Digitally Yours!

Two unsuccessful stints. Re-run after a re-christening as LG Electronics.
Suddenly, the South Korean giant is a household name in India. But not without
concerted effort and

careful planning, and to-the-T implementation.

Considering that this is a company that has had its dream of expansion in
foreign markets trampled on twice before, LG’s success in the Indian market is
worth a study. A new name, an entirely revamped and advanced product range, and
LG suddenly seems to have it all going its way. And what more could one want to
ease out the competition?

With a corporate philosophy of making people’s lives better, more
convenient and healthier, LG India has come a long way since its inception in
1997. The company has the distinction of having the fastest-ever Rs 5,000 crore
in sales revenues by any company in the Indian consumer electronics and home
appliances industry.

LG believes in continuously upgrading itself to maintain its position at the
top. And in the Net age, the next step has to be going online. Why?
"Because the spare time people have will only get shorter. And we want to
be ready both in terms of experience and infrastructure for them to shop online
with ease," explains Arindam Bose, head of IT at LG. Entering a space in
anticipation of its potential does reap rewards. And LG seems to have taken to
its e-initiative with gusto.

Initially, going online was only a strategic move against principal rival BPL,
but building a tech-savvy image for LG soon emerged as a means to asserting its
market leadership. "Soon, online capabilities will be a prerequisite for
reaping the benefits of a mass market. After all, the early bird gets the
worm," says Bose.

With electronic durables gradually beginning to be viewed more as necessities
and not assets, there’s been a paradigm shift in shopping patterns. There is
likely to be a discernible preference for online transactions and this is bound
to grow. Assuming this future scenario, the company is getting well prepared.

The idea of attaining the leadership position in the B2B and B2C segments has
fuelled LG’s business model and spurred fresh investment in that direction.
"We have taken a serious approach towards e-biz initiatives," says
Bose. LG has been recognized as the No 1 consumer electronics company in the B2C
area. A recent Nasscom-BCG (Boston Consulting Group) survey has placed LG’s
B2B initiatives on par with those at Cisco and Maruti Udyog.

The genesis

The first two years of business saw LG raking it in in India. The
electronics giant looked to scale newer heights. It clear ambition–to be the
leader in the consumer electronics segment by 2003. "The way things were
headed, being seen as a top company just wasn’t enough. We had to do things
differently," says Bose. Luckily for LG, the B2C space was just picking up
at that time and there was need for direct customer feedback. LG also realized
that when it launched a new product, the Internet could be an easy, instant and
cost-effective medium for consumers to get information.

This was in early 2000, and the Cyber LG brand was conceived. "We wanted
to have an online birthday bash for LG that year and an online sale of $1
million by December 2000,"says Bose. Both the Cyber LG launch and the
birthday party were huge successes, backed by heavy offline promotions. LG
overshot its first year’s target, reaching $1.1 million in sales, apart from
achieving its database target of 1.2 million.

The lgezbuy evolution saw the site generating revenue of $1.1 million by
December 2000, but LG spent $1 million on promotional and brand-building
activities for the same. This year, the sales target is $1.4 million. The
difference, however–LG plans to spend only $50,000 on promotional activities.
"That’s because we want to make lgezbuy profitable this year,"
explains Bose. "The effort in the first year was towards building a Cyber
LG brand and it paid off. It’s time to cash in on that now," he says.

‘Online buying and more’

LG believes that the association with the customer who shops online is far
more than its relationship with one who makes his purchases offline. And
lgezebuy.com is the industry’s first complete e-commerce website. With the tag
line ‘Online Buying and More’, it is perceived to be a place where you can
expect much more than shopping. The site has managed to sell all products, with
home appliances like microwave ovens and air-conditioners registering the
highest sales figures.

With a direct investment of Rs 25 lakh on website development and $1 million
on the promotion of ezbuy.com, LG has used campaigns like Cyber Olympics to
increase page views per month to about a million. The company also plans to tap
into those areas that contribute to 80% of the Internet user base–like New
Delhi, Mumbai, Kolkata and Hyderabad. The agenda here–setting up touch-screen
Web kiosks at Internet dealer outlets.

The company has created an easy-to-use site with no frills and graphics,
keeping in mind the fact that the customer’s time is valuable to him,
necessitating a ‘get-down-to-business’ attitude. Pricing is taken care of by
maintaining the market-operating price of the product, which, in turn, ensures
that there are no conflicts with channel players.

The idea was to build a Cyber LG brand that would bring in returns and
simultaneously earn repeat customers. It has been brought to a level where
customers actually gain more when they make purchases through lgezbuy.

Obstacle course

But LG’s cyber dream came with its share of birth pangs and
disappointments. When lgezbuy was conceived, LG had foreseen a large chunk of
its revenues coming in from NRI online sales. Yes, lgezbuy was a subtle attempt
at tapping that segment which could make purchases for gifting to their family
in India. However, in reality, the NRI contribution worked out to merely 14% of
total revenues. Against this, better promotion strategies to establish a
Net-savvy LG abroad led to an increase of 20% in 2001. The option of paying
online is available, but there are few takers for it. LG has also entered into a
deal with ICICI to facilitate payments via the net. But full assurance in the
system is yet to set in and 100% online payments come in only from NRIs.

Blooming to B2B

Almost a month after lgezbuy went online, the company decided to rope in
vendors and dealers as well. And with the launch of lgesource.com and
lgdealernet.com, September 2000 saw LG’s foray into the B2B initiatives. The
sites have been designed to serve as information centers for dealers and
vendors, wherein business partners, apart from having access facilities, will be
able to place orders on the basis of stock positions. This allows LG to deliver
on mass customization, while reducing inventory levels and fulfillment
time-frames.

"Establishing the dealer network was simple. The real issue lay in the
vendor network, with most of them having factories in very-low-infrastructure
zones," points out Bose. Therefore, initial apprehensions about the success
of the e-source initiative were many. "But it had to be done and we decided
to adopt it," admits Bose. The result–LG started out by connecting only
25 vendors close to its plant in Greater Noida. Today, of 105 vendors, LG has
103 vendors online. "We were lucky that 95 of our vendors were in the NCR
region," says Bose. Vendors have access to real-time information 24x7.

With a target of 100% online transaction by the first quarter of 2002, LG has
already managed 90% online dealing, resulting in cost savings of $2 million in
2001. Qualitative benefits like optimum inventory, faster collection, higher
employee productivity and cost savings on training and catalogues are also part
of the package.

The ‘e’ in HR

LG perhaps could be one of the perfect examples of a truly ‘e-biz company’.
Merely investing in cyberspace cannot handle larger issues; those handling the
site and those expected to use it should be well versed in the nuances of
putting it to maximum use. "LG has been aggressively adopting IT in all
spheres since 1998," says Yasho Verma, vice-president (HR and MS)at LG.

With this in mind began LG’s project to implement online appraisal,
training and HR systems. LG took up the training of its white-collared employees
and vendors online. Beginning from the induction to function-specific training,
as much as 70% of the training at LG was conducted online. "To begin with,
all employees have to undergo a compulsory training program followed by a
test," says Verma. The approach proved critical, considering that LG has
branches all over the country and online training could cut costs and make
timings flexible without affecting the functioning of the branch.

Surprisingly though, where LG saw a drastic cut in terms of effort and time
spent was in employee performance appraisals. "Earlier, it took us 60 days
from the day we used to shoot off the appraisal form to the time it came back to
us from all our 18 branches," points out Verma. "The entire process
could take anything between 95 and 100 days." This was the scenario till
1998.

From 1999 onwards, however, with the entire process being taken online, it
takes the HR managers at LG less than 30 days to have the process over and done
with. Other than the obvious time-saving benefit, the company has also seen a
reduction in the number of people working on the appraisal process. "Most
importantly, it has brought transparency into the system," points out Verma.
The system is built in such a way that all parties–the appraiser, appraisee
and the reviewer are aware of what rating has been given and can have a
discussion if any of them does not agree with the final rating.

Back to the future

Given the attempts at turning itself into a tech-savvy giant, LG seems to
have gained comparable ground both in the B2B and B2C segments. With 1,400
dealers, 200 distributors and a total network of 3,000-3,500, it is obvious why
such a choice was made. As a jubilant Bose claims, "We have achieved what
we set out to do. Our strategy has ensured that we are perceived ahead of our
competitors."

LG has now graduated beyond the services space. Having created a niche for
itself in both the B2B and B2C marketplaces, it is shifting focus to CRM,
believing that this will be the real differentiator. But tech-savvy or not, the
company is here to stay. Perhaps its all in the prefix Lucky–it has indeed
proved lucky for this Goldstar!

Meghna Sharma and Dhanya Krishnakumar–Dataquest