Sales & Distribution Project Report On Sales and Distribution in LG Electronics Submitted as part of course curriculum forPOST GRADUATE DIPLOMA IN MANAGEMENT (PGDM)Under the guidance of Mr. R. J. Masilamani

Submitted by14DM147 Pinki Rani14DM197 Shaunik Rai14DM207 Shubham Shrivastava14DM222 Suneera Agarwal14DM227 Sushant Kataria14DM233 Udesh Patidar

ACKNOWLEDGEMENT

The sense of fulfilment and elation that accompanies the successful completion of the Project would be incomplete without mentioning name of people who helped us in accomplishing this Project, people whose constant support and encouragement resulted in this realization. We take this opportunity to thank Honorable Director Dr. H.Chatuvedi for providing healthy environment in our college, which helped in concentrating on the task. We thank our Chairperson of Department Prof. Ashok Malhotra and all the Faculty members, teaching and non-teaching for helping us during the Project. We thank our mentor Prof. R.J. Masilamani for the guidance and inspiration he gave during the course of completion. We also extend our gratitude to BIRLA INSTITUTE OF MANAGEMENT TECHNOLOGY for giving us this opportunity

CONTENTI. About Lg electronics..4II. Product line.5III. Channel design...6IV. Margin allowed......7V. Pricing strategy..9VI. Swot analysis........11VII. Sales hierarchy....12VIII. Supply chain13IX. Scope of improvement16

INTRODUCTION

OBJECTIVES OF THE STUDY Complete study at the Retailer/Sub-Dealer Level and Distributor level Companys sales mix at various levels Comparison with Competitors pricing Margins allowed at various levels

LG ELECTRONICS AN OVERVIEWThe history of LG Electronics has always been surrounded by the company's desire to create a happier, better life. It was established in 1958 and the company since then has led the way into the advanced digital era, thanks to the technological expertise it has acquired by manufacturing many electronic appliances. Applying new technologies in the making of mobile devices and digital TVs in the 21st century, LG Electronics has unveiled many new products and continues to reinforce its status as a global company.

Headquartered in Yeouido-dong, Seoul, LG Electronics is a multinational electronics company, and a member of the South-Korean multinational conglomerate LG Corp. The two Korean companies, Lucky and GoldStar, merged to form LG. The abbreviation comes from this. But before it got its name as LG, Lucky was the brand name under which household products were sold, and Goldstar sold the electronic products under its brand name.

LG Electronics was one among the Top 100 global brands in 2005, and LG recorded a brand growth of more than 14% in 2006. The display manufacturing affiliate, LG Display, is today the world's largest and best plasma panel manufacturer. LG Electronics, today, is the world's second-largest television manufacturer and the world's fifth-largest mobile phone maker by unit sales.

PRODUCT LINE OF LG ELECTRONICS

ROLE OF MARKETING CHANNELSSuccessful value creation needs successful value delivery. Holistic marketers are taking a value network view of their businesses. The marketing channel performs the work of moving goods from producers to consumers. All channel functions have three things in common:A. Use up scarce resourcesB. Can be performed better through specializationC. Can be shifted among channel membersAfter a company has selected a channel, the intermediaries must be selected, then trained, motivated and finally evaluated.

CHANNEL DESIGN1. DIRECT DEALER CHANNEL- 2. SUB DEALER/ DISTRIBUTOR CHANNEL

DISTRIBUTION NETWORK

REGIONAL DISTRIBUTION MODEL- ALL DISTRIBUTORS WORK DIRECTLY WITH THE COMPANY. 46 Branch Offices and Another 110 Area Offices Across the CountryDIRECT CHANNEL STORES THAT DIRECTLY SELLS TO END CONSUMERS. EXCLUSIVE STORES OR SHOWROOMS- MORE FOCUS FOR PROFITABILITY AND LARGE VOLUMES. MULTI BRAND SHOPS. 34 % OF SALES .ADVANTAGES- NO LOSS OF MARGINS THROUGH INTERMEDIARIES. COMPLETE CONTROL OVER DISTRIBUTION PROCESS

DISTRIBUTOR CHANNEL1)SMALL RETAILERS WHO LACKS CAPITAL TO BUY DIRECTLY FROM LG.2)DIRECT DEALERS HAVE ATLEAST ADDITIONAL 3 % MARGIN.3)49% OF SALES.ADVANTAGES-1)ALLOWS PENETRATION OF FRAGMENTED DISPERSED MARKET.2)EASES LOGISTICS FOR BUYERS WHO BUY DIFFERENT ITEMS

PROCESS OF DISTRIBUTION

MARGINS ALLOWED Different profit margins when selling to subsequent dealers and sub-dealers. The profit margins vary depending on the product category in terms of how slow/fast the products moves.

CASH AND VOLUME DISCOUNTDealers give a cash discount of maximum of 1% and volume discount of maximum of 5%.MANAGING OF DAMAGED GOODSIf Dealers finds any good to be damaged or that it needs repairing, then it requests repair the damaged good within 15 days from the company or gets it replaced within the same time frame.

LOCAL PROMOTION AND BUDGETPromotion is done locally and the budget is reimbursed in the range of 50 to 100% (in some cases) by the company.

PRICING STRATEGY

RATIO OF FAST MOVING AND SLOW MOVING

The TV, Audio and Video segment of LG is the slowest moving of all the product categories under the brand. On the contrary, in Refrigerators, Washing Machines and Air Conditioners segment, LG is one of the fast selling brands and has been a market leader in this region.

COMPETITORS PRICE OF LEADING BRANDS

The comparison of selling prices of Washing Machines and Refrigerators of LG with those of other leading brands is illustrated below. The prices are average of the selling prices of both, high and low end models for all product types, for better comparison against competitors prices.

Comparison of Prices of Refrigerators

Comparison of Prices of Washing Machines

RATIO OF FAST MOVING AND SLOW MOVING CATEGORIESThe TV, Audio and Video segment of LG is the slowest moving of all the product categories under the brand. On the contrary, in Refrigerators, Washing Machines and Air Conditioners segment, LG is one of the fast selling brands and has been a market leader in this region. MARGINS ALLOWEDLG Direct Retailing has different margin levels for various Product Categories. There are 4 Product Categories as identified by LG:1. Category Killers2. Good3. Better4. Best

There is absolutely minimal scope of margin when it comes to Category Killer products at less than 1% and about 10% for Best category products.

WINDOW DISPLAY AND MERCHANDISINGLG Best Shoppe has managed well to display the products and different product variants of LG.

SWOT ANALYSISSWOT Analysis

Strength1. Wide range of products to serve all categories and a strong focus on technology and quality2. Effective localization of product offerings for growth markets like India, Brazil, China3. Brand offers sound rational appeal good product features and good value for money4. Good after sales service and wide distribution network5. Subsidiaries enjoy independence in decision making and hence have flexibility in adapting to the local market6. Sponsorship of sports and entertainment events enhances visibility7. It has nearly 100,000 employees and is one of the top mobile manufacturers

Weakness1. Brand lacks influence in the opinionated segment of early adopters especially in the social media environment2. Brand has limited market share compared to market leaders

Opportunity1. Fast growth of home appliances, electronics goods market in emerging economies2. Convert improved brand image and awareness in to market share3. Increase the already Wide product portfolio

Threats1. Price war with close Korean competitors like Samsung can disrupt growth in price sensitive markets2. Highly competitive industry dynamics3. Stagnant urban demand4. Instances of false green claims can erode brand value and consumer trust

SALES HIERARCHY OF LG ELECTRONICS

Supply chainThe Supply-Chain Process

At a time when most companies are dissatisfied with the high logistics cost, Lgs logistics cost is 3.01 percent on net sale after deduction of excise duty, including our export freight cost. The company experimented with several production and distribution models over the last few years. The exponential growth in demand and constantly catering to newer and distant locations buoyed Lg to improve our supply-chain. But it was the implementation of GSCP (Global Supply Chain Planning) in 2008 that streamlined the operations.Year 2008 also changed a lot of things for LG globally with the implementation of new IT systems and changing its transportation functions through adoption of IT. Earlier, the Korean cabal found it hard not only to keep up with the fast-growing company, but concurrently tracking demand, supply, inventory, manufacturing, raw materials, logistics and distribution. It was onerous to compute collective data that would allow the company to see its progress at a quick glance, and in real-time. The Indian arm had to regularly send across long detailed excel sheets of data. The Korean headquarters required a system to synchronize forecasts, production and sales that would eliminate the issues of inaccurate shipping, planning and inventory. The Global Supply Chain Planning was established.

The GSCP integrates control of the entire business process from receiving orders, production to sales, and inventory, with an online link of LG companies around the world. Integrated with the Oracle ERP systems of LG worldwide, the end result of the deployment of GSCP enables the company to close the gap between demand and supply. It also provides the previous weeks performance results and capability matrix.The difference in GSCP from the earlier IT tools that LG Electronics has been using is that it combines design, parts supply, procurement, production, supply-chain, and cost management into an integrated process thus allowing the company to know how much to produce. For that to happen, it is crucial that all the branch personnel from every department collaborate on the weekly Sales & Operations Planning (S&OP) to decide on production and sales plans.Prior to deploying GSCP, LGE also faced problems in managing inventory. At a time when it needed to be at 42 days of inventory, it had 10 to 15 days more of inventory. LGE rolled out 12 Inventory Optimization solutions thus releasing it from millions of cash flow thats no longer tied to inventory.Considering that LGEIL outsources its transportation, the company often faced simple theft, misrepresentation of inventory, counterfeiting and piracy. This was restricted by installing deployed Global Digital Logistics System (GDLS) which aids in better route optimization, as well as improved loading and tendering capabilities. Playing on its existing Oracle ERP and EXEWMS, the transportation solution provides execution capabilities to its shippers and 3PL partners.

Regional DistributionTen years ago, the consumer durables and electronics trade was in disarray in terms of distribution. Most companies preferred to go with national distributors, who in turn sent out the goods to dealers. Dealers did not deal with the company directly. Also, companies manufacturing several products had created separate divisions within their company and each division would deal with the distributor separately. This caused a certain amount of confusion in the supply-chain. Soon there arose issues and allegations in terms of margins or the lack of it, product quality, and reverse logistics. LGEIL (possibly, another first way back in 2003) charted a new course and went to the regional distributors (RDs) directly, thus doing away with national distributors. The company thought that only local people would know their own market. This has worked well for Lg. It also began offering higher margins to help them scale up their business from LG products. The expertise of the RDs also helps LGEIL to near correctly send out the right product batches and manage the reverse logistics too.Customer returns are handled by the customer support department directly, while the returns from dealers are handled by the supply chain. Transportation used is the same which goes for the delivery of the products to such dealers. In Maharashtra, the company has a warehouse in Bhiwandi and goods are moved to the warehouses of our trade partners. Lg deal directly with dealers and distributors who in turn supply to sub-dealers.So how does it distinguish between urban and rural supply-chain? Actually, it is surprising to know that goods that find their way to urban places also find their way to rural, though on a smaller scale because of power outages or lack of electricity.As is evident at LGEIL, theres much required to do something simple and keep it that way. OVERSEAS DISTRIBUTIONLG is an international brand world wide. They have their unique distribution channel in Pakistan; they market their product through a domestic renowned company known as BUTTERFLY. LG has given their license to BUTTERFLY Company to market their product.LG import their product from KOREA and the product come to the Karachi port and then it send to the warehouse, from where the product delivered to the different showroom located in the country. Lastly the showroom or the direct sales force can sell to the end user.

SCOPE OF IMPROVEMENT Improvement in Supply:Improvement in supply is required as Distribution frequently get stock out from a particular type of butter which is having more sales. This should not be a repetitive condition. The company should send exactly that what is required by the Distributor. Sending some others flavours which are not demanded can reduce the sales of the popular brand lead to decrease in transparency between the Distributor and the Retailers as the Distributor is going to avail the same policy with the retailers as the company is availing with him. Sending proper supply can strengthen the relation of the company. Distributor and the Retailers. Improvement in Packaging:Packing can be made more attractive by using cartoons to influence the person. As per the consumer survey, the packaging of product related the best. Should adopt more flexible Replacement policies:The major reason of dissatisfaction among the other retailers was replacement policy of expired products. It was also the reason for many of the closed outlets. The Distributors gets replacement of 1.4% of total sales by the company. This percentage can be increased to provide more flexibility to the Distributor. The Distributer gets replacement from the company twice in a year. The Distributor should get the replacement monthly so that he can also replace expire products of retailers regularly. Regular Audit of all the Distributors:A regular audit to all the Distributors should be made by the company officials to check the condition of all the supply vehicles so that proper delivery of butter is made to the retailers. It was observed that some of the supply vehicles of the Distributor were not working properly and the supply was made in boxes.Referenceswww.lg.com/global/sustainability/business-partner/www.lg.com/inen.wikipedia.org/wiki/LG_Corporation

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