LG Electronics India Pvt. Ltd.

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A wholly owned subsidiary of LG
Electronics, South Korea

Established in January, 1997

State-of-the art manufacturing facility at
Greater Noida, near Delhi, in 1998

LG Electronics India Pvt. Ltd.
Vision was to become a 'Health Partner' for
its consumers
The CTV range offered by LG has 'Golden
Eye' technology
Entire range of LG air-conditioners have
'Health Air System'
Microwave ovens have the 'Health Wave
System'
Refrigerators have the 'PN System
Washing machines have 'Fabricare System'
FINANCIAL PERFORMANCE
Turnover for 1997 Rs. 125 crores
Turnover for 1998 Rs. 485 crores
Turnover for 1999 Rs. 1056 crores
Turnover for 2000 Rs. 1903 crores
Turnover for 2001 Rs. 2216 crores
Turnover for 2002 Crossed Rs. 3000 crores
LG MARKET SHARE
Microwave oven market share(top 3)
0
10
20
30
40
50
LG Samsung Kenstar
%
a
g
e
Series1
LG MARKET SHARE
CTV market share(top 3)
0
5
10
15
20
25
LG Samsung Onida
p
e
r
c
e
n
t
a
g
e
Series1
LG MARKET SHARE
Refrigerator marketshare(top 3)
18
19
20
21
22
23
24
LG Whirlpool Godrej
%
a
g
e
Series1
LG MARKET SHARE
Washing Machine market share (top 3)
0
10
20
30
40
LG Samsung Videocon
%
a
g
e
Series1
LG CHANNEL STRUCTURE
Multi-tier structure
Have LG Shoppes, cyber shoppes, SSDs, X-
Canvas Studios, direct dealers
Also have a network of distributors and sub
dealers
About 10,000 stock and selling points spread
across the country
Different distribution strategies for its different
product groups
GSM mobile phones do not make use of CFAs
CTVs, microwaves and other like items require a
CFA
LG CHANNEL STRUCTURE


Primary manufacturing facility at Greater NOIDA

Two other manufacturing facilities have come up
in the region of Pune and Dehradun, keeping in
mind the benefits of Excise free zones (EFZs)

Procurement of supplies and materials for
production is done by the purchase department

LG CHANNEL STRUCTURE


The annual forecasts are further disaggregated
into forecasts that are carried out twice a month(15
days basis), on the basis of which inventories are
maintained and further production levels are
maintained

Most raw materials are bought from suppliers
within India

At the retail level, LG uses a combination of
exclusive LG showrooms as well as Multi-brand
outlets (MBOs)

LG CHANNEL STRUCTURE

Consumers for LG include individual consumers
as well as institutional clients

LG also indulges in e-retailing as an alternative
channel through its website www.lgezbuy.com

LG also has a separate channel for services and
spares
SUPPLIERS SUPPLIERS SUPPLIERS
FACTORY (OEM) FACTORY (OEM)
WAREHOUSE WAREHOUSE WAREHOUSE
CFA CFA CFA
DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
CFA
CFA
LG SHOPPE DEALER DEALER
CONSUMERS INSTITUTIONS CONSUMERS CONSUMERS CONSUMERS
www.lgezbuy.com
CFA
DEALER
LG DISTRIBUTION NETWORK
LOGISTICS FLOW
CORPORATE
LOGISTICS
TEAM HEAD
DISTRIBUTION
AND
PLANNING (FGs)
OPERATIONS
AND
TRAFFIC
ZONAL HEADS FOR
2 ZONES (South & west,
North & east)
BRANCH LOGISTICS
INCHARGE
CFAs &
WAREHOUSES
PRODUCT WISE
TO DEAL WITH
TRUCKERS
& TRANSPORTERS
LG CHANNEL PARTNERS
CFAs
The number of C/F agents as of 31st May,
2004 is 28.
They are spread across 20 states in India.
The company dispatches the goods to C/F
on consignment basis.
At the same time, these C/F agents all work
on contract basis.
They get paid as per the amount they stock.

DISTRIBUTORS

The company appoints distributor for selective cities where
the markets are small but require more focus and attention.
Distributors are required to conduct sales and marketing on
behalf of the company in these markets serving to all the
required company stores.
The company sends goods to the distributor on out right sale
basis.
It is the duty of the distributor to send his people into the field
to book the orders and also execute them through their own
delivery vehicles.
The distributor has to maintain his own sales, delivery and
accounts people for smooth working of his unit and is served
by the nearest C/F for all his requirements.
The distributor is given a margin of 10-20%

LG SUPPLY CHAIN
MANAGEMENT ISSUES
Delivery Schedule

takes 1 day for CFAs to service reorder within their
zones
distributor too caters to the demand in his area within
48 hours from the time of receiving the order
If goods have to be procured from the warehouse
then it takes 8 days (avg) for the goods to arrive at
the C/F or distributor and delivered to the stores.
no inventory management system in place with the
MBOs
LG Shoppe and franchisee showrooms do have a
system in place to consolidate their inventory and
sales with the company main office

LG SUPPLY CHAIN
MANAGEMENT ISSUES
Ordering

The retailers order their requirements directly to the
concerned distributors.
The distributors source the orders from the company
warehouses, which are connected directly with each
of the 43 branches.
The mother warehouse in Greater Noida caters to the
needs of all the regional warehouses.
It is the responsibility of the C/F agents to supply to
the distributors as per their requirements.
If any reorder do come in during the month then the
regional warehouse that entertains them properly
services them.

LG SUPPLY CHAIN
MANAGEMENT ISSUES
Planning & Forecasting

The company goes for annual forecasts on the basis
of the previous years sales and also current trends.
These sales forecasts are then disaggregated into
monthly sales plans.
The logistics and the production people meet every
15 days, and on the basis of sales as well as past
inventory, they freeze production for the next 15 days.
In case the sales in the previous period have not
been up to the mark, and the inventory levels are
high, the production is halted and stock of the
situation is taken.
LG SUPPLY CHAIN
MANAGEMENT ISSUES
Manufacturing

The company purchases nearly all its material
requirements exclusively
separate import departments that look after the
imports
Around 80% of all the models across the product line
are manufactured at the manufacturing facility at
Greater Noida
compressor plant in Noida

LG SUPPLY CHAIN
MANAGEMENT ISSUES
Reverse Logistics

The company accepts returns from their retailers as
well as company owned stores
The job of bringing back the defects again rests with
local distributor and C/F that collects them from the
shop
They are entered and kept separately at the
warehouse and proper stock is maintained and sent
to warehouse
The damaged goods are dispatched to the
warehouse periodically. The damaged goods
received from the distributor are credited to his
account and as such are only accepted after thorough
examination by the local sale executive


LG SUPPLY CHAIN
MANAGEMENT ISSUES
Direct marketing


LG uses direct marketing strategies in the microwave
oven product category, as the category hasnt picked
up in volumes in India as of yet. These are carried out
through road shows, exhibitions etc.

CHANNEL CONFLICTS AND
COOPERATION
The first type of channel conflict may arise because of the co-
existence of the following:
LG owned exclusive outlets
MBOs (multi brand outlets)

Another type of conflict could be a result of institutional sales being
sourced by both:
The company itself
The dealers who want to meet targets

Internal conflicts:
The branch managers, who look after all products in a
particular region, and product group managers, who look
after particular products, often monitor the same dealers in a
region, thereby leading to conflicts.
ALTERNATE CHANELS:
E RETAILING VENTURE



LGEZBUY.COM
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RECOMMENDATIONS

LG has a reasonable Distributions network in rural
India, however since it has plans to expand in that
segment, it must back it up with an even wider and
more accessible network. Also, the human
resources devoted in those regions need to be
strategically chosen, keeping in mind the different
mind set of not only the consumers but also the
channel partners.

Before going on an expansion spree in rural India,
LG must feel the pulse of that market and
understand exactly how the consumers in that
segment think and behave.
RECOMMENDATIONS
CONTD
Likewise, it must also have lots of incentives for its
dealers and distributors in the rural markets since trade
schemes tend to be highly effective in these regions.

LG could also look at providing easy credit schemes for
its rural customers.

As of now, all after sales services of LG products are
looked after by franchisees. The company tends to
spend a lot of money on setting up a servicing
infrastructure, training the staff, maintaining company
representatives at the servicing premise etc. Therefore,
LG could look at setting up company owned service
centers. This would instill confidence in the customers
and also create an after-market for LG products.
..RECOMMENDATIONS
CONTD
LG should also try and shift its sourcing of
materials and components from Indian suppliers,
to cut costs. Only the high quality components
should be imported from South Korea.

The number of company owned exclusive LG
outlets should be increased so as to provide
greater flexibility, keeping an eye on the cons of
this as well, such as channel conflicts, under-
cutting by dealers, costs etc.

To avoid unionization and cartel forming among
transporters, LG must not give the contracts to a
single transporter, but a number of them.



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