LG ELECTRONICS
South Korean multinational corporation South Korea's second largest electronics maker and the world's third largest appliance maker Company has 75 subsidiaries worldwide Design a d manufacture te ev s o s, home appliances, and es g and a u actu e televisions, o e app a ces, a d telecommunications devices. LG Electronics owns Zenith Electronics and controls LG Displays, a joint venture with Philips Electronics By 2005, LG was a Top 100 global brand. In 2006, LG recorded a brand growth of 14% World s World’s largest plasma panel manufacturer In 2006, its net income was $226 million, on total revenues of $24.7 billion

COMPANY – ITS SUBSIDIARIES
• LG Display, is one of the largest manufacturer of liquid crystal displays p y • In 2006, the company's mobile phone division, LG Mobile, marketed the LG Chocolate TM phone, changing the company's i ' image of th maker of thi k 3G phones. f the k f thick h • Focuses on the design and marketing of phones such as the LG Shine and LG Prada (KE850 ( • The company was picked as 'The Design Team of the Year' by the Red Dot Design Award in 2006~2007 • Called the 'New Apple' or 'New Sony' in the industry and online communities • S Sponsor E li h Premier League club -Fulham FC. English P i L l b F lh

LG ELECTRONICS - ORIGIN
Established in 1958 as GoldStar, producing radios, TVs, g , g , refrigerators, washing machines, and air conditioners. Merger of two Korean companies, Lucky and GoldStar, from which the abbreviation of LG was derived Before having the title LG – The p household products were sold under the brand name – Lucky, and the electronic products sold under the name Goldstar In 1995, GoldStar was renamed 1995 LG Electronics, and acquired Zenith Electronics of the United States.

LG – ELECTRONICS – BUSINESS DIVISIONS
Mobile communications
Currently number five, LG Electronics is expected to become the fourth largest handset maker in 2008

Digital appliance
The home appliance division makes products like refrigerators, air conditioners and washing machines Its 2007 sales totaled KRW 11.8 trillion, accounting for 29% of machines. 11 8 trillion the company's total revenue. The division's profit was KRW 717.1 billion. About 35% of the company's home appliance revenue comes from the North American market

Digital display
Plasma TVs, LCD TVs, Micro Display Panel TVs, Monitors, PDP Modules, OLED Panels, USB Memory, Flat Panel Computer Monitors

Digital media
Home Theater Systems, DVD Recorders, Super Multi DVD Rewriters, CD±RW, Notebook PCs, Desktop PCs, PDAs, PDA Phones, MP3 Players, New Karaoke Systems, Car Infotainment

COMPANY BRANDS
Company brands Cyon - Mobile phone Dios - Premium appliance (before LG's home refrigerator brand) Flatron - computer monitor, TV GoldStar - Home appliance IrisAccess - Iris recognition Platon - CRT TV Super Multi - Trademark for DVD+R(W)/-RAM burners p ( ) Tromm - Home washing machine Whisen - Air conditioner Xcanvas - PDP & LCD HDTV Xnote - laptop computer XD Engine - TV Technology Xpion - Desktop computer

LG ELECTRONICS - VISION
Pursuing its 21st century vision of becoming a true global digital leader that can make i customers happy h k its h throughout the world by means of its innovative digital products and services. services Set a new mid-term and long-term vision, aiming to achieve a position as one of the top three electronics electronics, information, and telecommunication firms in the world by 2010. Embracing th hil E b i the philosophy of "Great h f "G t Company, Great People," whereby only great people can create a great company

VISION OF LG
Management Based on Esteem for Human Dignity Human - Value each Individual. Dignity - Capitalize on Individual competencies, Respect for personal aspiration. Esteem - People are of the origin of all values. By developing l f h i i f ll l d l i people we improve the organizations clear tasks and fair treatment.

Compete in the International Market with a Global Mindset Mindset. Maximize value for the Customers, Employees & Shareholders Pursue the best in class through Management by Principle Contribute to Society through Good Corporate Planning.

LG ELECTRONICS - GROWTH STRATEGY
Fast Growth - Result of the strategies designed to expand the earnings - Improve the growth rate in terms of monetary value rather than quantity Fast Innovation Involves setting extremely high innovation goals and securing a competitive edge, aiming for a target of 30% more than what the competitors can achieve achieve. Also means 30% more sales and improvement in our market share, New product development and unveiling innovative products 30% faster, d l i f t developing t h l technology and establishing corporate value th d t bli hi t l three years ahead of our competitors.
One of the differentiating factor and means of value addition of the company is its FAST INNOVATION STRATEGY

LG ELECTRONICS – CORE CAPABILITIES
Product Leadership - Abilit to develop creative top-quality products using specialized new Ability t d l ti t lit d t i i li d technologies. Market Leadership - Ability to achieve the “LG brand is No. 1" goal,
- Reason i its formidable market presence worldwide. is i f id bl k ld id

People Leadership - Refers to presence of talented people who perform extremely well by internalizing and executing innovations

LG ELECTRONICS - CORPORATE STRATEGY
Perfect Management strategies consisting of outstanding and talented employees l d l Should adopt corporate culture to unleash the power of capabilities No Excuses - People leadership refers to talented people, who perform extremely well by internalizing and executing innovations.

“We” not “I” - Pursue a corporate culture that encourages all employees to work together and form a strong team. Fun Workplace - Workplace made full of fun

DIFFERENTIATING FACTOR – VALUE ADDITION
Innovation
Make customers happy with innovative digital products & services

Customer service – Introduction of 211 in their customer service where issues will be handled within an hour leading to better customer relationship. relationship Technology Leadership – Create products that are easy to use, affordable and technologically ingenious

ENVIRONMENTAL ANALYSIS
Technology Cultural Regulatory Economic Demographic D hi

TECHNOLOGY ASPECT
Rapid technological advancement in the industry Product differentiation on the basis of technology Increased R&D facility needed to sustain competition Technology alliances carried out by business majors with other gy y j players to develop new innovative products Market dominated by players coming out with products of advanced f t d d features and capabilities – S d biliti Samsung d i ti the dominating th market with advanced features in its AC’s. Twin power cooling, split air conditioning etc are the types of p g, p g yp AC’s gaining importance in the market Market dominated by products of innovative technology, unique products and cutting edge designs i d t d tti d d i

Slow technological advancement in the past, but increase in past number of players has posed more emphasis on the need of technology as a basic differentiating factor to establish in the h l b i diff i i f bli h i h market. The technology moved from Fluid Pattern to Dominant Design Technology overpowers cost – to sustain in the competition Technology seen as a value addition in the product for the user and from his point of view.

CULTURAL ASPECT
Presence of AC considered to be part of the comfort work environment Owning an AC considered to be a status symbol in case of a dual income families People’s affiliation towards having a comfort living condition. Increase in standard of living and purchasing power of people.

REGULATORY ASPECT
Less amount of governmental intervention Regulatory b di lik – pollution control b d state and R l bodies like ll i l board, d central electricity board propose rules and guidelines of the functioning of the AC g MITI authority and ministry of construction concerns about the prevention of heat loss in case of use of air conditioners Should cater to the regulatory measures of Energy Conservation Law Should cater to the energy conservation standards of the Energy Conservation Board. Should follow the regulations regarding the type of CFC’s to be used in the AC equipment.

ECONOMIC ASPECT
Rise in economic standards of country – more number of MNC’s – resulting in increased AC equipments being used. li i i d i b i d Increased government and industrial activity Cheaper consumer credit Very few successful players, offering product variants of different capacities and price variants. Rise in standards of living of people & Rise in purchasing power Reasonable prices of the varieties of AC equipment Cut throat competition has brought down the prices of the air conditioners Presence of varieties of AC s with different cooling capacities has AC’s brought price variations.

DEMOGRAPHIC ASPECT
Part of every household for comfort living Increase in number of small families, families with dual income Younger generation giving increased preference towards owning an AC and exhibit increased usage of the same. Increased usage in houses, place of work etc

COMPETITOR ANALYSIS
LG Electronics is a market leader in the AC Industry across all the product types in all AC market segments

Overall, the air-conditioner industry recorded sales of 1,45,000 in the January-April period. Similarly, while LG's market share in the home segment (comprising window and split airconditioners), was pegged at 24 per cent last year, it is currently at 22 per cent, according to the data y p g

Samsung is aiming at capturing a bigger slice of the airconditioner (ACs) market in the country, which is expected to touch 2.25 million units in 2008, from 1.8 million units last year. The company is targeting to corner a 22 per cent share of the AC market in India this year, from 16.5 per cent last year. Set a target to sell 500,000 air-conditioners during 2008, as against 300,000 units last year, a volume growth of 66 per cent i i l l h f Hitachi AC’s - It claims a 14 per cent share of the Rs 2,000crore AC market. In the room AC category, Hitachi market category manufactures both window and split ACs but 75 per cent of the demand is for window ACs Haier is aiming at a market share of 7-8% in the refrigerators segment and 9-10% in the ACs segment during 2008-2009.

Blue Star’s central air-conditioning segment continues to be the key growth driver, with contribution of over 70 per cent to FY 2007 sales. In 2007, the company’s split AC volumes grew by over 75 per cent as against industry average growth of 47 per cent. For the quarter ended December 2007, Blue Star’s operating profit margins jumped over 4 percentage points to 10.8 10 8 per cent while net profit margin also rose over 3% points. cent, points Voltas, Voltas the air conditioning and engineering services company of the Tata group, will target scaling up its market share to 20 per cent from 17 per cent in the fast growing AC segment, Stated target of achieving 20 per cent market share, the company has put in place an aggressive distribution strategy to p , increase the number of channel partners from 3,000 to about 4,000 next year

STRENGTHS
Strong Brand Identity Perfect & High standard cooling and power saving product Efficiency of the product measured and ensured at design stage Cutting edge technology & High quality design g g gy g q y g Elegant look, High technological and multiple features Reasonable costs with wide range of variety with varied applications Easy to handle and use & wide servicing facilities available Durable products

WEAKNESS
Availability of spare parts or replacement parts is difficult Complicated design might be a cause of concern while selling to the customer and during its usage.

OPPORTUNITIES
Environment factor - Rising temperature and humidity conditions Possessing A/C being viewed as status symbol. Rise in standards of living and purchasing power of people g p gp p p Can capitalize on the company’s brand image Low penetration product – More potential for growth Product Factors - Need for high technology - R li bili and durability requirements Reliability d d bili i - Availability at reasonable cost Features of product satisfying the energy conservation policy. policy

THREATS
Competitors product with many features Entry of many new players in the A/C market Reduced prices of the competitors product p p p Environmental regulations

LG – TURNOVER AND PROGNOSIS
•LG •It

has been a market leader in the air conditioning segment. h b k t l d i th i diti i t

has maintained its leadership position in the air conditioner segment for

the seventh consecutive year.
•LG

is targeting growth in both global residential and commercial air

conditioning products.
•In

2006-07 the company sold in excess of 10 million units of A/C’s p y

worldwide.
•In

2007 08 it sold 16 million units worldwide with a turnover of $4.8 2007-08 $4 8

billion.

TURNOVER OF LG WORLDWIDE
According to a Japanese market research company, Fuji- Keizai Co. Ltd., 62.97 illi Ltd 62 97 million air conditioning units were sold worldwide i i diti i it ld ld id in 2006, with LG responsible for 19.5 per cent or 12.28 million units.
Year Y 2006-07 2007-08 2008-09* 2009-10* 2010-11*
* Represent the sales forecast

Sales (units) S l ( i ) worldwide ld id 12.28 million 16 million 19.52 million 24.98 million 30 million

For 2008-09 the company is targeting 19.52 million sales in the air conditioner segment with 22% growth over the previous year. year The company plans to capture 30 million units by 2010 with a growth rate of 30% in the segment. LG operates six R&D centers for system air conditioners worldwide – which include Korea, North America, China, Asia, Europe and the CIS. ope d e C S. Innovation coupled with pricing is an advantage for LG and its been able to maintain i position as market l d b bl i i its ii k leader.

LG- AIR CONDITIONER’S INDIA
Air-conditioner sales in India were expected to go up further to two million units by 2008. The high-end new range products would contribute a significant portion of LG's air-conditioner sales. These air-conditioners were available at capacities of between one tonne and three tonnes. The products were priced in the range of Rs 23,000-Rs 66,000 . Air-conditioner Air conditioner sales were expected to account for 25 per cent of LG Electronics India's total revenue by 2007.

SEGMENTATION – NESTED APPROACH
Demographics

Personal characteristics

Operating variables

Situational factors

Purchasing approaches

SEGMENTATION-DEMOGRAPHICS
Industrial houses Commercial segments

•Large and medium industries NC s • MNC’s

•Shopping Malls, Auditoriums •Educational institutions

SEGMENTATION-OPERATING VARIABLES
Customers Prefer the product on the basis of technology variants and features in the product Advanced user friendly features given importance during the time of purchase. Customers financial status also given consideration for purchase criteria.

PURCHASING VARIABLES
Technical department in industrial and business segment influence a purchase decision. In commercial segments – architects play a important role in influencing purchase decision. Nature of the relationship between the company and its customers play an important role role.

SEGMENTATION – SITUATIONAL CHARACTERISTICS
High emphasis on the order because they are not replaced often. Product applications differ from segment to segment. A large industrial house will need a higher tonnage of A/C requirement compared to a commercial segment. g Size of the order are bulk in nature and done during establishment of firms/commercial centers. t bli h t f fi / i l t

SEGMENTATION – PERSONAL CHARACTERISTICS
Choice and variety of the product are made by influencers – architects. Final purchasing decision made by top management and purchasing department. Customer exhibits methodical approach to purchase the product product.

FORECASTING

FORECASTING OVERVIEW
What the Text Book says!! The f Th forecasting process is defined as i i d fi d What • A series of decisions and actions taken By Whom • By a business organization Why • To identify the forecasting objectives • To determine the independent and dependent variables • T develop a forecasting procedure To d l f ti d • To use available data in selected method to estimate the sales for the future
End Objective - So that the SALES for the FUTURE can be ESTIMATED

FORECASTING LG AIR CONDITIONING DIVISION PERSPECTIVE
They use Sales Force Composite Method The forecasting process is defined as o What A series of decisions and actions taken o By Whom (LG) By a business organization (Air Conditioning Division)
The Sales Force------------------------------The Area Manager---------------------------The Regional Manager----------------------g g The Division Director------------------------The Collector The Aggregator The Consolidator The Decider

FORECASTING LG AIR CONDITIONING DIVISION PERSPECTIVE
•

Why o To identify
• • • •

the forecasting objectives

Which products are likely to be sold or what does the Industry need. Which products have to be sold (Push n Pull) What profit margin is expected Which are the new products likely to be launched by the Air Conditioning Division

o To
• • • •

determine the independent and dependent variables

LG Corporate figures or Target to be achieved. Expected contribution of the Air Conditioning Division The Market synergy and Economic Conditions Competition

o To o To

develop a forecasting procedure use available data in selected method

FORECASTING LG AIR CONDITIONING DIVISION PERSPECTIVE
End Objective o So that the SALES for the FUTURE can be ESTIMATED
Expected Quantity and Total Value of Air Conditioners

End Objective - So that the SALES for the FUTURE can be ESTIMATED

SOURCE OF INFORMATION INPUTS

Sales Force

Dealers

Historic Company Performance (3 year Data)

Historic Dealer Performance (3 year Data)

Economic Conditions C diti

Competition Performance P f

TYPE OF INFORMATION COLLECTED
Units sold in Previous 3 years (Model wise) Value of units sold Profit margin Volume concentration (which are strong areas and which are weak ones) Dealer projections Seasonal variations Economic conditions Competition Growth rate.

COMPETITION DATA AS INPUT
What is the competition selling In comparison to competition how is LG’s product with similar specs doing. White space analysis If close competition grew at a percentage greater than LG then figures would be re-looked at. fi ld b l k d t

KEY INTERNAL INFORMATION
• • •

•

Current Production Capacity The need that can be catered too. This factor sometimes forces to put a Cap on the max units that p p can be sold during a period Also other key factors taken into consideration while forecasting f ti – Service force strength – Spare availability – Technology change

FINAL FORECASTING
Sales Force Area Manager

Input
1. Information on market performance from Dealers 2. Previous year data 3. Competition Performance 4. On previous set targets and achieved numbers. 5. LG Corporate Numbers

Process Consolidation Analysis Verification Possibility Ratio

Output

Number Projection

PRICING
The target customers for LG are the upper middle and upper class. The Th products are also designed to suit the needs of these two d l d i d i h d f h segments. LG pricing strategy is basically focused on the premium segment. The air conditioners come in the price range of Rs22,990/- to Rs.100000.

LG pricing strategy is cost + fixed mark up to cover their GP.

Since they cater to upper middle and upper class, therefore their th i 90% d l are i bi cities only. dealers in big iti l

LG follows pricing policy in which their normal formula is import cost + reasonable gross profit to cover their marketing expenses and also give them reasonable profit.

DISTRIBUTION STRATEGY
•

Their products cater to the upper and upper middle segment

and hence the dealers are mainly situated in the urban centers.
•

Simply based on historical forecast and feedback of their

dealer about the possible demand, they import from their p , y p principal. For most of its products its uses a pyramidal sales structure.
•

For Air conditioners it distributes through dealers in cities. g

They also have got a policy that retail price all over the country should be uniformed for the customers customers. LG relatively don't maintain loose stock at their end. Stock maintenance: The company ask their dealer to maintain sufficient stock at-least 4-6 week at their end. They believe in replenishment of dealer stock based on their sales. It means dealers stock always remain in within a limit, doesn't exceed beyond 6 week level.

PRODUCT RANGE
LG-LWA09C1RAE1 • 0.75Ton LG LWA09C1RAE1 -• 0 75Ton • 1000Watts • 9(EER) Price - Rs 10,000 to 12,500 LG-LWA12G2ND1 -• 1Ton • 1260Watts • 9.52(EER) Price - Rs 13,000 to 16,290 13 000 16 290 LG-LWA12F1RDL1 - • 1Ton• 1260Watts• 9.52(EER) Price - Rs 13,800 to 17,100 LG-LWA12G2RDE1 1Ton• 1260W tt 9 52(EER) LG LWA12G2RDE1 - • 1T 1260Watts• 9.52(EER) Price - Rs 13,800 to 16,300

PRODUCT RANGE
LG-LWA18G2ND1 - • 1.5Ton• 1850Watts• 9.73(EER) Price - Rs 14,500 to 17,500 LG-LWA18G2RDE1 - • 1.5Ton• 1850Watts• 9.73(EER) Price - Rs 14,800 to 17,990 LG-LW-M1861PC - • 1.5Ton• 1850Watts• 9.7(EER) ( ) Price - Rs 16,500 to 16,800

Product Range
LG-LW-N1860HI - • 1.5Ton• 2000Watts• 9(EER) ( ) Price - Rs 17,200 LG-LS-T1861PC - • 1.5Ton• 1750Watts• 10.29(EER) ( ) Price - Rs 19,500 to 24,500 LG-LS-K1860QC - • 1.5Ton• 1850Watts• 9.73(EER) Price - Rs 21,090 to 23,000

PRODUCT – VALUE
The entire range of LG air-conditioners have 'Health Air System', which not just cools, but keeps pollution out. LG has launched the indigenously developed Advanced sensor based Intelloeye Technology in 2007 The unique LG IntelloEye feature gives unmatched cooling performance that no other AC can provide at the touch of a button When the IntelloEye Mode is switched on, the inbuilt intelligent sensor automatically detects the room temp and accordingly adjusts the setting temperature, fan speed & swing settings of the Air conditioner

PRODUCT - VALUE
The AeroDNA System manages vital constituents that define y g the indoor air quality such as Temperature, Humidity, Odour, Purity and Flow to give perfectly conditioned indoor air at the most economical costs to the consumer. consumer For addressing the air purity aspect of air conditioning, we air-conditioning, have the NeoPlasma technology that is a 12 stage filtration that effectively kills viruses esp the Bird Flu virus, bacteria etc and removes odours to give pure fresh air for the consumer to breathe.

COMMUNICATION – PAST & PRESENT
LG is one of the most aggressive advertisers in the white g gg goods industry, spending close to 5 per cent of its revenue on marketing activities A close tie up with cricket ensured the brand building exercise would score well on consumer recall Promotion offers during festivals - During this offer, the customer would get an LG device ld t d i
Suggestion for future communication are dealt in management review and controls. gg f f g

GLOBALIZATION
Market Leader in air conditioners in the world In a move to accommodate emerging BRICs markets, LG established production facilities in China (1995), India (1997) and B il (2001) d Brazil LG’s Tianjin, China R&D center is particularly groundbreaking, as the first of its kind by a Korean manufacturer in that country LG also dominates the Chinese and Indian markets, maintaining the highest market share i i i h hi h k h Also running branches in Turkey and Thailand, LG currently operates eight production facilities internationally

GLOBALIZATION- AN EXPERIENCE
LG’s unique ability to combine ‘globalization’ and ‘localization’ strategies has partly made this unprecedented emergence possible, as it enables the company to adapt to the needs of local customers, recognizing regional, cultural, and religious differences The global leader in air-conditioning, has introduced the world’s first Photochangeable Air-Conditioner as an extension of its highly successful LG Art g g y Cool Inverter range in Australia Globalization strategy of LG is working well for LG to cement its brand gy g

CUSTOMER SERVICE
211 strategy – customer complaints will be attended within an hour LG offers Annual Maintenance Contract for annual service of it’s air conditioners The LG Air Conditioner comes with 12 months warranty on all parts except front grill & plastic parts and, thereafter 4 year and Additional warranty on the compressor, from the date of purchase of th product h f the d t

CUSTOMER SERVICE
The concerned customer care centre will advise the customer whether to effect the repair at site or at the customer care centre While the company will make every effort to carry out repairs at the earliest, it however is made expressly clear that the company is under no obligation to do so in a specified period of time The company or its authorized customer care centre/service dealer reserves the right to retain any part/s or components replaced at its discretion, in the event of a defect being noticed in the equipment during the warranty period The customer can lodge a complaint by filling an online form

MANAGEMENT REVIEWS & CONTROLS
Availability of spare p y p parts is an issue. LG can address this issue by identifying those issues in order to replace. The addition of features shouldn’t complicate the design. It should be simple and user-friendly user friendly The communication to corporate customer is not efficient and LG has to involve in trade shows, exhibitions to attract the corporate customer

MANAGEMENT REVIEWS & CONTROLS
By offering superior service, LG can create brand y g p , loyal customers and the company can get testimonials from these customers, so that they can be used as persuasion tools for other corporates LG should conduct events like IT week, Media week and announce offers during that period to increase sales LG can conduct events to award the star business men of the year, which in turn will build an image for the company and augment sales

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