IoT-based offerings to be our focus, says LG Electronics India MD

Interview with Kim Ki Wan

Korean consumer durables major LG has faced the heat of demonetisation and slowing demand in recent times. Kim Ki Wan, managing director, LG Electronics India, on plans for 2017 in a chat with Arnab Dutta. Edited excerpts:

How did slowing growth affect LG? What is your outlook?

Demonetisation of currency notes in November hurt money circulation and, consequently, activities in the market. Some other macro economic issues have also impacted growth. We took some steps, like offering easier financing schemes. However, we did not cut down on promotional spending; we don't like to take kneejerk reactions like many of our competitors (did).

India continues to remain important for LG's business, as its long-term growth prospects are bright. The government's recent push for infrastructure development like rural electrification and housing for the economically backward are positive signals for us. These will eventually help the market to grow and increase our customer base.

How does LG plan to stay ahead of the curve when conditions are unfavourable?

We are differentiating ourselves globally and in India. Providing smarter products and solutions will be the focus in 2017. So, the Internet of Things (IoT) and Artificial Intelligence will be the core of our offerings. All the new products we are launching will be IoT-compliant. We are also planning an initiative under which existing products will become IoT-enabled. We will be launching a pilot project this year, with a dedicated team which will reach out to our customers and convert the products at their homes. This we have already launched in Korea; this year will bring it in India. Based on the responses, we will decide the course of action.

We are introducing a web-based operating system (OS). This will replace the traditional OS that are usually installed in devices and expand their capacity multiple times.

You lost to archrival Samsung here, due their success in handsets. How does LG plan to cover the ground?

Yes. Our current status in the mobile handsets market is poor. We'd earlier captured market share but we could not hold on, as we were rushed into it. That has changed now. India is the most strategically important market for us. We are continuously monitoring the market here, checking its trends and learning from these to prepare for the long run. These, we believe, will reflect in our products and communication.

How long do you expect to absorb growing raw material prices?

Price hikes are inevitable. We are constantly working to absorb the growing cost by technological innovation. However, we will have increase prices for at least some categories of products. Many players in the market have tried to avoid this reality, to remain over-aggressive. But, they went beyond a certain point and ultimately paid the price when they got bankrupted and disappeared. We are here for 20 years and we revise prices reasonably, as we also have to maintain our margins.

What is your investment plan?

We plan to invest around Rs 70 crore ($10 million) to expand our production capacity, to rationalise our portfolio and to introduce new products. We now manufacture 95 per cent of our products locally.

Are you working to increase penetration?

We have covered 100 per cent of the market by placing our products in over 22,000 large stores. The general trend in India is that retail outlets are growing bigger. So, we are looking for larger retail spaces in outlets that are growing in size. Our focus this year will also be on LG's branded outlets. Currently, we have nearly 1,700 such outlets, of which 1,000 are smaller ones. We will be revamping these, so that more consumers can experience our premium products before purchase.

The Union Budget was aimed at bring back growth in rural markets. When do see you that coming?

It's hard to tell when exactly the demand growth will come back. But, the government initiatives will help revive demand in the long term.