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Digitally Yours!

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DQI Bureau
New Update

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.

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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.

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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.

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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.

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‘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.

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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.

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"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.

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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

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