India is LG's most important market: Kim

Q&A/ Kwang-Ro Kim

Kwang-Ro Kim

Kwang-Ro Kim, managing director, LG Electronics India Ltd, first came to India in 1997. The Korean chaebol was still finding its feet in India, having called off its joint venture with the C K Birla group.

At that time, people were not prepared to put their money on LG or Kim "" the Koreans were thought of as nothing more than poor cousins of the Japanese.

Seven years later, LG has become the leading consumer electronics brand in the country. Kim, now 58, has already got two extensions to his term and is unlikely to leave the country in a hurry, although there is talk that he is set to get a plum assignment in Seoul. Kim spoke to Business Standard on the road ahead.
Excerpts:

How do you look back at your seven years in India?

I think we have now built a great platform in India. We have the best trade network, the best manufacturing facilities and the best employees. A good foundation for business in India has been laid. It is now time to take off in a big way. It is true not just for LG but also the entire consumer electronics and home appliances industry.

We believe India is now the crown jewel in the LG empire....

LG has identified India as its most important market. In fact, in the next 10 years, we see it becoming more important than even China in our scheme of things. In the past 10 years, China has grown very fast. In the next 10 years, there will be some adjustments. India, on the other hand, has built a strong foundation in the past 10 years; so in the next 10 years it will grow very fast. Therefore, in terms of global significance, it will get more focus than China.

How much does India contribute to LG's turnover?

Currently, India contributes around 5 per cent of LG's overall production and sales. By 2010, it will go up to 10 per cent. Our internal target for 2010 is to be a $6 billion, or Rs 30,000 crore, company in India. With the exception of Korea and Japan, India and China are the only two $1 billion-plus markets for LG in Asia.

How much of this turnover will come from exports?

This year, our exports will be $70 million. Our target for 2007 is a billion dollars.

Since a big range of your products is tailor-made for the Indian market, your exports would essentially be to markets similar to India.... We primarily export to the Saarc region, west Asia and Africa because of their similarity to the Indian market. Like the Indians, people there too like big sounds in their TVs. Soon, India will be the export hub for all these markets.

LG has always set ambitious targets. As a result, your people often complain of stress.

Well, business is like war. And there is no doubt we have steep targets, but we have been achieving them. In the past seven years, LG has achieved what many Indian companies could not in 30 to 40 years of being in the same business.

What are your future investment plans in India?

We have so far invested Rs 500 crore in our Greater Noida plant. Our new 50-acre Pune factory is a replica of this one. We plan to invest another Rs 1,000 crore in India, of which 80 per cent will go to the Pune facility. We will not just add capacity but also manufacture new product categories like notebook PCs and mobile handsets. Our target is to produce a million notebooks in India by 2010.

Widening its reach and expanding the network has been LG's thrust in India. How did you go about doing it?

If you look at consumer durables sales in volume terms, the B and C towns and rural areas account for nearly 65 per cent. We thought that it should be true for us too. Today, the contribution of these areas to our sales of Rs 4,500 crore is more than 60 per cent, which is something unique for a multinational company in this industry.

We have at least one sales counter in every three out of four towns in India with a population of 10,000. Show me one durables company that has 40 branch offices across the company. Besides these branch offices, we have 70 remote area offices (RAOs) in smaller towns like Vellore, Rourkela and Haldwani, which we call the upcountry markets.

These RAOs are self-sufficient entities, each having an accounts department, a sales and marketing and a service team. All the RAOs are fully computerised and are connected to the branch offices and the corporate office through an ERP [enterprise resource planning] system.

How frequently do you travel to get a first hand feel of these markets?

I visit at least two upcountry markets every week and I plan to visit three now. We can make beautiful corporate policies sitting here. But they are of no use if you don't know what the market wants. Also, to be successful in a country you have to go out and enjoy the place. I'm in love with India and its culture.

What is your impression of rural markets in India. Do they offer enough depth for marketers like LG?

Oh yes. I have seen upcountry markets in Korea and Latin American countries like Brazil and Mexico where I worked earlier. But the upcountry market in India is much bigger and far more mature. I think rural markets here are greatly misunderstood.

Consumers care a lot for the quality of product and services. They don't just fall for cheaper prices. Most people tend to do what they are comfortable with. Which is why a lot of companies don't want to get into rural markets. Today, LG has an unaided brand recall of 85 per cent in rural areas.

You have also pioneered convergence at the dealer level, making him responsible to sell all your products.

I strongly believe in the convergence of product categories at the showroom and dealership level. For instance, 10 years ago, nobody thought that televisions and air-conditioners could be sold from the same place.

LG has pioneered this convergence. Today, a dealer sells LG products ranging from colour televisions to PCs to mobile phones. That greatly increases our reach in one stroke. I believe in second-step marketing, which means reaching out beyond your distributors.

Does LG follow the same model across the world?

No. This is not a standard practice. It all depends on the individuals heading the market. Our strategies differ from country to country.

What is the level of involvement of expatriate managers in the decision-making process at LG India?

Currently, there are 16 Koreans, including myself, at LG India. The expats always remain in the background. Their job is to give certain strategic inputs, but the show is effectively run by Indians. The level of empowerment of local managers is very high at LG. The Indian managers are extremely talented.

So is there a possibility of an Indian succeeding you?

Maybe. But I'm not sure. It might be difficult for an Indian managing director to communicate with the Korean headquarters.