It has been just five months since Soon H Kwon occupied the corner office at LG’s Greater Noida headquarters, near Delhi. He appears comfortable in his new role. The South Korean electronic giant plans to double India’s contribution to its global turnover to 12 per cent in three years. This aggression is important, Kwon says, if it has to stay ahead of the curve. LG’s rivals, Sony and Samsung, have already upped the ante here. Worldwide, LG is third after Sony and Samsung. In India, it is exactly the opposite, with LG at number one, followed by Samsung and Sony. In an interview with Viveat Susan Pinto, he throws light on how his company is dealing with the competition. Edited excerpts:
In the last six-eight months, Sony has cut prices, improved dealer margins and increased penetration of its products. How are you tackling this?
Our response is two-fold. If there is a need to respond to pricing action, we would. I don’t think we can remain silent on that front. But price is a short-term mode of combat. True competition comes with the kind of products you have; how you are able to take into account consumer insight and develop products accordingly. For instance, we have a special task force under my direct supervision, whose job is to find what are the unique insights we could work on. They are continuously tracking consumer behaviour and looking at areas that can be addressed.
How large is this task force?
This task force, the Indian Insight Product team, is a part of the larger research & development (R&D) unit we have in India. Our R&D unit has over 350 engineers. We would like to enhance our engineering capabilities, so you can expect the headcount to go up, as the task force looks at areas where we can develop products for the Indian consumer.
What is the investment you are making in manufacturing, given that you would like to double revenues in three years?
This year, we are investing '800 crore in manufacturing, which includes everything from R&D to capacity enhancement, quality control etc. This will be across our Pune and Greater Noida facilities.
Are you looking at new production units as demand for consumer durables is growing in India?
Not at the moment. For now, our Pune and Greater Noida facilities can take care of our needs.
Modern trade is increasingly becoming an important channel for most manufacturers though it is not a large contributor to overall sales. How fast do you see it changing?
Modern trade and regional speciality stores will together contribute about 25 per cent to industry sales in five years. This is from about 11-12 per cent now. So that is quite a ground that the two channels will cover in the next few years. Players will have to orient themselves to this reality sooner rather than later, which means forging tie-ups and relationships that are win-win. There is no escaping this.
Input cost pressures have been a worrying factor. Are you anticipating price hikes soon?
In the beginning of this calendar year, there was severe input cost pressure. Thanks to this, we had to raise prices of home appliances, including refrigerators and washing machines. Competition immediately reacted. But since then, there has been no price increase. On an average, prices of home appliances have gone up by seven per cent from December to now, while prices of room air conditioners have gone up by nine per cent. We are not looking at any more price hikes for the moment.
Have you seen any impact on production due to a components, supply crunch following the earthquake and tsunami in Japan?
We did anticipate some problems. But we quickly reacted by looking at alternate sources of supply. For now, we are sourcing parts from Korea, Taiwan and China. This should take care of our needs in the interim till the Japanese bounce back.
