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LG has recently revamped the distribution for the IT business and has announced its re-entry into the notebook segment. Sanjoy Bhattacharya, Product Group Marketing Head, IT, LG India, spoke to Dhaval Valia about the company’s future product and channel strategies
Competition in the flat-panel display market is heating up, with new players like Acer AOC making major headway in terms of market share; Samsung, too, has been winning mind and market share. How has the IT division of LG performed amidst strong competition?
We continue to be the market leader by a very comfortable margin in the flat-panel display market. In 2010, we retained the market leadership with 27 percent market share in the unbundled market, while in the overall market, which includes OEM sales (bundled), we recorded a share of over 14 percent. That is because we don’t account for OEM sales in the LG India figures.
In unit terms, of the total 36.5 lakh unbundled units sold in the country in 2010, we sold 9.32 lakh monitors. The total bundled and unbundled flat-panel display market was estimated at 56 lakh units during 2010.
In the ODD market, we continue to be a market leader and sold close to 23 lakh units in 2010.
In terms of revenues, the IT business recorded Rs 790 crore, at a very marginal growth rate over 2009. LG is eying business worth Rs 885 crore in 2011.
What are the growth targets for 2011 for the IT business?
IDC has forecast 14 percent growth in the flat-panel display market. We have projected to sell 11.25 lakh unbundled units in 2011 [which translates into 20.7 percent targeted growth].
Overall we have set a revenue target of Rs 885 crore, and going by the performance of the first five months of 2011, we are well on track to achieve the target.
What is LG’s product strategy to retain market and technology leadership in the both the segments you operate in?
On the ODD front, our focus is to grow the share of Blu-ray drives. In 2010, six percent of LG ODD shipments consisted of Blu-ray technology. In 2011 we see growing demand for this technology and, as a result expect it to contribute 12-15 percent of the total shipments.
In the flat-panel market, we have adopted a strategy to have a broader portfolio and plan to add more SKUs at every price point.
Earlier we had 5-7 SKUs at any given point, but now we have expanded this to 17-18, and we will be further adding SKUs to take the count to 25.
This helps us to take on the competitors head on. With a wider portfolio covering all entry-level price points, today we have the widest portfolio in the market.
In addition our focus is on driving new technologies like 3D and slim displays.
The third category we are bullish on is the monitor TV. We have launched two models—a 20-inch LED monitor TV HD-Ready at Rs 8,990 SRP and a 22-inch full HD model at Rs 11,000. We are seeing an increasing demand for such combo products from the upcountry market and, going by the units sold so far, monitor TV is expected to contribute nearly 6-7 percent of our annual [monitor] shipments during 2011.
LG has made major changes to its distribution strategy. Elaborate on the reasons for making those changes when your regional distribution model has been working effectively.
Yes, we have optimized our distribution over the past six months. We have signed up Rashi Peripherals as the national distributor for three range of display products—Slim series, 3D series along with IPS monitor, and entry-level 16-inch LED monitors—totaling around eight SKUs. Rashi will exclusively distribute these models.
We have also partnered with Redington as a regional distributor for monitors in Mumbai, Nagpur, Andhra Pradesh, Kerala, Haryana, Jammu & Kashmir, Jharkhand, North Bengal and Guwahati. Among these regions, Redington will be exclusive in Mumbai, Nagpur, Jharkhand, North Bengal, Haryana and J&K.
While our 200-plus regional distributor network is robust and delivering on targets, what we analyzed was that there were certain territories where we weren’t able to deploy enough credit in the market, as RDs have limited working capital. This hampered coverage and penetration in the smaller cities.
Getting Rashi and Redington on board will help increase credit, stabilize the market operating price, increase our penetration in upcountry markets and also connect with bigger partners.
We don’t see much impact on the business of regional distributors with the inclusion of these two distributors and they [RDs] will continue to be the backbone for LG business.
What are the new channel initiatives that LG has launched recently or plans to launch soon?
Our focus over the next couple of years is to increase penetration in small cities. For this we have invested in a very ambitious and unique program, called System Builders Development Officer (SADO).
Over the past 6-8 months we have deployed 175 on-field people whose job is to engage with the system builder community in small cities and towns in order to understand their needs, and to equip them with training on system building and LG products. The mandate for SADO is to cover towns where 50-100 PCs are sold in a month.
Another unique program we launched recently is the SMS LG IT 53030 service. A channel partner or customer in any remote area having an issue or requiring information about LG products just has to send a SMS and, within 24 hours, our call center would contact them to understand their needs. The issue would be fixed within 72 hours.
The third high-investment initiative is to create LG zones across 900 retail outlets countrywide demonstrating our 3D monitors and monitor TVs. We have already completed the first phase deploying these zones in 350 stores, wherein we provide the retailer with a 5-rack unit to display the demo products with a Blu-ray HD projector to provide the full HD and 3D experience to customers.
In all we have budgeted Rs 12 crore toward marketing to promote the new category products.
When is LG launching notebooks and how different will your GTM be, considering that your earlier foray into the mobile PC category wasn’t successful?
As our India MD has announced, we will be launching the LG notebook portfolio within the next 60 days. The preparation for the same is underway and we have already been showcasing our products at channel meets.
Last fortnight, we did a channel meet in the north, where we displayed the 3D notebook, which received rave reviews.
Our focus will be on the premium segment, ranging from Rs 35,000 to Rs 65,000. In all we plan to launch 10 SKUs, all with the second-generation Core i processor and OS preloaded. |