One fairly interesting advertisement on TV shows a model taking out a cube of ice from her refrigerator. Simultaneously a large block of ice is seen being dropped into Antartica, which leads to a fresh new ice cover & a number of rejoicing penguins. Similarly, it depicts how water saved from a washing machine results in massive afforestation, and how a microwave’s technology replicates the sun in terms of keeping food fresh and nutritious.
On the other hand, we have an advertisement of a mobile handset, which professes to be ‘built for humans, inspired by nature’. Users can talk to this mobile and tell it to wake up, look at pictures of friends and immediately have access to their Facebook statuses, share content by simply holding phones back to back and mirror their phone displays to the big screen wirelessly among other features.
As avid industry watchers would instantly recall, the former is a corporate branding advertisement for LG, which talks about how its refrigerators, washing machines and microwaves are saving the planet and also providing benchmark performance. The other is a recent advertisement for Samsung Galaxy SIII, which was launched in India in May this year.
The roughly Rs.1.2 trillion Indian consumer durables (including the Rs.550 billion mobile retail market) has been nearly synonymous with LG and Samsung in post-liberalisation years. The South Korean chaebols entered India in mid-1990s, and continue to control over one-third of this market together. However, ads like the ones mentioned above mark remarkable positioning shifts for both LG (whose logo is a visual depiction of its core Life’s Good theme) and Samsung (whose logo represents a company moving step in step with a fast changing world). Earlier, they were both synonymous with a very high price-performance ratio – technology that was aspirational (though not comparable to the likes of Sony & Pansonic then) at prices well within reach of the Indian middle class. Now, as these ads signify, both have moved up the technology ladder and seek respect for their products per se, be it for intuitive & ‘ahead of the curve’ technology or for planet saving features. They would not want to be associated with the ‘price leader’ label, and neither do they display their previous zeal for attractive festive season promotions. More remarkably, the status quo in their sensational and headline grabbing rivalry has also been turned on its head of late.
LG raced ahead initially with an extensive distribution strategy. However, it lost momentum post 2010. Circa 2011 saw Samsung gunning past LG for the first time in India and the gulf has only widened since. LG could grow by hardly over 1% yoy to Rs.162 billion in 2011, while Samsung grew by 25% yoy to reach Rs.200 billion. In the TV space, Samsung overtook LG in flat panel sales last year. Thanks largely to their dominance in home appliances, LG (7th) maintains a higher position compared to Samsung (12th) in the ‘4Ps B&M Most Valuable Brands’ survey. However, Samsung is gaining mind share fast, and in the critical mobile segment, it’s a virtual ‘no contest’. While Samsung (25.3% share) is second only to Nokia (38.2% share) in overall mobile handset sales, LG is a distant 8th with market share of 2.5% for FY 2011-12 (CMR data). The importance of the mobile handsets division to Samsung can be gauged from the fact that the division already contributes around 55% to the company’s India revenues. Katyayan Gupta, analyst with Forrester Research, adds, “LG is not that fast in bringing its global launches in India, and hence is not able to capitalise on the initial hype created, especially in the mobile phone space.”
Meanwhile, both players face significant competition in different sub-segments. Already, Voltas has overtaken LG in AC sales as per GFK-Nielsen data in May 2012, and players like Hitachi & Carrier are gaining share. In the washing machine and refrigerator segments, specialised players like IFB, Whirlpool & Godrej pose a potent threat. In fact, Gupta feels that the home appliances and durables market in India has for long been a two-player (LG & Samsung) market, and there is a scope for another big player. It is felt that if FDI in multi-brand retail opens up, there could be even more competition, particularly from American and Japanese players.
The response of both our Korean giants to this competition will determine how well they consolidate and grow their position hereon. As far as their mutual rivalry is concerned, one option for LG is to come up with a very strong response in the mobile space. But considering how they’ve failed to penetrate it since 2004, and the division has seen six different heads in the six years, it looks daunting. LG has launched just one smartphone this year so far. At that pace, perhaps the division doesn’t merit the attention of the company. So the other option, really, for LG, would be to go back to its core competencies and focus on what it does best. That might, in fact, give it a better chance of turning the tables once again, if at all.
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Source : IIPM Editorial, 2013
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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