Tuesday, January 8, 2013

The new #1 Samsung

LG ruled the Indian consumer durables market for long. But since 2011, it has been struggling to play catch up with the new #1 Samsung. The road to regaining glory isn’t an easy one for LG

With LG at a crossroads, Kwon has enough reasons to worry about. Though this time around, the company doesn’t stand a chance of being put on life support system, it’s the love for the gold that gives him the wrinkles. The company has already lost the crown when it comes to overall revenues and profits. Now, with Samsung’s new strategy to go bullish on the mobile handset market in India (especially the smartphone market where it has already captured a 41% market share; CY2011), and with LG’s loosening grip on the same cash-cow of a product segment, more questions are being asked about whether hopefuls in the LG India boardroom really trust a turnaround in near future. This is LG’s core problem. Between 2010 and 2011, its share in the Indian handset market fell from 5% to 2%, while that of Samsung rose by 2.1% to 17.1%. To imagine that Samsung India earns 55% of its revenues from this category (Rs.10,500 crore), LG’s stance of ignoring the mobile handset market is nothing but suicidal.

There is another problem-in-the-making. We say in-the-making, because the effect of it hasn’t quite started showing on the chaebol’s health. It all started in 2007 when Moon Bum Shin, the-then MD of LG India, announced the company’s vision – that of LG being regarded as a premium brand. Supposedly, the decision was in line with the company’s global mandate. Since then, LG has been at it to reposition itself as a premium brand, and not one meant for the masses. LG was out in the market to try something new, a detour from the main road that helped it become the #1 in the market. Four years have gone by since then, and even today, your neighbour would vote for LG being a great ‘mass’ product! The company however is not one to give up. Even Shin’s successor Soon Kwon, MD of LG India, is working on repainting LG’s image with rich colours. Onlookers are not quite convinced that this will help LG work its way up the ladder again, by playing up on the aspirational value. If a Motorola tying up with Dolce & Gabanna (using its best selling product the MotoRAZR) couldn’t help catapult Motorola’s perception to that of a maker of premium phones, LG cannot on its own switch its identity to a high-end CD manufacturer. The company should take some lessons from the books of automakers or even some handset makers in this regard. The Skoda and Volkswagen brands are mass brands while Bentley and Audi are premium offerings from the same company - the Volkswagen group. Lexus is a high-priced product, while Toyota sells cars for the masses – again both belong to the same company. It’s the same story with Vertu and Nokia. If LG has to create an impact in the premium pockets, it has to walk ahead with a non-confused positioning strategy. Creation of sub-brands with identities unique or faintly linked with the parent LG brand is an option. 


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
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