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

1958 1959
THE 1960s

GoldStar (today's LG Electronics) established Korea's first radio produced Radio exported to the US and Hong Kong as Korea's first

1962

1965
1966 1968 1969
THE 1970s

Korea's first refrigerator produced

Korea's first black & white TV produced Korea's first air conditioner produced Korea's first washing machine produced GoldStar Communications went public Color TV produced Exports surpassed US$100 million as Korea's first in the electronics industry

1974 1977 1978

The 1980s: Global production centers Initially in the developed world..

1980 1982 1984

First EU sales subsidiary in Germany (LGEWG) established Color TV plant in Huntsville in the US established Sales surpassed one trillion won

1986
1989

European-standard VCR plant in Germany established

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 2001

The world's first Internet-enabled refrigerator launched Global sales of refrigerators reached the number one position the world's first Internet- enabled washing machine, air conditioner, and microwave oven launched 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 All-in-one LG 55" LCD TV, the worlds first and largest among LCD TVs, commercialized. The worlds largest and first LG 71" plasma TV commercialized. The worlds first terrestrial DMB phone developed 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

2003

2004

2005

LG Today

Global Revenue: US $ 35 billion (consolidated $ 45 billion) 72,000 employees working in 77 offices and marketing units worldwide.

Worlds 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 2002 2003 2004 2005

Domestic

International

The Vision: Clear Global Aspirations

The LG India Story So Far..

LGEIL-Winning Spirit
7000 6500 6000

7200

Turnover in Rs (Cr)

5000 4000 3315 3000 2216 2000 1056 1000 125 0 1997 1998 1999 2000 2001 2002 485 1930

4500

2003

2004

2005

LG Leads on Market shares (March 2005) Washing Machine

40 30 20 10 0 Samsung LG 12.7 35.6

Refrigerators
29.3 30 28 26 22.9 24 22 20 Whirlpool
28 26 24 22 20 18 16 14 12

LG
27.4

45 40 35 30 25 20 15 18.1

39.4

14.3

Color TV
Samsung LG

Microwaves
Samsung LG

*Source: ORG-Marg

Proportion of intending buyers Brand Most likely to buy (%)

3 5 3 0 2 5 2 0 1 5 1 0 5 0

3 2

1 1 6 7

1 0

L G

S a m s u n g

id

*Source: AC Neilsen-ORG-Marg Brand Track, Jun 04-Apr 05

h ir lp o o l

d r ej

eo c o n

Top of Mind Brand Awareness Figs in %

3 0 2 5 2 0 1 5 1 0 5 0

2 9

1 2

1 1

1 1 8

L G

G o d r ej

*Source: AC Neilsen-ORG-Marg Brand Track, Feb-Apr 05

S a m s u n g

B P L

id eo c o n

Has LG Applied The 86% Solutions In India?

1. Dont Build a Car, when you need a bullock-cart

LG India: Closely studied the local needs & Adapted international technology

Discovering Key Category Barriers

LGs Innovation

Watching TV causes eye strain

Golden Eye Preserve Nutrition System Fabricare

Food in the fridge goes stale Expensive clothes should not be washed in Washing Machines ACs are for cooling so it is a luxury item

HealthAir System

Discover Local Insights: Fear that TV Viewing will spoil childrens Eyes

2 X Golden Eye TVC

LG Invented products to meet Indian consumers needs

Local Market Insights

LGs Innovation

TV Signals dont reach all over the country

DTH TV (Indias first) Football shaped TV Introduced Semi Frost Free Introduced Chaos Punch

World-cup Football Craze in 2002

Frost free refrigerators are unaffordable by masses

Agitators in washing machine can damage clothes

LG Innovated to meet Indian consumers needs

Indian Consumer Needs

LGs Innovation

Majority of Indian consumers dont read English

Indian-language On screen instructions Ballad TV 2000 Watt output Free Cricket game With TV in 1999 World-cup Sponsorships

Big audiences on TV sets + high ambient noise

Cricket is the second religion for most Indians!

Cricket is a second religion for most Indians!

2. Connect Brands to the Market

Grassroots Marketing An LG India Invention

Widest distribution network covering India inch by inch!:

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 Indias 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 Indias Strategy: Make Impossible possible Have Faith in Indias 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 Indias 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 days in 2001, 2002, 2005. Make presence felt at the street level.

LG Indias 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

LGs 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!