LG Electronics; ''healthy'' growth to the top

Not long ago, at a press conference held to announce the launch of new products, the expansion of existing product range and announce much-better- than-expected half yearly results, Mr. Ajay Kapila, vice president for sales and marketing of the South Korean electronics giant, LG Electronics India, grandly stated, "LG will be the biggest consumer electronics and consumer durable company in India by 2003".

One look at the growth pattern of the company since its entry into the country in 1997, and readers may well state that this claim may not be too tall!

The financial year 1999-2000 was not a very good year for the consumer electronics and consumer durable industry as is evident from the fact that BPL Ltd. - the largest player in the market - declared a mere four per cent increase in turnover against previous year's results. In this bleak scenario, LG's 86 per cent increase in turnover in the first half of year 2000 at Rs 934 crore against Rs 503 crore in previous year's corresponding period is, well, something to talk about.

Ever since LG entered India in 1997, it has been speeding along in top gear. Within two years of operations in India, it declared a turnover of more than Rs 1,000 crore. At that time the target was to be the number one consumer electronics company in India by year 2005. But at LG, targets are constantly being revised – upwards. For instance, the sales target for the year 2000 has been revised to Rs 1,750 crore, from the Rs 1,500 crore target set earlier. Now, the target is to be the number one Indian consumer electronics and consumer durable company by 2003.

What is it that really sets LG apart from the others? According to Mr. K. R Kim, managing director, LG Electronics, with the company "providing good quality products, with reliable after-sales service", LG has become synonymous with reliability and quality. He firmly believes the Indian consumer has understood that though LG doesn't offer discounts, freebies or exchange schemes, its products are value for money, a philosophy deeply ingrained in the Indian mindset. As Mr. Kapila hastens to add, "We are committed to providing the Indian consumer the best we have to offer."

Indeed, LG's strength lies in its manufacturing and product excellence. Unlike other multinational companies, LG has launched many products in India before they have been launched in other markets. LG entered the Indian market at a time when freebies, discount wars and exchange schemes were at their peak. Says Mr. Kapila "LG consciously stayed away from all this and in our campaign we clearly said, 'with LG, there will be no schemes and no scheming', which seems to have been appreciated by consumers."

With health as the unique selling proposition, LG is also one of the most heavily advertised brands in the country. According to the company, its advertising strategy, starting with World Cup cricket, where it was one of the official sponsors, has led to the LG brand enjoying a brand recall of as high as 30 per cent. In 1999, LG spent about four per cent of turnover on advertising. For the year 2000 LG plans to beef this figure up by another 20 per cent.

Revolving around this USP of health, LG's golden eye televisions offer wrinkle-free viewing, its refrigerators incorporate a preserve nutrition technology, the air-conditioners promise cool, clean, dust and bacteria-free healthy air, the washing machine is said to knock out dirt to preserve the life of clothes and the microwave ovens are touted as the world's only healthwave cooking system.

The core proposition of health has worked wonders in an otherwise unhealthy India with its problems of congestion and attendant pollution problems. Says Mr. Kapila, " LG's health proposition was unique when it was introduced in 1997 and was one of the strong planks of our advertising strategy. It was so successful that it is now being imitated by our competitors."

Recently, LG has forayed into the vacuum cleaner segment with the launch of four models vacuum cleaners, positioned, again, on the health platform. These are to be launched by September 2000. The vacuum cleaner segment is currently dominated by Eureka Forbes, which has a market share of 70 per cent. With a high powered marketing campaign, supported by an annual budget of Rs 4 crore LG hopes to garner a market share of 35 per cent in this product category within the first year of operations. Another product launch is that of the "Power Entertainment Series" with products MP3 and audio CD recorders.

Over the past two years LG has achieved an almost ten-fold growth in turnover from Rs 125 crore in 1997 to Rs 1,056 crore in 1999. It has invested US$ 100 million in its Indian operations so far and plans to invest an additional US $ 289 million over the next nine years. The company hopes this will give it a major manufacturing presence in a range of white and brown goods as well as a range of electronic components by the year 2005.

The company has also firmed up plans to issue an IPO by 2001 and plans to divest 25 per cent of its equity to the public. LG's future growth is going to come from introduction of new products and integrating its distribution systems through the Internet. As Mr. Kapila says, "we intend to expand our activities through the Internet not because we need to but because we want to be there when it becomes necessary to"

With such grand plans based on sound performance and the health plank, there is no reason to disbelieve Mr. Kapila’s grand opening statement!