Lg Brown Goods
Project on LG Contents Mission3 Mission Statement3 Vision3 Core Values3 How the present strategies are within the mission, vision and core values3 Present Strategy3 Market Analysis3 Segmentation3 Targeting4 Positioning4 Needs4 PESTLE Analysis4 Political factor4 Economical factor4 Socio-cultural factors5 Technological factors5 Legal factors5 Environmental factors5 Industry/ Competitive Analysis6 Industry in which LG Competes6 Industry performance for last 5 years and projections for next 3 years6
Market share of Top 5 players by segments7 Market share of organized and unorganized for last year and projection for next three years8 Industry’s 5 competitive forces9 Indirect Competitors of LG Electronics (Brown Goods) –9 Top Direct Competitors of LG Electronics in INDIA –9 Competitive advantages of Samsung Electronics –10 Competitive Advantages of Sony Electronics –10 Competitive Advantage of Videocon –10 SWOT Analysis of LG Electronics –10 Performance Review11
Past performance of the product and elements of the marketing mix11 Objective of the company13 Mission Mission Statement To become a top innovative electronics company in the world. It takes pride in its company and employees and believes that this is what will make it into one of the most innovative companies of the 21st century. Vision LG’s vision is to deliver innovative digital products and services that make our customers’ lives better, easier and happier through increased functionality and fun.
Global, Tomorrow, Energy, Humanity and Technology are the pillars that this corporation is founded on; with the capital letters L and G positioned inside a circle to centre our ideals above all else, humanity. The symbol mark stands for our resolve to establish a lasting relationship with, and to achieve the highest satisfaction for our customers. How the present strategies are within the mission, vision and core values By adopting the Blue Ocean Strategy LG will be able to sustain its leadership position.
BOS provides a systematic way of identifying and creating high growth opportunities. LG is looking not just to maintain its leadership position in India, but to continue to grow, and to transition from a mass brand to a premium one. Through the adoption of this policy, LG plans to launch products or services which create or significantly increase its market shares and profit by offering differentiated values in view of customers. The move to adopt Blue Ocean Strategy is seen as an ambitious drive to resurrect LG globally.
The strategy aims at designing in order to exploit opportunities, so far untapped; either within the present segments of LG or outside, where there is zero or negligible competition. Present Strategy * Local and efficient manufacturing to reduce cost * Product localisation; LG came out with regional language menus on its TV * Introduction of low priced products for the rural market especially in the TV segment * LG has adopted the regional distribution model in India * Offering affordable products at a lower margin –cutting on volume to ring in revenues * LG is adopting the Blue Ocean Strategy (BOS) in India as part of its global strategy * BOS gives a frame work for breaking away from the competition to achieve high customer value and profitability simultaneously * Blue Ocean Products are products and services which create a differential value for the customer, thus opening up vast, new markets to drastically improve profitability and market share * Blue Ocean Business Model is one that focuses the efforts of the company on providing differentiated value to customers. Market Analysis
Segmentation – Demographic Higher income group Occupation – Geographic Tier 1 and Tier 2 cities – Psychographic Loyalty status – switcher loyal because product of different need are taken from different brand considering superiority Usage rate – high in terms of usage user life stage – marriages and other life stage are when brown good and eletronics are bought benefts – for consumer who seek benefits derived with tech occassion – bought mostly on festive season so provided with various schemes. – Behavioural LG look for Value and lifestyle which people believe they correspond to. Targeting
LG has targeted its market on the basis of the product that they are offering to the consumer. upper-lower and higher segments people more concern to health benefits, life style and quality products LCD and Plasma TV for premium segment trying to shift to mid class and mass market of product selective specialization Positioning Differentiate product on technology which appeal to consumer on basis of health benefits like health wave system for oven, golden eye for TV its tagline describes to make people life better convenient and healthier they try to position as young vibrant and premium brand Needs
Needs met by the LG brown n electronics product – ease of use, higher efficiency PESTLE Analysis Political factor Taxation policies, foreign trade regulations, trade policies are the important political factors. LG must follow the compliances given by the government like the Environmental Protection Agency. Sales volume gets negatively affected due to any change in the policies or foreign trade regulations. It will cause consumer to pay more for products. There is a possibility that the change in government can have an effect from the support of LG’s Research and Development. These political factors are:
High import duty Export promotion scheme of Indian government like EPCG(Export Promotion Capital Good Scheme), EOU(Export Oriented Units) status Plants in Tax incentive areas like Pune, Greater Noida. Economical factor Price wars is the biggest economic factor for LG. LG has used competitive strategies like localization and adapting it to different markets. Making it easier to grab consumer’s attention with products that are easier for their everyday living. In India, LG opened manufacturing facilities that begun with the R&D looking at what competitors have already brought to the arket and made their product unique and geared towards the consumers needs. Things that may affect sales volume from a economic stand point is a sudden change in consumer’s income. So LG would have to look in to how they can make products more affordable for consumers in recession. In India GDP is rising. Per Capita Income is increasing, so spending power of consumer is increasing. Socio-cultural factors LG went into the market in India with all the right tools. They adapted to the market and immediately began to be the innovators of that market.
They have given back to the society by providing them with employment opportunities by building manufacturing plants. They are manufacturing eco-friendly products and increasing the life style of the people. Within the social factor, LG has been able to achieve a higher sales volume in India. Technological factors LG has always been a leader in innovation from the 1980s so technology is the important factor for them. LG is expanding in 3G Network technology. In India, Reliance incorporation with LG has 3G plans made for smart phones. LG introduced its LG Optimus 3D to the market in India.
Improvement in technology made the product cheaper and quality of product has been increased. Legal factors Legal factors like employment law and consumer protection law can also affect the start-up of a company. Employment laws, like how many people a business employs the number of employees in each location, the minimum number of employees specified in the employment law etc. Consumer protection law protects consumers from fraudulent or unethical business practices, misleading advertisements, and defective products. So, these are some of the laws that businesses must abide before starting a venture.
Environmental factors LG must follow the compliances given by the government bodies like the Environmental Protection Agency which also monitors the implementation. The company was penalised for failing to meet its commitment to make products free of polyvinyl chloride (PVC) plastic and brominated flame retardants (BFRs) by the end of 2010. All of LG’s mobile phones are now free from PVC and BFRs while other products such as TVs and notebooks contain PVC/BFR free parts; LG aims to phase these substances out from TVs monitors and PCs by 2012 and household appliances by 2014.
In the Guide the company scored badly on the Energy criteria, being criticized for setting a weak target for the reduction of greenhouse gas emissions and not making renewable energy part of its low carbon strategy. LG scored most points in the Sustainable Operations category with the company providing take-back for obsolete phones in 52 countries and being in the process of addressing the issue of conflict minerals. LG is now following a green product strategy. The objective of LG Electronics’ green product strategy is to minimize the environmental impact on the whole value chain while enriching lives.
The strategy consists of three components; energy, human and resources. The strategy is based on a model that takes into consideration high energy efficiency, a reduction in raw material usage, and human welfare. Industry/ Competitive Analysis Industry in which LG Competes LG Competes in Consumer Durables industry. The consumer durables industry emerged in the twentieth century and has now become a global industry worth billions of dollars. * LG specializes in the manufacturing of consumer durables The scope of our report covers LG’s brown Goods which include: * Television * Audio-Video Systems Computers * Electronic Accessories Industry performance for last 5 years and projections for next 3 years * We believe that the Indian consumer durables industry will post strong double digit growth of ~15% over the next 3 years. * We believe that the industry will continue to grow led by lower penetration, increasing disposable income, easy credit availability coupled with declining prices. Increasing rural demand would be the key feature of the industry growth going ahead. * However, increase in raw material prices and intense competition among players, are key challenges for the industry. In a scenario of shorter product life cycles and increasing competition, we believe that the companies with strong R;D, wide distribution network, strong brand would benefit most from the strong industry growth. * We believe that the consumer durables industry’s growth has been two pronged: (a) driven by lower penetration in rural markets and (b) new innovations and replacement demand in urban markets. Source: Display search ,CEAMA, GEPL, Capital Research Market share of Top 5 players by segments Source: Display search ,CEAMA, GEPL, Capital Research Source: Display search ,CEAMA, GEPL, Capital Research
Market share of organized and unorganized for last year and projection for next three years Present Scenario : At present around 97 per cent of the more than 5 million retail premises of all types in India are smaller than 50 sq mtrs. So organized retail forms only 3% of the total retail sector in consumer durables industry. Prediction for the future : The urban and rural markets in India are growing at an annual rate of 7 to 10 per cent and 25 per cent respectively. One of the key enablers of this growth has been the increasing penetration of organised retail.
While there are established distribution networks in both rural and urban India, the presence of well-known brands and organised sector is increasing. This situation is, however, transforming. Shopping malls are becoming increasingly common in Indian cities, and based on plans announced by key developers, a proliferation of new malls is expected over the next three years. Although many of the new malls would be much smaller than their western counterparts , Indian consumers will have a far larger number of attractive, comfortable, brand-conscious outlets in which to shop.
As a result, the organized retail industry is expected to cover a market share of 15 to 18 per cent by the end of 2010, from just 3 per cent at present. This will have a positive impact on the consumer durables industry, as organized retailing would not only streamline the supply chain, but also facilitate increased demand, especially for high-end and branded products Industry’s 5 competitive forces Indirect Competitors of LG Electronics (Brown Goods) – The indirect competitors of LG electronics brown goods such as television, audio systems and cameras are the manufacturers of modern computers and laptops such as Lenovo, H.
P and Dell. Modern laptops offer a variety of multidimensional features to the consumers who use them. For instance they can be used as a television, as a video and audio music player or even as a camera as it hosts all these capabilities in itself. Thus it provides indirect competition to firms which produce the exclusive gadgets offering these services on a single unit basis. Another form of indirect competition is posed by the major mobile phone manufacturers of the world such as Apple, Nokia, Samsung and H. T. C.
Modern mobile phones have become very sophisticated and encompass a variety of multimedia features such as gaming, videos, music, camera and the internet. Thus it is acting as a one for all device today and thereby poses indirect threat to dedicated players offering singular service gadgets such as T. V, Music systems or D. V. D players. Also LG faces indirect competition from cheap imitations and imports especially from China and Singapore. These products though poor in terms of quality are very economical and hence cater to a wide range of rural consumers who are extremely price conscious.
They can easily purchase these cheap electronic goods at low prices. Thus, they are eating away a possible market share of LG electronics and thereby acting as an indirect competitor to it. Top Direct Competitors of LG Electronics in INDIA – 1. Samsung Electronics 2. Sony Electronics 3. Videocon Competitive advantages of Samsung Electronics – Samsung electronics gains competitive advantage by innovations in the process of product manufacturing, design and development. It has a very strong research and development unit that is working continuously to offer new and innovative product designs.
Its speed of execution is perhaps its biggest strength. The time gap between product visualization and its actual delivery is very short which helps it offer the latest in technology trends to its customers in a short span of time. It maintains a very talented pool of creative people who help in driving its technological innovations. It has also been able to feel the pulse of the customers over the years and has been successful in offering product features which were highly desired by the customers at acceptable prices.
Competitive Advantages of Sony Electronics – The biggest advantage possessed by Sony Electronics is its strong brand image which it has been able to build over a period of time. Its core competence includes the miniaturization of products which involves making products and its components of very small sizes without compromising on its quality. It has a great research and development wing that helps it come out with cutting edge breakthroughs in technology and innovation. Thus, it has been able to offer products with high quality.
It has been successful in creating a pool of loyal customers from urban and semi urban areas who seek advanced high quality products without being too concerned about the price factor. Competitive Advantage of Videocon – Videocon has gained competitive advantage in the electronics industry by offering technologically advanced good quality products at relatively low prices. It strives to provide the best possible service at the lowest possible prices. This has enabled them to become a hot favourite among the price sensitive Indian consumers especially those belonging to rural areas having low purchasing power.
It uses strategic planning and vendor management to achieve operational efficiency. It has been able to penetrate a wide market area due to its efficient distribution systems. It has the largest distributed manufacturing base in India having twelve facilities across the country. Thus it has been able to manage a complex supply chain effectively. SWOT Analysis of LG Electronics – Strengths – 1. LG electronics is one of the market leaders in home appliances segment in India and so enjoys a position of strength in the electronics industry. 2.
Most of the LG products are of simple design and very ease to use which helps it in satisfying its customers and building trust. 3. It has alliances and partnerships with major technology companies of the world such as G. E, Siemens and Microsoft etc. 4. It has a very wide range of product categories to tap consumers of various segments. 5. It has one of the widest distribution networks in the industry with more than 47 branches and 175 area offices. 6. It has a strong R;D division which helps it to come out with technologically advanced products. Weaknesses – 1.
The after sales service of LG is not perceived to be up to the mark as customers are not highly satisfied with it. 2. It has similar product categories and features as compared to its close competitors. 3. It has not been able to create a powerful brand image for itself in the market. 4. It is often directly compared to its biggest competitor Samsung and its supremacy over other brands is overlooked. 5. It has not been able to attract the top talent in the form of highly skilled employees to its fold. Opportunities – 1. The rural market in India is growing as the economic condition of the areas is improving at a fast rate.
This has opened a huge potential for sales in these areas for LG. 2. The consumer electronics industry in India is also poised for further growth thereby giving ample opportunity to LG to expand its scope. 3. There will be great opportunities to launch new products in the future as technology is advancing and consumers are always on the lookout for something new. 4. LG has the opportunity to become the leader in white goods market as well by leveraging its supremacy in the other electronics fields. Threats – 1. The biggest threat to LG electronics is from its biggest competitor
Samsung which is also from South Korea and is a dominant force in the Indian Electronics market. 2. There is a threat of entering into a price competition with its close competitors that could lower its profit margins. 3. The short product life cycle of electronic products is also a threat to the company as they become obsolete very quickly. 4. The changing government regulations on health, safety and environment issues may also pose a threat to the operations of LG. 5. Cheap imitations and imports from China also pose a small degree of threat to its sales. Performance Review
Past performance of the product and elements of the marketing mix LG Electronics is doing everything it can to retain its number one position in the Indian brown goods consumer durables market, estimated at Rs 35,000 crore. With more than 30 per cent share of this market, it now expects its India operations to overtake its Korea sales in the next three to four years. LG Electronics India is targeting revenue of Rs 20,000 crore (the figure currently is Rs 16,000 crore) through rapid expansion and new product launches. It is investing Rs 800 crore to expand production capacity, and the advertising budget is Rs 700 crore for this year.
LG is focusing on key innovations including 3D TV, mobile digital television, and new solar cell business. The performance highlights – Sales have been shown according to product and place. The following chart shows the percentage contribution made by different product categories in total sales of LG Company. The chart shows that major part of LG revenue comes from brown goods (Home Entertainment and Mobiles). The chart below shows the breakup of sales region wise: Source: 1. Business Standard article June, 2012. 2. Annual Report-LG, 2011 Product Product localisation is a key strategy used by LG. LG came out with Hindi and regional language menus on its TV. • Introduced the low-priced “Cineplus” and “Sampoorna” range for the rural markets. • LG was the first brand to introduce gaming in CTVs. In continuation of its association with cricket, LG introduced the cricket game in CTVs. Price To overcome high import duties, LG manufactures PC monitors and refrigerators in India at its manufacturing facility at Noida, Delhi. LGEIL had already commissioned contract manufacturing at Mohali, Kolkata and Bhopal for CTVs. This has helped LGEI to reduce costs.
LGEIL is implementing a “digital manufacturing system” (DMS) as a cost-cutting innovation. This system is a follow-up to the Six Sigma exercise LGEIL had initiated earlier. Place (Distribution) LG has adopted the regional distribution model in India. All the distributors work directly with the company. This has resulted in quicker rotation of stocks, and better penetration into the B, C, and D class markets. LG also follows the strategy of stock rotation, rather than dumping stocks on channel partners. LG has over 46 branch offices and another 110 areaoffices across the country.
LG had set a target of developing 2,000 dealers, in addition to the existing 3,000 dealers all over India Promotion To make itself a known brand in the consumer electronics sector, LG has taken innovative marketing and promotional initiatives: • Launch of new technologies in consumer electronics and home appliances. • LG was the first brand to enter cricket in a big way, by sponsoring the 1999 World Cup, and followed it up in 2003 as well. • LG brought in four captains of the Indian cricket team to endorse its products. LG invested more than USS 8 million on advertising and marketing in this sport. LG has differentiated its products using technology and health benefits. The CTV range has ‘Golden Eye’ technology, air-conditioners have the ‘Health Air System’ and microwave ovens have the ‘Health Wave System’. Objective of the company LG Electronics India aims Rs 16,000 crore sales turnover in 2012. The Indian unit of South Korea’s LG Electronics expects to double its revenue to $9 billion by 2015, a top executive said, as rising incomes and growing urban households expand the consumer durables market in Asia’s third largest economy. LG Electronics Inc, the world’s No. TV brand, said on Sunday it aimed to increase its global market share in LCD TVs to 15 percent this year from 11 percent last year by boosting unit sales by 54 percent. LG Electronics is aiming at a 50% market share in the 3D TV market this year, as against 40% last year with the launch of its latest series of Cinema 3D Smart TVs priced in the range of Rs 55,000 to Rs 7,00,000, boasting of world’s slimmest bezel TVs. Soon Kwon, MD, LGEIL says, “We are targeting business worth Rs 1000 crore from 3D TVs and aim to consolidate our position in the Flat Panel TV segment with 30% market share.
We have an aggressive marketing strategy with target investment of Rs 100 crore. ” The new range is also accompanied by new Cinema 3D glasses for 2012. Adds Kwon, “3D entertainment is set to explode in India at a steady growth of 500%. We are anticipating the size to go up to 5 lakh units this year, as against 1 lakh units last year. ” LG’s aim is to increase export from India to about 40%. LG’s estimated sales(in million) of year ending dec’12 is 47 and dec’13 is also 47.