Table of Contents
1.0 Introduction
The rising globalization has not only increased the interactions between and among companies, but it has also opened the world market for major competitors. Companies are especially keen to introduce their services in the developing countries as consumers gain more buying power in these nations. Market and product globalization leads to a decline in the trade barriers between countries hence making it easier for a company to sell products in the international market. With this, it is important to evaluate the marketing of LG smartphones in the Indian market since as a developing country with a large population, India offers an impetus for the introduction of the LG smartphones. This report will evaluate the viability of introducing the sale of LG Smartphone’s in the Indian market through analyzing the country and market analysis, market entry strategy, Marketing mix and staffing policy and strategy for international business operations.
2.0 Company background
LG Corporation was founded in South Korea in 1958 as Lucky Goldstar and is headquartered in Yeouido-dong, Seoul, South Korea. LG Electronics is part of the LG Group of companies and is the second largest electronics company in the world after Samsung. The company deals with the sale of mobile communications, home entertainment, home appliances & air solution and vehicle component appliances. Over the years, the company has opened subsidiary companies such as Zenith, LG Chem, LG Electronics, LG Display and LG telecom. The company has employed an estimated 82, 000 workers in the more than 128 countries worldwide. The company has set the pace in the digital era through its unique technological expertise and manufacture of home appliances such as tvs and radios. Since the 1990’s the company has focused on the innovation of mobile phone technologies and 2010, the company entered the Smartphone industry. LG has since developed unique smartphones that offer distinct features aligned with the tastes and preferences of the consumers in the global arena.
3.0 Country and market analysis
3.01 External factors that make the market attractive
Political stability
The suitability of LG seeking to establish Smartphone’s in the Indian market would be 5/10 since some states in India offer more security than others (Bremmer, 2005). Also, some states changed their policies after the ascension of Prime Minister Narendra Modi to power in 2014.
Corruption levels
In 2016, India was ranked position 76 among 176 countries in the Corruption Perception Index which was released by Transparency International. This factor would be rated at 4/10 due to the risk of high corruption. Goswami (2017) stated that despite the government’s efforts in minimizing corruption in the country, bribery and red tape continues to plague the country.
Free market systems
The Indian market uses a mixed model which is more liberalized in this globalization age. This factor would be rated at 9/10 since India is the fifth largest country globally regarding purchasing power parity (PPP). In addition, the country is the second after China in the category of the emerging economies (Shilling, 2012).
3.02 Customer/ competitor based factors
Level of existing competition
For the last few years, India has attracted many foreign Smartphone manufacturing companies as the US and China markets reach near saturation point. This has pushed the domestic companies such as Intex and Micromax into making efforts to gain a larger market share as they seek to close the gap between them and the leading Smartphone seller in the country, Samsung (Aulakh, 2015). This factor would be rated at 6/10 since it is a viable venture considering the existing level of competition among companies which shows there is a high demand for Smartphones in the country.
Efficiency and value of existing competitors
This factor would be rated at 6/10 since the existing competition between companies has forced firms to come up with various marketing strategies to win more consumers such as price aggressiveness. This is especially practiced by firms that have just entered the Indian Smartphone market to help increase consumer awareness. As a fast-growing Smartphone market, India is expected to outpace the US, the second largest Smartphone market before 2020 (Aulakh, 2015).
Product availability to meet consumer needs
With India being a developing country, consumers are more conscious about the cost of Smartphone’s since only a few of them have disposable cash. About 75% – 80% of the Smartphone sales come from devices sold at prices under 10, 000 Rs. This factor would be rated at 7/10 since LG would offer Smartphone’s at both competitive and fair prices to the consumers. The company can also offer a portfolio of Smartphones across various price categories.
3.03 Industry and business based factors
Trade barriers
The suitability of this factor can be rated at 4/10 since there are various trade restrictions in India such as import licensing; standards, testing, labeling and certification; anti-dumping and countervailing measures; export subsidies and domestic market, procurement and service barriers, factors that would affect the free flow of trade in the country.
Labor force availability in India
The suitability of this factor can be rated at 9/10 since the country has about 485 million workers. Each year, about 12 million people enter the labor force annually which is higher than the 5.5 million workers employed every year (Bhattacharya, 2015).
Company strategy
This suitability factor can be rated at 9/10 since LG seeks to strategically place itself in the Indian market through product differentiation and the use of a marketing mix strategy that will create both product awareness and interest to the consumers. The company will build the new product on the already established LG brand name in India.
Transport costs
The suitability of this factor can be rated at 6/10 since the Indian transport network is not yet well developed. As such, LG will incur more costs when transporting products. Transportation between New Delhi and the South takes approximately one week hence companies can incur losses due to the long transportation time and the fuel used on the way.
4.0 Marketing mix and staffing policy
LG Company will standardize the products by offering competitive and fair prices and also offering products that are aligned with the international standards. LG will use the price, product, promotion, and place marketing mix strategies to gain an edge in the Indian market. The company will start by surveying the products offered by competitors and review the distinct features that the Indians prefer in their Smartphone’s. This will help in developing and offering products that are aligned to the consumers’ expectations. Goi (2009) stated that the product is the most important factor in any organization hence the need to develop products that fit the tastes and preferences of the people from a distinct community.
This will be achieved through offering a portfolio of Smartphones with distinct features and variations in price. The prices will be affordable to all the people in all social classes. Besides, the prices will be competitive to the ones offered by other companies and also fair to the consumers. The products will be strategically placed in major towns and busy streets to help increase consumer awareness. In addition, LG will open outlets in rural areas to gain touch with the consumers from grass-root areas. In the initial months of the introduction of the products, the company will run various promotions focused on increasing consumer awareness of the products and also developing a rapport with consumers and possible consumer loyalty.
5.0 Market entry strategy
LG can use indirect export which involves the sale of products through a domestic intermediary in the host company. The advantages include low financial risk, low entry cost, low staffing requirements and lack of marketing costs while the weaknesses include low profitability, full dependence on the domestic intermediary and lack of ability to gain international experience. The company can also use direct export through a representative office or an own foreign distribution network (Tang & Ben, 2011). The advantages include a physical presence in the foreign market, direct contact with consumers, control over sales and high profitability while the disadvantages include high entry costs and time consumption in maintaining an own distribution market. Another mode is the whole owned subsidiary which is the creation of a foreign subsidiary that is fully owned by the company. The advantages include full control, the good image in the foreign market and profitability while the disadvantages include high entry costs, high risks and complicated registration procedures in the foreign market.
Another mode can be through management contracts where an exporter provides management services for a company owned by the importer. The advantages include low risk, low capital commitment and gaining experience in a foreign market while the disadvantage is low profitability. Licensing is another mode that involves selling patented rights to a specific product to a foreign company (Tang & Ben, 2011). The advantages include low financial costs and financial risk, low staffing and steady income while the weaknesses include lack of control in the foreign market, low income, and disloyalty in the licencee. Franchising can also be used which is the sale of rights to the domestic franchiser to conduct commercial activities through a foreign franchise. The advantages include low entry costs and rapid expansion of the foreign market while the disadvantages include sharing of the profits, conflicts between partners and disloyalty by the franchisee.
The best entry mode for LG in the sale of Smartphone’s in the Indian market is the whole owned subsidiary and direct export since they are more profitable than the other modes. LG is an international company that has achieved contact with foreign markets in all the six continents in the world. As such, the company does not need any foreign subsidiaries to help gain entry in a foreign market since the company has already created loyal and committed consumers. As such, while venturing in the Indian market, the company will first introduce the Smartphones to the consumers who are loyal to other products under the LG brand such as TV’s, radios and home theatres and rely on word of mouth and advertisement through local online and offline platforms to create consumer awareness.
6.0 Strategy for international business operations
The company can use an international business strategy that involves seeking a strategic position within the Indian market for the sale of smartphones through strategic positioning and the use of a marketing mix strategy that is aligned with the consumer expectations. The international market raises various heterogeneous issues due to its operations in multiple countries that have distinct political, economic, social and cultural characteristics. The success of an international business strategy lies in successfully overcoming the challenges presented in the foreign, unfamiliar markers in different countries (Nachum, 2011). In this age of globalization, the international market has rapidly developed and become more diverse and heterogeneous in terms of economic, political and cultural international business characteristics involved. As such, LG needs to develop a holistic international business approach that will help to address the challenges in the Indian Smartphone market hence maximize the sales and profits.
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- Bremmer, I. (2005). Managing Risk in an Unstable World. Harvard Business Review. June 2005. Web. Retrieved on November 14, 2017.
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- Goswami, S. (2017). Study Finds India is Asia’s Most Corrupt Country, While Japan Comes Last. Forbes. March 8, 2017. Web. Retrieved on November 14, 2017.
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- Shilling, G. (2012). India’s accelerating Shift Toward Free Markets. Bloomberg View. December 18, 2012. Web. Retrieved on November 14, 2017.
- Tang, J. and Ben, S. L. (2011). A Network Based Theory of Foreign Market Entry Mode and Post-Entry Performance. International Journal of business and Social Science. 2(23): 50- 59.