Transcript Document

LG Electronics
Discovering “The 86% Solution.”
“The 86% Solution”
Prof Vijay Mahajan & Kamini Banga
The Essence of “The 86% Solution?”
 86% of worlds population
(insert cover of the book The 86%
Solution here)
lives in the emerging and
developing world – an
invisible opportunity!
 MNCs have traditionally
focused on developed
markets like NA and Europe,
ignoring 86% of the world
populace.
 Branding and Marketing
principles in emerging
markets are quite different
from developed markets.
 Innovation is the key to
success in emerging markets
LG History
A Quick Review
Early Beginnings as “GoldStar”:
Korea focused – Some Export to developed world.
THE 1950s
THE 1960s
1958
GoldStar (today's LG Electronics)
established
1959
Korea's first radio produced
1962
Radio exported to the US and Hong Kong
as Korea's first
1965
Korea's first refrigerator produced
1966
Korea's first black & white TV produced
1968
Korea's first air conditioner produced
1969
Korea's first washing machine produced
1974
GoldStar Communications went public
1977
Color TV produced
1978
Exports surpassed US$100 million as
Korea's first in the electronics industry
THE 1970s
The 1980s: Global production centers
Initially in the developed world..
1980
First EU sales subsidiary in Germany
(LGEWG) established
1982
Color TV plant in Huntsville in the US
established
1984
Sales surpassed one trillion won
1986
European-standard VCR plant in Germany
established
1989
Sales subsidiary and a joint production
subsidiary in Thailand established
The 1990s: Entry into China & India.
Acquisitions & Joint Ventures
1990
Ireland-based design technology center
established
1993 With the establishment of Huizhou subsidiary in
China (LGEHZ), marketing in China took full
swing
1995 Company name changed to LG Electronics and
the US-based Zenith acquired
1997 40-inch PDP TV and the world's first IC set for
DTVs developed; India production subsidiary
(LGEIL) established
1998 World's first 60-inch PDP TV developed
1999 LG.Philips LCD, a joint venture with Philips,
established
The New Millennium:
technology & innovation
2000
The world's first Internet-enabled refrigerator launched
Global sales of refrigerators reached the number one position
2001
the world's first Internet- enabled washing machine, air conditioner, and
microwave oven launched
2003
World's first synchronous-asynchronous IMT-2000 mobile phone
developed; the world's first 76-inch PDP TV developed;
CDMA mobile handsets took the largest share in the US & world CDMA
market
2004
All-in-one LG 55" LCD TV, the world’s first and largest among LCD
TVs, commercialized. The world’s largest and first LG 71" plasma TV
commercialized. The world’s first terrestrial DMB phone developed
2005
World's first DMB (Digital Multimedia Broadcasting) notebook PC
unveiled. World's first DMB Phone with Time-shift function developed
Network solution joint venture of LG-Nortel launched
CDMA mobile phones ranked first in the world in the 3rd quarter
LG Today
 Global Revenue: US $ 35 billion (consolidated $ 45 billion)
 72,000 employees working in 77 offices and marketing units
worldwide.
World’s largest producer of CDMA handsets, DVD
players, optical storage devices, air conditioners, canister
vacuum cleaners and micro ovens.
 Growth driven by globalization
Driven by Globalization
80% of Revenue from outside South Korea
25
20
15
10
5
0
2000
2001
Domestic
2002
2003
2004
International
2005
The Vision: Clear Global Aspirations
The LG India
Story
So Far..
LGEIL-Winning Spirit
7200
7000
6500
Turnover in Rs (Cr)
6000
5000
4500
4000
3315
3000
2216
1930
2000
1056
1000
485
125
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
LG Leads on Market shares (March 2005)
Refrigerators
Washing Machine
35.6
40
30
28
30
20
29.3
26
12.7
22.9
24
10
22
0
20
Samsung
LG
Whirlpool
LG
27.4
45
39.4
40
35
30
25
18.1
14
12
20
15
28
26
24
22
20
18
16
Microwaves
Samsung
LG
14.3
Color TV
Samsung
LG
*Source: ORG-Marg
Proportion of intending buyers
Brand Most likely to buy (%)
3 5
3 2
3 0
2 5
2 0
1 5
1 1
1 0
1 0
7
6
5
0
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u
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d
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m
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*Source: AC Neilsen-ORG-Marg Brand Track, Jun 04-Apr 05
Top of Mind Brand Awareness
Figs in %
3 0
2 9
2 5
2 0
1 5
1 2
1 1
1 1
1 0
8
5
0
V
B
S
G
L
s
r
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L
d
m
id
P
a
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n
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n
g
*Source: AC Neilsen-ORG-Marg Brand Track, Feb-Apr 05
Has LG Applied
The 86% Solutions
In India?
1. “Don’t Build a Car, when you need a
bullock-cart”
LG India: Closely studied the local needs &
Adapted international technology
Discovering Key Category Barriers
LG’s Innovation
“Watching TV causes eye strain”
“Golden Eye”
“Food in the fridge goes stale”
“Preserve Nutrition
System”
“Expensive clothes should not be
washed in Washing Machines”
“Fabricare”
“ACs are for cooling so it is a luxury item”
“HealthAir System”
Discover Local Insights:
“Fear that TV Viewing will spoil children’s Eyes”
2 X Golden Eye TVC
LG Invented products to meet Indian consumer’s needs
Local Market Insights
LG’s Innovation
TV Signals don’t reach all over the country
DTH TV
(India’s first)
World-cup Football Craze in 2002
Football shaped TV
Frost free refrigerators are unaffordable by masses
Introduced
Semi Frost Free
Agitators in washing machine can damage clothes
Introduced
“Chaos Punch”
LG Innovated to meet
Indian consumer’s needs
Indian Consumer Needs
LG’s Innovation
Majority of Indian consumers don’t read English
Indian-language
On screen instructions
Big audiences on TV sets + high ambient noise
Ballad TV
2000 Watt output
Cricket is the second religion for most Indians!
Free Cricket game
With TV in 1999
Cricket is a second religion for most Indians!
World-cup
Sponsorships
2. “Connect Brands to the Market”
“Grassroots Marketing” – An LG India Invention
 Widest distribution network – “covering India inch by inch!”:
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51 branches
72 regional offices
61 central area offices
112 district area offices to cater to rural markets
100 remote area offices
 SPEED to market: products reached 18 states within 3
months of launch.
 SERVICE at the doorstep:
 1108 service centers
 24 hour, hassle free service
Not just Bottom of the Pyramid –
The WHOLE Pyramid!
 Covers the width of categories from Home Entertainment to
Household Durables to IT services to Mobile Phones.
 Wide price range – cater the entire population of India.
 Latest technology inventions in top end – world class products
in the show rooms.
 Keep refreshing the portfolio – 40 to 50 new models every
year.
 Visibility at the retail outlets – the real on-ground battle field.
3. “Think Young!”
LG India’s Strategy: Associate with Youthful Symbols
 Capitalize the Youth Passions: Cricket and Bollywood.
 Early sponsorship and association with Cricket since 2000.
 Abhishek Bacchan: The latest craze amongst youth.
4. “Discover the Lands of Opportunity”
LG India’s Strategy: Make “Impossible” possible
Have Faith in India’s Potential
 Business Challenge: MARKET CREATION
 New lifestyles = New Opportunities.
 Innovate to meet local market needs and aspirations.
 Greed for Speed!
 Target the multiple consumer segments: The super rich, the
middle classes, the youth, the poor and the rural.
 Price right – not cheap.
LG India’s Strategy:
Invest in communication to realize your dreams.
 Set “stretched” goals
 Disproportionately higher Share of Voice
 Continuous presence – to maintain salience and top of mind
awareness.
 Invest in sponsorships: ICC sponsor for test and one day’s in
2001, 2002, 2005.
 Make presence felt at the street level.
LG India’s strategy: Empower for Speed
Markets will not wait!
 Deep distribution structure for quick reach of products
 Empowerment at grassroots level to ensure speedy decisions
 At national level Product Group Heads on key categories –
run their categories as effective CEOs
To
Sum Up
LG’s Global Success
Key Success Factors
 Corporate ambition for Global Leadership – clearly
enumerated for every stakeholder.
 Belief in “The 86% Solution” principles and markets as
engines of growth.
 Focus on Growth and Innovation.
 Speed a vital winning ingredient
 Dream ‘impossible’ dreams; fuel those with adequate
investment to convert dreams to reality.
“Have A Wall?”
A Global Ad from India
LG X Canvas TVC
The World Can
Be Yours!