LG Electronics to write History in India

Since 1997, LG has been cruising relentlessly to make the brand No. 1 in the CE and IT space. It has achieved its target in the CE segment and has acquired a respectable position in the IT space. As far as LG IT division is concerned, it is growing at an enviable pace in tandem with other divisions. So much so that, in Q2 2005, LG has become the No. 1 brand in the PC monitor market (both in the CRT and LCD segments) and has become the No. 3 brand in the consumer PC segment. LG’s foray into’the PC market is very late. Another success is mobile handsets, which have also been very successful for the company. The IT arm of LG has evolved over a period of time from a PC essential company to a PC solution company. “This has been primarily possible because of the commitment to give the best products and technology to the Indian consumers,” says Mr. R. Manikandan, General Manager, Product Group Head -IT Products, LGEIL.

In 2005, LGEIL IT division contributed 11 per cent to the overall revenue, which is expected to reach 12 per cent in 2006. This year, it has also introduced some of the slimmest LCD monitors for the 17" and 19" categories. Moreover, the company will also focus very seriously on the laptop segment, as it believes that the growth potential in this segment is huge. This year, LG is likely to come up with many lifestyle notebooks enabling the customers to experience the latest technology.

Having started with a turnover of Rs.125 crore in the opening year, LG is chasing a target of US$10 billion by 2010. It touched Rs.7,500 crore last year (2005) and the target is Rs.9,000 crore for this year (2006). Mr. Manikandan says, “The potential that the Indian market holds for LG makes us believe that we can keep growing enormously in the years to come.”

“The corporate philosophy at LG is ‘Fun to Work’ and’we always say ‘We and not I’, which drives the team spirit and pleasure to work,”Mr. Manikandan says. LG has always made everything differently. When the competition depended upon the national distributors, LG went for regional distributors. Mr. Manikandan believes that the regional distribution is a model, which makes LG one of the unique companies in this country. He adds, “Regional distribution gives us the benefit of being able to reach every nook and corner of India.” Presently, the company has 500-plus active regional distributors and 4,000-plus active resellers. As the channel margin has gone down, LG creates opportunities for the partners to make margins. Mr. Manikandan says, “We offer a platform for the channel partners to proliferate into retailing and upselling. In 2006, we believe that more and more channel partners would venture into retailing because they see more value in this venture. We will, of course, continue to launch new promotional schemes and offers that would encourage them to sell more and get more value out of it.”

“If you look at our active regional distributors today, around 35 per cent of them have already started retailing and in 2006 I expect this number to cross 50 per cent. This only suggests that apart from distribution, channels are finding impetus in this business proposition,” he adds.

The company has 51 branches, 175 area offices and over 10,000 trade partners.

A unique concept of a Service Mall has been created by LG Electronics, which has been recently inaugurated to enhance customer satisfaction by working speedily towards their service requirements and to establish new benchmarks and best practices in the consumer durable industry. The LG Service Mall would also help in monitoring service standards and procedures at all LG Service Centres (ASCs) across the country. Due to these CRM initiatives, customers are assured that they can buy the product of their choice from any part of the country and will get prompt after-sales service also. The corporate value of fun-to-work, openness, innovation and partnership is also applicable to each associate of LG – be it the channel partners or consumers. So, the effort is to roll out better values for the channel partners, which, in turn, gives better profitability to channels.

The company keeps minute care of the channel partners, including timely scheme settlement, thin inventory holding for lowest warranty liability, quick rotation of stocks, etc. On the consumer front, the value additions are in the form of optimally configured PCs, extended warranty, superior performance, excellent after-sales service, etc. The company follows complete transparency in its communication channels and also encourages innovation tools for continuous value addition like Six Sigma, Tear Down Re-engineering and 100 PPM. In spite of such a competitive environment, LG also practises ethical and fair dealing with all its trade partners and stakeholders and has terrific relations with them. Their efforts and results are awarded personally by the Managing Director of the company, Mr. K. R. Kim, who also motivates them by personally visiting them frequently and acquainting them with the latest developments at LG. These partners, therefore, feel secure and trust LG for doing business. Precisely for this, it has already occupied 3-per cent market share in the laptop space and has become number three in the consumer PC segment. Mobile Handsets Another segment, which is growing very fast for LG electronics, is mobile handsets. The GSM phone market in India has seen phenomenal growth and to cash in on its experience in this segment internationally, LG plans to establish its brand strength in the domestic market by a combination of new designs and technology. Although a latecomer in the GSM market, LG has elicited a positive response from the Indian customers. LG forayed into the GSM segment in India in October 2003, with the launch of two high-end handsets.

Today, it has a product line-up of ten models in this segment, which include Music Phones, Colour Phones and Camera Phones.

In 2004, LG Electronics India Private Ltd. (LGEIL) announced the commencement of India’s first GSM plant in Ranjangaon, Pune. The greenfield facility was inaugurated in October 2004. It is located 50 kms from the city of Pune at Ranjangaon and covers over 50 acres of land. The Ranjangaon plant has enabled LGEIL to expand its consumer reach and ensure better supply chain management that has translated into a faster response time. It is today India’s first functional GSM manufacturing facility.

February 2005 saw LG reiterating its commitment to introduce the latest cutting-edge technology products in the Indian market, when it launched its range of 3G handsets. The launch made LGEIL the first company in India to unveil 3G handsets in the market. With the unveiling of 3G handsets, LGEIL aims to redefine the mobile usage experience. These UMTS (Universal Mobile Telecommunication System) handsets offer a download speed of 384 kbps as against a normal GPRS speed of 48 kbps and allow for Live Video Streaming Capability, Video Conferencing Capability, 3D Gaming, Continuous Video Recording, Auto Launch Browser, 384 kbps Download Speed, USB Support. Mr. H. S. Bhatia, PGH, GSM Phones, LGEIL, says, “In 2006, we would be launching around two GSM handsets every month, ensuring that we provide all the options for the customers. Today, people are becoming very choosy and all our handsets this year are going to be based on the latest technology with the looks and style to go with it.”

The outstanding feature of the LG Electronics’ India Pvt. Ltd. is the striking state-of-the-art manufacturing facility at Greater Noida set up in 1998 with an investment of Rs.500 crore. Spread over 47 acres, the plant is one of the most modern and automated installations of its kind in India. This facility manufactures Colo ur Televisions, Refrigerators, Washing Machines, Air-Conditioners, Microwave Ovens, Monitors and PCs. LG has also set up its compressor plant at Greater Noida in 2003. The Greater Noida manufacturing unit has been designed with the latest technologies at par with international standards at Korea and is one of the most eco-friendly units amongst all LG manuf-acturing plants in the world.

The new greenfield facility at Ranjangaon Pune is a wholly-owned subsidiary of LG Electronics India located at Ranjangaon, 50 km from the city of Pune. Covering over 50 acres, the facility will be manufacturing GSM phones, Colour Televisions, Air-Conditioners, Refrigerators, Washing Machines, Microwave Ovens and Colour Monitors by the end of 2005.

R&D activities

Research and development is one of the most emphasized activities at LG’s production facility. The company is known for launching new products that are both consumer-friendly and have state-of-the-art technology. Moreover, LG’s R&D team keeps a constant vigil at the market requirements and develops the models accordingly in the minimum time possible.

A significant amount of outlay is made every year towards R&D. This amount has been growing over the years. The result of this activity is that LG has launched notebooks based on Intel’s NAPA platform – LG P1 Express Dual and LG M1 Express Dual. The most important aspect of both these notebooks is that it comes with enhanced security features and it is also Bluetooth enabled. Mr. Manikandan says ,“We were the world’s first to roll out all-format compatible DVD Writers. We are the world’s first to offer LCD Monitor with Picture correction technology called ‘F-engine’.”

HR Policy

With a strong HR policy, LG’s employee retention is pretty high. The company takes pride in the highest manpower productivity and the lowest manpower cost in comparison to the industry. In fact, LG is benchmarked in terms of manpower costing. Extending support to, and solving problems of, employees is LG’s forte. The company’holds regular meetings at the manufacturing lines in the factory with the workers to discuss and solve their problems then and there. Morning meetings are also the norm at LG where the whole team gets together to motivate each other. LG has come up with the unique concept of Pizza Meetings where all the departments meet for a pizza treat and discuss issues in an informal setting. HR melt-ins is also a regular feature at LG where the HR department meets with the employee having a problem and his immediate senior to solve the issue.