MM GA 2 LG

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LG ELECTRONICS INDIA PVT LTD (LGEIL)

MARKETING STRATEGY-

FORMULATION AND

IMPLEMENTATION

MARKETING MANAGEMENT GROUP ASSIGNMENT 2

INSTRUCTOR: Dr. S. R. SINGHVI

Submitted by:

Group 7

PGDM Section B

Ankit Arora 068

Garima Shukla 081

Pallavi Srivastava 093

Omkar Sushil Samvatsar 106

Vijeesh Rajagopalan 118

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Table of Contents

Executive Summary................................ ................................ ................................ ........................... 4

Product Analysis:................................ ................................ ................................ ............................... 5

Product Life Cycle ................................ ................................ ................................ ......................... 6

Customer Analysis:................................ ................................ ................................ ............................ 7

Segmentation................................ ................................ ................................ ................................ . 7

Positioning................................ ................................ ................................ ................................ ..... 7

LG: Change in mindset ................................ ................................ ................................ .............. 7

Current Positioning Statement ................................ ................................ ................................ .... 7

LG Brand identity structure................................ ................................ ................................ ........ 8

Market Analysis: ................................ ................................ ................................ ............................... 8

Present Market:................................ ................................ ................................ .............................. 8

Market size: ................................ ................................ ................................ ................................ ... 9

Market Profitability: ................................ ................................ ................................ ..................... 10

Market Trends: ................................ ................................ ................................ ............................ 10

Hypothesis: Future Market (2010-11): ................................ ................................ ......................... 11

Competition Analysis: ................................ ................................ ................................ ...................... 11

Competitors Array: ................................ ................................ ................................ ...................... 11

Competitor analysis using porters framework: ................................ ................................ ............ 12

Porters Five Force model for Television Industry ................................ ................................ .......... 12

Logistics ................................ ................................ ................................ ................................ ........... 14

Problems identified in the logistics:................................ ................................ .............................. 15

Pricing Strategy of LG ................................ ................................ ................................ ....................... 15

Marketing communication mix: ................................ ................................ ................................ ....... 15

Advertising: ................................ ................................ ................................ ................................ . 15

Sales promotion: ................................ ................................ ................................ .......................... 16

Sponsorship of Indian amateur golf tour ................................ ................................ ...................... 16

Exhibitions ................................ ................................ ................................ ................................ ... 16

Cricket related activities:................................ ................................ ................................ .............. 17

Trade promotion schemes ................................ ................................ ................................ ........... 17

Other activities ................................ ................................ ................................ ............................ 17

LG SWOT Analysis ................................ ................................ ................................ ............................ 17

Marketing Implementation ................................ ................................ ................................ .............. 18

Marketing organisational structure ................................ ................................ .............................. 18

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LG Marketing organizational structure flow chart ................................ ................................ ........ 19

Objectives ................................ ................................ ................................ ................................ .... 19

Policies ................................ ................................ ................................ ................................ ........ 19

Future Marketing Strategy ................................ ................................ ................................ ............... 20

Customer Strategy for 2010-2011 ................................ ................................ ................................ 20

Positioning for 2010-11 ................................ ................................ ................................ ................ 21

Product Strategy for 2010-2011: ................................ ................................ ................................ .. 21

Logistics strategy for 2010-11 ................................ ................................ ................................ ...... 21

Pricing strategy for 2010-2011 ................................ ................................ ................................ ..... 21

IMC Strategy for 2010-11 ................................ ................................ ................................ ............. 22

Implementation of strategy 2010-11................................ ................................ ................................ 22

Time line ................................ ................................ ................................ ................................ ...... 22

Evaluation & Control ................................ ................................ ................................ ........................ 23

Annual Plan Control: ................................ ................................ ................................ .................... 23

Profitability Control: ................................ ................................ ................................ .................... 23

Efficiency Control ................................ ................................ ................................ ......................... 25

Strategic Control ................................ ................................ ................................ .......................... 25

Critique of the Website: ................................ ................................ ................................ ................... 26

Present website ................................ ................................ ................................ ........................... 26

Negatives of present website: ................................ ................................ ................................ ...... 28

Positives of present website: ................................ ................................ ................................ ....... 28

Strategic Marketing Plan for Online Selling of LG TVs ................................ ................................ ....... 29

ANNEXURES ................................ ................................ ................................ ................................ ..... 31

References................................ ................................ ................................ ................................ ....... 35

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Executive Summary

After a highly successful second coming in India after the debacle of 1992, LG

embarked on a major repositioning exercise under the leadership of their new country headMr. Moon B Shin. LG is currently the market leader in the CTV market with a 25.7% share.

The current marketing strategy of LG is all about positioning them as a premium brand

among the urban consumers. LG is also focusing heavily on the rural market to drive its top

line growth objective of 20% per year. The rural market of India offers huge potential due to

very less penetration and increase in disposable income. LG has aligned its market strategy

with its new positioning by investing heavily in R&D to drive innovation which is consumer

centric and develop more products which are localized .The market remains and is expected

to be more competitive as all the competitors including the challenger Samsung areincreasing their R&D and advertisement expenditure. One company to watch out for LG is

Videocon as their highly successful country head Mr. KR Kim has moved to Videocon. LG

has a long product line which spreads from Rs 6000 to Rs 3,00,000 catering to every

consumer segment with many products that are designed to meet local needs, for e.g. New

Time Machine series which has a built in memory to record programs is targeted at the Indian

housewives. LG has embarked on a drive to revamp its sales force according to the industry

needs. Also great attention is to be paid on the after sales service which forms one of the most

important components of the marketing mix especially in Indian context where television is a

high involvement product. With the increase in the internet users the online marketing can

extensively be used to promote the product and gain considerable share-of-voice. Logistics

and distribution also plays a very important part as the whole rural market sales depend

heavily on availability of the product. Also the increase in market expenditure and

competition would exert considerable pressure on the bottom line as it would tend to squeeze

out the margins. At the end, it all boils down to how much value is being passed on to the

consumer. The company which does it better eventually commands the greater market share.

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LG TV

Product Analysis:

Characteristics of Television buying:

y Television is a high involvement product. Consumers generally take interest in

comparing the different models and choosing the model that satisfy their needs best

and is within the budget as well.

y It involves complex decision making process. Consumers generally give 3-4 visits to

the stores, study catalogues, collect information from various sources and people and

compare different models and offers before buying the television.

y There is usually a time gap of at least 7-10 years between two purchases.

LG India sells the following types of televisions:

y Cathode Ray Tube television: These televisions consist of a vacuum tube and an

electron gun which falls on a fluorescent screen to produce images. These televisions

are generally cheaper and bulkier than the other types of televisions offered by LG.

Features:

Music mode

Golden Eye technology

Glossy finishing

DVD component

y LCD TV: These televisions use Liquid Crystal Display technology. They are usually

thinner and weigh lesser than CRT televisions which tend to be bulky. LCD

televisions also have a higher contrast than CRT televisions.

Features:

Trumotion technology


Full High Definition picture

Built in memory and storage(Limited models)

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y Plasma televisions: Plasma televisions are flat televisions characterised by their large

screen size. They are very slim and attractive and can be mounted on the wall. The

image produced by plasma television is of very high resolution.

Features:

High dynamic contrast ratio


16 Bit colour reproduction

Built in memory and storage(Limited models)

y LED Televisions: They are similar to LCD televisions but instead of using fluorescent

lighting they use LED backlighting. The images produced by LED televisions havehigher dynamic contrasts than LCD televisions. They are generally costlier than LCD

televisions. They are slim and lightweight too.

Features:

Trumotion technology


Full High Definition picture

Product Life Cycle

The colour television is in the growth stage of its product life cycle in India. Following are

some of the characteristics of the product:

The television industry is still experiencing good sales growth year on year. Firms are

queuing up to tap the largely untapped rural market and there is also growth potential in the

semi ± urban markets.

Television industry is characterized by high levels of technical innovations and most

of the popular innovations have an impact on customer buying patterns.

Television Sales of LG has risen at a level of 15% over the last year whereas its

advertising expenses have increased by 10%.

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Customer Analysis:

Segmentation

Due to the increasing competition in the TV market LG has to move beyond offering just a

competitive price and establishing its outlets at the prime locations. Initially LG had

identified consumers as Premium and Reliable customers on the basis of their income. But

with economic slowdown in the market, LG can now further segment the Premium urban

consumers on the basis of their psychology. The reason for this kind of segmentation is that

the major factor which derives the sales is not advertising but the consumers¶ behaviour

which is affected by the environment.

Positioning

LG: Change in mindset

With the exit of the company¶s hugely successful country head Mr. KR Kim and arrival of

new country head Mr. Moon B Shin, LG underwent a shift in its vision which started lastyear. Mr. Shin has set a target to reposition LG as an aspirational brand which takes it away

from its price ±warrior approach which Mr. KR Kim adhered to for the most part of the

decade. One of the reasons to drift away from this earlier hugely successful price warrior

strategy is that this model is easily replicable. Now LG wants to compete on quality alone

and not price. Some major changes under this new repositioning strategy are

y Customer led innovation

y Segmentation of consumers into two broad categories ;Premium service consumers

and reliable service consumers

y Focus is customer satisfaction and not incremental sales

y Increasing expenditure on advertising budget with Rs 400 cr .

y Increasing expenditure on R&D with Rs 200 Cr.

y Clubbing of sales and marketing department into one.

y Increased expenditure on CSR initiatives

y Focus on after sales service.

LG TV in India has positioned itself as a high technology product. LG makes an effort to

continuously launch new advanced technology products to meet the evolving needs of the

customer. It has positioned itself as an innovative, high performance and reliable product

with health benefits. LG tagline ³life¶s good´ points to the product¶s ability to make

customer¶s life better with high quality products.

Current Positioning Statement

³LG strives to enhance the customer¶s life (and lifestyle) with intelligent features, intuitive

functionality, and exceptional performance. Choosing LG is a form of self-expression and

self-satisfaction. Our customer will take pride in owning the amazing and take comfort in

knowing he/she made a smart, informed decision.´

(Source: LG website)

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LG Brand identity structure

Market Analysis:

Present Market:

TV¶s available in market are :

y Liquid Crystal Display(LCD)

y Plasma TV

y LED TVy CRT TV

As per 2008 data, CRT TV accounts for 92.9% of TV sales in 2008. LCD TV comes second

with 6.6%.

RELIABILITY

Stylish

Design

PerfectHarmony

Smart

Technology

Perfect Harmony of Smart Products with Stylish

designs that are a perfect with in consumers life

A refreshing and sophisticated Brand

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Market size:

TV market i India in 2007 was R s 9741 Crores. Also in 2009 93% houses in urban market

have TV. This indi ates a very hi h penetration of TV of urban areas.

(Source : PITC May 2008)

Source: OR Marg

Source: OR Marg

17%

26%

15%3%

9%

30%

CRT CTV Market Share

S

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c £

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s

37%

23%

22%

18%

LCD TV Market Share

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Source : ORG Marg

Market Profitability:

India being second largest population in the world and an annual GDP growth rate of7.9% in

Q2 of 2009(Nomura consulting and financial advisory ltd.) continues to lure marketers as a

market offering great opportunities for growth. Also increasing disposable income provide

for increased potential in Indian market. Additionally democracy & bureaucracy provide a

stable climate to industries. Indian TV market is an oligopolistic market with few leading

firms like Sony, LG, Onida, Videocon, Panasonic. This makes rivalry between firms stiffer.

Market Trends:

Indian consumers generally buy TV with a long term perspective of around 10years. This

makes after sales service one of the most important elements in the marketing communication

mix of the company to maintain brand loyalty, customer satisfaction and generating word of

mouth publicity.

As per estimates, it is expected that LCD TV market will grow at 50% YoY w.r.t 2008-09. So

it is expected that by 2009-10 LCD TV market in India will be 15, 00,000 units. This will be

basically due to increasing disposable income & advent of DTH in India. Most TV players

are concentrating on this growing LCD TV demand.

Here it is important to note that demand for big screen TV is not much affected during

recession times. Reason being most people curb spending on holidays, vacations & reduce

travel. People prefer to stay at home. Hence demand more or less remains the same (HBR:

April 2009).

Further, the Sixth Pay Commission helped in boosting TV demand because of the increased

disposable income.

45

6

18

31

Plasma TV Market Share

LG

Panasonic

itac i

Ot ers

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Also, we note that demand of TV is related to the housing sector demand. In the stimulus

package government (Dec 8¶08) has invested 4000Crores for the housing sector. This is

expected to boost housing sector & hence boost TV demand. (Source: rajasthan.gov.in).

Also here it is important to note that emergence of nuclear families has contributed greatly to

increase in sales of TV in India. (HBR: July August 2006)

Hypothesis: FutureMarket (2010-11):

Based on the above, we can conclude the following about the TV market in 2010:

India being second largest population in the world and an annual GDP growth rate of more

than 8% from 2002 to 2012(estimate) offers a potential market. It is expected that in 2010-

2011, the market for TV in India will be around Rs. 21.5k crores. This estimate is based on a

CAGR of 9% which is traditionally observed in TV market in India. Here it is important to

note that we have already factored in the effect of recession as explained above. Also the

demand for LCD TV will grow.

(Source: http://www.eetindia.co.in/ART_8800544859_1800010_NT_37130528.HTM )

Competition Analysis:

LG¶s major competitors are Samsung, Sony, Videocon, Onida and Panasonic.

In order to find out the strongest rival of LG TV, we have carried out the following analysis

where we compare LG with its major competitors on parameters of market share, distribution

channel, logistics efficiency and the price offered by them.

Competitors Array:

Weights LG Samsun

g

Sony Videocon

Market Share 0.35 6 5 4.5 4

Distribution

Channel

0.30 6 6 5 7

Logistics

Efficiency

0.15 7 6 6 6

Price 0.20 6 7 5 7

Total 6.15 5.85 4.975 5.80

It can be concluded from the above that Samsung is its strongest competitor followed by

Videocon and Sony.

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Competitor analysis using porters framework:

Competitor¶s objective

Samsung :

y Samsung wants to increase its shareespecially in the fast growing LCD

television market.

Sony :

y Sony wants to increase its shares in

the LCD television market.

Videocon:

y To increase its share in the overall

television market

Competitor¶s strategy

Samsung :

y Samsung has changed its strategyfrom being a premium brand to that

catering to the mass market.

Sony :

y Sony believes in creating high degree

of loyalty amongst its customers by providing great quality.

Videocon:

y Videocon¶s strategy has always beento be competing on cost and to

provide value to consumers.

Competitor¶s Assumptionsy Sony has a policy wherein its dealers

are not allowed to sell their products

under a specific price called theminimum operating price. This it

does as it feels that lowering its pricemay affect its image as a premium

brand.

Competitor¶s Resources & Capabilitiesy Samsung and Sony are very strong

international brands and have

resources and research capabilities tostand up and counter any new

strategy by LG.

Porters Five Force model for Television Industry

Degree of rivalry:

y Although LG is the market leader in terms of percentage share of the market, its

average realisation is pretty low owing to its policy of competitive pricing.

y Though Samsung is larger than LG globally, LG has been very aggressive in the

Indian market to get a strong foothold.

y Videocon has been able to stand its ground in the face of tough competition from

international firms with bigger brand names. With the move of LGs highly successful

country head Mr. KR Kim to Videocon, LG can look forward to a bitter battle.

y There are two basic positions that the firms have taken. Some firms have decided to

offer competitive prices and play the number game while some others have tried to

position themselves as an ³aspiration´ brand maintaining higher sales margins.

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Threat of entry:

y Excellent distribution networks are imperative for great returns in the television

industry and act as entry barriers to new entrants. A good distribution network leads

to cost efficiency which is an order winner.

y Brand image is an important factor that affects consumer buying. Thus it acts as an

entry barrier to new firms.

y Large scale operations also leads to economies of scale which saves operational cost

and hence helps in providing competitive pricing which acts as an entry barrier.

Threat of substitutes:

y Internet is fast becoming a medium of providing television programmes. But it is still

not at a stage where it can substitute television owing to lack of infrastructure for broadband internet in most parts of India.

Buyer power:

y Buyer power is high and most firms compete on the basis of providing good value at a

lower price than its competitors.

y The switching cost for buyers is almost zero and thus brand switching is common.

y It is a price sensitive market and pricing strategy needs to be spot on to be successful

in the Indian television market.

Supplier power:

y Some important parts like the picture tube in a CRT television form a major chunk of

the cost of a television. Owing to reduction in import duties on parts imported, the

bargaining power of television producers has gone up.

y Firms like Videocon have successfully implemented backward integration to reduce

their cost even further.

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Logistics

LG has around 2 manufacturing plants, 14 electronic manufacturers, 800 vendors of raw

materials, 37 sales points, 44 stock points, 140 area offices, 5,000 dealers and 12,000 sub-dealers.

LG has adopted the 5R approach towards efficient management of its flow of goods, energy,

information, human resource as well as its core products and services from the place of

production to the point of sale. The approach involves:1. Right Time

2. Right Place3. Right Condition

4. Right Cost5. Right Handling

In the warehouse, the products are coded with a 3 colour paper:

1. Red Card ± To stop the product from going to the market,

2. Green card ± To allow the product to go to the market,

3. Yellow Card ± Wait for product to be labelled with green, and then allow it to move to

market.

LG uses third-party logistics (3PL) to manage its logistics requirement, thereby shifting thefocus towards more strategic value adding operations. They use 3PL companies to handle

transportation between supplier ± manufacturer as well as manufacturer ± point of

sale/warehouse, warehousing, and distribution of their products in India. This ensures that

products are available all across the country. This also reduces transportation & warehousing

costs and not to forget the inventory levels.

Currently it uses the GSCP (global supply chain process) as a tool to optimize the supply

chain in order to monitor demand, supply, manufacturing status, logistics and distribution . It

prepares a production and dispatch plan on a weekly basis using the inventory & production

data from the ERP.

It uses an inventory management tool to integrate production, logistics and commercials to

enable them to respond to changing needs of customers.

It is a client of LG CNS India and thus uses its Enterprise Data Management, Quality

Consulting, Software testing, Manufacturing Execution System, Identity & Access

Management, Product Development as well as Staffing and Recruiting services.

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LG factory is located at NOIDA and has three types on warehouses:

1. Mother Warehouse

2. Branch Warehouse

3. Spare part warehouse

Problems identified in the logistics:

1- Lack of in transit material damage checking system.

2- Lack of 100% Bar code scanner facility

Pricing Strategy of LG

LG TV offerings available in market are from Rs 6200(lower segments) to Rs

3,00,000(premium segment)

Mr. Shin has set a target to reposition LG as an aspirational brand which takes it away from

its price ±warrior approach which Mr. KR Kim adhered to for the most part of the decade.

One of the reasons to drift away from this earlier hugely successful price warrior strategy is

that this model is easily replicable. Now LG wants to compete on quality alone and not price.

Also here it is important to note that in Diwali¶08 LG TV did not give any discount on TV.

This might be a part of its strategy to reposition itself.

Refer appendix for price list.

LG IMC

Marketing communication mix:

Advertising:

LG uses TV, print and outdoor ads primarily to advertise its range of products. LG do not

use a celebrity for everything. For LG TV, the positioning has been around the eyes. Theyused children to promote the fact that LG¶s golden technology does not cause strain on the

eyes. Further TV was promoted as a medium of ³infotainment´.

y Print ads: Print ads are given in all the leading newspapers. Frequency of print adsincrease during Diwali time to educate customers about various schemes and offers.

y TV commercials: LG commercials focus on the product features and style to lure itscustomers.

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y Hoarding, Posters, banners are used so as means of outdoor advertising

y Radio: LG also uses the radio FM for the promotion activities.

Sales promotion:

a) LG life¶s good membership:Membership privileges-

o Earn reward points on your purchases

o Earn bonus points on the LG product you already have

o Refer and earn bonus points

o Complimentary insurance coverage

o Regular performance check of your LG products

o Discounts on Annual Maintenance Contract

o Special invites for free service camps

o Special offers from LG and other brands

o Updates on new product launches

b) Exclusive discounts and rewards that can be availed at select Programme Partners:Programme Partners include some of the leading names in restaurants, home-

décor, travel & stay, entertainment, apparels & accessories, health & fitness andlifestyle.

c) Combo Offers: some of the combo offers offered in 2008 are-

Model 32LH35FR 37LH35FR 42LH35FR 47LH35FR

MRP LCD TV 44,000 63,000 71,000 90,000

HOME THEATRE 18,990 18,990 18,990 18,990

COMBO MRP 62,990 81,990 89,990 1,08,990OFFER PRICE 49,990 64,990 69,990 84,990

+50 DVD PACK 10,000 10,000 10,000 10,000

TOTAL BENEFIT

ON MRP23,000 27,000 30,000

34,000

d) Attractive exchange offers

Sponsorship of Indian amateur golf tour

Exhibitions

LG organises various exhibitions to increase its visibility among customers. It has organised

³LG stars of India´ festival in many cities such as Mumbai, Delhi, Hyderabad, Lucknow,

Kakinada and Chennai which included exhibition cum sales. Customers were offered

attractive prizes and coupons to book their orders then and there. Attractive schemes such as

³lead the Indian team at the ICC Champions Trophy, South Africa´ and ³win a trip to South

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Africa´ were given to the customers. Further free service camps, 0% finance camp, lucky

draws and fun filled activities were organised at the exhibition area. Customers were also

offered coupons.

Cricket related activities:y LG cricket quiz contest

y LG wishing bat scheme

y LG lead XI contest

y LG is the official sponsor of ICC till 2015

Trade promotion schemes

Attractive schemes were offered to dealers such as ³Get 2 TV free with every 50 TV

purchased´.

Other activities

Line activities and promotions: 60 per cent of LG¶s budget is spent on these kinds of

activities. LG has around 1,150 in shop demonstrators and 1,000 counters across the country.

Society and college activities

LG SWOT Analysis

Strengths

1. Innovative marketing e.g. consistent launching of new products, first TV brand to usecricket to leverage itself.

2. Strong focus on Research & Development. They believe in developing high quality

innovative products.3. Local and efficient manufacturing to reduce cost.

4. Indulge in product locali ation by advertising on TV in Hindi or regional languages.5. Use a regional distribution model thus enabling better penetration into the less income

segment.6. Use India¶s advances in IT sector to their benefit.

7. Brand has a high unaided awareness level as compared to other competitors.

Weakness

1. Share a Frame of Reference with Samsung

2. Similar categories as compared to closest competitor Samsung

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Opportunity

1. In India the penetration level as far as white goods are concerned is lower as

compared to other developing countries.

2. Unexploited rural market.

3. Rapid urbanization.4. Increase in income level, i.e. increase in purchasing power of consumers.

5. Easy availability of finance.

Threats

1. Higher import duties on raw materials.

2. Availability of cheap imports from countries like Singapore, China and other Asian

countries.

3. Stiff Competition from Korean counterpart Samsung.

4. Stiff competition from Videocon since ex LG India head KR Kim recently moved toVideocon

Marketing Implementation

Marketing organisational structure

LG follows a pyramidal sales structure. Its corporate office is located in Greater NOIDA and

branch offices are set up in major cities. These branch offices are responsible for setting up

central area offices (CAO) in smaller cities who in turn set up remote area offices (RAO) in

smaller towns and villages.

Each RAO consist of servicing, marketing and sales team. Separate budget for marketing

activities is assigned to each office. The executive in charge is independent to decide the

scale and duration of promotions in his area. LG promotes independent decision making and

participation.

The RAOs and CAOs are electronically connected through V SAT and intranet. Further,

branch managers can seek permission for decisions like setting up of large hoardings from

head office electronically.

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LGMarketing organizational structure flow chart

Objectives

The LGEIL¶s goal is to capture 40% market share of the consumer white goods market in

India by 2012. Their current share is 26%. They also aim to have a growth rate of 20% each

year. Also they intend to become numero uno in LCD TV market.

y Customer led innovations

y Higher returns to shareholders

y ³best in class´ organisation

Policies

y Invest to create a global brand identity

y Upgrade and align the company to meet the future requirements.

y Innovate through design and technology

y Manage company¶s product portfolio to remain ahead of competitors.

y Develop strategies to segment customers.

y Align all the strategies towards future growth and higher return on investment and

equity.

LG Electronics India Pvt. Ltd. (LGEIL)

Corporate office, Greater NOIDA

Central area offices (CAOs)

Remote area offices (RAOs)

Sales dept. Marketing dept. services dept.

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FutureMarketing Strategy

Customer Strategy for 2010-2011

According to HBR, consumers can be divided into four categories:

y Slam-on-the-brakes: They are worst affected by recession. They reduce all types of

expenditure by eliminating, postponing, decreasing, or substituting purchases. Usually

lower-income and anxious higher-income customers come into this segment.

y Pained-but-patient : They are found at all income levels. They are consumers that

economize their spending in all areas but are optimistic that situation will improve in

the long run.

y Comfortably well-off : They constitute top 5% income level people and their

expenditure is similar to that before recession. Usually retired people.

y Live for today: they are the typical urban young. They don¶t like to change their

consumption behaviour unless they become unemployed.

In order to boost up its sales in the premium segment LG should continue launching new

product innovations such as the latest LG Monitor TV. They will enable them to capitalize on

getting higher margins rather than volumes. The quality conscious consumers can be lured by

emphasizing on the top notch quality of the LG TV. The youngsters can further be attracted

by offering convenient automatic credit cards billing. They can also influence the psyche of

the consumer by advertising TV as a product they deserve because they are successful.

LG should focus on the semi developed rural markets to derive its sales growth now that the

disposable income of the rural population is increasing. Since the definition of rural marketsin India is not clear, an escape from this confusion can be that LG can target those urban and

semi rural markets which are exhibiting high GDP growth and are not adversely affected by

the downturn.

Since the consumer can easily postpone his purchase of consumer durables like TV, LG

should focus on the quality of their product, promote the savings from purchasing TV now, or

offer monthly payment plans. Introduction of loan waiver and subsidy to the Indian farmers

by the central government will facilitate this. LG¶s sales have already received 35%

contribution from sales in rural segment in 2008 and around 45% in 2009.

LG should make use of the 4As approach which is:

1. Availability

2. Affordability

3. Acceptability

4. Awareness

Availability

Rural areas are spread over a vast geographical region and adding to it is the poor road

infrastructure. LG will have to increase its reach by incurring considerable distribution costs.

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It use of Hub and Spoke model wherein the rural offices can be set up in towns/bigger villages and distribution to adjoining villages can be catered to from there. At present LG has

set up 45 area offices and 59 rural/remote area offices.

Affordability

After the success of LG Sampoorna, LG can come up with reasonably priced TVs for rural

and semi-urban market in the range of Rs. 6000 to Rs. 10000.

Acceptability

In order to increase acceptability of LG products in the rural market, it can come up with a

TV customized for this new segment, equipped with simple features suited to rural India.

Awareness

Awareness can be created by conducting Store demonstrations at Dealer stores. LG can use

road shows, mobile vans to reach rural customers and advertise in the local language of the

people. Wall writings can also be considered as Philips had been successful with it. An

exhibition during fairs and Haats is another means of promotion.

Positioning for 2010-11

LG should continue to position itself as a high technology and reliable product. It should

concentrate on the profitable premium segment but at the same time target rural customers as

well. It should shift its focus to customer satisfaction. Apart from technology, LG should

concentrate on being an ³aspirational product´ for all age groups. This may be done through

changing marketing communication style, focussing on after sales services and presenting

itself as a socially responsible product.

Product Strategy for 2010-2011:Move to club marketing & sales is a smart move which may lead to more customer lead

innovative products which are localized to the need of Indian consumers.

Logistics strategy for 2010-11

1. Implement a web-based track-n-trace system which will provide a better idea of

shipments as it reaches a destination.

2. Implement warehouse management system software to optimize warehouse space,

improve packaging efficiency & reduce manpower.

Pricing strategy for 2010-2011

Based on their strategy to cater to both premium market & quality sensitive market, LG needs

to price its product smartly. Prices must be in accordance to its positioning.

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IMC Strategy for 2010-11

With an increase in advertising expenditure to 400 cr. already announced for the year 2009

LG should continue to increase their advertising expenditure as the market is highly

competitive and there is constant fight to gain a substantial share of voice. Mobile vans and

road shows will play a significant role going ahead especially to capture rural market. LG

uses malls as a place for display as a lot of people visit them. In-house demonstrations of

products after purchase and after sales services become more important as competitiongrows. LG should also focus more on after sales service because it is the last and the mostimportant communication as it also generates considerable mouth -to-mouth communication

and goes a long way in brand building of the company.LG has always used the mass popularity of cricket in the Indian sub-continent as a means to

increase brand awareness. Moreover, it has been noticed that cricket world cups and other bigsporting event generally tend to create an upward spike in the sales of television sets. LG can

utilize the huge potential offered by the three major sporting events happening in the next 18

months. They can use Football world cup, commonwealth games and especially cricket world

cup 2011 to increase its brand awareness and to increase its sales

Implementation of strategy 2010-11

Time line

January ±March: These months are important in context of rural markets as it is the season of

harvest and hence witness increased spending from rural consumer.

April ±May: Is the time for a surge in advertising expenditure as country is gripped in cricket

fever due to IPL which reportedly reached 59 Million consumers last year.

June - September: This time should be used to promote common wealth games.

October- November: These are the months when the demand of rural as well as urban

consumers rises manyfolds due to the festive season (Dhanteras, Diwali, Dusshera). LGshould again increase its advertising expenditure and also focus on various other marketing

communications like sales promotion and exhibition (eg. Trade fair) to gain considerableshare of voice.

Apart from these LG should allot a fixed advertising agenda for every month. Sponsoring

various reality shows are also a good way to gain visibility. Advertising time for TV should

be during prime time unlike some other home appliances which target housewives

particularly and advertise in less costly noon timings and during re-telecasted of TV soaps.

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Evaluation & Control

Annual Plan Control:

y The annual plan should have quantifiable goals that can be tracked. After every

predefined period likes 3 months, a meeting evaluating the last period should take

place. After this meeting, resetting of goals in case of market dynamics should take

place. In case of deviations from the marketing plan, the firm should look at reasons

that could have lead to such a situation and reset goals if required.

y Sales analysis and micro sales analysis can be used to find variance from the goals.

y Market share is very important to LG given that market penetration is one of the main

goals of LG. So an analysis of market share should be done on a regular basis.

Profitability Control:

y The firm should do a thorough cost analysis of all its products variants. It should

identify the places where it can increase cost efficiency through process

improvements.

y For profitability analysis it should analyse the various financial instruments like

balance sheet, cash flow statements and profit and loss account statements.

Following budgeting scenarios can be used as sample scenarios:

( fig in 000s)2007-08 2006-07 Growth

%

Income 71561291 67086647 6.669947

Cost of materials 51661393 49538718 4.284881

Manufacturing Expenses 1690930 1514047 11.68279

Employees remuneration & benefits 2,405,500 1914965 25.61587

Administrative, Sales & Marketing

Expenses

11031938 10428863 5.782749

Interest & Finance Charges 148234 384760 -61.4736

Depreciation 1105019 1130197 -2.22775

PBT 3518277 2175097 61.75265Source: CMIE

Here we see that there is sudden dip in interest & finance charges. Since limited data is

available, and this dip cannot be treated as trend, we assume that interest & finance charges

remain constant at 2007-08 levels.

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2006-

07

2007-

08

Growth

%

2008-09

Estimate

2009-

2010

Estimat

e

2010-

2011

Estimat

e

Income 670866

47

715612

91

6.6699

47

7633439

1

814258

55

868569

17

Cost of materials 49538718

51661393

4.284881

53875022

56183503

58590899

Manufacturing Expenses 151404

7

169093

0

11.682

79

1888477

.9

210910

5

235550

7

Employees remuneration &

benefits

191496

5

2,405,5

00

25.615

87

3021689

.8

379572

2

476802

9

Administrative, Sales &

Marketing Expenses

104288

63

110319

38

5.7827

49

1166988

7

123447

28

130585

92

Interest & Finance Charges 384760 148234 -61.473

6

384760 384760 148234

Depreciation 113019

7

110501

9

-

2.22775

1080401

.9

105633

3

103280

1

PBT 2175097

3518277

61.75265

4414152.4

5551705

6902854

Now let¶s do the same analysis, rest being same as above, and changing income growth in

2010-11 to 20%.

2010-2011 Estimate

Income 123657910.8Cost of materials 58590898.65

Manufacturing Expenses 2355507.255

Employees remuneration & benefits 4768029.379


Expenses 13058592.29

Interest & Finance Charges 148234

Depreciation 1032800.718

PBT 43703848.56

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Instead if we assume that income falls by 5% we get the following :

2010-2011 Estimate

Income 82841139.49

Cost of materials 58590898.65


Employees remuneration & benefits 4768029.379Administrative, Sales & Marketing




PBT 2887077.204

Now we will see effectively when 20% growth is achieved with increased sales & marketing

expenditure. Increased marketing expenditure assumes growth of 10% instead of 5.78%.

2010-2011

EstimateIncome 123657910.8

Cost of materials 58590898.65


Employees remuneration & benefits 4768029.379





PBT 42078931.37

Efficiency Control

y The firm should gain understanding of the various functions within the firm to

increase efficiency in the time taken and the cost. It should also increase the quality

control measures to reduce product flaws which can also hamper the brand image.

Strategic Control

y LG should do a marketing audit to determine areas that provide opportunities for

growth and also those areas which act as problem areas and develop suitable

strategies for both type of markets.

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Critique of the Website:

Present website

Corporate Website: http://www.in.lge.com

Image 1: Image taken ± Website taking time to load

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Image 2: Home page after it was loaded successfully

Image3: List of products of LG

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Image 4: LG ± Colour Television

Source:http://www.onlinemarketingindia.com/top-10-search-engine-positioning-

mistakes.htm

Negatives of present website:

1. Website designed for high bandwidth. Internet speed in India is slow. So may not be

effective to have a very heavy website. It might show up something like image 1shown above & hence might fail to attract a µpasser-by¶ consumer. Such graphics can

be moved to locations which will require few clicks ensuring that consumer is really

interested.

2. Customer support website takes a very long time to load.

Positives of present website:

1. Along with giving information for each product category separately, it gives

information of the premium products of LG on home page. But as suggested in point

1 of negatives, this must be made easier to load.2. Full detailed information about each TV is available on the website. It includes its

salient features, technical specifications, catalogue & manual. This is essential for

consumers who will buy online or gather information online.

3. Customer feedback can be provided on the website enabling the consumer to put forth

their grievances quickly. Moreover the redressal system is very efficient whereby the

customer is attended to within a day or two and a solution to the problem provided.

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StrategicMarketing Plan for Online Selling of LG TVs

LG must try to use internet as a platform to promote LG TV. This can be done in the

following ways:

1. LG website should add a feature wherein consumers can register on the website,

search for the required product based on their preference, after which they can add itto a cart. Subsequently a payment can be made to select a mode of online payment

which should be secure as well as convenient.

2. Banners and pop-ups can be used on the frequently visited sites especially social

networking sites like Twitter, Orkut, Facebook as well as email portals like Gmail and

Yahoo. This can be used to create awareness about both LG brand as a whole and LG

TV in particular. The banners should emphasize on the product features, tagline and

promotional offerings and also provide a link to the LG website.

3. Advertisements of LG TV offerings can be posted on search engines like Google and

make effective use of the AdSense feature and sponsored links.

4. Blogs can also be used to provide links to LG website and its latest promotional

offers.

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ANNEXURES

Annexure 1

Source :´How to market in a downturn´ HBR April 2009

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Annexure 2:

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Annexure 3: print ad, 2008

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Annexure 4 : print ad, 2008

Annexure5 : promotional offer on the website

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References

Present market:

y http://www.eetindia.co.in/ART_8800544859_1800010_NT_37130528.HTM

y http://www.expressindia.com/latest-news/Sony-aims-30-pct-share-of-Indias-LCD-

TV-market/460017/

Market size:

http://www.in.lge.com/AboutUs/aboutus-companyProfile-factsnfig.aspx

PITCH March 2009

Future of market 2010-11:

http://www.eetindia.co.in/ART_8800544859_1800010_NT_37130528.HTM

For TV commercials:

http://www.in.lge.com/Experience%20LG/exp-tvc.aspx http://www.youtube.com/watch?v=vtd4ppNPY4w

Corporate Website: http://www.in.lge.com

http://www.rediff.com/money/2005/apr/05spec.htm

MM GA 2 LG

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