LG Electronics

(1) formulation of sales strategy through d evelopment of account management policies sales force compensation policies, sales revenue forecasts, and sales plan,

(2) implementation of sales strategy through selecting, training, motivating, and supporting the sales force, setting sales revenue targets.

(3) sales force management through development and implementation of sales performance, monitoring, and evaluation methods and analysis of associated behavioral patterns and costs.

SALES MANAGEMENT

SALES

• A sale is the act of selling of products or services in return for money or other compensation. It is an act of completion of a commercial activity

Type of sales1. Public Auctions 4. Internet Sales2. Annual maintenance Contract 5. Fixed-Price

Sales3. Silent Auction Sales

• A wholly owned subsidiary of LG Electronics, South Korea

• Established in January, 1997

• State-of-the art manufacturing facility at Greater Noida, near Delhi, in 1998

LG Electronics India Pvt. Ltd.

LG Electronics India Pvt. Ltd.

• Vision was to become a 'Health Partner' for its consumers

• The CTV range offered by LG has 'Golden Eye' technology • Entire range of LG air-conditioners have 'Health Air

System' • Microwave ovens have the 'Health Wave System' • Refrigerators have the 'PN System’• Washing machines have 'Fabricare System'

LG -Background

• Gold star co.1958• LG India,official sponsor of CTV kits for

1982 Asian Games• 1995- technical collaboration with

Bestavision group• 1995- CK Birla group• 1997-LG Electronics Ltd

Mission• To be the best company in its product

range• To bring a smiling face to every home

across the world• Corporate logo incorporate -world ,future,youth,humanity ,technology

Vision- “Global Top 3 by 2012”"Life's Good“

Represents LG's determination to provide delightfully smart products that will make your life good

"Life's Good“Represents LG's determination to provide delightfully smart

products that will make your life good

Slogan"Life's Good"

Represents LG's determination to provide delightfully smart products that will make your life good

SymbolLG Symbolizes

• Future• Humanity• Technology

India challenges

The challenges faced by LG when entered in Indian market

• 1. Low brand awareness about LG in India.• 2. One of the last MNCs entered in India (Samsung,

Panasonic entered in 1995 in India).• 3. High import duty• 4. Competition from local market players and other

MNCs in consumer durable segment.• 5. Price sensitiveness of the Indian consumer

LGEI over comes these challenges to emerge as Innovative marketing strategy

• Launch new technologies in consumer electronic and home appliances.

• LG was the first brand to enter in cricket in big way a way, by sponsoring the 1999 world cup followed it up in 2003 as

well.• LG brought in four captains of the Indian cricket team to endorse its products. LG invested more then US$ 8 million on advertising and marketing in this sport.• LG has differentiated its product using technology and health benefits. CTV has “Golden eye technology” Air conditioner has “Health air system” and microwave ovens have the “Health wave system”.

Regional channel and wide distribution network

1. LG has adopted the regional distribution channel in India. All the distributers work directly with the company. This has resulted in quicker rotation of the stock and better penetration into B, C, D, class market.

2. LG also follows the stock rotation policy rather then dumping stock on channel partners.

Product localization:-

1. Product localization is the key strategy used by the LG

2. LG came out with Hindi and regional language menus on its TVs.

3. Introduced the low-priced “Cineplus” and “Sampooma” for the rural market.

4. LG was the first brand to introduce gaming in TVs in continuations of its association with cricket LG introduce cricket game in CTVs

MAJOR KEY SUCCESS FACTORS:

1. Innovative marketing - 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.

2. Local and efficient manufacturing to reduce cost - To overcome high import duties, LG manufactures PC monitors and refrigerators in India at its manufacturing facility at Noida, Delhi.

3.Commissioned contract manufacturing at Mohali, Kolkata and Bhopal for CTVs.

4. Product localization - Product localization is a key strategy used by LG. It came out with Hindi and regional language menus on its TV.

5. Regional distribution model - This has resulted in quicker rotation of stocks and better penetration into the B, C and D class markets.

MAJOR KEY SUCCESS FACTORS:

• 6. Leveraging India’s IT advantage - LG Electronics has awarded a contract to develop IT solutions to LG Soft India (LGSI). The project involves development and support for ERP, SCM, CRM and IT-enabled services for LG.

MAJOR KEY SUCCESS FACTORS:

Strategies adopted by the organization:

• LG follows 10 commandments which are as follows.• 1. Foster working environment-5S Environment• 2. Fast execution is key to success• 3. Transparent and fast communication-open

communication• 4. Update market -knowledge –Demographics• 5. Win –Win relationship with the trade partners• 6. Customer is the king• 7. Even Billing –Road to ach supplier A• 8. Be in touch with the market (70% Market, 30% Office).• 9. Plan and Execute annual marketing Calendar-Time to

market• 10.Display share of 50% -to get 50% consumer share.

Consumer Electronics• Production in the consumer electronics industry is US$ 6.7 billion in

2009–2010.• The segment registered a growth of 18 per cent in 2009–2010 from

US$ 5.5 billion in the previous year.• The consumer electronics segment contributes about 27 per cent to

the total hardware production in the country.

• Production in the consumer electronics industry is US$ 6.7 billion in 2009–2010.

• The segment registered a growth of 18 per cent in 2009–2010 from US$ 5.5 billion in the previous year.

• The consumer electronics segment contributes about 27 per cent to the total hardware production in the country.

Consumer Electronics

Consumer Appliances• The consumer appliances market is estimated at US$4.34 billion, with

imports valued at US$ 1.22 billion in 2009–2010. • Most imports are in the finished goods categories such as watches, electric

coffee makers, food grinders, electric heaters, etc.

• The consumer appliances market is estimated at US$4.34 billion, with imports valued at US$ 1.22 billion in 2009–2010.

• Most imports are in the finished goods categories such as watches, electric coffee makers, food grinders, electric heaters, etc.

Key Players

Key Players

Product Mix Of Key Players By volume

Electronic Goods EX-IM

• Every year India imports electronics and appliances in huge quantity.

• More that 70 per cent of Indian electronics market depends on import of both finished

goods and components.

• India imported worth US$ 18.5 billion and exported worth US$ 3.69 billion of electronics

goods between April 2008 and February 2009

• Every year India imports electronics and appliances in huge quantity.

• More that 70 per cent of Indian electronics market depends on import of both finished

goods and components.

• India imported worth US$ 18.5 billion and exported worth US$ 3.69 billion of electronics

goods between April 2008 and February 2009

USD (mn) 2006-07 2007-08 2008-09 % Growth 2007-08 % Growth 2008-09

Exports 2690.5 2809.3 3697.1 4.4% 31.6%

Imports 15057.3 17320.4 18505.8 15.0% 6.8%*excluding computer in physical form

Sales Trend- Consumer Electronics

Market Players( Organized Sector)

1. LG2. Samsung3. Amtrex Hitachi4. Carrier5. National6. Voltas7. Videocon8. Blue star9. Godrej10. Others

Market Share( Organized Sector)

Geographical Distribution Of ACs

LG POSITION OF CTV IN VARIOUS STATES IN INDIALG market share of consumer appliances and consumer electronic:-

LG position of REF in various states in India

LG position of AC in various States in India

Consumer Durable- Growth Drivers

LG- Product Portfolio

LG- Product PortfolioMobile communications• CDMA Handsets• GSM Handsets• 3G Handsets • Cellular Phones

Mobile communications• CDMA Handsets• GSM Handsets• 3G Handsets • Cellular Phones

Digital appliance• Air Conditioners • Refrigerators• Microwave Ovens • Washing Machines

Digital appliance• Air Conditioners • Refrigerators• Microwave Ovens • Washing Machines

Digital display• Plasma TVs• LCD TVs• Micro Display Panel TVs• Monitors

Digital display• Plasma TVs• LCD TVs• Micro Display Panel TVs• Monitors

Digital media• Home Theater Systems • DVD Recorder • Notebook PCs• Desktop PCs• Car Infotainment

Digital media• Home Theater Systems • DVD Recorder • Notebook PCs• Desktop PCs• Car Infotainment

LG Technology Collaboration

LG CHANNEL STRUCTURE

• Multi-tier structure • Have LG Shoppes, cyber shoppes, SSDs, X-Canvas

Studios, direct dealers• Also have a network of distributors and sub dealers • About 10,000 stock and selling points spread across the

country • Different distribution strategies for its different

product groups • GSM mobile phones do not make use of CFA’s • CTV’s, microwaves and other like items require a CFA

LG CHANNEL STRUCTURE

• Primary manufacturing facility at Greater NOIDA

• Two other manufacturing facilities have come up in the region of Pune and Dehradun, keeping in mind the benefits of Excise free zones (EFZ’s)

• Procurement of supplies and materials for production is done by the purchase department

LG CHANNEL STRUCTURE

• The annual forecasts are further disaggregated into forecasts that are carried out twice a month(15 days basis), on the basis of which inventories are maintained and further production levels are maintained

• Most raw materials are bought from suppliers within India

• At the retail level, LG uses a combination of exclusive LG showrooms as well as Multi-brand outlets (MBO’s)

LG CHANNEL STRUCTURE

• Consumers for LG include individual consumers as well as institutional clients

• LG also indulges in e-retailing as an alternative channel through its website www.lgezbuy.com

• LG also has a separate channel for services and spares

Consumer Durables SCM

IMPORTANCE:• Product Proliferation• Multiple players• High competition• Benchmarking and TQM• Production Demand mismatch• Ever Increasing Targets• Bargaining power of Retailers

IMPORTANCE:• Product Proliferation• Multiple players• High competition• Benchmarking and TQM• Production Demand mismatch• Ever Increasing Targets• Bargaining power of Retailers

OBJECTIVES: • Efficient Sourcing• Demand Planning• Inventory Optimization• Order Management• Tracking• High Inventory for High Demand Periods• Reverse Logistics

OBJECTIVES: • Efficient Sourcing• Demand Planning• Inventory Optimization• Order Management• Tracking• High Inventory for High Demand Periods• Reverse Logistics

Benefits of Efficient SCM

•Reduced vendor payments due to better on-time delivery and

improved availability

•Increased revenues from improved availability of high fast moving

inventory

•Working capital reduction due to improved inventory management and

reduced order cycle times

• Fixed capital reduction due to effective asset utilization

•Reduced vendor payments due to better on-time delivery and

improved availability

•Increased revenues from improved availability of high fast moving

inventory

•Working capital reduction due to improved inventory management and

reduced order cycle times

• Fixed capital reduction due to effective asset utilization

Consumer Durables Channel

Individual Consumers Institutional Consumers

Traditional RetailingCompany

Managed StoresFranchisee

Showrooms

E-RetailingReverse Logistics

LG DISTRIBUTION NETWORK

ALTERNATE CHANELS: E RETAILING VENTURE

LGEZBUY.COM

LG Logistic Organization Structure

• LGE Transportation with its annual expense exceeding $40 million, was recognized as one of the critical areas within the companies operations that would deliver significant value to both the top and bottom line.

• Transportation Cost account for approximately 51% of total logistic cost and was recognized as a primary target for reduction.

• In order to extend the value of Oracle ERP and EXEWMS systems deeper into the distribution network ,LGE needed to integrate a best of breed transportation management into its existing enterprise management systems.

• LGE Transportation with its annual expense exceeding $40 million, was recognized as one of the critical areas within the companies operations that would deliver significant value to both the top and bottom line.

• Transportation Cost account for approximately 51% of total logistic cost and was recognized as a primary target for reduction.

• In order to extend the value of Oracle ERP and EXEWMS systems deeper into the distribution network ,LGE needed to integrate a best of breed transportation management into its existing enterprise management systems.

The Situations of Supply Chain

The challenge for LGE was to achieve transparency between market demand variability and distribution planning and execution.

To effectively manage this, LGE set out to establish integrated best practice workflows across the entire transportation and distribution organization.

The selection criterion was focused on partnering with the best in class transportation management solution provider, followed by the lowest overall total cost of ownership the least rest and a rapid time to value.

The Challenge In Supply Chain

CHANNEL CONFLICTS AND COOPERATION

• The first type of channel conflict may arise because of the co-existence of the following:

• LG owned exclusive outlets• MBOs (multi brand outlets)

• Another type of conflict could be a result of institutional sales being sourced by both:

• The company itself• The dealers who want to meet targets

• Internal conflicts:• The branch managers, who look after all products in a particular

region, and product group managers, who look after particular products, often monitor the same dealers in a region, thereby leading to conflicts.

• DISTRIBUTORS

• The company appoints distributor for selective cities where the markets are small but require more focus and attention. Distributors are required to conduct sales and marketing on behalf of the company in these markets serving to all the required company stores.

• The company sends goods to the distributor on out right sale basis.

• It is the duty of the distributor to send his people into the field to book the orders and also execute them through their own delivery vehicles.

• The distributor has to maintain his own sales, delivery and accounts people for smooth working of his unit and is served by the nearest C/F for all his requirements.

• The distributor is given a margin of 10-20%

LG SUPPLY CHAIN MANAGEMENT ISSUES

• Delivery Schedule

• takes 1 day for CFA’s to service reorder within their zones • distributor too caters to the demand in his area within 48

hours from the time of receiving the order• If goods have to be procured from the warehouse then it

takes 8 days (avg) for the goods to arrive at the C/F or distributor and delivered to the stores.

• no inventory management system in place with the MBO’s • ‘LG Shoppe’ and franchisee showrooms do have a system

in place to consolidate their inventory and sales with the company main office

LG SUPPLY CHAIN MANAGEMENT ISSUES

• Ordering

• The retailers order their requirements directly to the concerned distributors.

• The distributors source the orders from the company warehouses, which are connected directly with each of the 43 branches.

• The mother warehouse in Greater Noida caters to the needs of all the regional warehouses.

• It is the responsibility of the C/F agents to supply to the distributors as per their requirements.

• If any reorder do come in during the month then the regional warehouse that entertains them properly services them.

LG SUPPLY CHAIN MANAGEMENT ISSUES

• Planning & Forecasting

• The company goes for annual forecasts on the basis of the previous year’s sales and also current trends.

• These sales forecasts are then disaggregated into monthly sales plans.

• The logistics and the production people meet every 15 days, and on the basis of sales as well as past inventory, they freeze production for the next 15 days.

• In case the sales in the previous period have not been up to the mark, and the inventory levels are high, the production is halted and stock of the situation is taken.

LG SUPPLY CHAIN MANAGEMENT ISSUES

• Manufacturing

• The company purchases nearly all its material requirements exclusively

• separate import departments that look after the imports • Around 80% of all the models across the product line are

manufactured at the manufacturing facility at Greater Noida

• compressor plant in Noida

LG SUPPLY CHAIN MANAGEMENT ISSUES

• Reverse Logistics

• The company accepts returns from their retailers as well as company owned stores

• The job of bringing back the defects again rests with local distributor and C/F that collects them from the shop

• They are entered and kept separately at the warehouse and proper stock is maintained and sent to warehouse

• The damaged goods are dispatched to the warehouse periodically. The damaged goods received from the distributor are credited to his account and as such are only accepted after thorough examination by the local sale executive

LG SUPPLY CHAIN MANAGEMENT ISSUES

• Direct marketing

• LG uses direct marketing strategies in the microwave oven product category, as the category hasn’t picked up in volumes in India as of yet. These are carried out through road shows, exhibitions etc.

Consumer Durable Value Chain

Durable- Top 10 Players (Indian) by sales FY 2009-10

1. Nokia India2. LG Electronics India Ltd3. Samsung India Electronics4. Sony India

5. Philips India6. Whirlpool Appliances7. Titan Industries8. Siemens9. Videocon Industries10. Blue star

1. Nokia India2. LG Electronics India Ltd3. Samsung India Electronics4. Sony India

5. Philips India6. Whirlpool Appliances7. Titan Industries8. Siemens9. Videocon Industries10. Blue star

Source: http://www.naukrihub.com/india/consumer-durables/companies-list/top-players

• India being the second largest growing economy with huge consumer class has resulted in consumer durables as the fastest growing industries in India

• LG, SAMSUNG the two Korean companies has been maintaining the lead in the industries with LG being leader in almost all the categories.

• India being the second largest growing economy with huge consumer class has resulted in consumer durables as the fastest growing industries in India

• LG, SAMSUNG the two Korean companies has been maintaining the lead in the industries with LG being leader in almost all the categories.

BE Factors…

• Economic -Rise in disposable income -Changes in custom duties and exchange ratesSocio-cultural -life style improvement -high value products at reasonable price -multiple ownership

BE Factors….

• Technological -advancements -responsiveness to deal with competition -technology import route

BE Factors…

• Global -dumping and competitionDemographics -largest middle class in the world -quality and health consiousness

Industrial competition analysis

• Bargaining power of buyers• Bargaining power of suppliers• Threat from substitutes• Threat of new entrants• Rivalry among existing players

SWOT Analysis

• Strengths -differentiation and adaptation –Golden Eye,

14’’ CTV -innovation -Sampoorna CTV ,multilingual

screen displays -promotion plan -mobile showrooms -distribution -brand image

SWOT

• Weaknesses -dealer margins, schemes -high promotion costsOpportunities -industry growth -anti dumping duty on Chinese TVs by U.S

McKINSEY 7S FRAMEWORK

• Strategy• Structure• Style• Shared values• Skills• Staff• system

Strategies adopted by LG

• Entry –Indianised face with global technology• Operations- own plant ahead of schedule• Products-product adaptation strategy• Segmentation-high middle class and carved a

niche in a crowded segment• Brand-LG , the global leader

strategies

• Leadership-localisation Indians at top slots unlike other MNCs

LG’s marketing success

• Extensive consumer research• Strategic pricing• Sharp positioning• 3 more Ps -pace,people,passion

Positioning

• Golden Eye TV-Wrinkle free viewing• Refrigerators-PN system• ACs- Health air system• Washing machines-Fabricare system• Microwave oven –Healthwave cooking

RECOMMENDATIONS

• LG has a reasonable Distributions network in rural India, however since it has plans to expand in that segment, it must back it up with an even wider and more accessible network. Also, the human resources devoted in those regions need to be strategically chosen, keeping in mind the different mind set of not only the consumers but also the channel partners.

• Before going on an expansion spree in rural India, LG must feel the pulse of that market and understand exactly how the consumers in that segment think and behave.

…RECOMMENDATIONSCONTD…

• Likewise, it must also have lots of incentives for its dealers and distributors in the rural markets since trade schemes tend to be highly effective in these regions.

• LG could also look at providing easy credit schemes for its rural customers.

• As of now, all after sales services of LG products are looked after by franchisees. The company tends to spend a lot of money on setting up a servicing infrastructure, training the staff, maintaining company representatives at the servicing premise etc. Therefore, LG could look at setting up company owned service centers. This would instill confidence in the customers and also create an after-market for LG products.

..RECOMMENDATIONSCONTD

• LG should also try and shift its sourcing of materials and components from Indian suppliers, to cut costs. Only the high quality components should be imported from South Korea.

• The number of company owned exclusive LG outlets should be increased so as to provide greater flexibility, keeping an eye on the cons of this as well, such as channel conflicts, under-cutting by dealers, costs etc.

• To avoid unionization and cartel forming among transporters, LG must not give the contracts to a single transporter, but a number of them.