Case
Teaching Notes
Supplementary Resources
Abstract
LG, a large multinational Korean company, decided to enter India employing a green field entry strategy as a wholly owned subsidiary in 1997. This case helps students analyse the reasons behind this decision, describing the external and internal environment which was prevalent at the time of entry. The case provides details of the various consumer electronics markets until 2005, and the key potential success factors identified by the then MD of LG India Ltd, Mr. Kim.
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
All the tables in cases A, B and C which do not have references were provided by LG.
Table I: Unemployment Rate
Historic – % of economically active population | ||||||||
1997 | 1998 | 1999E | 2000E | 2001E | 2002E | 2003E | 2004E | |
Unemployment rate | 10.5 | 10.6 | 10.5 | 10.5 | 10.5 | 10 | 9.9 | 9.5 |
Source: International Labour Organisation/Euro Monitor International
Table II: GDP of India
Market Sizes - Historic - Rs Crore | ||||||||||
1995 | 1996 | 1997 | 1998 E | 1999 E | 2000 E | 2001 E | 2002 E | 2003E | 2004E | |
Total GDP | 1147801 | 1292609 | 1482563 | 1698011 | 1894183 | 2075911 | 2232126 | 2406249 | 2669483 | 3032504 |
Sources: Total GDP: Euro monitor International from International Monetary Fund (IMF), International Financial Statistics
Table III: Inflation
Historic – % growth | |||||||||||
1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | |
Inflation | 13.2 | 4.7 | 4 | 3.7 | 4.4 | 3.8 | 3.8 | 4.2 | 5.8 | 6.4 | 8.4 |
Sources: Euro monitor International from International Monetary Fund (IMF), International Financial Statistics and World Economic Outlook/UN/national statistics
Table IV: GNI India
Historic - Rs Crore | |||||||||
1996 | 1997 | 1998 E | 1999 E | 2000 E | 2001E | 2002 E | 2003 E | 2004E | |
Gross national income (GNI) | 1365530 | 1513950 | 1736230 | 1936600 | 2079580 | 2258880 | 2437870 | 2733910 | 3127030 |
Source: International Monetary Fund (IMF), International Financial Statistics
Table V: GDP Measured at Purchasing Power Parity
Historic – International $ per capita | |||||||||
India | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 |
GDP measured at purchasing power parity | 1223.9 | 1288.3 | 1373.1 | 1457.4 | 1524.4 | 1595 | 1712.5 | 1883 | 2082.4 |
Source: GDP measured at purchasing power parity: Euro monitor International from IMF
Figure V: Disposable Income in India
Table VI: Indian Consumer Market
Table I Estimated households by annual income | Table II Structure of the Indian consumer market (1995–96) | |||||
Annual income (in Rupees) at 1994–95 prices | No. of households (in million) | Annual income (in Rupees) at 1994-95 prices | Classification | Number of households (in million) | ||
Urban | Rural | Total | ||||
<25,000 | 80.7 | <16,000 | Destitute | 5.3 | 27.7 | 33.0 |
25,001–50,000 | 50.4 | 16,001–22,000 | Aspirants | 7.1 | 36.9 | 44.0 |
50,001–77,000 | 19.7 | 22,001–45,000 | Climbers | 16.8 | 37.3 | 54.1 |
77,001–106,000 | 8.2 | 45,001–215,000 | Consumers | 16.6 | 15.9 | 32.5 |
>106,000 | 5.8 | >215,000 | The rich | 0.8 | 0.4 | 1.2 |
Total no. Of households: 164.9 million | Total no. Of households | 46.6 | 118.2 | 164.8 |
Source: National Council of Applied Economic Research (NCAER).
Table VII: Indian Demographic Profile
Age structure: | |
0–09 years: | 23% |
10–19 years: | 22% |
20–29 years: | 17% |
30–49 years: | 24% |
50+ years: | 15% |
House Hold Disposable Income Bracket | Total Households | Remarks | |
2005 E Million 100% = 206 | 2015 E Million 100% = 244 | ||
Globals > USD 22,000 | 1 | 3 | Just the strivers and globals will together exceed the entire population of Australia and 3/4th of Korea |
Strivers US$ 11,000 to 22,000 | 2 | 6 | |
Seekers USD 4000 to 11,000 | 11 | 55 | The top three segments will exceed the size of Brazil, Japan, Russia Germany and UK |
Aspires USD 2000 to 4000 | 91 | 106 | |
Deprived < USD 2000 | 101 | 74 |
Source: The Great Indian Middle class: NCAER: MGI Consumer Demand Model
Table VIII: Income Groupings and Ownership (Ownership per Household 2001–02) (Estimated)
Annual Household Income (‘000) | Households (Million) | Two Wheeler | CTV | Ref | AC | Car | |
Deprived | <90 | 135.4 | 0.07 | 0.05 | 0.04 | 0.00 | 0.00 |
Aspirers | 90–200 | 41.3 | 0.47 | 0.40 | 0.34 | 0.02 | 0.04 |
Middle Class | 200–1000 | 10.7 | 0.70 | 0.73 | 0.62 | 0.15 | 0.32 |
Rich | >1000 | 0.8 | 0.20 | 0.17 | 0.14 | 0.01 | 0.03 |
Total | 188.2 | 0.20 | 0.17 | 0.14 | 0.01 | 0.03 |
Table IX: Income Figures in ‘000 per Annum at 2001–02 (E) Prices, Households in ‘000 Numbers
Chart 1: Major Players in the Indian CDs Industry | ||||
CTV | Refrigerators | Washing Machines | RACs | B&W TVs |
Aiwa | BPL | BPL | Blue Star | Videocon |
Akai | Daewoo | Electrolux | Carrier | Onida |
BPL | Electrolux | Godrej | Daikin Shriram | BPL |
Daewoo | Godrej | IFB | ETA General | Oscar |
LG | LG | Ken star | Hitachi | T-Series |
Onida | Samsung | LG | Ken star | Unorganised Sector |
Oscar | Videocon | National | LG | |
Panasonic | Whirlpool | Onida | National | |
Philips | Voltas | Samsung | Samsung | |
Samsung | Haier | Siemens | Videocon | |
Sansui | Videocon | Voltas | ||
Sharp | Voltas | Whirlpool | ||
Thomson | Whirlpool | Haier | ||
Toshiba | Haier | Unorganised Sector | ||
Videocon | ||||
Beltek | ||||
Haier |
Table X A: Consumer Electronics Market (Retail Value)
Market Sizes - Historic - Retail Value RSP - Rs mn - | |||||||
Geographies | Categories | 1998 | 1999 E | 2000E | 2001E | 2002 E | 2003 E |
India | In-home consumer electronics | 111810.6 | 129275.5 | 124194.1 | 122190.3 | 140571.2 | 162938.5 |
India | Televisions and projectors | 74382 | 90579.2 | 83376.8 | 80416.2 | 92549 | 105478.6 |
India | VCRs and DVD Players | 2024.9 | 1690.7 | 1226.6 | 998.2 | 803.8 | 2921.7 |
India | TV and VCR/DVD combinations | - | - | - | 29 | 27.2 | 30 |
India | Home audio and cinema | 14056.2 | 15329.9 | 17565 | 18606.6 | 20721 | 22600.2 |
India | Personal computers | 21347.6 | 21675.7 | 22025.7 | 22140.3 | 26470.3 | 31908 |
Source: Euro monitor from trade sources/national statistics
Table X B: Consumer Electronics Market (Retail Volume)
Market Sizes - Historic - Retail Volume - ‘000 units | |||||||
Geographies | Categories | 1998 | 1999 E | 2000 E | 2001 E | 2002 E | 2003 E |
India | In-home consumer electronics | 16524.9 | 17553 | 17021.6 | 17034.2 | 19979.7 | 23568 |
India | Televisions and projectors | 7340 | 8306 | 7577.4 | 7406 | 8615.5 | 9874.9 |
India | VCRs and DVD Players | 343.2 | 313.1 | 234 | 198.2 | 159.1 | 381.5 |
India | TV and VCR/DVD combinations | – | – | – | 2.5 | 2.3 | 2.5 |
India | Home audio and cinema | 6766.6 | 6703.8 | 6863.1 | 6991.3 | 7947.6 | 8655.8 |
India | Personal computers | 2075.1 | 2230 | 2347.1 | 2436.2 | 3255.2 | 4653.3 |
Table XI: Psychographics Segments – Refrigerator
Psychographics | Behaviour | % |
Premium seeking upgrades | Enhance capacity to satisfy evolving family requirements. Are status conscious: perceive capacity up gradation as being tech savvy, stylish. Skewed towards higher income (27% 15–25 K). Skewed towards females (50%). | 10 |
Basic brand trusting follower | Focus on basic functions and features like good interior layout, keeping food fresh, odour free. Very strong relation with brands – look for assurance and reliability of the product through the brand. Tend to be middle income (50% 8 to 15 K). Skewed towards mid size fridge (40% buy 180-250L). | 24 |
Savvy package shopper | Carefully weigh all elements of complete package, product reliability, assurance through service, warrant a dealer recommendation. Want basic functions like cooling, interior layout etc. Three sub segments – with focus on service, warranty of all features. | 37 |
Home enhancing basic buyer | Want products that make the house look attractive. Seek functional features like good cooling interior space etc. Skewed towards 6–10 K (50%). Skewed towards women (65%). Skewed towards small entry level fridge (85% own, 250L). | 12 |
Personal budget buyer | Have a fixed price in mind (not necessarily the cheapest). Look for the best bargain they can get within the budget. Skewed toward experience/replacement buyers. | 17 |
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved