipur) amongst 25-40 year old men owning a

car or motorbike (for Home Electronics); 25-40 years old men and women in

car/motorbike owning house holds (for fridge’s); and women in car – owning

households (for washing machines).

Here are some of the findings:

In Home Electronics (Delhi), LG ranks alongside Sony as a status symbol. It also

leads on willingness to recommend (along with Sony and BPL), and product

differentiation. On spontaneous recall, Crompton and Bajaj lead and LG are at the

next level along with Sony, Onida and Samsung.

In Mixer Grinder (Delhi), Godrej leads by far on spontaneous recall. But on

willingness to recommend, LG is the leader, and so top on status and product

differentiation.

In Citrus Juicer (Delhi), LG doesn’t lead on any parameter. On spontaneous recall,

willingness to recommend and status connotation, the leader is BPL, while Whirlpool

leads on product differentiation.

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In Mumbai, LG Home Electronics have the poorest recall of all the brands. Sony leads

on recall and willingness to recommend. On status and differentiation, Crompton

leads.

In Mixer Grinder (Mumbai), Godrej leads the pack on three parameters. LG is the

leader only on status connotations.

In Citrus Juicer (Mumbai), Bajaj has the highest recall, while LG figures in the last

few. Whirlpool leads on all the other parameters.

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.

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Organisation 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)

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Chapter – 4 DATA ANALYSIS & INTERPRETATION

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

(Computation in Appendix I)

Brand Awareness of LG

Schemes preferred by consumers

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

65

66

Most preferred LG product

Product Ranking

Refrigerator 1

Microwave 2

AC 3

Television 4

Washing Machine 5

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

products

Top of Mind recall for Refrigerators

68

Top of Mind recall for Air-conditioners

Top of the mind recall for colour TV.

69

Top of the mind recall for Washing Machine

Top of the mind recall for Citrus Juicer

70

Top of the mind recall for Split Air Conditioners

Top of the mind recall for Microwave Oven

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Chapter – 5 FINDINGS & RECOMMENDATIONS

5.1 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 2006. 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

these brands could not establish themselves hence there was no lasting impressions.

Now, the trend is slowly catching up in favour 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.

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

judged from the following FIVE-FACTOR INDUSTRY ANALYSIS MODEL

Existing Competition: Atleast 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.

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.

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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 is

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 substitute are not very

significant hence the industry is attractive to stay in.

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 organisation the bargaining power

by them is looked down upon since prices etc are fixed the company which are not

negotiable.

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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 indegenization 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.

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.

5.2 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 2006: Even to day after

three 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 the company should create such campaigns, which highlight the

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

refrigerator, Flatron T.V. etc, it should highlight them as premium products for the

elite class. Other products such as 14” Home Electronics 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.

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

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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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ANNEXURES

LG’s Turnover (in Rs. Crore)

2004 125 cr2005 477cr2006 950 cr

Sales Figures (2004-06)

Year CTV Refrigerator Washing Machine

AC’s Microwave

300 lt (FF)

DC SA FA

2004 NA NA NA NA 3500 NA NA2005 1,95,000 54,500 36,700 39200 49000 10,000 50002006 180,000 16250 42000 41200 6600 24200 7000

LG-Market Share 2006

Product Name PercentageTelevision 9Refrigerators

550 watts 3440 watts 36

Citrus Juicer Fully Automatic 37Semi Automatic 12

Air Conditioners 17

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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 2003?

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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BIBLIOGRAPHY

BOOKS

Marketing Management - “Philip Kotler”

Human Resource Management - “Ashwathapa”

Human Resource Management - “T.N. Chhabra”

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 2006

COMPANY LITERATURE

“LG Parivar” the LG in-house magazine.

“Global News” LG weekly news bulletin.

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Documents

Food Processor