LG Electronics, which is not a very successful player in the GSM segment in India, is very aggressively trying to reposition itself as a niche player. Announcing this shift in the focus, Ketan Girap, head, Brand Management and Corporate Marketing, LG India, says, "We want LG to be a premium brand. To achieve this objective we plan to introduce new models and support it with quality, efficient distribution and superior after sales services."
"We are focusing on two types of customers-primary and secondary. We want LG to be the most trusted brand," says Amit Gupta, S&M (Planning and Administration), LG India. The company will step up its investment on marketing over the next two years to Rs 1,000 crore, from the current level of around Rs 320 crore. The activities will include direct advertising as well as below-the-line initiatives. LG also plans to increase contribution of premium product sales, from about 22% at present to 30% in 2008.
Focus on GSM
Though LG has a significant presence in the CDMA segment in India, its success in GSM has not been substantial. But now the company wants to become the #3 player in the country in this segment. For this, the company plans to launch a slew of products in the medium and premium categories. The company wants to be looked at as a premium handset manufacturer, and will increasingly look at the upper segment of the market. The company does not want to focus on the low-end handset market.
Keeping its focus on the lucrative GSM space, the company plans
to offer forty handsets by the middle of the current calendar year. Already LG
Shine, Chocolate, and Veiwty have been launched in the premium segment and
OS-driven products will also be launched in the coming month. "We will
first launch a Simbian Model and then a Windows Mobile operated handset,"
said Shirish Bhagwat, AGM, Product Manufacturing, GSM, LG India. When asked
about the launch of handsets like Prada, Bhagat said, "We do not have any
concrete plans as of now, but I am optimistic that we will shortly launch
"We are very aggressive on the GSM segment. We are planning our launches very efficiently. We are focusing on media, branding and placement of products. We have a whole set of products that we plan to launch. We will keep launching handsets at regular intervals to keep the momentum going," said Amit Gupta, S&M (Planning and Administration), LG India. On whether LG is exiting the CDMA segment completely, Ketan Girap said, "We have a strong position in this market. Going forward, we will consolidate our position here. We will be looking toward the GSM space for further growth."
On the branding front, LG is following a two-pronged strategy. On one hand, the company wants to promote LG as a premium brand, and on the other it wants to promote a single product. On their branding strategy, Gupta said: "LG has a wide range of products. What we are looking at is a synergy among brands. Though we will invest in GSM advertising separately, but we are trying to forge a synergy between products like IT and consumer durables."
Exclusive Brand Shops
LG has 160 brand shops. It plans to add some more shops to the existing format and also wants to develop more shops in different formats. "We have launched two flagship stores, one each in Noida and Hyderabad, and in 2008, we will be expanding the initiative," said Bhagwat. These stores will be based on the franchise model. LG has a set of criteria to select a store as flagship store.
"We are very aggressive in the GSM segment. We are planning our launches very efficiently"
On the distribution front, the company has decided to extend the LG Fone n Fun outlets. These outlets are being promoted as experience zones, where customers can touch and feel and use the GSM handsets available with LG.
The company will also strengthen its retail network by increasing its outlets from the present 15,000 to 65,000 outlets by 2008. LG will pump in Rs 145 crore in key retail management and marketing activity. The company also plans to increase the number of brand shops as well as service centers. Special attention will also be provided to the newly opened channel of modern retail-part of institutional sales for LG-as the company expects a greater contribution from this segment in the future.
The company is also focusing on after sales services. "We are available on the after sales service front, but I think the visibility is lacking, so we will be focusing on improving that," said Amit Gupta. "We are planning a campaign to improve visibility. Any LG product that you buy will have service number and even the service head's name on it. Information is also available on the LG website regarding service centers," he added.
LG also plans to push the sale of IT products, including laptops and flat-screen monitors. The company aims to reach $4 bn sales by 2010. The current year's sales are likely to touch Rs 10,000 crore.
The Rajnandgaon Plant
In 2004, LG opened its second India plant in Rajnandgaon, near Pune. LG's first plant was opened in Greater Noida. Refrigerator, LCD TV and monitor, CRT TV, ODD, and GSM handsets are manufactured in the Pune plant. The total manpower strength of this plant is 750, out of which 45 are involved in R&D activity. 35% of the production capacity is dedicated to exports. LG's Pune plant has a robust testing facility, which helps in insuring reliability of products. Every product is tested in simulators, which simulate Indian conditions, to make products function properly in actual working conditions.
To improve the production facility and prevent reoccurrence of faults, daily meetings are conducted to keep workers aware of the faults. LG also invites ideas from workers to improve the process. The Pune plant also has a training facility to conduct skill improvement exercises for the workforce. GSM handsets manufactured are of the low-end segment.
The Pune plant has the capacity to produce 8,400 handsets per day. The capacity has not been added over the last one year and there are no plans to add more capacity in the near future. Most of the capacity is export oriented.
Will it, Won't it?
In a market currently dominated by Nokia and Sony Ericsson, it will be interesting to watch how the competition reacts to these efforts by LG. Dislodging the two giants would not be an easy task for LG. However, the third slot, which LG is trying to capture, is currently occupied by Motorola, which is not seeing the best of times. In a way the target seems achievable, but it is unlikely that LG will be able to eat into the market share of Nokia and Sony Ericsson.
The rate at which the Indian mobile market is growing, it is possible to improve sales figures if not market share. At present, the company has a market share of 1.6% in the GSM handset market. By next year, the company aims to triple its business in the GSM segment and sell 4 mn handsets from the present 1.5 mn units. The Korean consumer durables major, which recently launched its high-end phone, LG Viewty, hopes to garner a market share of 7-8% by next year.