Sales Report of

LG Electronics India Ltd.

Submitted By:
Neeraj Chadawar
FMG 19A
191035
 EXECUTIVE SUMMARY
India‘s consumer market is riding the crest of the country‘s economic boom. Driven by a young
population with access to disposable incomes and easy finance options, the consumer market has
been throwing up staggering figures. Even discounting the purchase power parity factor, income
classifications do not serve as an effective indicator of ownership and cnsumption trends in the
economy. Accordingly, the National Council for Applied Economic Research (NCAER), India‘s
premier economic research institution, has released an alternative classification system based on
consumption indicators, which is more relevant for ascertaining consumption patterns of various
classes of goods.

The Indian consumer durables segment can be segregated into consumer electronics
(TVs, VCD players and audio systems etc.) and consumer appliances (also known as white
goods) like refrigerators, washing machines, air conditioners (A/Cs), microwave ovens, vacuum
cleaners and dishwashers.

India being the second largest growing economy with huge consumer class has
resulted in consumer durables as the fastest growing industries in India LG, SAMSUNG the
two Korean companies has been maintaining the lead in the industries with LG being leader
in almost all the categories. The rural market is growing faster than the urban market,
although the penetration level is much lower .The CTV segment is expected to the largest
contributing segment to the overall growth the industry. The rising income levels double-
income families and consumer awareness are the main growth drivers of the industries.

In consonance with the global trend, over the years, demand for consumer appliances has
increased with rising income levels, double-income families, changing lifestyles, availability of
credit, increasing consumer awareness and introduction of new models. Products like air
conditioners are no longer perceived as luxury products.Consumer durables sector is
characterised by emergence of MNCs, exchange offers, discounts, and intense competition. The
market share of MNCs in consumer durable and consumer appliances sector is 65%. MNCs major
target is growing middle class of India. MNCs offer superior technology to consumers, whereas
the Indian companies compete on the basis of firm grasp of the local market, their well-
acknowledged brands, and hold over wide distribution network.

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MNC's major target is the growing middle class of India. MNCs offer superior technology to
the LG, SAMSUNG the two Korean companies has been maintaining the lead in the
industries with LG being leader in almost all the categories.
LG having a turnover of Rs 9,500 crore and market share of 26 per cent, is investing Rs 360
crore on brand-building and other marketing initiatives and around Rs 140 crore on research
and development, besides launching new platforms in information technology and related
areas.

LG‘s innovative ‗211 campaign‘ to provide quality after-sales service, will also be expanded
from the existing 22 to 40 cities by next month, The campaign, for which IT infrastructure
has been set up, includes the company‘s response to customer complaint within two hours.
The fixing time for complaints varies from one hour to a maximum of 24 hours.

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 Table of Content
1. Objective of Report

2. Introduction
3. Classification of consumer durables sector
4. Scope
5. Opportunities and Threads
6. About LG
7. Vision and Growth Strategy
8. Various Market Share
9. About White Goods
10. Industrial Growth
11. Costumer Service
12. Future
13. RECOMMENDATIONS AND SUGGESTIONS
14. Limitations
15. Biblography

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OBJECTIVES OF THE REPORT
Primary objective
The main objective of report is to find out the market share of the LG and also
calculate the display share.
Find out the positional dealer region who can sale the LG product in large volume.
The main objective of research was to identify how we would increase our sales.
.
Secondary objective
While purchasing the consumer durables which parameter is most important for the
consumer?
Do the consumers prefer the financial facility for buying consumer durable?
How frequently consumers change the consumer durable?
To enhances the knowledge of consumer durable market.
To increases the knowledge consumer durable product of LG

Introduction

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 Before the liberalization of the Indian economy, only a few companies like Kelvinator,
Godrej, Allwyn, and Voltas were the major players in the consumer durables market,
accounting for no less than 90% of the market. Then, after the liberalization, foreign players
like LG, Sony, Samsung, Whirlpool, Daewoo, and Aiwa came into the picture. Today, these
players control the major share of the consumer durables market.
Consumer durables market is expected to grow at 10-15% in 2007- 2008. It is growing
very fast because of rise in living standards, easy access to consumer finance, and wide range
of choice, as many foreign players are entering in the market
With the increase in income levels, easy availability of finance, increase in consumer
awareness, and introduction of new models, the demand for consumer durables has increased
significantly. Products like washing machines, air conditioners, microwave ovens, color
televisions (CTVs) are no longer considered luxury items. However, there are still very few
players in categories like vacuum cleaners, and dishwashers

Consumer durables sector is characterized by the emergence of MNCs, exchange offers,

discounts, and intense competition. The market share of MNCs in consumer durables sector
is 65%. MNC's major target is the growing middle class of India. MNCs offer superior
technology to the
Consumers whereas the Indian companies compete on the basis of firm grasp of the local
market, their well-acknowledged brands, and hold over wide distribution network. However,
the penetration level of the consumer durables is still low in India

Classification of consumer durables sector

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1.Consumer electronic include vcd/dvd, home theatre, music player, color
television (CTVs), cameras, camcorders, portable audio, Hi-Fi, etc
2.White goods include dishwashers, air conditioners, heaters, washing
machines, refrigerators, vacuum cleaners, kitchen appliances, non-kitchen appliances,
microwaves, built-in appliances, Tumble dryer, personal care product etc.
3.Moulded luggage include plastics
4. Clocks and watches
5. Mobile phones

Scope

1. In term of purchasing power parity (ppp), India is the 4th largest economy in the world
and overtake Japan in the near future become the 3rd largest.
2. Indian consumer durable market is expected to reach $400 billion by on 2010
3. India has the youngest population amongst the major countries. There are lot of people in
the different income categories nearly the two third population is below the age of 35 and
nearly 50% is below 25.
4. There are 56 million people in middle class, who are earning us$4,400- US$21,800 a year.
And there are 6 million rich household in India.
5. The upper-middle and high-income household in urban areas are expected to grew to 38.2
million in 2007 as against 14.6 million in 2000.

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 Opportunity
1. In India the penetration level of white goods 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.
6. Presence of well known Brands available in market.
7. Presence of well distribution network available in urban as well as rural areas.

Threats
1. Higher import duties on row materials.
2. Cheap imports from Singapore, China and from other Asian countries
3. Demand is seasonal and is high during festive season.
4. Demand is depend on good monsoon.
5. Poor government investment on infrastructure.

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 About LG
LG Electronics was established on October 1, 1958 (As a private Company) and in 1959,
LGE started manufacturing radios, operating 77 subsidiaries around the world with over
72,000 employees worldwide it is one of the major giants in the consumer durable domain
worldwide. The company has as many as 27 R & D centres and 5 design centres. It's global
leading products include residential air conditioners, DVD players, CDMA handsets, home
theatre systems and optical storage systems.

LG Electronics pursues its 21st century vision of becoming a true global digital leader,
making its customers worldwide delighted through its innovative digital products and
services. Going forward LG India will synergize all activities in keeping with the global
vision of becoming a global top 3 player in all business areas. LG‘s top priority in 2007 is to
maximize customer satisfaction and heighten the competitive edge of its flagship products.

LG Electronics (LGE) is one of the leading companies in the field of electronics with a global
presence in many countries.LGE, headquarters in Korea, has three divisions. These divisions
deal with display, home appliances, and multimedia. Digital division is responsible for TVs
(including digital TV), monitors, components, plasma display panels (PDP), etc. Home
appliance division offers a range of products that include air-conditioners, refrigerators,
microwave ovens, washing machines, dish-washers, vacuum cleaners, compressors, etc.
Multimedia division caters to DVD players, notebook PCs, PC cameras, audio and security
systems, banking automation, and CD-ROM and DVD-ROM drives.
The Indian subsidiary LG Electronics India Pvt. Ltd (LGEIL) has recorded a resounding
success in the Indian consumer electronics and appliances market. It is the second largest
brand and the fastest growing consumer electronics company in India.
We contemplate emerging as the top brand of the country by the year 2001. We have
achieved a turnover of Rs 10,560 million in less than 32 months of operations in the country.

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LG Electronics is a South Korean company and was established in India in 1997. They
started their business with manufacturing of Color Televisions, LG Washing Machines, Air-
Conditioners and Microwave Ovens and other electronics products. Till date it has gained a
reputed name in Indian home appliances industry and serving their customers satisfactorily
from past one decade.

Setting new standards for home appliances The LG Home Appliance Company is an
innovator in the home appliance industry, offering healthier and greener products by blending
LG‘s insightful products, including refrigerators, washing machines, dishwashers, cooking
appliances, vacuum cleaners, and built-in appliances, are sought out by consumers around the
world. LG‘s innovative technologies and convenient features have set new standards in the
appliance industry, helping to establish LG as a true global leader.

Business areas and main products

Mobile communications
(a) CDMA Handsets,
(b) GSM Handsets,
(c) 3G Handsets,
(d) Cellular Phones

Digital appliance
a)Air Conditioners,
b)Refrigerators,
c)Microwave Ovens,
d)Washing Machines,
e)Vacuum Cleaners

f)Compressors for Air Conditioners and Refrigerators

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 VISION

Global Top 3 by 2010

Global Top 3 Electronic/Telecommunication company

GROWTH STRATEGY

“Fast innovation, Fast growth”

CORE COMPETENCY

“Product leadership, Market leadership, People leadership”

CORPORATE CULTURE

No excuse, “we” not “I”, Fun workplace

SLOGAN

"Life's Good" represents LG's determination to provide delightfully smart products

that will make your life good
The LG Electronics Life's Good signature consists of the LG logo, seal, and the
slogan, "Life's Good" set in Charlotte sans typeface curved around the LG
symbol. The curving of the slogan reinforces LG's personality and uniqueness.
The consistent usage of this signature clearly establishes the unique identity of
the company and unifies every
division and product from LG Electronics across the globe

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 LG INDIA
LG Electronics India is the fastest growing company in the consumer electronics, home
appliances, and computer peripherals industry today.
LG Electronics is continually providing, superior technology products & value for money to
more than 50 lakh households in India. LGEIL is celebrating the 11th anniversary this
year.
LG Soft India the innovation wing of LG Electronics in Bangalore is LG Electronics' largest
R&D centre outside Korea. We at LGSI focus on niche technology areas such as mobile
application development, digital video broadcast and biometrics software and support LG
Electronics with our expertise. Motivated by a passion for technology, a strong work culture
and loyalty to the organization, we are determined to see LG become one of the top three
brands globally.
Prominent consumer electronic company, LG Electronics Inc. has said that it expects the sale
of its products in India to up by 15 per cent in 2008. Moon Bum Shin, managing director of
LG Electronics India has said that the company has earmarked 4.8 billion rupees for
investment purpose in India this year. The said money will be used to market as well as
manufacture new products.
LG Electronics, which is originally a South Korean Company with branch in India, informed
that its sales of GSM mobile phones, color televisions, air conditioners and other household
goods in the Indian market was to the tune of 95 billion rupees ($2.4 billion) in 2007. As per
Shin's estimate, the sales in 2008 would be around 110 billion rupees.
In order to achieve its target, Shin said LG Electronics will concentrate on catering to the
high-end consumer market which will help boost sales this year. India churns out six (6) per
cent of LG Electronics global revenues of $42 billion. The Indian branch of LG exports to 40
countries

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 India challenges
The challenges faced by LG when entered in Indian market
1. Low brand awareness about LG in India.
2. One of the last MNCs entered in India (Samsung, Panasonic entered in
1995 in India).
3. High import duty
4. Compitition from local market players and other MNCs in consumer
durable segment.
5. Price sensitiveness of the Indian consumer
LGEI over comes these challenges to emerge as
Innovative marketing strategy
1. Launch new technologies in consumer electronic and home appliances.
2. LG was the first brand to enter in cricket in big way a way, by sponsoring
the 1999 world cup followed it up in 2003 as well.
3. LG brought in four captains of the Indian cricket team to endorse its products. LG invested
more then US$ 8 million on advertising and marketing in this sport.
4.LG has differentiated its product using technology and health benefits.
CTV has “Golden eye technology” Air conditioner has “Health air
system” and microwave ovens have the “Health wave system.

Local and efficient manufacturing to reduce the cost

To overcome high import duties LG manufactures TV refrigerator in India at manufacturing

facility at Noida and Pune. LGEI had already commissioned contract manufacturing at
Mohali Kolkata and Bhopal for CTVs. This has helped LGEI to reduce cost.
LGEI implementing the ―Digital manufacturing system‖ (DMS) as the cost cutting
innovation this system is follow-up to the six sigma exercise LGEI had initiate earlier.

R&D potential
LG has the research and development facilities in Bangalore and Pune. Both the unit carry
out R&D department for the domestic as well as the parent company it also dose customize
R&D for the specific countries to which it export product.
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 Regional channel and wide distribution network

1.LG has adopted the regional distribution channel in India. All the
distributers work directly with the company. This has resulted in quicker
rotation of the stock and better penetration into B, C, D, class market.

2. LG also follows the stock rotation policy rather then dumping stock on
channel partners.

MAJOR KEY SUCCESS FACTORS

1. Innovative marketing - LG was the first brand to enter cricket in a big way, by sponsoring
the 1999 World Cup and followed it up in 2003 as well.
2. Local and efficient manufacturing to reduce cost - To overcome high import duties, LG
manufactures PC monitors and refrigerators in India at its manufacturing facility at Noida,
Delhi.
3. Commissioned contract manufacturing at Mohali, Kolkata and Bhopal for
CTVs.
4. Product localization - Product localization is a key strategy used by LG. It came out with
Hindi and regional language menus on its TV.
5. Regional distribution model - This has resulted in quicker rotation of stocks and better
penetration into the B, C and D class markets.
6. Leveraging India‘s IT advantage - LG Electronics has awarded a contract to develop IT
solutions to LG Soft India (LGSI). The project involves development and support for ERP,
SCM, CRM and IT-enabled services for LG.

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LGs Market share in Various States in India in AC segment

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 LGs Market share in Various States in India in Washing segment

This analysis is based on the ORG survey conducted by LG which represent the LG
position of different consumer durables in various states in India. I select different brand in
different category as per the market share and the demand of product in market. This analysis
represents the LG market position during the period of March 2008. It shows that LG has
captured maximum market share almost in every category. LG and Samsung have the

16
maximum market in consumer durable market but LG dominate the almost all the category in
consumer durable.
Prominent consumer electronic company, LG Electronics Inc. has said that it expects the sale
of its products in India to up by 15 per cent in 2008. Moon Bum Shin, managing director of
LG Electronics India has said that the company has earmarked 4.8 billion rupees for
investment purpose in India this year. The said money will be used to market as well as
manufacture new products.

The key strategies being implemented include increasing the number of its regional
offices from six to eight. LG has split its southern regional office into two, one comprising
the states of Tamil Nadu and Kerala and the other consisting of Andhra Pradesh and
Karnataka. In addition, it has split one of its northern regional offices by making Uttar
Pradesh a separate region after spinning it out from Delhi NCR. The other four regional
offices take care of East, Gujarat and Madhya Pradesh, Maharashtra & Goa and Punjab,
Haryana & Rajasthan respectively.
In the coming year, LG is also repositioning its marketing spends, resulting in a significant
increase in its mass media expenditure for better brand visibility. LG had a marketing budget
of Rs 320 crore in 2007 with a 60:40 split in favor of below-the-line activities. Next year, the
company plans to increase the share of mass media even as overall marketing spends would
be raised by just about 10- 15%.

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 Growth of consumer appliances in India

Growth of Consumer appliances in India (in

billion)
20
18
16
14
12
10
8 Series 1

6
4
2
0
2000-01 2001-02 2002-03 2003-04 2004-5 2005-06

Washing Machines

LG has always been a trailblazer in bringing the world‘s smartest, largest-capacity washing
machines to the market. This year, LG launched an 11kg washing machine with a new and
innovative damping system and fixed outer tub. It also boasts the largest capacity in a
standard-sized, 24-inch cabinet in the European market.

During the last few years, the market for consumer durables has grown tremendously. It is a
fully automatic segment, which in recent times has been getting the attention of both the
manufacturers as well as the buyers. The customer has now a plethora of world class brands
to choose from. The trends have also indicated a shift from three to four kg capacity
machines to larger ones.

The emerging new technologies in the washing machines are aero power, triple cascade
tornado wash, digital intelligence, unique optical sensor etc. Gradually these new concepts
are being introduced by the companies.

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 LG

Samsung

May-06
May-05
Videocon

Whirpool

0 5 10 15 20 25 30 35 40

Market Share of the Major players in Washing Machine

segment

Refrigerators

LG debuted its latest 385-liter bottom freezer at the MAISON & OBJET 2010 in Paris last
January. By combining LG‘s Linear Compressor technology with a smart inner structure, the
new LG bottom freezer provides approximately 50 liters more space than other 2-meter-tall
bottom freezers. LG‘s other latest refrigerator is its ultra-high-capacity, 4-door, French-door
refrigerator. Also featuring the company‘s unique Linear Compressor technology, it offers
the ultimate in convenience, with freezer drawers that open and close automatically and an
upper drawer that converts from a freezer to a refrigerator compartment.

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The refrigerator industry is highly competitive which implies a high premium on quality of
the product. Manufacturers of refrigerators have, in general, improved the quality of the
product, especially the reliability of the compressor. In so far as new technology is concerned
the concept of "Frost free" refrigerators has been gaining popularity. Non CFC (Non-Chlro-
fluro-carbons) refrigerators are being manufactured in the country but because of their high
initial cost the demand is sluggish. As regards air-conditioners, the split air-conditioning is
becoming more popular with export orders from abroad. Manufacturers are also being
encouraged to adopt environment friendly technology, like, production of non-CFC (Non-
Chloro-Fluro Carbons) based air-conditioners. Technologically the Indian window air-
conditioner industry has come a long way and is now at par with international level. The
earlier noise levels of 68 db are now down to 58 db for air-conditioners using reciprocating
compressors and even lower for those fitted with rotary compressors. The energy efficiency
ratio (EER) now being offered is 0.90 KW hr/Tonne compared with earlier figures of 1.2 KW
hr/Tonne. Import of capital goods for the manufacture of non-CFC refrigerator and air
conditioners are being allowed duty free.

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 Sales of Refrigerator in India (in 000)
7000

6000

5000

4000

3000

2000

1000

0
2005 2006 2007 2008 2009 2010

Market Share of the Major players in Refrigerator

segment

21
Year after year performance of LG electronics
(in Rs crore)

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 Cooking Appliances

LG‘s premium Lightwave Ovens offer Lightwave Technology, a halogen-heating system

that cooks tasty and healthy food with a minimum of fuss. LG‘s Lightwave Oven combines
the functions of a convection oven, grill, and microwave, allowing chefs to create delectable,
gourmet-standard dishes in the comfort of their own kitchens. It also helps retain nutrients
and flavors, and makes healthier meals through its steam function.

Vacuum Cleaners

LG‘s most advanced bagless vacuum cleaner, the Kompressor Elite, features the world‘s first
motorized compressor and health-conscious features like steam mopping and a Power Punch
mattress tool. With HEPA filters providing more hygienic filtration to keep the air cleaner,
LG vacuum cleaners deliver the kind of cleanliness you‘ve been looking for.

Built -in Appliances

LG‘s Built-in Appliances create a convenient and efficient kitchen environment by

combining individual home appliances into well-designed, fully-integrated packages. LG‘s
Built-in Appliances include hoods, hobs, built-in ovens, built-in microwaves,
dishwashers, and refrigerators.

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 About white goods
consumer appliances (also known as white goods). white goods signify for the relatively
high-priced, heavy, and slow-moving electronic goods like fridge, air-conditioner, micro
woven etc. It‘s evident that white Goods mainly include all ranges of home appliances.

Durable goods are those which don‘t wear out quickly, yielding utility over time rather than
at once. Examples of consumer durable goods include electronic equipment, home
furnishings and fixtures, photographic equipment, leisure equipment and kitchen appliances.
They can be further classified as either white goods, such as refrigerators, washing machines
and air conditioners or brown goods such as blenders, cooking ranges and microwaves or
consumer electronics such as televisions and DVD players. Such big-ticket items typically
continue to be serviceable for three years at least and are characterized by long inter-purchase
times.

Performance of white Goods

In the past 10 years, the global market has witnessed a surge in demand as economies such as
Brazil, Mexico, India and China have opened up and begun rapid development, welcoming
globalization with élan. The consumer durables industry has always exhibited impressive
growth despite strong competition and constant price cutting, and the first contraction since
the 2001 dot-com bust has been due to the global recession. Given the strong correlation
between demand for durables (both new and replacements) and income, the industry naturally
suffered during the 2008-2009 period. However, projections for current year going forward
are very optimistic, as consumers resume spending, and producers launch new enticing
variants to grab new customers. Leading players include Sony Corporation, Toshiba
Corporation, Whirlpool Corporation and Panasonic Corporation.
Developing countries such as India and China have largely been shielded from the backlash
of the recession, as consumers continued to buy basic appliances. In fact, China has been
ranked the second-biggest market in the world for consumer electronics. Despite the
recession, their strong domestic economy and growing high-income population have buoyed
demand leading to aggressive market growth.
There is growing interest for new age products such as LCD-TVs and DVD players.
Meanwhile, the penetration of the basic, largest dollar items such as ovens, washing machines
and refrigerators is also increasing. India too, has witnessed a similar phenomenon, with the

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urban consumer durables market growing at almost 10 %p.a., and the rural durables market
growing at 25% p.a. Some high-growth categories within this segment include mobile
phones, TVs and music systems.
The Indian consumer durables industry has witnessed a considerable change in the past
couple of years. Changing lifestyle, higher disposable income coupled with greater
affordability and a surge in advertising has been instrumental in bringing about a sea change
in the consumer behavior pattern. Apart from steady income gains, consumer financing and
hire-purchase schemes have become a major driver in the consumer durables industry.
In the case of more expensive consumer goods, such as refrigerators, washing machines,
color televisions and personal computers, retailers are joining forces with banks and finance
companies to market their goods more aggressively. In addition, change in policy, such as the
WTO FTA in 2005 resulted in zero customs duty on imports of all telecom equipment,
thereby improving the pricing and affordability of imported goods.

Challenges

The biggest threats to the local industry going forward are supply-related issues pertaining to
distribution and infrastructure, as well as demand issues due to competition from imported
goods. The lack of well developed distribution networks makes it especially challenging to
penetrate the fastest growing rural areas economically. In addition, regular power cuts and
poor road linkages make systematic production, assembly and delivery problematic.
On the demand side, customers have increasing choice from both domestically produced and
imported goods, with similar features. This homogeneity makes it difficult for players to
remain ahead of the competition.
MNCs hold an edge over their Indian counterparts in terms of superior technology combined
with a steady flow of capital, while domestic companies compete on the basis of their well-
acknowledged brands, an extensive distribution network and an insight in local market
conditions. The largest MNCs incorporated in India are Whirlpool India, LG India, Samsung
India and Sony India and homegrown brands are Videocon, Godrej Industries and IFB.

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 Consumer Durables: Industry size, growth and trends

During FY07, volume share of the single largest consumer durable was colour TVs at 30%,
followed by refrigerators and air conditioners at 18% and 13% respectively. Washing
machines and other assorted consumer durables captured a share in the total volume by 5%
and 34% respectively.

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 Refrigerator: Demand and supply side dynamics

According to CMIE statistics, domestic consumption of refrigerators witnessed a decline

between FY05 and FY08, while exports grew. From 3% of the total consumption in FY05,
exports grew to7% of the total consumption in FY08. On the supply side, domestic
production of refrigerators in the total supply remained at the same levels in the past three
years ended FY08. At 99% each in FY06-08, the share of production reported a mere 100
basis point increase over FY05, as imports slided. The refrigerator industry posted a sluggish
performance since the beginning of FY09 on the back of volatile steel prices. The first quarter
saw a production growth of a mere 50 basis points to 2.18 mn units, as per CMIE.

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 Sales of Consumer Electronics Companies

The consumer electronic goods industry underwent a slowdown during the last quarter of
FY08. According to CMIE, the industry witnessed a slower 10.5% growth in the Mar 08
quarter compared to a substantial 17.4% growth in the previous corresponding quarter.
Domestic consumer electronic companies together reported a subdued sales growth of almost
17% in FY07, on the back of a robust 40.5% growth in FY06. While the larger companies
reported robust growth in sales, it was the smaller ones whose sales were negatively affected
that eventually brought down the industry sales growth.

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 Industrial Growth

The industrial sector grew in moderation during FY08 at 8.5% on the back of a comparatively
higher growth of 11.5% during the previous fiscal. The country‘s real GDP grew by 9%
during FY08; a tad lower than 9.6% in the previous fiscal. The consumer durables segment
witnessed a fall in production particularly for items where consumer preferences have shifted
towards newer products. Shifting in the consumption pattern coupled with rising input costs
of steel, iron ore etc, may further affect the production levels of these goods. On the supply
side newer variants of consumer durables on the back of technological advancements have
flooded the market, whereas on the demand side it is the prospering middle class and
consumerism which have led to changing demand patterns.

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 Foreign Direct Investment

The net Foreign Direct Investment (FDI) inflows to India increased from US $ 22 bn in FY07
to US $ 32.3 bn in the following fiscal. During 2007 and 2008, the share of FDI in the
electronic goods segment remained flat at 0.2%, coming on the back of a 1.5% share in
CY06.

30
 The key growth drivers for the Indian consumer durables industry:

 Rise in disposable income: The demand for consumer electronics has been rising with the
increase in disposable income coupled with more and more consumers falling under the
double income families. The growing Indian middle class is an attraction for companies who
are out there to woo them.
 Availability of newer variants of a product: Consumers are spoilt for choice when it comes
to choosing products. Newer variants of a product will help a company in getting the
attention of consumers who look for innovation in products.
 Product pricing: The consumer durables industry is highly price sensitive, making price the
determining factor in increasing volumes, at least for lower range consumers. For middle and
upper range consumers, it is the brand name, technology and product features that are
important.
 Availability of financing schemes: Availability of credit and the structure of the loan
determine the affordability of the product. Sale of a particular product is determined by the
cost of credit as much as the flexibility of the scheme.
 Rise in the share of organised retail: Rise in organised retail will set the growth pace of the
Indian consumer durables industry. According to a working paper released by the Indian
Council for Research on International Economic Relations (ICRIER), organised retail which
constituted a mere four percent of the retail sector in FY07 is likely to grow at 45-50% per
annum and quadruple its share in the total retail pie 16% by 2011-2012. The share will grow
with bigger players entering the market.
 Innovative advertising and brand promotion: Sales promotion measures such as discounts,
free gifts and exchange offers help a company in distinguishing itself from others.
 Festive season sales: Demand for colour TVs usually pick up during the festive seasons. As a
result most companies come out with offers during this period to cash in on the festive mood.
This period will continue to be the growth driver for consumer durable companies.

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 Major hurdles and challenges plaguing the Indian consumer durables sector:

 Threat from new entrants, especially global companies: The domestic consumer durables
sector faces threat from newer companies, especially from global ones who have
technologically advanced products to offer.
 Rivalry and competition: Presence of a large number of players in the domestic consumer
durables industry leads to competition and rivalry among companies. Threat from rivalry and
competition poses a threat to domestic companies.
 Potential markets remaining yet untapped: A large segment of the domestic market,
mostly the rural market is yet to be tapped. Tapping this yet untapped and unorganised
market is a major challenge for the Indian consumer durables sector.
 Threat from substitute products/services: The domestic consumer durables industry is
plagued by threats from substitute products. Easy accessibility to theatres/multiplexes,
especially in urban areas has turned off the viewership from TV to a large extent. With the
advent of a horde of FM radio stations, radio sets have now substituted TVs.
 Customer power with respect to availability of choice: The availability of a wide product
line on account of most products being homogeneous, poses a threat for companies operating
in the consumer durables sector. Customers have the choice of both domestically produced
and imported goods, with similar features.

Sector Outlook

According to isuppli Corporation (Applied Market Intelligence), country's fiscal policy has
encouraged Indian consumer electronic industry. The reduction on import duty in the year
2005-06 has benefited many companies, such as Samsung, LG, and Sony. These companies
import their premium end products from manufacturing facilities that are located outside
India.

Indian consumers are now replacing their existing appliances with frost-free refrigerators,
split air conditioners, fully automatic washing machines, and color televisions (CTVs).
Some companies like Samsung Electronics Co. Ltd. and LG Electronics India Ltd. are
now focusing on rural areas also. These companies are introducing gift schemes and
providing easy finance to capture the consumer base in rural areas.

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 Sector Financial In Rs

31/03/2002 31/03/2003 31/03/2004

Sales 37,331m 30,100m 43,096m
Sales Growth - -19.4% 43.2%
Gross Profit Margin 10.7% 6.6% 4.3%
Profit After Tax (PAT) 1,019m 940m -1,202m
PAT Growth - -4.3% -209.5%
Market Capitalization 1,787m 2,392m 2,359m
P/E Ratio 7.0 7.6 -7.9
Return on Capital
13.9% 23.1% 6.9%
Employed (ROCE)

Growth in 2005-06

Consumer Durables Growth

Air Conditioner 20-25%
Refrigerator 5-10%
Microwave Ovens 25%
Washing Machines 5-10%
Color Televisions (CTVs) 15-20%
Black & White Televisions -20%
Clock 10%
Watch 10%
VCDs 30%
Consumer Electronics (Overall) 9%

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 India – AC and Refrigerator
Sales Struck 35% Increase in April 2009
Sales of ACs and refrigerators in India, particularly in the northern and southern parts, grew upto
35% in April, with the temperature rising continuously.

With the temperature going up in India, sales of refrigerators and air conditioners (ACs) increased 30-35%
in April 2009 against April 2008, as reported by Economictimes.

LG, the market leader in India, has claimed to have sold 2 Lakh ACs during the month, 30% higher than
April 2008. According to LG, models with 2-3 star rating comprised two-third of its April sales. Also, its
refrigerator sales surged 35%. Samsung, which is selling only 5 star rated refrigerators, saw almost 25%
growth in sales of both ACs and refrigerators in April, while Godrej Appliances witnessed nearly 30%
increase in the sales of these items.

Split models were the major drivers of the growth in AC sales, as over the past few years these models
have been witnessing higher sales than the relatively cheap window ACs. On the other hand, mass direct
cool segment led the growth in sales of refrigerators in India.

As the mercury has sharply risen in April, the demand for air conditioners has outshined the supply.
According to consumer durable companies, northern and southern parts of India, particularly, posted high
demand.

A latest report "Booming Consumer Electronics Market in India" from RNCOS highlights that growing
affluent middle class population, encouraged by rapid growth in the economy, has attributed a highly
dynamic nature to the consumer electronics industry of India. Factors like booming retail sector,
increasing disposable income and easy availability of finance have led the industry to experience
commendable growth in past few years.

Despite this, consumer electronic goods, such as microwave, washing machines and refrigerators are
having low penetration in India, which represents enormous future growth potential. Consequently, many
international companies are looking forward to enter the Indian market.

34
In wake of economic slowdown, Indian consumers have grown increasingly price-conscious and are
mainly spending on the economy segments, like one-tonne split ACs.

According to a Research Analyst at RNCOS, "Lower electricity bills have successfully compensated the
premium on products having higher star ratings. In view of production constraints, companies are offering
window ACs only upto three-star rating while all star ratings are being offered for split ACs. However,
with consumers getting increasingly aware of energy efficiency, demand for higher rated products is
poised to soar in coming times."

LGs Target for the current Fiscal

Our Bureau

Mr Young-Ha Lee, Executive Vice-President & CEO of Digital Home Appliance Company, LG
Electronics Inc, at the launch of TV refrigerator in the Capital on Monday. — Kamal Narang

New Delhi , March 29

AFTER consolidating its position in the domestic market, the Korean white goods major LG Electronics
India Pvt Ltd (LGEIL) is eyeing exports worth $70 million this fiscal, up from $40 million that it clocked
in 2003.
Commenting on whether the company proposes to make India as the nodal centre for exports to the South-
West Asia region, Mr K.R. Kim, Managing Director, LGEIL, said, "India in itself is such a huge market,
hence, the focus of the company will be the domestic market. Besides, we will be competing with other
LG outfits in the export market."
Currently West Asia and Africa are the focus regions for exports for LGEIL. The company is also
exporting to Hong Kong, New Zealand, Sri Lanka and Bangladesh, to name a few.

35
LGEIL, the wholly-owned subsidiary of the Korean parent, has already invested Rs 100 crore over the last
several months in the Indian operations through internal accruals.
"The investment has been used for the Pune factory and other expansion plans," Mr KIM said.
The company is looking at sales of Rs 7,000 crore this year. LGEIL contributes five per cent to LG
Electronics' global sales.
On whether the company would be looking at an initial public offer, which has been in the offing for the
last few years, Mr Kim said, "no, not this year."
Further, the company on Monday announced the launch of a hi-end product in India aimed at
strengthening its digital product portfolio in the Asian sub-continent. Unveiling the TV refrigerator — TV
Dios, Mr Kim said, "the refrigerator brings together the best in food preservation and storage with multi-
media functions as a quintessential digital home appliance."
TV Dios comes with a 13-inch hi-definition TFT LCD TV installed in the centre of its door. The 600 litres
TV Dios, priced at Rs 2 lakh, also has a built-in radio tuner providing access to FM stations and is
supported by built-in speakers. Launching this product in the Indian sub-continent, Mr Young-Ha Lee,
Executive Vice-President & CEO of Digital Home Appliance Company, LG Electronics Inc said, "The
product has been received very well in the US and the UK and we are confident it will do equally well in
this part of the world."
On whether the company is going to roll out sub-Rs 5,000 range of refrigerators, Mr Ajay Bajaj, Product
Group Head, Refrigerators, said, "the company had planned to do so, but due to the rise in input costs, it
was deferred. However, the next couple of months will see a direct cool model in 150-160 litre capacities
in the sub-Rs 5,000 range."
Currently, the company is manufacturing refrigerators up to 310 litres in its facilities in the country and
would resume production of 400 litres once the Pune unit goes on stream, Mr Bajaj told Business Line.
Further, the company is outsourcing a very minuscule number of refrigerators from Voltas Ltd, he said.
"We propose to outsource 50,000 units during the current year from Voltas. If the demand arises we are
open to outsourcing from others."
Elaborating further, he said, only those capacities where the company was of the view that investments in
moulds would not be feasible, it has opted for outsourcing. Besides, outsourcing in refrigerators category
is not feasible in the long term as there is constant technology change in the product, he pointed out.
Unfazed by the slowdown, LG Electronics India has revised upwards its revenue and recruitment targets
for 2009. The Korean consumer electronics firm expects revenue to grow by 20-25% against the original
target of 15%. It also plans to ramp up its recruitment and create 3,500 jobs this year compared to its
earlier estimate of 2,200 jobs.

36
LG India is the country‘s largest consumer electronics firm by way of revenue.

The company‘s latest projections come on the heels of LG India achieving sales growth upwards of 22%
since January. In April and May ‗09, the company saw a near 50% sales growth.

"In the backdrop of such high sales growth, we are confident of surpassing initial revenue and headcount
expansion targets. We are hopeful of growing our festive season revenue (July to December) by nearly
35% to Rs 7,500 crore," LG Electronics India director (HR & management support) Y.V. Verma said.

LG India achieved Rs 10,730 crore turnover in calender 2008 and has a pool of some 3,600 employees on
its rolls. While its plans to create nearly 3,000 blue-collar jobs for its services and retail network, the
balance 500-odd people will be absorbed in sales, marketing and R&D functions.

"We increased our market-share in all product categories by 1-to-4% in the January-March quarter. In fact,
we achieved market leadership in the LCD TV segment. We enjoy the third position in the GSM handset
turf with a 7% market share behind Samsung. The strategy is to attain the second slot by October," LG
India head (East) Ranjit Kumar said.

The company has undertaken a spate of initiatives to ensure such a high growth rate — roll out India-
centric products, build its brand, motivate employees through rewards and complete decentralisation of
branches across the nation. It is also building a separate team to focus on secondary sales (from dealer to
consumer) based on localised promotions.

"In fact, we just rewarded all our employees with 200% bonus of their basic pay for the stellar
performance in the January-March quarter. We have also given an average salary increment of 9.5%. LG
India has reduced its attrition rate from 18% in 2007 to just 3.5% now," said Mr Verma.

India is the largest market for LG Electronics in the APAC region (which excludes Korea, China and
Japan). The company has outlined some $80 million investments this year to develop products which are
customised for the India market.

37
 CUSTOMER SERVICE
The best and the biggest international brands are here in India –but the irony if it all: where is the after-
sales-service? So integral to a brand, so critical for its success and so taken for granted in developed
markets! In India, after sales service is, for want of a better description, the pits. So what‘s stopping the
best companies from pulling out all the stops when it comes to providing the best service? Do customers
expect for too much? Or is it that in India they don‘t really care. Brand Equity fanned out to MNC as well
as Indian consumer durable companies, stockiest and dealers, analysts and market researchers to get a feel
of what‘s really keeping after sales from being used as a cutting edge marketing tool in pushing products
across categories.
Customers support following the purchase of a product or service. In some cases, after-sales service can be
almost as important as the initial purchase. The manufacturer, retailer, or service provider determines what
is included in any warranty (or guarantee) package. This will include the duration of the warranty
traditionally one year from the date of purchase, but increasingly two or more year‘s maintenance and/or
replacement policy, items included/excluded, labor costs, and speed of response. In the case of a service
provider, after-sales service might include additional training or helpdesk availability. Of equal importance
is the customer's perception of the degree of willingness with which a supplier deals with a question or
complaint, speed of response, and action taken.

Future
It is predicted by LG‘S analysts that by 2009 – 10, the urban households are projected to grow by 4
percent while rural households are expected to grow by 11 percent.

The colour televisions, refrigerators, air-conditioners and microwaves have become a household sight in
villages and small townships that was long thought of as a luxury and domain of urbanites.

Rural sector offers huge scope for consumer durables industry, as it accounts for 70% of the Indian
population. Rural areas have the penetration level of only 2% and 0.5% for refrigerators and washing
machines respectively. The urban market and the rural market are growing at the annual rates of 7%-
10%and 25% respectively. The rural market is growing faster than the urban market. The urban market has
now largely become a product replacement market. The bottom line is that Indian market is changing
rapidly and is showing unprecedented business opportunity.

38
 RECOMMENDATIONS AND SUGGESTIONS
1. LG should improve it‘s after sale service because its hits badly LGs
market share western region.
2. More detailed customaries service is to be provided.
3. The training to in shop demonstration should be given at frequent time
interval and feed back should be considered positively.
4. The company should look into the matter of person hiring for in shop demonstration. A big
LG showroom should have at least 2 such kind of person.
5.LG should try new dealer who have the potential. So they can target more
market.
6. As there is a bottle neck competition between Samsung and LG, it is necessary to take
measure steps to overcome the area of downfall in LG with respect to Samsung.
7. The marketing managers should make better relations with dealers and
reputation of the company

8. Customer considers quality as their first preference, so the company

should give more stress on this.
9. The switching of customer from LG product to other brand is due to the
bed after sell service in shop.
10.The product is well aware and it is on top of mind of customer. So
company should always improve services and update their technology

LIMITATIONS
Every study has certain limitations. In my study, also there were certain
limitations, which I could not able to solve.
1. The research was conducted in a very small area.
2. My research work period witness the biggest ups and downs in product sale of different
brands, which affected the perception of the customer. This was biggest drawback of my
study.
3. Time factor was also important for me. I had only 15 days to complete my research, for
which a full-fledged report was insufficient for me.

39
4. The customer filled the questionnaire mostly in careless manner, so it was difficult to
make them hold for time.
5. I had only found the upper-middle class family to fill up the questionnaire, but generally, an
average middle class family was required for the study

6. The sample size is also very small which represent my research on consumer behavior.

40
 Biblography

http://www.cci.in/pdf/surveys_reports/consumer-durables-sector.pdf

http://www.ibef.org/download/Electronics_171109.pdf

http://www.lg.com/in/about-lg/corporate-information/overview/index.jsp

http://www.indiahousing.com/home-appliances.html

http://www.scribd.com/doc/24934409/Changing-Consumer-Durables-Industry-in-India

http://www.business-standard.com/india/news/consumer-durable-industry-witnesses-
30-growth/397928/

http://www.naukrihub.com/india/consumer-durables/companies-list/

http://www.google.co.in/

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