While mobile phone users around the country are tossing their BlackBerrys and grabbing the latest from Samsung, LG is happy that the fellow-Korean has its mind occupied in the mobile devices market! That Samsung is raking in millions isn’t what makes LG smile. It’s happy about being a lap or two ahead on the home appliances circuit. In the overall white goods market, LG commands a 33%-plus share in India, with Samsung pocketing around 20% (FY2011-12). As was the case even ten years back, the refrigerator category is still LG’s strength. Today, the company earns 60% of its revenues from this category (where it has a 38% share as compared to Samsung’s 24%), with another 30% coming from washing machines (LG – 36%, Samsung – 20%). The other 10% comes from microwave ovens, flat panel TVs and ACs. Aggressive pricing has always been the key to LG’s success. No more. With the Korean working to reposition itself as a premium brand since the second half of 2012, today, it is betting more on quality than price leadership. Though it is still bets the biggest on its strongest hand – refrigerators, it isn’t ready to ignore other categories yet, just like Samsung hasn’t forgotten TVs, ACs and microwaves. Soon H. Kwon, Managing Director, LG Electronics India, talks about LG’s opportunities and challenges, and how he reads the ever-growing home appliances market in India.
In January this year, LG launched the world’s first Power Cut EverCool refrigerators, that retains cooling for several hours without a power supply. What expectations do you have from this launch and the category?
Though the current scenario demands a wait and watch approach from LG, we don’t wait to react. We are proactive, and our launches will continue. We expect our refrigerator business to grow by 20% in 2013 to touch a turnover of Rs.5,300 crore. We would like to retain the 38% market share that we have in this product category when 2013 ends. Expectations are that the new ‘Powercut Evercool’ product will contribute to 15% of our revenues from the refrigerator business.
Despite reduced levels of excitement amongst buyers in the home appliances market, products from the stables of LG and others like Samsung, Panasonic and Voltas are still selling well. Do you agree?
Home appliances fulfil some basic needs. For products like mobile phones or LCDs, people can hold back their purchase decisions for some time. But one can’t avoid buying products to fulfil basic needs.
In recent years, buyers in India have gradually shown a preference for ‘quality’ than ‘price’. Have you noticed a similar shift in consumer psychology in India?
Frankly, I haven’t. But people have moved up the value chain – from one door, 180 litre to two-door, 350 litre refrigerators. That is expected. But as far as LG is concerned, we are the largest sellers in the home appliances market – with a share of 36-37% – only because till date, we have worked to cater to the needs of all segments. For us a buyer who wishes to purchase a basic model of a refrigerator is as important as one who wants the most advanced of models. For us, urban, semi-urban and rural are all equally important markets.
How did the home appliances market fare in 2012, and how was it for LG in particular?
For different brands and categories across the home appliances industry, the year 2012 did bring about mixed news. But for LG, it was a good year. Our toplines grew 15% in the category last year, and that by any standards is a healthy one.
Do you see some positive signs amongst the buyer community at present?
The current state of affairs in the Indian economy don’t point out to anything positive. Factors like inflation, rupee depreciation, rise in costs and the overall dull growth rate of the economy is quite disappointing. India is not a country that deserves to grow by a lackadaisical 5%. Yes, the government is working hard, but there is no positive sign of growth yet. And this affects mindsets in the buyer community.
Which segments in the home appliance industry are worst hit by the dullness that prevails?
So this dip in demand for CRT TV, is the sight common across other markets as well?
In India, while the home appliances segment grew at 15%, the overall CRT TV industry saw a 30% fall in demand in 2012. In Asian countries, the trend is similar. For instance, manufacturers in Indonesia may discontinue their CRT TV businesses much before those in India do because of the fall in price (due to plummeting demand), which leaves no margins for sellers. The only region where CRT TVs still commands a decent market is the African continent. There, going by the huge waiting list of consumers, it can be said that the decline of the CRT TV has not happened yet. Reason being – buyers there still choose price over quality!
You have plans to reorganise LG’s portfolio. Does it mean giving a preference to certain product categories over others?
Reorganising our portfolio essentially means designing it in order to meet consumer needs. Judging by the fall in the CRT TV market, we have made a transition from CRT TVs to flat TVs. Having the largest market share in CRTs and LCDs, we are working to design our LCD and LED panels portfolio to suit demands in the contemporary times.
You are focussing heavily on branding exercises in Tier 3 and rural locations as well, are you not?
LG is the most aggressive and pro-active brand to reach rural India. For instance, one of our branding exercises involves 20 trucks in many Tier 3 and rural areas equipped with different products. These give consumers in smaller towns a taste of what LG has to offer. Just to add, we also have a special and a huge investment plan to focus on many locations across rural India where the population is 50,000.
And how about using social media for your marketing initiatives?
Though we use Facebook and Twitter to spread the good word about LG amongst consumers across the world, we are not too aggressive on the social platform. Not yet.
Lastly, as a leader of a company that leads in the Indian home appliances market, what is the leadership model you follow?
I believe in collaborative leadership. Horizontal leadership is what I call it. The top requirement for such a style is clear communication that should seep through the organisation top-down. Internal cooperation with other departments is the second requirement. The third and final requirement is maintaining core values of the parent organisation. If you follow a horizontal leadership style, then you can motivate employees in whichever market, under however tough a market condition.
