New Delhi: Despite a slowing economy, makers of consumer goods such as refrigerators, television sets and washing machines say demand in India for their wares has been largely unaffected. LG Electronics India Pvt. Ltd, or LGEIL, in one such firm. The South Korean company continues to be bullish about its India prospects and is investing in expanding operations across areas such as design, service and manufacturing, managing director Moon B. Shin said in an interview. Edited excerpts:
Has the current economic downturn affected the electronics and appliances industry? What is the way forward?
Consumer demand has not gone down. Despite the downturn in the economy, for us the first four months of 2009 have been better than the first four months of last year in terms of sales. So, clearly, we have not seen any shortfall in demand for electronics and appliances across categories.
Gathering pace: Managing director Shin says it is more important for LG Electronics to be No. 1 in India than anywhere else across the globe. Rajkumar / Mint
I am of the view that by the end of this year, India’s economy will get rid of the downturn, so going ahead, we will only see growth happening, and increase in consumer demand. Also, rural markets were better than last year for us. A good harvest coupled with initiatives announced by the government provided a boost to the purchasing power of rural consumers, which also benefited our business.
Having said that, do you have specific plans for rural consumers?
We are increasing our focus on the rural markets. It is interesting to note that for rural consumers, price is not the only deciding factor. Consumers today are looking for value for money, premium products, along with good service. I visited some rural markets recently, (where) people are asking for 50-litre refrigerators. So it’s not that they want only cheap products. So we are currently working on developing a range of low-end products across categories which will offer value for their (rural consumers) money. The launch is slated around Diwali season this year under the LG brand.
Which are the areas you are investing in India?
India is a very strategic and important market for the parent company. Given the nature of the consumer electronics industry, our business requires a lot of investment in logistics, skill development, services and manufacturing. In the next five years, we are going to invest in the fundamentals of the business. The focus this year will be on setting up a design centre and a research and development facility at our unit in Greater Noida.
Going forward we are thinking of setting up an institute here to study and review the future of India’s economy, which will help us in our plans for the market here. We have such centres in Korea and China. The research will help us know where is India heading.
What kind of investments are you planning in R&D and manufacturing?
In the last five years, we have invested about Rs200 crore on R&D and Rs400 crore every year on marketing. Going ahead, from this year onwards, we are looking to double the amount of investments done in R&D to Rs400 crore every year. Currently, we have one manufacturing unit each at Greater Noida (near Delhi) and Ranjangaon in Pune.
As we continue to invest in manufacturing, there is scope for expansion at the Ranjangaon unit for the next three years. Probably by 2012, we may have to find another extension. We will look at setting up another unit around that time.
What is your vision for the Indian market and are you making any changes at the organizational level to support the vision?
We want to be the No. 1 player in every category in India. In the last six-seven years, we have managed to grab the top slot in many categories. It is important to be No. 1 here than anywhere else across the globe.
Since India is an emerging market, we need speed in operations here. We will soon appoint an expert to look into the company’s organizational structure and help us in making the decision-making process shorter. The vision is to empower people in different verticals to take decisions and clearly define their own roles and responsibilities.
What is the company’s current turnover and the target for this year?
In 2008, the company sold products worth Rs10,730 crore. In 2009, the target is to take this figure up to Rs13,000 crore.