LG's Growth Strategies in India

            
 
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Case Details:

Case Code : MKTG115
Case Length : 19 Pages
Period : 1998 - 2005
Pub Date : 2006
Teaching Note :Not Available
Organization : LG
Industry : Consumer Electronics
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"We have seen many Japanese and Chinese companies arriving in India, but like other foreign-owned businesses they typically put one foot in the water to see if it is warm or cold. They have doubts. They lack determination. What's been different about us is that we made a full commitment - a very big investment - from the start, including setting up two full-scale manufacturing facilities."1

- Kwang-RO Kim, Managing Director, LG Electronics India Private Ltd. in 2005.

"We are driven by our sales targets which is the primary objective, rather than market shares. Slow market growth is not an argument for sitting back."2

- Salil Kapoor, Head of Marketing, LG Electronics India Private Ltd. in 2004.

Big Plans for India

On September 06, 2005, India's largest consumer electronics and home appliance company - LG Electronics India Private Ltd. (LG), announced that it would invest Rs. 9 billion3 by 2008 to expand its manufacturing plant in Ranjangaon, Pune.

Of the total investment, Rs. 4 billion would be invested in setting up a DVD4 writer manufacturing facility. This facility will be first of its kind in India and the second largest in Asia.

The remaining amount would be used for expanding the Pune plant which produced most of LG's product range (Refer Exhibit I for LG's product range).

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According to LG, the plant would start producing DVD writers by mid 2006. The company planned to make India a major export hub of DVD writers to European countries by 2010. By 2008, production of DVD writers was expected to reach 33 million units.

Commenting on the major investment being made in India, Kwang-RO Kim (Kim), Managing Director of LG said, "Prompted by our success in India, we have announced a major expansion at the second production unit at Rajangaon. It will give us an edge over other players in terms of production and subsequent market share."5

After its entry in India in January 1997, LG established its first manufacturing plant in Greater Noida, Uttar Pradesh in 1998 with an investment of Rs. 5 billion. In its first year, LG recorded a turnover of Rs. 1.25 billion, and by 1999, its turnover increased to Rs. 10.56 billion (Refer Table I for LG's turnover between the years 1997 and 2004).

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1] Pramath Raj Sinha, "Premium Marketing to the Masses: An Interview with LG Electronics India's Managing Director," www.mckinseyquarterly.com, 2005.

2] "LG Defies Marketing Wisdom to Stay on Top," www.economictimes.indiatimes.com, February 14, 2005.

3] As of December 16, 2005, 1 US$ = 45.43 Indian Rupee.

4] DVD (digital video disk or digital versatile disk) is an optical storage device that resembles a compact disk (CD) but is encoded using a different format called universal disk format. Its storage capacity is more and output quality is better than a CD.

5] "LG Electronics Announces an Investment of Rs 900 cr at Ranjangaon, Pune, Announces Asia's Second Largest DVD Writer Plant at Pune," www.prodomain.com, September 06, 2005.

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