KOLKATA: Early this year, Soon Kwon, the MD and president of LG's India unit summoned the top 30 managers of the company for a video conference to tell them life had become tough for the country's largest consumer durables maker.
Driving profitability, maintaining market share, and improving sales planning would be the key goals for the year, he said as he warned his senior team about a slowing market, growing competition, and difficult macro environment. The LG India boss has followed this up with weekly calls with executives whose sales and profit targets are monitored by him. Kwon has reason to worry.
After nearly two decades in which growth has fluctuated between 20% and 40%, propelling the Korean company to the number one spot in India's Rs 35,000-crore consumer durables market, LG India reported flat sales growth in 2011.
Revenues grew marginally to Rs 16,200 crore from Rs 16,000 crore in the previous year, well short of its annual sales target of Rs 20,000 crore by a considerable margin, primarily because of the poor performance of the mobile business. The company's response has been to tighten control over its Indian operations.
In the recent past, the company has appointed two expatriates, both South Korean nationals, as business heads. SH Park has taken over as director of home entertainment while MJ Jeon has been appointed head of the AC business. The B2B segment already had a Korean boss, DP Kim.
In all, three of the five divisions of the Indian unit have Korean heads, a far cry from the past when locals used to helm most divisions. It's not just at the top where the increased Korean presence is being felt. A senior company executive said close to 50 Korean middle and senior managers were working out of LG India's corporate office in Noida, compared with 10 just two years ago.
He wished to remain anonymous since the company has recently issued an internal email that bans all senior executives from talking to the media, except the company spokesperson. The parent's stepped-up interest is because LG Electronics India is beginning to struggle on multiple fronts.
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The company has for the first time lost market share in the Rs 9,300-crore AC market, though it maintains a significant lead over its nearest competitor. Air-conditioners account for almost onefourth of the consumer electronics pie. It has been badly battered in the mobile phone market, where its market share in 2011 fell 5 percentage points to 2%.
But it has managed to hold on to its market share in refrigerators, washing machines and microwaves while flitting between the number two and three slots in the flat-panel television market.
LG attributes its subdued growth to an under-performing mobile phone business and a difficult macroeconomic environment due to higher inflation for much of the current fiscal, depreciation of the rupee in the closing months of 2011, and hike in input prices.
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