EXECUTIVE SUMMARY

Attaching high value to outward appearance is pervasive in Korean society. New words such as
Ullzzang (good looking faces) and Momzzang (hot bodies) are being coined continuously, and
the societal trend toward beauty and appearance is growing. Why are people so fanatic about
appearances? One answer

is because appearances create a person's first impressions. Another reason is that attractive
features exert undeniable power in everyday life. Some studies show that people with attractive
looks tend to have a better chance of securing employment, receiving higher salaries, finding life
partners, and receiving assistance from other people (1,2).

Applying the prevalent "appearance-is-supreme" attitude to product development, the

proliferation of design-oriented new product development (NPD) is a case in point. Management
consultant/author Tom Peters has written that one must be able to grasp the attention of
consumers in 0.6 second in order to sell a product. Just as appearance determines one person's
first impression of another, design functions as the first contact point between company and
consumer. Consequently, as the only means of product communication, the importance of design
in successful product development cannot be overstated (3-7). Moreover, it is predicted that
design will play an even greater role in the future product-development activities of companies
(8-11).

Strong market competition demands more creativity and innovation in business strategies. To
enhance creativity and innovative thinking in companies, some research claims that the design
department should play a leading role in product development (12, 13). Especially in the case of
user-driven products such as mobile phones and MP3 players, where user-centered product
features are stressed over technology and user needs are diversifying, design now exerts great
influence over the entire NPD process (14).

Many firms, such as Apple, Philips, Bang & Olufsen, and Allesi, are consistently striving to gain
competitive advantages through design-oriented NPD (15). Apple, for example, was able to
break out of its business slump and recover its reputation by offering consumers paradigm-
breaking new products through innovative designs. Apple introduced the innovatively designed
iPod, featuring single colors and a round click wheel, in the highly competitive MP3 player
market, which had previously evolved around diverse functions and sound enhancements. With
the success of iPod, Apple's sales increased more than threefold from $5.7 billion in 2002 to
$19.3 billion in 2006.

With the role of design becoming more important in the new-product development process,
active research on subjects such as the correlation between investment in design and a company's
financial gains (4,16), the role of design (8), and the role of management in design-oriented NPD

1
(15) has become essential. However, the studies just cited have limits, as they do not identify the
dynamic evolutionary process and key success factors of design-oriented NPD.

The objective of this paper is to identify the dynamic evolutionary process and key success
factors of design-oriented NPD from the case of LG Electronics' (LGE) Chocolate Phone.
Launched at the end of 2005, Chocolate Phone has been a great success in the market and is a
typical example of design-oriented NPD strategy in Korea (see "Outcomes of Design-Oriented
NPD," page 00). Our findings should be useful to R&D leaders, product designers and other
business practitioners in developing their new products and gaining a competitive edge in the
market.

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 OBJECTIVES

 To access the consumer acceptability of LG TV in market

 To understand its competitors in business of electronics goods.

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 RESEARCH METHODOLOGY

Methodology can be defined as a systemic way of approaching a problem to identify the truth
and for this certain step should be taken in a systematic order and these steps are called methods.

“Research methodology is a process of planning, acquiring, analyzing and disseminating relevant

data and information”.

The use of right methodology is necessary because if the right methods are not adopted and
thoughts are not arrange in a logical order the exact truth might not be expressed. Thus the
methodology means correct arrangement of thoughts and knowledge.

WHY RESEARCH IS REQUIRED

Conceptually, the purpose of research is to discover the answers for the questions through
application of scientific procedures. The main aim of the research is to find out the truth which is
hidden and which has not been discovered yet.

Through each research study has its own specific purpose, but generally researchers are done:

To gain familiarities with a phenomenon or to achieve new insights into it.To determine the
frequency with which something occurs or with which associated with something else. To test
the hypothesis of casual relationship between variables To take appropriate decisions.

Research is a careful and systematic effort of gaining new knowledge. Research is an original
contribute on to the existing stock of knowledge making for its advancement; it is pursuit of true
with the help of study, observation, comparison and experiment.

In short the search of knowledge through objectives and systematic method of finding solution to
problem is research.

RESEARCH DESIGN:

The research design is the plan, structure and strategy of investigation conceived so as to obtain
answer to research questions and to control variance.

The definition of three important terms – plan, structure and strategy.

4
The plan is an outline of the research scheme on which the researcher is to work. The structure
of the research is a more specific outline or the scheme and the strategy shows how the Research
will be carried out, specifying the methods to be used in collection and analysis of data.

Research design is the specification of methods and the procedure fro acquiring the information
needed. It is the operational pattern or framework of the projects that stipulate what information
is to be collected from which sources by the procedures. The importance of research design lies
in the fact that it makes a statement of what is to be done in order to achieve the research
objectives and how it is to be done. It is an expression of what of the research exercise in terms
of results and the analytical input needed to convert data into research findings.

A design may be quite suitable in one case but could not fit in some other research problem. One
design cannot serve the purpose of all types of research problems. Also most of the research
problems are complex in nature and cannot be solved by a specific research design. Hence a
combination of research design is used to reach a solution.

The research design when chosen correctly prevents deviation in the study. The present study is
the cross sectional descriptive type with fields study and partly casual in nature as it seeks to find
out consumer behavior with respect to mobile and correlate them with income, age, education,
professions etc. and formulate marketing strategies based on the study.

SAMPLING AND SAMPLE DESIGN:

It is not possible to examine every item in the population hence interferences is drawn about a
large numbers of items possessing a particular attribute based on based analysis of fraction of
such items. It is called a sample. For developing a sampler design following points need to be
discussed with regard to the present study –

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POPULATION:

In statistical usage the terms population is applied to any finite collection of individuals. It has
displaced the orders terms universe. It is aggregate of all elements possessing certain specified
characteristics which need to studied and defined prior to sample. Population can be finite if
units can be counted or infinite. Since the present study is done in Bareilly, The population is
finite. Population can be defined in terms of elements, sampling units, extent and time.

In this study, the specifications will be as follows:

1. Element : People

2. Sampling Units : Distributors

ELEMENT:

An Element is the unit about which information is collected. It provides the basis for analysis. It
identifiable physically. In the present study the element is dealer having a good knowledge about
the service. (Regarding Brand)

SAMPLING UNIT:

The sampling unit is the basic unit containing the element of the target population. The sampling
may be different from the element. It can be either geographical unit (state, district etc.) or social
unit (Household, family, club etc.) or a construction unit (enclave, house, flat etc.) or it may be
an individual. In the present stuffy, a sample of distributor is selected in the three stages. First of
all a sample of cities is selected, than a sample of colonies is selected from each selected colony
after the entire distributor in it.

SAMPLE FRAME:

A sample frame could be a telephone directory, a list of block and localities of a city, a map or
any other list consisting of all the sampling units, each stage of sampling process requires its own
sampling frame. Since the present study undergoes two stages sampling process, we would need
two sampling frames. First a list of localities, Second a list of distributors with in the selected
localities.

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SAMPLING DESIGN: Representation of entire universe is only possible through the sampling
technique. Considerable care has been taken in selecting the sample so that is Convenient in
terms of size and enough to represent the entire universe

SUMMARY OF RESEARCH DESIGN

Data source: Primary data (survey & Questionnaire) and secondary ( books, internet,
newspaper , magazine)

Research approach: Survey method

Research instrument: Questionnaire

Sampling plan: Sample unit (consumers)

Sample size: 100 consumers

Sample area: Bareilly city and near area

Contact method: Personal contact

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 STUDY OF THE COMPANY

COMPANY PROFILE

At LG Electronics, purchasing collaboration with design has resulted in greater component

integration and lower cost. In fact, collaboration between purchasing and engineering in product
development isn't an option. Collaboration is the way LG develops many of its new cell phones,
televisions and other consumer electronics equipment.

"R&D engineers want to do the right thing," says Tom Linton, chief procurement officer at LG,
based in Seoul, South Korea. "They actually want to choose suppliers who have the right cost
and supply but they need our help to find that sweet spot."

Linton adds that purchasing needs engineers help to reduce cost and boost quality from suppliers.
He says if collaboration between purchasing and R&D is done right, "it's a win-win for
everyone."

Key to reducing cost is the LG procurement engineering team, which was established by Linton
when he became LG's CPO about two years ago. Procurement engineers are heavily involved in
new product development.

He says LG had some purchasing involvement with new product development in the past, "but I
brought procurement engineering with me to LG and ramped it up and expanded it across the
corporation. Key is having technical credibility when you work with design or R&D groups."

8
Members of the procurement engineering team are degreed engineers and work closely with
R&D and product development.

"I believe we have the right approach and are now working on improving upon it every day,"
says Linton.

LG's approach is to involve purchasing with new product development and R&D teams.

Purchasing's role is to identify new technologies that suppliers may be working on and bring
ideas back to LG for possible inclusion in products that may be on the market in two or three
years. It also helps set costs for new LG products as well as for the key components that will be
in the product.

LG not only wants the new technology, but it wants the support of suppliers and their technical
resources, says Linton. He says that is necessary because design cycles are so fast and a company
needs access to a supplier's best resources to maintain or gain an edge over competitors.

Collaboration among engineers, purchasers and suppliers can help influence the direction of a
supplier's technology.

9
 LITERATURE REVIEW
STUDY OF THE INDUSTRY

Setting cost targets

With LG's cell phones, cost targets are set by the LG's mobile communication business
procurement team after meeting with the product planning division and with R&D.

There are target costs for the baseband processors, memory chips and other semiconductors in
the phone. "We want to meet the targets or do better than the target costs," says Tae Woo Kim,
vice president, development procurement team for mobile communication. "At the end of the day
we want to reduce cost," he says.

Kim says much of what procurement engineers do in new product

development with mobile phones concerns semiconductors. That's
because 80–85% of LG's spend in the mobile communications business
is for semiconductors.

LG makes a variety of smart phones and other cell phones such as the
Chocolate, Incite and Shine.

Mapping technologies
He says procurement's involvement in product development begins with the technology roadmap
meetings. LG procurement engineers have with suppliers to discuss what technologies suppliers
may have in the works that might be used in future LG phones.

Kim says buyers have technical meetings to discuss new technologies and compare technology
roadmaps to see how they match up.

Besides new technology that suppliers may be working on,

procurement engineers also talk to suppliers about technology issues
such as packaging changes that may be coming for semiconductors,
migration of chips to higher densities and power consumption
issues.

Power consumption is important with mobile phones because they

are battery-operated and cell phone users want the longest run times
possible between charges. The more efficient the chip, the longer the run time.

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As a result, procurement engineers will ask suppliers about their process technology migration
plans. If the supplier plans to move from 65nm process technology to 45nm, that will result in
lower power consumption because line widths of the chips will be smaller, requiring less power.

Time for integration

Another key issue procurement engineers collaborate with suppliers and new product
development engineers on is integration of more functionality on fewer chips.

"We use all kinds of chips and we have a lot of part numbers," says Kim. But LG has been
successful in reducing the number of components without sacrificing functionality.

Collaboration among procurement, R&D, product development and suppliers has resulted in the
number of components in an LG cell phone being reduced 37% over the last two years, says
Kim. The number of suppliers has also been reduced, which resulted in LG being able to work
more closely with the remaining suppliers.

"Suppliers end up with more business and are very happy to work with us more closely," he says.

On example of integration on chips is the baseband processor, which is kind of like the brain of a
cell phone handling key phone functions. LG has switched to baseband processors that handle
more functionality such as 3G wireless connectively, Wi-Fi and GPS. In the past, a separate chip
would have to be used to handle each of those functions.

In some cases, chips are combined in multichip packages. An example is DRAM and flash
memory combined in single package to reduce board space.

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Design-oriented new product development: LG Electronics' Chocolate Phone
illustrates what it takes to be successful.

Chocolate Phone Background

In the second half of 2004, Cyon brand of LGE's Mobile Communication Division was suffering
from such poor financial performance and brand image that LGE management and employees
were being pressured to come up with a product that would turn the tide. To this end, the
company's Mobile Research Center launched a superslim-phone development project called the
S Project in an effort to develop the smallest and slimmest cellular phone that would fit into a
person's hand.

As the S Project progressed behind lab doors, the interest of the mobile phone market turned to
slim mobile phones; Motorola was first to market its RAZR phone and seized the slim-phone
market. Now it became critical for LGE to develop an innovative phone that would not only
meet customer needs but also be different from its competitors' products. Consequently, LGE
expanded the scope of the S Project into the Chocolate Phone Development Project.

Beginning in the latter half of 2004, the Chocolate Phone

Development Project involved 90 developers, designers and
marketers and took approximately one year until the introduction of
the final product. In the first nine months, the design and
development organizations played a central role in coming up with a
design concept and developing an external look and functional
capacity that fit the concept. In the final three months, the design,
sales and marketing teams cooperated to fix a marketing concept for
the phone and devise the most effective way to reach consumers.

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Four Phases of Development
Figure 1 shows the four phases of the Chocolate Phone development process: product concept
creation, design, development, and marketing.

1. Product concept phase: a product that makes you want to buy it just by looking at it.

At the outset, the Chocolate Phone development project team focused on discovering consumer
needs. During this process, it was learned that consumers see mobile phones not as mere
"devices" but as "part of their lives." In other words, consumers keep their mobile phones beside
them when they sleep and carry them throughout their everyday lives.

Figure 1.--Chocolate Phone's development history encompassed four

phases.

Creating Product Concept

Affordable iconic product

* Beyond the concept of a mere 'device' to a 'luxury' product

that brings pride and satisfaction through possession of it

* A product that makes you want to buy it just by looking at it

Design

Slim and minimal

* Stimulate customer emotions with a simple, sleek design

which maximizes luxuriousness

*Product designed under optimum security

Developing Functions

Abandon technical specifications that hurt design

* Abandon key pad, select touch pad

* Give tip 24 pin connector and high quality camera module

* Exclusive MP3 chip and 512MB built in memory

Position as a Premium Product

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* Introduce Black Label and high-end price strategy

* Friendly, luxurious, and emotional product naming

* Tailored global market strategy

Once the project team understood this, it set the core concept of Chocolate Phone to be a product
that goes beyond the concept of a simple "device" to a "luxury" product whose mere possession
brings pride and satisfaction, a product that consumers always want to have beside them. In
comparison with existing products, which promoted function or price as defining factors, LGE
worked out the Chocolate Phone strategy that stressed individuality and the luxurious style of the
product itself; that is, Chocolate Phone began with a commitment to make an "iconic product
that would make you want to buy it just by looking at it."

2. Design phase: winning with simplicity.

In order to embody the concept of an "affordable iconic product," the project team created a
design that would combine minimalism with a premium look and feel. By minimalism, they
meant a simple design from which decorative aspects were largely removed. For Chocolate
Phone, this meant a pure black color for the entire exterior of the product and the removal of all
unnecessary lines or decoration. Also, in order to make the external body look sleek and slim, all
buttons were hidden under a black veil, but when this surface was "touched," it would unveil
itself, creating a sense of mystery and thus captivating the consumers.

To actualize the simple yet luxurious design of Chocolate Phone, the plans were kept highly
confidential until the final design was confirmed. Only three designers, under the head designer,
were involved in the final stages of the project. The reason for such caution was that if the
designs were revealed outside the company, competitors would most likely waste no time in
imitating or copying them, thereby negating all efforts to create an innovative design.

3. Development phase: dieting and muscle power.

The development team established the principle of "radically eliminating all technical
specifications that could harm the phone design." This principle played a critical role in the
decision-making process regarding key functional development specifications, such as replacing
the keypad button with the touch pad and not adopting the Ministry of Information and
Communication's standard 24-pin connector. (The standard connector would make Chocolate
Phone incompatible with other devices and possibly hurt sales.)

Additionally, in order to maintain a simple design, a high-function camera module was left out in
favor of a minimal standard 1.3-megapixel CMOS module. Considering that products introduced
at that time boasted picture quality of up to 5.0-to-8.0 megapixels, this decision meant that
Chocolate Phone would lag behind other phones from a technical viewpoint. The reason for such
a decision was that a high-quality-picture camera required a thick lens compartment that would
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make it difficult to maintain a slim design size and shape. For the same reason, the camera's
automatic focus feature was left out, and the digital multimedia broadcasting (DMB) receiving
function that was the talk of the technical world was also boldly abandoned.

At the point where it was necessary to decide whether to take the path of current competitive
technology or to accept risk and adhere to the design concept, the project team decided to make
consistent design-centered decisions. This decision gained momentum under the command of
Seungkwon Ahn, head of the Mobile Research Lab. During important decision-making meetings,
such as the application feasibility meetings, he gave the clear-cut and rather difficult order to
"adjust to the design concept no matter what." When developers pointed out that developing and
assembling certain components under this design concept would be almost impossible, he met
with developers one-on-one to encourage and support them in accepting the decision.

The development team also put a lot of effort into maintaining the simple design concept while
incorporating functions that gave a competitive edge. A good example is the "multi-tasking"
support that was superior to competitors' products. Multi-tasking is a good way of differentiating
products from competitors because software technology can realize various features without
hurting the design concept. Compared with Pantech or Samsung's competitive products at the
time of market launch, Chocolate Phone was developed to enable an optimal multi-tasking
environment such as listening to music and taking pictures, using SMS, gaming, and accessing
the Internet. An MP3 chip was also built in to provide superior acoustic delivery, and 512-MB
built-in memory was chosen to distinguish it from competing models, which offered less than
100 MB of memory.

4. Marketing phase. creating the black label of the cellular phone.

Knowing that even a well-made product could prove useless if marketing fails, the project team
agonized over the marketing concept for Chocolate Phone. The marketing division wanted to
abide by the initial product-development concept and adopt a marketing strategy stressing
luxury, to "focus on emotion and design rather than the slim technology, making a must-have
phone." The design-centered NPD had not only caused frequent friction with the development
sector but also with the sales division. After the decision was made to adopt the touch pad
instead of the keypad button in order to maintain a sleek and simple exterior design, the sales
division criticized the decision harshly and objected that the product was not one that could be
positioned as a premium product.

The design may have been satisfactory to the sales division, but the touch-pad was an
inconvenient interface for users; consequently, setting a high price would cause the product to
fail in the marketplace. The confrontation between the sales division, which advocated a mid-to-
low price range, and the marketing division, which insisted on a premium selling price, was very
sharp. During this dispute, Changmin Ma, head of the marketing division, played a decisive role
in reaching an agreement. He worked late hours with the marketing team for over a month to

15
structure the logic behind the premium concept and prepare specific data to persuade the sales
division. When the conflict with the sales division was at its peak, late hours and all-nighters
became the norm for the marketing personnel in charge of the project and 100 Q&As were
drafted in meticulous preparation to win the sales team over. In the end, the marketers were able
to persuade the sales division, and Chocolate Phone was positioned as a premium product,
consistent with its design concept.

Had it not been possible to persuade the sales division, and had the Chocolate Phone been sold as
a mid-to-low price range product, a large number might have been sold but profits would have
been low, making it impossible for LGE to build an image as a maker of premium products. By
marketing Chocolate Phone as a premium product, a marketing manager claimed that "a
foundation stone was laid to position Cyon as a premium brand, and provide a basis for the relay
introduction of the second and third premium design model lines."

After the conflict with the sales division was resolved, a new challenge presented itself: which
specific marketing concept to adopt? After deep consideration, the decision was made to adopt
Chocolate Phone as a "black label" concept like that used in fashion brands. This was indeed a
flesh shock, as the term black label was used to imply a premium brand. A number of Western
fashion houses-Armani Black Label and Burberry Black Label being two examples--adopted the
black label in their brand names when they upgraded the material and the price of their products.
By introducing this concept, LGE sought to establish a premium-brand image different from its
existing Cyon brand.

There were no disagreements within the project team regarding the creation of new black label
value by harmonizing premium value and emotional value. However, there was a lot of dissent in
the naming process. After completing the development of the super-slim slide phone, and as the
project team was concerning itself with finding a name for the product, two advertising agencies
proposed the "Chocolate" idea.

Initially, when the Chocolate idea was presented, the arguments for and against were very
intense. The opposition felt strongly that the cheap Chocolate name should not be given to an
ambitious project that was being launched to create a totally different image from that of the
existing Cyon. The logic behind the argument was that if the price was set in the mid-US$500
range, the name must also have a premium image. The arguments for and against were resolved
on the side of Chocolate Phone when it was suggested that creating an emotional image could
increase consumer demand. In this way, the marketing principle of Chocolate Phone fully
matched the emotion-centered approach that had been consistently stressed by the design-
oriented NPD strategy. All effort was now concentrated on using the nickname Chocolate to
create the image of "a friendly product that consumers want to have."

It was decided to undertake emotional marketing that emphasized communication with

consumers. When people first heard the name Chocolate Phone, they were surprised by such an

16
unusual name for a mobile phone. The marketing manager of Mobile Communication Business
Division confessed that the marketing people in charge of marketing Chocolate Phone had many
concerns regarding adoption of the nickname Chocolate, because it was the first of the Cyon
black label series to be adopted from the fashion industry's black label concept. However, fears
that the premium image would be damaged were dispelled by a sensual advertising strategy that
touched various emotions associated with the taste of chocolate.

To target the global market, LGE developed a global marketing strategy tailored to meet the
needs of local customers. Starting with the United Kingdom in May 2006, Chocolate Phone was
launched in 100 countries, including the United States, Mexico, China, and Southeast Asia. By
adopting a localized policy coordinated with a systematic and integrated marketing strategy, the
entry of Chocolate Phone in global markets has gained a healthy momentum.

In Europe, LGE concentrated promotion efforts on Chocolate Phone and the Cyon black label
series, a strategy consistent with the European market that traditionally values design. In North
America, in consideration of local customer tastes, LGE applied diverse functions in line with
the booming music-phone market. The North American Chocolate Phone included a touch wheel
key on the phone's front surface to permit controlling music and added a Bluetooth stereo
headset to support a wireless stream of music. In addition, 2 GB of external memory was
installed to permit storing over 500 songs. By providing this memory and adding MOD/ VOD
functions, the North American model made it possible for customers to enjoy a variety of
downloads.

Principal Success Factors

The most important success factor of Chocolate Phone development was the adoption of the
design-oriented NPD strategy--a completely different approach from the existing function-
oriented development strategy. By making design the core competitive factor, Chocolate Phone
surpassed the existing competitive factors of price and function.

Prior to the development of Chocolate Phone, LGE's general phone development pattern
involved first developing the function and later deciding on the design to match it. Even when
the design department came up with a good idea, in many cases it was abandoned on the grounds
that it was not possible to develop the components dictated by the design. As a result, LGE did
not have a clear competitive edge over competitors in either functions or cost. The company was
stuck in the middle of a difficult fight, unable to take specific action.

However, LGE recognized that consumer needs flow from function to emotion, and a new
attempt was made to give the design and marketing aspects the absolute priority. Adoption of a
design-centered NPD strategy, which made design the consumers' key purchase factor,
represented a big change from the previous function-oriented NPD pattern. By doing this, LGE
was able to clearly position Chocolate Phone as a different product, thus assuring that it would

17
acquire competitive advantage. The difference between a design-oriented NPD strategy and a
function-oriented NPD strategy is summarized in Figure 3.

18
Success factors from the design perspective

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Appointing a distinguished designer.--Because design was the key to Chocolate Phone's success,
a competent person who could create distinct designs was needed above anything else. For this
reason, chief researcher Kanghee Cha, a designer renowned in the DVD player and audio devices
sector of Digital Media Business Division, was appointed as the design leader at the beginning of
2005. Acknowledging his design professionalism, top management requested that he "create an
epoch-marking design for the phone." Although Kanghee Cha was an expert designer with 15
years of experience and had won numerous awards in the field of digital media, he was a novice
in mobile phone designs. However, his background allowed him to start with a totally fresh
design perspective.

In the function-oriented product development strategy, the design function is mainly responsible
for designing the exterior of products and does not participate in marketing or development. In
contrast, in the design-oriented development strategy, the design function leads all new-product
development processes and exerts a big influence on decisions about product development and
marketing. Designers play various roles, such as analyzing customer needs, researching new
product concepts, and evaluating prototypes. Consequently, designers need insight into the
market and technology, as well as analytical skills. Hiring top designers is the prerequisite to
successful design-oriented product development. LGE could not have succeeded with Chocolate
Phone without securing excellent designers.

2. Combining customer insight and communication skills.--The case of Chocolate Phone

development illustrates the critical skills a designer must have in order to succeed using a design-
oriented NPD strategy. For example, in the process of researching consumer needs, the
Chocolate Phone Development Project team found that consumers see mobile phones not as
mere "devices," but as "part of their lives." In other words, consumers have gone beyond the
stage where they prefer certain advanced functions, such as slim technologies and sound or
camera picture quality, and take pride in the possession of their phones as an expression of their
alter egos, and something they want to keep with them at all times. In a nutshell, customer needs
have risen from a functional to an emotional dimension.

The best method for discovering a consumer's emotional needs is the designer's intuitive insight
rather than a systematic interview or a research survey. Similarly, design concepts that seek
simplicity are drawn from the designer's market insight rather than from a systematic customer
research process.

Another important skill for a designer is the ability to communicate and persuade stakeholders.
Even if a good design concept has emerged, it cannot be incorporated into a product unless the
related department stakeholders are persuaded. In the case of Chocolate Phone, the design leader
continually tried to create new design concepts through persistent communication with top
management and related departments. For example, to overcome inside opposition of "isn't
function the core of the mobile phone?" he continually visited the sales, development and
planning teams and top management to persuade them that design was paramount. In particular,

20
he explained why iPod became such a great hit. He argued that in the end it was the design that
made people buy it, and along with his logic he prepared tactful presentations to assure top
management of success.

Success factors from the development perspective

1. Technological requirements for realizing the design concept.--Many people think that
engineering may not be important to design-oriented NPD. However, acquiring the fight
technology is actually more important than it is in function-oriented NPD. If the development of
a specific component does not turn out well in the case of a function-oriented development
process, it is usually a small problem for the development division alone, but in design-oriented
development it creates a big problem for the entire NPD process. In particular, design-oriented
NPD is challenging for the developers who don't want to change production lines, re-do
electrical circuits or order new components, etc., when the design is changed

The Chocolate Phone development team had to perform many new tasks to develop functions
that fit the design concept. For example, in order to maintain the phone's 14.9-mm thickness, a
touch-sensor technology was developed. Chief researcher Jungwook Ha, who headed
development of the functions, claimed that the components used in Chocolate Phone were
developed to match design concepts from the outset; in fact, even the cable, remote control and
straps provided with the phone had to be newly developed and designed to fit the phone.

To develop the right components, researchers devoted themselves full-time to development,

giving up their holidays and working seven days a week during the development period, which
lasted about one year. Because many new technologies were attempted, many problems arose
throughout the development process, and 3,200 Chocolate Phones had to be tested and retested in
order to refine the technology.

Thus, in order for design-oriented NPD to succeed, it is essential that the right technology for
implementing the design concept be acquired. If not, a well-drafted design concept becomes an
unrealistic one, and the design-oriented NPD activity could end in failure.

2. Optimization of functions.--As described earlier, in order to maintain a simple design concept,

the development team gave up a high-quality camera module and adopted a minimum 1.3-
megapixel CMOS method instead. They gave up the camera's automatic focus function for the
same reason, and also boldly surrendered the DMB function that was of central interest at that
time. This illustrates that in order to develop a product true to the design concept, the custom of
adding a new function to the existing one needs to be discarded in favor of decisive and creative
reverse thinking, such as boldly giving up or removing functions even though it is possible to
realize them technologically.

3. Total interest and support from top management. The full support and clear direction of the
CEO, the head of the business division, and the head of Mobile Phone Lab played an important

21
role in the successful development of Chocolate Phone. In particular, the strong will and active
support of the head of Mobile Lab in developing a multi-functional and innovative phone was
critical. Project team members agreed that the Mobile Phone Lab head was the de facto leader of
Chocolate Phone development.

The leadership qualities of the Mobile Phone Lab head were evident in three areas: setting a clear
direction, running the "voice-of-customer" team, and giving utmost support to budget and human
resources. To establish a clear direction, the Mobile Phone Lab head guided all researchers
starting from the phone planning stage in "adjusting the technology to the design concept," i.e.,
fitting all components into the 50-[cm.sup.3] body so it would fit into one's hand. On the one
hand, he would at times threaten with job termination those who were lukewarm or skeptical
about the direction, while at the same time visiting the researchers who worked late hours to
encourage them.

The head of Mobile Phone Lab also led the voice-of-customer team, which was in charge of
researching customer preferences. Every three months he would pick three researchers and ask
them to work all day comparing and analyzing Chocolate Phone--then in development--with
competing products, a job that was unconventional at that time. In this way, it was recognized
that "it was possible to look at the phone not from an expert developer's point of view, but from a
customer point of view, and a lot of insight was provided in developing Chocolate Phone."

The Mobile Phone Lab head made developing Chocolate Phone a top priority and gave prompt
support whenever the project leader requested additional manpower, test devices or other
support. During this process, the development team was named "black hole team" because it was
able to command a large budget and large amounts of human resources. The full support of top
management sent a clear message that the design-oriented NPD strategy must be successfully
executed. In the end, this helped the project team to break out of habitual complacency and drive
them to reach their objective.

Strong support from top management is one of the key success factors in NPD (20,21). This is
more important in design-oriented NPD than in function-oriented NPD, because design-oriented
NPD tends to produce a radical and innovative product, which can result in strong opposition
from development, sales, marketing, and other internal organizations.

Success factors from the marketing perspective

1. Scouting outside marketing professionals.--The key to success of the Chocolate Phone was
held by the design and marketing sectors. For this reason, LGE, which formerly stressed the
cultivation of inside talent, took the risk of scouting outside veteran marketers. Two of these
marketing veterans were scouted to swiftly upgrade the weak marketing foundation. One of them
was the marketing division leader, Changmin Ma.

22
Ma took what could have become simply a well-designed MP3 phone and transformed it into an
original premium product by applying the luxury black label series to it. According to Ma, "The
black label was not born through deliberation from the company side, but rather from
considering what consumers wanted in a product."

Because Ma had been brought in from the outside, he encountered numerous conflicts with the
sales division, but by establishing a clear logic and direction for premium and emotional
marketing of the design concept, and through continuous communication, he succeeded in
winning over that division. And by constant communication, he was able to persuade the head of
the business unit to apply the black label concept to Chocolate Phone.

2. Active use of outside ideas.--It was also important to not only utilize ideas from inside the
organization but also to actively absorb and implement ideas from outside. The ideas of "Cyon
prosumers" were reflected in the Chocolate Phone development process. The word prosumer is a
combination of the words "producer" and "consumer," and refers to consumers who actively
participate in the product development and production stages. LGE rejected the stereotype that,
because of phone security and technology issues, the planning process was the researchers' sole
domain, and worked with consumers to create the simple Chocolate Phone design, stressing the
emotional aspect. The touch-pad method that was selected to keep the thickness of the mobile
phone at 14.9 mm is a good example of how prosumers' views were reflected in product
development. Furthermore, the ultimate objective of utilizing Cyon prosumers was to create a
customer-centered image that conveyed the message that it is the consumers who make LGE
products.

Surprisingly, the Chocolate Phone name came from an advertising agency. After LGE had
clearly communicated the marketing concept of a friendly product that would appeal to the
emotion of consumers while at the same time having a luxury feel, two of three ad agencies
proposed the name "Chocolate." This shows how the marketing team played an important role in
managing relations with and clarifying the product concept to the ad agency. In order to make
good use of outside ideas, the inside organization needs to have the management capacity to
appropriately absorb and utilize these ideas.

Success factors from the organizational perspective

1. Clear communication of development principles among related functions.--For the successful
execution of a design-oriented NPD strategy, there needs to be a creative tension between the
functions rather than trying to avoid any conflict between them. Such interaction is well
illustrated in the Chocolate Phone development. The various divisions involved experienced
many communication clashes and conflicts over such issues as choosing which components to
adopt or give up in sticking to the design concept, or positioning or naming Chocolate Phone.
Nevertheless, most problems were weighed against the basic principle of whether or not they
were aligned with the design concept, which allowed a consensus to be reached in a constructive

23
way. In particular, conflicts and disputes between the design and development sectors, and
marketing and sales sectors, were frequent, at times causing big problems; however, because the
design-oriented product-development principle and objective were clearly shared by the
members, all difficulties and conflicts were successfully resolved.

2. Shift to customer-oriented thinking.--Organizational culture, which is a shared value that

governs the minds and actions of individuals, is an important motivator that influences new-
product development activities (22). At the same time, organizational culture is the result of
managerial factors that control product development, such as strategy, leadership, human
resource management, and organizational management practice, which is why it is so difficult to
change. In the case of Chocolate Phone, however, diverse efforts, such as a clear design-oriented
product development strategy, the active interest and support of management, and the use of
outside talent, created synergies and changed the engineer-centered organizational culture to the
customer-centered one.

In the old engineer-oriented culture, the thoughts, motives and circumstances of researchers were
considered more important than those of the market or the consumers. Developers also preferred
product improvement that utilized existing production lines over creating new and highly risky
inventions. In such an organizational culture, the solution to market and consumer needs
naturally depended on the list of priorities. As a result, products the researchers wanted, or that
were compatible with the internal competencies of the organization, were more likely to be
developed than products the market or consumers wanted.

In developing Chocolate Phone, however, although initially there was much internal conflict and
dispute surrounding the application of a new-product development concept and the scouting of
outside talent, the paradigm shifted from a function-oriented product development to a design-
oriented product development strategy, a new paradigm that top management fully backed and
supported. In the end, such diverse efforts caused researchers and others involved in new-product
development activities to become more customer-focused and business-minded.

The key success factors of the design-oriented NPD as deduced from the case analysis of
Chocolate Phone are summarized in Figure 4.

Conclusions and Implications

The customer-following approach is good for developing incrementally improved new products
that satisfy such expressed needs as dissatisfaction with past purchases, while the customer-
leading approach is more suitable for developing innovative products. For example, Sony
Walkman, Apple iPod, and LGE Chocolate Phone all belong to the latter type and have been
highly successful in the market. Currently, the number of customer-leading approaches is
increasing rapidly because of design-oriented NPD strategy.

24
Encouraged by the success of Chocolate Phone, LGE promulgated the Design Management
Proclamation in the second half of 2006 and announced a company-wide commitment to design.
The CEO declared that "Design is not the exterior of a product that we simply see and feel, it is a
cultural code that forms and changes our lives," and claimed that "all products and services will
be developed with design at the heart." As a result, LGE was able to create yet other innovative
designs, including Shine in October 2006, Prada in May 2007, and Viewty in December 2007.
These are currently receiving more attention from customers than Chocolate Phone.

Companies determined to stay a step ahead of competitors have to accurately read the needs of
customers and continuously develop unique products (23). In particular, design-oriented NPD
strategies will become very important for companies in gaining a competitive edge. This is
because these strategies not only yield aesthetically pleasing products but they also meet the
emotional needs of consumers who want to express their individuality. This allows the inner
product-development process, which involves planning, developing and marketing, to be firmly
driven by a market point of view from outside the company. Currently, design is the most
effective means of communication between company and consumer.

Acknowledgment

The authors are grateful for the useful comments and support provided by Professor Youngsoo
Shin, chief of the Yonsei University technology management program, during the preparation of
this article. In addition, the authors thank RTM's Editor and anonymous reviewers for their very
helpful comments and suggestions on earlier drafts.

25
FINDINGS AND ANALYSIS
Demographic profile

Male 28%
female 72%

Inference:
Gender profile Male 28% Female 72%

26
OCCUPATION DISTRIBUTION

BUSINESS MAN 24%

PRIVATE SERVICE 76%

Inference: This diagram show that most of the people occupation is private service. Also good
amount of business man available here. By this we can know about difference in preference. By
knowing occupation distribution clearlythe company can segment and target customer according
to their occupation.

27
Awareness about LG, SAMSUNG & LG by Customers

LG 62%
SAMSUNG 16%
VIDEOCON 22%

Inference: (Given in percentage form) From the above pie – charts, it is clear that most of the
customers (62%) of LG came to know about LG through TV advertisement as compare to
customers of Samsung and LG. As far as print media ad is concerned, only few customers came
to know about LG through print media ad as compare to customers of Samsung & LG. But no
customers of LG came to know about LG through hoardings and billboards, but few customers
came to know about Samsung & LG through hoardings and billboards. Hence, we can infer that
LG is doing positioning through TV advertisements rather than through print media ad and
hoardings and billboards. They should more focus on word to mouth marketing because they are
weak in this.

28
Which is the strong brand among LG or Videocon?

LG 62%
Videocon 38%

(Given in percentage form) Inference From the above figures, it indicates that people give more
preference to price as compare to other attributes (Like Brand & Quality) while buying the LG
products. good at LG . Hence, we can infer that LG are strong brand and having more quality
than LG (as given in Table and Piechart). Also, LG & Samsung products are more expensive
than LG.

29
From where you prefer buying consumer durables

Co.shoppee 68%

Showroom 17%

Exhibitions 9%

On-line 6%

Inference:
1. A majority of customers prefer to buy from co.shoppee. Very less proposition of customers
buys from Online and Exhibitions.

2. 49% customers are prefer to by from the showrooms because the showrooms are more
convenient to customers they also think that these shops give more discounts.

3. People are less interested to buy from the exhibition they only visit the exhibition for price
quotation of the product and the comparison of the product.

30
You prefer to buy from the same as you have mentioned in above que.
Because of following reasons

Attractive Price 12%

Service 73%

Demonstrations 9%

Offers 6%

Inference:
1. Customers buy from showrooms because of the service and convenience. These are two main
factors.

2. Customers are preferred to buy from the showroom because of they think that these
convenient store may provide good after sell service.

3. Customer also thinks that there is more chance to bargain and they can get more discounts in
these showrooms.

4. Price also a factor that attracts the customer in these showrooms.

31
Do you prefer any financial scheme to purchase consumer durable?

YES 12%

NO 88%

Inference
1. Majority of the consumer donot want to go for financial scheme.

2. 16% consumer is not a small amount, there is only t.v.few company which provide financial
scheme

3. If t.v. Company easily provide this scheme to consumer so they can attract more customer.

32
Would you wait for festive season for available discounts for purchase a
Television?

YES 80%
NO 20%

Inference
By this we can infer some customer prefer to buy t.v. on some festival. North India is more
belive in festival. On festival company can attract customer by give some typa of discount .

33
Up to how much money are you willing to spend on a t.v? at this time:

Less than 6000 -------

6000-13000 10%

13000-20000 17%

20000-30000 73%

More then 30000 -------

Inference:

By this diagram I can infer than most of customer are see price, if company provide some good
product with more features and style and design it will help in increse market share. Some
customers are want to spend a big amount of money on t.v. these customer don’t care money
because of high income so company also need to work on R&D, so company can provide a
different product.

34
How do you feel after using the LG t.v?

EXCELLENT 72%

GOOD 14%

FAIR 8%

POOR 6%

Inference :

There is 19% customer who not satisfies with product and feels poor about the t.v. Company has
to find out all the reason and should work on it. If company don’t attarct old customer this will
become a big threat for company.

35
 CONCLUSION
The variables affecting the industry with regard to each of the five forces have been Categorized
as favourable or adverse. Favourable variables have the potential to improve profitability, while
adverse variables reduce profitability of the industry. Some strategic initiatives, which could be
adopted to leverage the favourable forces And protect themselves from the adverse ones, are as
follows:

• R&D and Marketing will have to work closely together. R&D will have to play a role in cost
innovation, which can cut component cost and raise performance. The number of defectives has
to be reduced at negligible levels. The quest should be to do even better. Each assembly line can
be made to compete with the other.

• Vital to the spread out is the re-haul of distribution network. Home appliances have
necessitated separate dealers, many of them specialists. For sharper focus on all categories
individually, the market has to be opened wider.

• Brand building will be important, so as to ensure brand preference. Marketers will have to
strategise to pull the consumer up the value escalator. A good fraction of sales if come from high
margin products as flat TVs and projection TVs would improve profitability of companies.
Sharply differentiated products with effective communication on a continuous basis would be the
key for future. Challenge lies in creating higher order universal benefits and sensitising the larger
audiences to it. LG and Samsung are likely to retain top positions.

• Buyers are easily swayed by costs, which are also verified by the presence of large number of
product offerings. Focus would be on providing value for money to the consumer, with more
brands in the economy segment. The challenge before marketers is to span out, and address a
wider set of needs. They will have to identify segments not addressed by them so far and also
introduce low price-point products aimed at rural markets.

• Besides catering to the cost conscious segment, marketers need to segment the market on the
basis of psychographics, which will help in inducing brand loyalty through lifestyle and
experiential marketing.

• The increase in disposable incomes, more number of households above the threshold income,
declining prices, shortened replacement cycle and the demand for multiple TV, all these factors
are expected to sustain the growth momentum at 10-12 per cent during 2008-09 to 201011.

36
 FINDING AND RECOMMENDATIONS
Dealer survey Findings
1. By calculating the display share we found that in most of store LG has 24% display share
almost all categories.

2. By the actual monthly sale of particular store we came to know the capacity of the store and
how much product can they sale.

3. It helps us to know that weather dealer is capable of being a direct dealer of LG or not and it
also helps to find out the new dealer who are capable of being the dealer of LG.

4. We also came to know while visiting the shops that there was big problem of after sale
service.

5. Many dealers were facing the problem of after sale service because there is no follow up calls
from LG.

6. Demo calls also not done properly.

7. LG is on 3rd rank in bareilly CTV.

8. Sales promotion scheme are sufficient.

9. Pricr range preferred by consumer is generally in between 70000 to 13000.

10. Dealer are not satisfied with the incentive provided by the company

11. The top competitor of LG product in Bareilly is LGand SAMSUNG.

12. In Bareilly area the performance of LG is in better position but the competitor also hold
closer margin.

13. There is high growth of sale in market due to booming in new technology and better service.

14. Word of mouth plays a vital role in awareness among customer. This is one factor, which can
play a good role in promotion of products as well as demonstration given by the shopkeeper also
plays a vital role for customer.

15. Marketing growing so that is good sign for company in coming year.

16. Consumers are mostly gets attracted by the price discount offered by company and product
warranty.

37
 RECOMMENDATIONS AND SUGGESTIONS
1. LG should improve it’s after sale service because its hits badly VIDEOCONs market share in
Bareilly 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 feedback
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 bottleneck competition between Samsung and VIDEOCON, 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.

38
 ANNEXURE
1. Name of the Dealer/Retailer………………………………

2.Address………………………………………………………………
…………………………………………………………………………
……………………………………….

3. Mention the brand name of the T.V presents in your Showroom? 1 2 3 4 5 4. What are the
ranges of price that the company
offers? .......................................................................... ...................................................... .............
.............. .................................................................

4.Rank the various brands in order of their selling 1 2 3 4 5 6.Why the rank 1) Product is sold
high?

a) Less Price [ ]

b) Design and style [ ]

c) Good brand image [ ]

d) Good product features [ ]

e) After Sales Services [ ]

f) Durability [ ]

5.Why the rank 2) Product is sold high?

a) Less Price [ ]

b) Design and style [ ]

c) Good brand image [ ]

d) Good product features [ ]

e) After Sales Services [ ]

f) Durability [ ]

39
6.Why the rank 3) Product is sold high?

a) Less Price [ ]

b) Design and style [ ]

c) Good brand image [ ]

d) Good product features [ ]

e) After Sales Services [ ]

f) Durability [ ]

7.What more can the company do to increase its sales?

………………………………………………………………………………
…………………………………………………………………………

8. According to you which company has the best marketing strategy?

………………………………………………………………………………
…………………………………………………………………………

9.AnySuggestions:………………………………………………
……………………………………………………………………………
……………………………………………………………………………

40
 CONSUMER SURVEY QUESTIONNAIRE
Consumer Survey for various Brands of television:
1. Which of the company’s products would you prefer to own?

a) Videocon

c) BPL

b) LG

d) ONIDA

e) samsung

2. Why you prefer this company product?

……………………………………………………………………………

3. What were the factors that persuaded you to come to your chosen brand?

a) Company advertisements

b) Advise friends and colleagues

c) Dealer’efforts

d) Any other; please specify ………………

4.Do you prefer any financing scheme to purchase consumer durables?

a) Yes

b) NO

5. While purchasing consumer durable which parameter influences you?

(Please rate the following sources of information)

Price 1 2 3 4 5.

Brand Image Service. 1 2 3 4 5 {5 for high—1 for low}

Durability ……………………… ……………………… ………………………

……………………… Product feature ……………………… Design and
style .................................

6. From where you prefer buying consumer durables?

41
a) Co.shoppee

b) Showroom

c) on-line

d) exihibition

7.You prefer to buy from the same as you have mentioned in .

6 because of following reasons?

a) Attractive Price

b) Service

c) Convenience

8. How much money are you willing to spend on a t.v?

a) Less than7000

b) 7000-13000

c) 13000-25000

d) 25000-35000

e) more than 25000

c) Demonstrations d) Offers

9. Would you wait for festive season to avail discounts?

a) Yes

b) No

10. Which Newspaper/Magazines do you read?

…………………………………………………………………………………………
………………………………………………………………………………………….

11. How do you feel after utilizing the services of LG TV?

a) Excellent

b) good

c) fair

42
d) poor

12.Any other comments. ……………………………………………………………. ...

………………………………………………………………………………………
………………………………………………………….. ……………………………

Thank you for participating in the survey

Customer’s personal profile:

1. Name………………………………………………………………………….

2. a) Age ( In years ) : ……………………………………............................

b) Gender (please tick) : Male / Female

3. Educational Qualification……………………………………………………..

4. Address. ………………………………………………………………………
……………………………………………………………………………......…..

5. What is your occupation?

a) Business

b) Pvt. Service

c) Govt. Service

d) student

e) others

f) Others (please specify) ………………………………………

43
 BIBLIOGRAPHY
Books ,Website: Http: www.lgindia.com ,

http: www.wikipedia.org

Philip Kotler, Marketing Management,

I have used the following source for finding the data

A. Research methodology - C.R. Kothari

Literature from the web site

"http://www.lgindia.com"

www.lg.org.in.advertisment.promotion-doc

www.lg.org.highquality.product.data.exe

Authorized dealer in a city

9258733763

44