Analysis of the Indian color television industry with special focus on the leadership strategy of LG

Abstract

The Indian Television industry first really took off after the Asian Games held in the country in 1982. Initially the growth was fuelled by black & white TVs. Till the early 90s, television was still considered to be a luxury item. Colour televisions really took off after the cable TV revolution in the early 90s. Till the late 90s the major players in the Indian CTV market were BPL, Videocon, Onida (Mirc) and Philips. Japanese companies like Sony, Toshiba, Panasonic and Sharp also entered but were premium priced niche players. There were also many smaller regional players like Oscar, Weston, Crown, etc. which had good bases in certain regions. The price differences between CTVs and B&W TVs gradually reduced and so by the end 1990s, CTVs were outselling B&W sets. The late 1990s saw the entry of the Koreans LG and Samsung into India and they revolutionized the CTV industry. They introduced heavy a large variety of models to suit different tastes and also started the trend of heavy advertising and promotions. They followed strategies like brand association with cricket (almost a religion in India), to develop their brand equity. By 2002, LG was number 1 and Samsung number 2 in the market. It is seen that the Indian consumer is very price conscious. At the same time, the awareness and aspiration levels have risen. So they are looking at good quality at reasonable price when they buy televisions. Also TV sales in India have a marked seasonal trend with spurt in festival seasons like Diwali and Ganesh. Sales also shoot up before major sporting events like Cricket World Cup. The Indian economy has been experiencing good growth lately. So the spending power of consumers has gone up. At the same time CTV prices have fallen. So this has led to good growth in CTV sales. Still there is huge potential for growth as the penetration especially rural areas is still not high. The government has reduced the import duties of CTVs and their raw materials leading to price drops. For a long time flat televisions were priced much higher than conventional CTVs. But now the price differential has come down and flat TVs are really driving the growth in the market. Larger screens and high technology TVs like Projection and plasma TVs are growing fast but still occupy have only a small share of the market. The current top players in the CTV market are LG, Samsung, Onida, Videocon, Philips, Sansui and Sony. Amongst these Sony, Philips and Onida have expanded their market recently while Sansui has fallen. However, LG has just raced ahead of its competitors. LG has followed the strategy of providing products with good features at very reasonable prices. This has really gelled well with the Indian consumer mindset. They were also the initiators of creating a “pull” to draw the customers to stores rather than just pushing the products when they were there. It realized very early on the huge potential that the small towns and rural regions had for growth. So they built up a very extensive distributor channel. They have regional distribution with a lot of autonomy given to the regional offices. They provide large incentives to their dealers while retaining smaller margins to get dealer loyalty. Their branding was also successful because they associated simple concepts like good health and better life with their products which the consumers were able to connect with. They run a lot of consumer promotions and also indulge in substantial Public Relations activities to build their brand equity. LG is financially sound with good bottomline growth and low levels of debt. They have flexible operations which can manufacture different product lines as well as workers with different skills. They drive their employees hard but have good compensation and work culture. They maintain a strict Six Sigma Quality focus in all their functions.