LG’s marketing strategies in India

Prepared by class 1 group 4:

1. Muhammad Sharif2. Aditya Inamdar3. Sahib Aliyev4. Artur Tkhya5. Assel Zhaxybayeva

Introduction

“A company which is being driven by its sales targets rather than its market share”

“We have seen many Japanese and Chinese companies in India, but like other foreign owned businesses they typically put one foot in the water to see if it is warm or cold. They have doubts. They lack determination.

Introduction

What’s been different about us is that we made a full commitment – a very big investment – from the start, including setting up tow full scale manufacturing facilities”Managing Director, LG Electronics India

Differentiation Strategy, Customization, Superior Technology The Rapid Growth

Introduction

Overview of Expansion

Introduction

1997 Entry in India

1998 First Plant in Uttar Pradesh

2001Became fastest growing electronics, home appliances and computer peripherals

2004 50m customers and more than Rs 60 b turn over

2005 GSM Mobile phone plant in Pune

2010 Planned to invest Rs 1.3 Bn I R&D

2010 Major export to European countries

LG products

Introduction

Golden Eye TV 1997

Health Air AC 1998

Sampoorna TV 1998

Chaoc Punch Washing Machine late 1990

DIOS Refrigerators feb 2002

Linux Based PC sep 2002

LG Mobile Phones late 2002

Ballad – Flat TV mid 2004

Distribution - Network

Introduction

• Geographical layout of India

• Distribution plans for each region

• Remote Area Offices – Regional Sales Offices

• Warehouses all over India – Quick move of goods

• Non traditional distribution network

• Website for the dealers – Connection with head office

Study parameters

Introduction

A critical evaluation of the performance from marketing perspective

Identification of the marketing challenges facing the firm

Identification and evaluation of possible solutions

The Selection of the best solution

An out line of the way in which you would implement the solution

Agenda

Introduction

Introduction

Market assessment and PESTEL analysis

Competitor analysis

Pricing and promotion strategies analysis

SWOT and TOWS analysis

Recommendations

Market assessment

Market assessment

• Initially imported products from S.E. Asia

• DVD writers : expected growth 33 mil units (2008)

• To be made major export hub for European market

• Mobile phones : planned investment of Rs. 1.3 billion into R&D by 2010 to meet growing demand

• Refrigerators , Televisions & Air-conditioners: positioning as “health” concerned brand (1997)

Market assessment

• Launched 45 new products (2001)

• 60 new products launched (2002)

• Launched Ballad-Flat TV for southwest India (2004)

• My-PC – Linux based PC (2002)

• Launch of CDMA phones (2002)

Market assessment• Placed importance on good distribution network

• No credit period given to dealers ( market trend was 45-90 days )

• LG dealers focused on volumes rather than margins

• Aggressive promotional techniques

• Higher profitability

• Loyalty

• Faster inventory rotation

• Online platform to order products

• Reduced inventory & procurement cycles

• Exclusive PC outlets (2003)

Market assessment

• Developed regional strategies – CAOs, RAOs, RSOs

• Helped and nurtured newly opened outlets

• Rural penetration increased market share

Market assessment

• Honest Pricing Policy

• Later adopted to aggressive pricing

• Promotion was all year round

• Repositioning as family brand

• Cricket campaigns

PESTEL analysis

• Political – Taxation system, trade policies, regulatory processes

• Economic – economic growth, market cycles, employment, per capita income, inflation

• Social – lifestyles and customer attitudes, demographic

• Technological – innovative products and alternatives, maturity of technology

• Environmental – recycled material usage in end products, green technology used in manufacturing plants

• Legal – patents, licenses, copyrights

Competitor analysis

Samsung India

Competitor analysis

• LG’s key competitor in India is Samsung Electronics.

• Samsung outperforms LG globally and in South Korea.

• Head quarter of Samsung India located in New Delhi.

• The company’s sales turnover exceeded US 1 billion by the

end of March 2005. Samsung posed the potential threat for

LG India being fast emerging as the leading technology

company in Asia.

Videocon International

Competitor analysis

• Videocon International produced refrigerators, coolers,

glass, shells, kitchen appliances, and compressors.

• In June 2005, Videocon acquired Electrolux and colour

picture tube manufacturing business of Thomson.

SONY India

Competitor analysis

• The company was set up by Sony Corporation Japan

• Sony India competes with wide range of products: color

televisions, walkmans, music systems, DVD players,

digital cameras, video recorders and mobile phone.

• The company sales turnover for the 2004-05 amounted

to Rs. 8 billion

MIRC Electronics

Competitor analysis

• The local company produced quality color televisions

with capacity of 1,2 million color televisions per annum.

• MIRC Electronics also produced washing machines, air-

conditioners, DVDs, plasma televisions and home theatre

sets.

NOKIA

Competitor analysis

The company competed with LG India in GSM segment.

Nokia dominated in the market with its 65 % in 2004.

HCL Infosystems The company seized the 14,17 % of the PC market share.

0

10

20

30

40

50

60

Rifregerators Color TVs Microwave Ovens

Washing machines

LG

Samsung

Whirpool

Others

Market share (2004)

Competitor analysis

Promotion strategy

• When the company entered India in 1997, LG as a brand was unknown in India.

• By 1997 the Indian market had all the global consumer electronics companies such as Sony, Panasonic, Samsung, Philips as well as local brands such as Videocon, BPL and Onida.

Promotion strategy

• One of the key factors of promotion LG as a brand was a partnership with advertising agencies that knew the market well

• This partnership ultimately led to the building of India’s top consumer durable brand, with a estimated turnover of US$1.43bn. in 2004, whereas in 1997 was only US$27.5m.

• Lowe was lead agency which was responsible overall corporate branding and premium products

Promotion strategy

• Focused to reach every consumer in India

• Project LG as a true MNC and not as a Korean brand

• Health positioning

• Build the brand by associating with sporting event such as

cricket and golf

Promotion strategy

Pricing strategy

• In 1997- entering into India market.

Selling imported products at high prices.

• To overcome high import duties, LG manufactures PC monitors and refrigerators in India at its manufacturing facility at Noida

• The first manufacturing plant was established in 1998 in Noida

• In 1998- launching first low priced TV for rural consumers.

Pricing strategy

• In 2000- adopting new low price strategy. LG decreased prices by 5-15% relative to competitors.

1997

1998

1999

2000

2001

2002

2003

2004

1.25

4.85

10.56

19.03

22.16

33.15

45.00

65.00

Pricing strategy

SWOT and TOWS analysis

STRENGTHS1. Huge manufacturing capacities 2. Market leader thanks to innovative and customer friendly products

at competitive pricing and vast non-traditional distribution network

3. Focus on health of customers as USP4. Differentiation strategy combined with customization (e.g.

Sampoorna TV for rural customers with menu in Hindi)5. Consistent updating of the product lines (e.g. 105 new models

launched in 2001-2010)6. High dealers loyalty and retention7. “More for less” pricing strategy8. High brand recall as a result of huge promotion and advertising

spending

SWOT analysis

WEAKNESSES

1. Image of manufacturer of home appliances and consumer electronics and not IT products or mobile phones

2. Not very good image on the PCs market associated with failure of launch of PCs based on Linux operating system

3. Late entrance on the market of GSM mobile phones

4. Huge capex and current expenses (to support distribution and promotion) while low margins

SWOT analysis

OPPORTUNITIES1. Growing demand as a result of increase of disposable income and

growth of population2. Further penetration the home appliances market to gain and sustain

position of a dominant player 3. Entering high premium segment which will grow in line with Indian

economy growth 4. Increase market share on the PCs and mobile phones markets

SWOT analysis

THREATS1. Fierce competition 2. Threat from Samsung especially on the TVs, PCs and mobile phone

markets3. Decrease of profitability

Customer solution for electronics and home appliances products only Costs ConvenienceAreas for improvement: communication and customer solutions for mobiles and PCs

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PCs

TV, electronic and print media

advertising

Cricket sponsorship

POS promotions etc

“More for less” pricing strategy

Low margins (for dealers)

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ConsumersDealers

Marketing mix: 4C Vs 4P

SO: “Maxi-Maxi” Strategy• To increase production volume to satisfy growing demand (S1, O1)

• To penetrate further the home appliances market consistently offering consumers new innovative products through vast distribution channels and high loyalty of dealers (S2, S5, S6, S7, S8: O2)

• Penetration the high premium segment (Upper Middle, Upper-Upper

Middle, and Rich) by offering consumers highly innovative, differentiated and customized products at higher prices (comparatively to LG products for mass market) (S4, S5: O3)

• Increase market share on the mobile phones and PCs market applying “shop in shop” concept throughout vast dealers network, especially in rural areas where competitors have poor presence and using “more for less” pricing strategy (S6, S8: O4)

TOWS analysis

ST: “Maxi-Mini” Strategy• To expand geographical coverage to the areas where

competitors are not well presented using the vast non-traditional system of distribution while offering the products with more features at lower pricing (“more for less”) (S6, S7, S8: T1, T2)

• To increase sales using all strengths to enjoy economy of

scale (S1-S9: T3)

TOWS analysis

WO: “Mini-Maxi” Strategy• To launch the new products on IT and mobile phone markets with

UCP under new brand name or with repositioning (W1, W2: O4)• Increase sales catching the growing demand opportunities to enjoy

economy of sсale (W4: O1, O2)

WO: “Maxi-Mini” Strategy

• To expand geographical coverage to the areas where competitors are not well presented using the vast non-traditional system of distribution while offering the products with more features at lower pricing (“more for less”) (S6, S7, S8: T1, T2)

• To increase sales using all strengths to enjoy economy of scale (S1-S9: T3)

TOWS analysis

Recommendations

Recommendations

Strategic Directions

Targeting and Segmentation

Implementation through marketing mix

Recommendations

Mass market:Low income, Lower Middle, Middle Middle

Disposable income: up to Rhs 1 000 000 a year

Area: rural and semi-urban areas, cities

Trends: Within this segment the size of middle class will increase to 41% of population by 2025, while the size of low income sub-segment will decrease to 26% of population

Premium segment: Upper Middle, Upper-Upper Middle, and RichDisposable income: above Rhs 1 000 000 a year

Area: large cities

Trends:This segment will not grow sharply as mass market segment, however its portion in national consumption will increase from 7% to 20 % by 2025

• Targeting segment

Recommendations

• Marketing mix for new strategyProduct Mass market Electronics: Consistently updating product line to provide

consumers with best solutionsMobile phones: Affordable, reliable and relatively simple models PCs: Basic and affordable models of tablets, and netbooks Sales and after sales services

Premium segment

Electronics: Highly innovative, differentiated and customized productsMobile phones: Launch new products featuring more intellectual and innovative nature and based on newest technologies (android or analogous systems). PCs: Launch the new comprehensive and innovative models incl. notebooks and tabletsSales and after sales services

Recommendations

• Marketing mix for new strategyPrice Mass market Keep “more for less” strategy“.

Promotional pricing” during the new products launch period to create buyers’ excitement, then “more for less” strategy

Premium “more for more” (in comparison with mass market)

Place Mass market Increase number of outlets to expand geographical coverage to the areas where competitors are not well presented

Premium Opening of exclusive LG concept stores (similar to Apple stores) and LG corners in big city stores (“shop in shop” concept)

Promotion

Mass market TV, radio, cricket sponsorship

Premium •Newspaper and Life style journals in English,•Advertisement in cinema•Sponsorship of charity events•Internet advertisement and social networks (Facebook)

Thank you!