By Indrajit Ghosh, Director, India and South Asia
Recently a senior LG India executive commented in the press that “LG still retains the gun and knows how to shoot”. The comment was significant in view of the recent churning in the Indian consumer electronics industry, particularly after such a long and unhindered run of the Korean firms LG and Samsung in the Indian market.
The Korean giants entered the Indian market in the late 1990s, offering Indian consumers world-class value products, accompanied by a blitzkrieg of advertising. Prior to this, the European and Japanese brands were prone to introduce high-cost, obsolete models, while Indian manufacturers were to slow to introduce the latest technologies.
The Korean firms re-wrote the rules of the game and came out winners. The same happened in automobiles, with Hyundai selling well in India. In fact, everyone else followed this basic approach, and the product offerings to the market underwent a substantial upgrade. Korean brands grabbed nearly 50% of the market in consumer electronics and home appliances, ambushing Indian, Japanese and European competitors.
Initially, LG was a mass-market player with high volume and low margins, while Samsung was a high-image, high-margin operator. Starting in 2007, the two switched roles, with LG pursuing a “no sale without margins” approach, with the intent to become a top-end player like Sony. Samsung, meanwhile, tried to appeal to customers’ emotions, aiming to be a mass-market player while retaining their high-end image.
The result was that LG slipped in market share and Samsung struggled to retain control of pricing as deep discounting by channels became the norm. The last year or so saw a steady rise in fortune of Indian brands like Videocon, Godrej in TV and home appliances, while Sony and even Panasonic increased share in LCD. The main reason for this can be attributed to the shifts in strategy by LG and Samsung.
Historically, LG was looked upon in India as a go-getter, famous for introducing aggressive schemes to attack competitors and riding roughshod over channel partners. This image was blurred after it tried to switch to gaining emotion in the high-end of the market. Now, LG wants to go back to its old approach, leading to the comment that LG has just kept its guns away but still retains it and has not forgotten how to shoot.
The other reason is for LG to become more mass-market based from now on is that the economic downturn has hit cities more than the countryside; hence, where we see flat growth in cities, LCD TV sales have started rising in smaller towns. This will make both LG and Samsung more rural-focused along with Videocon, Onida, Philips and others. Taking a cue from these changing dynamics, Nokia has turned its attention to the rural markets, and for the first time has appointed a fully rural-oriented sales force to be headed by a National Rural Sales Manager.
This rural shift could spell trouble for Sony as they discontinued CRT TVs in 2008. While FPD TV is growing very fast, the Indian market continues to be a dominated by CRT. With no CRT, Sony’s LCD TVs will be limited in semi-urban and rural dealers as they will not be able to offer dealers any volume drivers such as CRT.
All the changes in the Indian market do not mean that the hold of LG and Samsung is weakening. LG is now a US$2.2 billion company in India, while Samsung closed the gap and now stands at US$1.8 billion. It is interesting to note that both the CEOs of LG and SS share the same surname; LG’s Moon Bum Shin and Samsung’s Jung Soo Shin, who came in last month after the reshuffle). It is now time to watch to see which Shin SHINES brighter.
