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LG FINAL

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  • pg 1
									    LG Electronics India Pvt. Ltd.

•   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)

       50
       40
%age




       30
                                         Series1
       20
       10
        0
             LG     Samsung   Kenstar
              LG MARKET SHARE

                  CTV market share(top 3)

             25
percentage




             20
             15
                                            Series1
             10
              5
              0
                  LG    Samsung    Onida
        LG MARKET SHARE

            Refrigerator marketshare(top 3)

       24
       23
       22
%age




       21                                     Series1
       20
       19
       18
               LG     Whirlpool   Godrej
       LG MARKET SHARE

       Washing Machine market share (top 3)

       40
       30
%age




       20                                Series1
       10
       0
             LG     Samsung   Videocon
    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 CFA’s
        • CTV’s, 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 (EFZ’s)

•   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 (MBO’s)
    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
     LG DISTRIBUTION NETWORK

               SUPPLIERS            SUPPLIERS        SUPPLIERS




                      FACTORY (OEM)         FACTORY (OEM)


          WAREHOUSE                 WAREHOUSE          WAREHOUSE



  CFA      CFA             CFA            CFA        CFA           CFA



                     DISTRIBUTOR       DISTRIBUTOR   DISTRIBUTOR



        LG SHOPPE          DEALER         DEALER      DEALER       www.lgezbuy.com



INSTITUTIONS        CONSUMERS          CONSUMERS      CONSUMERS      CONSUMERS
                  LOGISTICS FLOW
                             CORPORATE
                              LOGISTICS


                            DISTRIBUTION      OPERATIONS
    TEAM HEAD                   AND               AND
                            PLANNING (FGs)      TRAFFIC


 ZONAL HEADS FOR                               TO DEAL WITH
2 ZONES (South & west,      PRODUCT WISE        TRUCKERS
     North & east)                           & TRANSPORTERS


                 BRANCH LOGISTICS
                     INCHARGE



                                  CFA’s &
                                WAREHOUSES
     LG CHANNEL PARTNERS
•   CFA’s
      • 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 CFA’s 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
         MBO’s
       • ‘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 year’s 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 hasn’t 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
           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.
THANK YOU

								
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