Trailblazers: Playing the game: LG

LG is now a $2.4 billion company. However, it all started on the back of its success with TV sets

For Korean consumer electronics and home appliances major LG, life wasn't so good in the beginning. The company's association with India began in 1993. It entered the market through a joint venture with the Delhi-based consumer electronics company, Bestavision, to sell colour TVs under the name of Goldstar. But the venture faltered and was called off. In 1995 the company changed its name to LG.

That year, it tried to enter the Indian market through a joint venture with the CK Birla Group to manufacture refrigerators, TVs, audio and video equipment, washing machines and room air conditioners. This effort, too, did not succeed because of irreconcilable differences between the two regarding the business model to be followed.

Though this story is about LG's TV business, what the brand did to the Indian consumer durables category is remarkable. LG was the catalyst in the consumer-durable market's explosion. In the early '90s, when India's liberalisation was flagged off and the Government of India began allowing multinationals to operate in India, LG established its wholly-owned subsidiary in the country. It re-launched itself as LG Electronics and used the brand name LG. It formally entered India in January 1997, and started its operations four months later. After a lot of struggle to enter the Indian market, LG finally forayed with three categories: TV, washing machines and refrigerators. At that point, the TV market was comparatively more mature as compared to appliances. The consumer was in a mode to spend more money on TV sets, which were all set to become lifestyle statements.

The then local player BPL had started making some mistakes, and had become comparatively weaker than it was it in the early '90s. Another important competitor for LG in the TV space was the Korean Samsung (in India since 1995), which apparently wasn't too strong in East India. LG came in with a pan-India launch, talking in a single language across the country.

Sony was a big brand in those days in the TV space, and the first thing LG did was price its colour television sets (CTVs) higher than Sony. This, in a day and age when Korean products were considered to be inferior in quality compared to the Japanese ones. "The consumer must have thought we were crazy," grins Amitabh Tiwari, business group marketing head, home entertainment, LG India. But, because consumers generally equate high prices to better quality, the strategy got LG noticed. "We took a huge risk with our pricing, but the consumer ended up thinking we have better designs," he adds.

LG backed it up with strong advertising on the baseline 'Life's Good'. In stage II of its marketing (2000 onwards), LG decided to go for market share, because the consumer had started asking for LG at this point. BPL's depleting market share benefited Videocon to a certain extent, and LG to a large extent. Videocon created the 'Bring Home the Leader' campaign to exercise its sovereignty - a move some trade partners thought to be as arrogant. Meanwhile, LG tomtommed its quality, as the top management at LG stated that even if one TV set fails, it would look into it personally.

LG also dropped its prices at this stage to play the volume card: from 20,000 units sold in a month in 1997, it started selling 1 lakh units a month in 1999-2000. There was a concentration on an expansion drive, economies of scale and beefing up distribution channels to achieve reach and volume. LG started making seven per cent net profit in CTVs then. "The more we became affordable, the more people bought us," Tiwari says. In stage III, LG launched 'Sampoorna': a TV for unpenetrated rural markets and C+ towns priced at Rs 10,000 (market price for such a 21" TV was Rs 15,000). Stage IV saw LG sign up an agreement with ICC and became the sponsors of World Cup Cricket - a move which catapulted it to a different level as cricket and LG became synonymous.

In 2006, LG forayed into the panel business with LCDs and Plasmas, but the brand here was more of a follower of first mover Samsung. Furthermore, the gap was fueled by the fact that Samsung had better designs than LG. Another mistake on LG's part was the launch of a product ahead of its time - The Time Machine - which was an LCD with the personal video recorder service (currently offered by Tata Sky). "We were talking too technical and the consumer was too confused," Tiwari says. Meanwhile, Samsung was doing the right things with its affordable pricing and designs, intimidating LG further.

LG corrected itself somewhat with the launch of Pearl Black in 2007 and the Scarlet in 2008. As they looked fashionable, LG associated itself with glamour and fashion shows. Further, communication was revamped and given an international look as opposed to the 'desi' style carried on till then. "We didn't make mistakes with CTVs but we stumbled a bit on LCDs. However, today we are almost neck to neck in terms of unit sales with Samsung in the television space," Tiwari concludes.