Dissertation Report
On
Growth Strategies Of LG Electronics (India)
Submitted By
P Hari Krishnan
Roll no: 41109
MBA (IB) - Marketing
for the partial fulfilment of
MBA-IB (2007-09)
SYMBIOSIS INSTITUTE OF INTERNATIONAL BUSINESS
PUNE
Executive Summary
The first of the 3 part dissertation series on “Growth Strategies of LG Electronics India” presents a picture of the consumer durables industry in India. The consumer Durables industry consists of durable goods and appliances for domestic use such as televisions, refrigerators, air conditioners and washing machines. The consumer durables industry can be broadly classified into two segments: Consumer Electronics and Consumer Appliances. Consumer Appliances can be further categorised into
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There has been a 40-50% decline in offers like discounts, gift vouchers and other schemes over the last one year as it could not help companies sustain margins. Instead, they are now coming up with innovative marketing schemes like combination of products to consolidate profits,
Competition has forced companies to offer efficient after sales service and support and this, in turn, has swayed customer preference for branded products. Success in the long-term will require firms to develop a wide and robust distribution network, differentiate their products in areas of relevance to the consumer and innovate in the areas of promotion, product financing.
There is a discernible shift in the consumers’ preference in favour of higher-end, technologically superior branded products, the demand being spurred by increasing consumer awareness and preference for new models. It reflects the changing dynamics of consumer behaviour – luxury goods are now being perceived as necessities with higher disposable incomes being spent on lifestyle products. This shift is also explained by the growing trend of products being manufactured in the organized sector of the economy and the narrowing down of the price differential between branded and non-branded goods.
The consumer durables industry in India is set for sustained growth over the long term, fuelled by favourable
The substitute products, that may take a portion of the market share away from the consumer electronics retail industry, do not create a huge or direct hazard. Today’s society and culture place a big emphasis on technology and it is highly reliant on electronics. The bargaining power of buyers for electronic products is extremely low because the buyers primarily consist of a weak and divided group of individuals, and technology has became a vital need for most people.
At the apex of the market was haute couture with it very high-end “custom” product offering that catered to the extremely wealthy. Luxury goods manufacturers believed diffusion brand’s lower profit margins were offset by the opportunity for increased sales volume and the growing size of the accessible luxury market and protected margins on such products by sourcing production to low-wage countries. Eye-catching utilization of their products by prominent figures in society leads to increasing demands for luxury good items and it is a growing industry with the global luxury goods market growing 9% per year. These consumers buy their products for satisfaction and to boost their self-esteem rather than for ease or comfort. All these components blend in the context of a successful business of the luxury goods.
This gain value and addresses a key decisive achievement factor in the industry (Grant,2010). As position is important to offer convenience and a deep assortment, An extra unique intangible resource would be their brand representation and customer loyalty, this is vital since it can attract or attract consumers and it could be necessary to build the brand image .
The expansion of the company will have different inferences; the company may get high level of profits or get losses. Profits can use as a good measure of the company’s expansion in a certain region. The success of the company is normally measured by the level of profits that it generates by involving itself in a certain venture. In this case this company is completing whether to enter the India market or not. It is recommendable for the company to enter India market since there is high demand for its products in the country (Hafford-Letchfield, 2010). Though its products received mixed reactions from China and Japan, the company can take encouragement from the fact that the Indian market did not compose of many electrical companies like in the case of china and Japan. The degree of competition in India is low while the demand is high. Applying the law of demand and supply, entry to the Indian market will signify an increase in the profits of the company (Kuada, 2008). The demand for its products would be in the rise in this country.
But before that lets looks at the consumer durable market, the consumer durable market consists of products from watches to fans. With the help of the below mentioned data we can understand the penetration and reach of a consumer durable like refrigerator in comparison to a product like Television Set, car, bike or Grinder.
Technology is vital in the retail market. “Companies must manage their brands carefully. First the brands position must be continuously communicated to consumers. Major brand marketers often spend huge amounts on advertising to create brand awareness and to build preference and loyalty”. Armstrong,
When launching into this industry the new product needs to be admired by consumers, retailers and wholesalers. The advertising campaign must be able to convince merchants and retailers to stock the new brand. With the existence of Coca Cola, Pepsi and Cadbury Schweppes the new brand will have to compete for shelf space. These top competitors have already established a strong image in the customer’s mind. Merchants or retailers will acquire many risks in dedicating shelf space to the new brand. Therefore, the new brand or product must be able to provide compensation for space.
Retain customers or acquire new while moving into turbulent financial environment? Brand expansion or brand fortification? Product performance versus brand image, points of parity versus points of difference? Classic or fashion forward? Sales generation or brand building activities? Quality maximization or cost minimization? Balance between exclusivity and democratization is the issue.
The aspire to become part of what luxury products represent and, as soon as their finances permit, are very happy to fulfill long-held dreams by buying goods and brands that help them satisfy their personal and social aspirations” (Lu, 24).
I believe that nowadays, luxury brands who tend to be reserved to elites are democratizing themselves. Aiming to reach more customers, luxury brands use new strategies: Implementation of entry-level products, collaboration with Fast fashion brands (H&M x Karl Lagerfeld).
The Luxury goods industry is a very wide industry comprising of products from watches, jewellery, perfumes, expensive wines to yachts, expensive pens, and clothes. Goods for which demand increases more proportionally as compared to income, are known as ‘Luxury goods’, in contrast to a "necessity goods", for which demand increases less proportionally to income.
As India changes and reinvents itself at a remarkably accelerated pace, the private consumption patterns of its population have been transformed. What is new about these changes in the consumer behaviour of 1.15 billion individuals? Historically, change has been a gradual and largely predictable process, allowing industry experts to reasonably forecast consumption patterns and consumer behaviour in the near future based on the current and
* 2. INDUSTRY ANALYSIS CONSUMER DURABLES • Consumer durables Sector can be classified as follows: – Consumer Electronics includes VCD/DVD, home theatre, music players, colour television, cameras, camcorders, portable audio, etc – White Goods: include dishwashers, Air Conditioners, water heaters, washing machines, refrigerators, vacuum cleaners, kitchen appliances, non-kitchen appliances, microwaves, built-in- appliances, tumble dryer, personal care products, etc. – Molded
Ratan Tata, chairman of Tata Motors Ltd., hoped to raise the status of Middle class families in India by offering the Tata Nano. Expectations were increasing amongst the customers regarding the product features and its efficiency. Competitors were eagerly waiting for its arrival to find out what they were going to be up against. It had strong and convincing features and was actually a good product. Unfortunately there were too many strategic marketing problems that kept it from being as big as they thought it was going to be. We will explain the problems it met and showcase some alternative solutions that could be implemented.
Because of the overwhelming response from rural India, now not only Indian players, but several foreign brands such as LG Electronics and Coca-Cola have also been attracted towards the rural markets.