LG Electronics India Pvt. Ltd.

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• A wholly owned subsidiary of LG Electronics,
South Korea

• Established in January, 1997

• State-of-the art manufacturing facility at

Greater Noida, near Delhi, in 1998
 LG Electronics India Pvt. Ltd.
• Vision was to become a 'Health Partner' for
its consumers
• The CTV range offered by LG has 'Golden
Eye' technology
• Entire range of LG air-conditioners have
'Health Air System'
• Microwave ovens have the 'Health Wave
System'
• Refrigerators have the 'PN System’
• Washing machines have 'Fabricare System'
 FINANCIAL PERFORMANCE
Turnover for 1997 Rs. 125 crores

Turnover for 1998 Rs. 485 crores

Turnover for 1999 Rs. 1056 crores

Turnover for 2000 Rs. 1903 crores

Turnover for 2001 Rs. 2216 crores

Turnover for 2002 Crossed Rs. 3000 crores

 LG MARKET SHARE

M ic ro w a v e o v e n m a rk e t s h a re (to p 3 )

50
40
30
%age

S eries 1
20
10
0
LG S am s ung K ens tar
 LG MARKET SHARE

C TV market share(top 3)

25
20
percentage

15
S eries 1
10
5
0
LG S am s ung O nida
 LG MARKET SHARE

R efrigerator m arketshare(top 3)

24
23
22
%age

21 S eries 1
20
19
18
LG W hirlpool G odrej
 LG MARKET SHARE

W ash in g Machin e m arket sh are (to p 3)

40
30
%age

20 S eries 1
10
0
LG S am s ung V ideoc on
 LG CHANNEL STRUCTURE
• Multi-tier structure
• Have LG Shoppes, cyber shoppes, SSDs, X-
Canvas Studios, direct dealers
• Also have a network of distributors and sub
dealers
• About 10,000 stock and selling points spread
across the country
• Different distribution strategies for its different
product groups
• GSM mobile phones do not make use of CFA’s
• CTV’s, microwaves and other like items require a
CFA
 LG CHANNEL STRUCTURE

• Primary manufacturing facility at Greater NOIDA

• Two other manufacturing facilities have come up in

the region of Pune and Dehradun, keeping in mind
the benefits of Excise free zones (EFZ’s)

• Procurement of supplies and materials for

production is done by the purchase department
 LG CHANNEL STRUCTURE

• The annual forecasts are further disaggregated into

forecasts that are carried out twice a month(15 days
basis), on the basis of which inventories are
maintained and further production levels are
maintained

• Most raw materials are bought from suppliers within

India

• At the retail level, LG uses a combination of

exclusive LG showrooms as well as Multi-brand
outlets (MBO’s)
 LG CHANNEL STRUCTURE

• Consumers for LG include individual consumers

as well as institutional clients

• LG also indulges in e-retailing as an alternative

channel through its website www.lgezbuy.com

• LG also has a separate channel for services and

spares
 LG DISTRIBUTION NETWORK

SUPPLIERS SUPPLIERS SUPPLIERS

FACTORY (OEM) FACTORY (OEM)

WAREHOUSE WAREHOUSE WAREHOUSE

CFA CFA CFA CFA CFA CFA

DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR

LG SHOPPE DEALER DEALER DEALER www.lgezbuy.com

INSTITUTIONS CONSUMERS CONSUMERS CONSUMERS CONSUMERS

 LOGISTICS FLOW
CORPORATE
LOGISTICS

DISTRIBUTION OPERATIONS
TEAM HEAD AND AND
PLANNING (FGs) TRAFFIC

ZONAL HEADS FOR TO DEAL WITH

2 ZONES (South & west, PRODUCT WISE TRUCKERS
North & east) & TRANSPORTERS

BRANCH LOGISTICS
INCHARGE

CFA’s &
WAREHOUSES
 LG CHANNEL PARTNERS
• CFA’s
• The number of C/F agents as of 31st May,
2004 is 28.
• They are spread across 20 states in India.
• The company dispatches the goods to C/F
on consignment basis.
• At the same time, these C/F agents all work
on contract basis.
• They get paid as per the amount they stock.
• DISTRIBUTORS

• The company appoints distributor for selective cities where

the markets are small but require more focus and attention.
Distributors are required to conduct sales and marketing on
behalf of the company in these markets serving to all the
required company stores.
• The company sends goods to the distributor on out right sale
basis.
• It is the duty of the distributor to send his people into the field
to book the orders and also execute them through their own
delivery vehicles.
• The distributor has to maintain his own sales, delivery and
accounts people for smooth working of his unit and is served
by the nearest C/F for all his requirements.
• The distributor is given a margin of 10-20%
 LG SUPPLY CHAIN
MANAGEMENT ISSUES

• Delivery Schedule

• takes 1 day for CFA’s to service reorder within their

zones
• distributor too caters to the demand in his area within
48 hours from the time of receiving the order
• If goods have to be procured from the warehouse
then it takes 8 days (avg) for the goods to arrive at
the C/F or distributor and delivered to the stores.
• no inventory management system in place with the
MBO’s
• ‘LG Shoppe’ and franchisee showrooms do have a
system in place to consolidate their inventory and
sales with the company main office
 LG SUPPLY CHAIN
MANAGEMENT ISSUES

• Ordering

• The retailers order their requirements directly to the

concerned distributors.
• The distributors source the orders from the company
warehouses, which are connected directly with each
of the 43 branches.
• The mother warehouse in Greater Noida caters to the
needs of all the regional warehouses.
• It is the responsibility of the C/F agents to supply to
the distributors as per their requirements.
• If any reorder do come in during the month then the
regional warehouse that entertains them properly
services them.
 LG SUPPLY CHAIN
MANAGEMENT ISSUES

• Planning & Forecasting

• The company goes for annual forecasts on the basis

of the previous year’s sales and also current trends.
• These sales forecasts are then disaggregated into
monthly sales plans.
• The logistics and the production people meet every 15
days, and on the basis of sales as well as past
inventory, they freeze production for the next 15 days.
• In case the sales in the previous period have not been
up to the mark, and the inventory levels are high, the
production is halted and stock of the situation is taken.
 LG SUPPLY CHAIN
MANAGEMENT ISSUES

• Manufacturing

• The company purchases nearly all its material

requirements exclusively
• separate import departments that look after the
imports
• Around 80% of all the models across the product line
are manufactured at the manufacturing facility at
Greater Noida
• compressor plant in Noida
 LG SUPPLY CHAIN
MANAGEMENT ISSUES

• Reverse Logistics

• The company accepts returns from their retailers as well as

company owned stores
• The job of bringing back the defects again rests with local
distributor and C/F that collects them from the shop
• They are entered and kept separately at the warehouse and
proper stock is maintained and sent to warehouse
• The damaged goods are dispatched to the warehouse
periodically. The damaged goods received from the
distributor are credited to his account and as such are only
accepted after thorough examination by the local sale
executive
 LG SUPPLY CHAIN
MANAGEMENT ISSUES

• Direct marketing

• LG uses direct marketing strategies in the microwave

oven product category, as the category hasn’t picked
up in volumes in India as of yet. These are carried out
through road shows, exhibitions etc.
 CHANNEL CONFLICTS AND
COOPERATION
• The first type of channel conflict may arise because of the co-
existence of the following:
• LG owned exclusive outlets
• MBOs (multi brand outlets)

• Another type of conflict could be a result of institutional sales being

sourced by both:
• The company itself
• The dealers who want to meet targets

• Internal conflicts:
• The branch managers, who look after all products in a
particular region, and product group managers, who look
after particular products, often monitor the same dealers in a
region, thereby leading to conflicts.
 ALTERNATE CHANELS:
E RETAILING VENTURE

LGEZBUY.COM

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 RECOMMENDATIONS

• LG has a reasonable Distributions network in rural

India, however since it has plans to expand in that
segment, it must back it up with an even wider and
more accessible network. Also, the human
resources devoted in those regions need to be
strategically chosen, keeping in mind the different
mind set of not only the consumers but also the
channel partners.

• Before going on an expansion spree in rural India,

LG must feel the pulse of that market and
understand exactly how the consumers in that
segment think and behave.
 …RECOMMENDATIONS
CONTD…
• Likewise, it must also have lots of incentives for its
dealers and distributors in the rural markets since trade
schemes tend to be highly effective in these regions.

• LG could also look at providing easy credit schemes for

its rural customers.

• As of now, all after sales services of LG products are

looked after by franchisees. The company tends to
spend a lot of money on setting up a servicing
infrastructure, training the staff, maintaining company
representatives at the servicing premise etc. Therefore,
LG could look at setting up company owned service
centers. This would instill confidence in the customers
and also create an after-market for LG products.
 ..RECOMMENDATIONS
CONTD
• LG should also try and shift its sourcing of materials and
components from Indian suppliers, to cut costs. Only the
high quality components should be imported from South
Korea.

• The number of company owned exclusive LG outlets

should be increased so as to provide greater flexibility,
keeping an eye on the cons of this as well, such as
channel conflicts, under-cutting by dealers, costs etc.

• To avoid unionization and cartel forming among

transporters, LG must not give the contracts to a single
transporter, but a number of them.
 THANK YOU

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