Sales & Distribution Project LG-SONY

SALES AND DISTRIBUTION PROJECT

Sales (Pre & Post) & Distribution’ effectiveness:

A comparative study of

Sony & LG

Televisions

Executive Summary

This project aims to study the distribution channels, sales network and service

patterns of the consumer durable market (Television) through an analytical

and comparative study of two leading companies- LG Electronics India Ltd.

(LGEIL) and Sony India Pvt. Ltd. The project also tries to bring out the

shortcomings, if any, in the present system and thus recommends suggestions

to improve the same. These suggestions are based on the market research

conducted by our group.

The project was prepared in accordance to the guidelines provided by our

group mentor Prof. Maninder Singh and the company officials we contacted

during the industry research. This project report also contains the valuable

insights provided to us by the channel Partners. Two company officials from

each company and 6 channel members were contacted during this project.

The project outlines the television market in country. We have also provided a

brief history of both the companies we have chosen. Further this project

explains the distribution pattern of these companies the market presence and

the reasons for their present position in the market.

We have also tried to explain the various problems encountered by the end

consumers and provided suggestions which were based on a market research

conducted on a sample size of 225.

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Acknowledgments

We are very thankful to the entire dealer, service, and sales network of , LG

Electronics India Pvt. Ltd, Delhi , without which completion of this project would not

have been possible.

We are extremely grateful to Mr. Rishi Vasudeva (Area Manager, LG Electronics

India Pvt. Ltd. Delhi), Mr. Bharat Sethi (Deputy Manager, LG Electronics India Pvt.

Ltd. Delhi) and Mr. Syed Asif Ali (Executive, SONY India Pvt. Ltd. Delhi) Mr. Amorinder Chettri, (Territory Incharge, SONY India Pvt. Ltd. Delhi) for sharing with

us all the details of the project and providing us with valuable insights about sales,

distribution & servicing function. We would like to thank them for the patience shown

by them and being of such a great help to all our queries.

We would also like to express our gratitude towards our professors, Prof. Maninder

Singh, for giving us an opportunity to do this project on sales and distribution and for

being the guiding light through the completion of this project.

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CONTENTS

1. Executive Summary 2

2. Acknowledgement 3

3. Methodology 5

4. Television Industry in India 85. Company Background (LG) 116. Distribution network 13 7. LG Channel Partners 148. Channel Conflicts And Corporations 18

9. Company Background (Sony) 19

10. Distribution Network 22

11. Sony Channel Partners 23

12. Channel Conflicts And Corporations 25

13. Findings 26

14. Conclusions 37

15. ANNEXURE- 1 3816. ANNEXURE- 2 41

17. ANNEXURE- 3 44

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Methodology

The focus point of this research was to do analytical and comparative study of the sales, service and distribution function of the two brands of the television makers, the chosen brands were:

1. LG2. SONY

Information SourcesPrimary Data Sources :-

LG Sony Area sales manager Dealers

Secondary Data Sources :-

www.LG.com www.sony.co.in www.ximb.ac.in

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http://www.ximb.ac.in/

http://www.sony.co.in/

http://www.LG.com/

Data Collection Tools

Interviews Questionnaires

Sample Size Used

The sample size for the dealers was 6 in number while the sample size for sales

people was 4.

SONY (dealers) - 3

SONY (sales people) – 2

LG (dealers) – 3

LG (sales people) – 2

LIMITATIONS:

It was difficult to ask for time required for a detailed discussion on the

questionnaire & therefore several aspects of the questionnaire were answered

briefly.

The company officials did not divulge details about competitive sales policies,

strategies & certain financial terms with dealers as they find it to be a

confidential piece of information of the company.

Television Industry in India

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Today India is being referred as to land of opportunities for television manufactures. The trends and opportunities within the India market and predict that by 2012, LCD (Liquid Crystal Display) shipments will surpass those of CRT (Cathode Ray Tube) TVs in India.

India has the second largest population in the world and an annual GDP growth rate of more than 8 per cent from 2002 to 2012, with a TV market that is projected to be 1.3 crore (13 million) units in 2008. CRT TV accounts for 92.9 per cent of those units in 2008, followed by LCD TV with 6.6 per cent and PDP (Plasma Display Panel) TV with 0.5 per cent. However, Display search finds that the India flat panel TV market is just at the beginning of a real growth curve, with Y/Y growth of more than 100 per cent expected for each of the next five years. Growth will be driven by enhanced purchasing power, the digital broadcast (DTH, IPTV, STB cable) transition as well as consumer awareness and affordability of flat panel TVs. India's growing upper middle class is projected to be the greatest source of LCD TV purchasing power. Display Search analyses the favourable demographics where more than 23M Indians—greater than the entire population of Australia—will enter this demographic in the next five years.

Meanwhile, major brands like Samsung, LGEI, Sony and Philips and Indian local brands like Videocon and Onida are all focusing promotional efforts around LCD TV. Several Chinese brands are also targeting India with their first exports.

Other key findings in the report include:

Among the imports of LCD TV into India, approximately 25 per cent were imported in as CBU (Complete Built Unit) and 75 per cent were imported as SKD (Semi-Knock Down) or CKD (Complete Knock Down).

In 2007, the leading India LCD TV brands were Samsung, with more than 30 per cent share, followed by Sony (19 per cent), and LG (16 per cent). The leading PDP TV brands are LGE, Samsung and Panasonic. LGE also leads

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the CRT TV market in India with more than 25 per cent market share, followed by Samsung and Videocon.

Thailand has a special FTA (Free Trade Agreement) with India on duty benefits. Therefore, companies like Sony and Panasonic are making LCD TVs in Thailand and then shipping them to India.

21" flat CRT TVs have a 55 per cent share of the total CRT TV market in India.

There are still some concerns about India's LCD TV market growth: poor power supply; vague progress towards India digital TV broadcasting; a complex TV import-duty structure; and regulations that are very complicated and very inefficient.

In 2008, the share of 32" will be more than 45 per cent in India LCD TV market, followed by 20-26" with 31 per cent share. 40-47" accounts for only 15 per cent in India LCD TV market.

CRT TV OEM is a key business in India as many brands ship components into the country and then subcontract to local OEM makers to assembly CRT TVs for them.

Sony, Samsung and LGE have the most exclusive shops in India.

The growing LCD TV market in India has encouraged Indian company Videocon group to set up a TFT LCD panel manufacturing fab.

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Company Background

LG Electronics India Ltd.

Established In : Jan 1997 Managing Director : Mr. Moon B. Shin Corporate Office : Plot no51, Udyog Vihar, Surajpur Kasna Road, Greater

Noida (UP) Corporate Website : http://www.lg.com Number of Employees: 3000+

Business Areas & Main Products

Home Entertainment

Plasma Display Panels, LCD TVs, LED LCD TVs, Colour TVs, Audios, Home Theatre System, DVD Recorder/Player, BluRay Players

Home Appliances

Refrigerators, Washing Machines, Microwave Ovens, Vacuum Cleaners, Air Purifiers

AC

Split AC, Window AC, Commercial AC’s

Business Solutions

LCD monitors, CRT monitors, Network Monitors, Graphic Monitor, Optical Storage Devices, LED Projectors, NAS (Network attached Storage) and Digital signage

GSM

Smart Phones, Color Screen GSM Handsets, Camera Phones, Touch Screen Phones, 3G Phones, Multimedia Phones, Dual SIM Phones, CDMA Phones


Based in South Korea, LG Electronics (LGEI) had a global turnover of US$ 29.9 billion in 2003. LGEI has 50 affiliated companies across the globe, with 300 offices and presence in 120 countries. With over 64,000 employees, it focuses on four main businesses - Electronics and Telecommunications, Services, Finance and Chemicals. LGEI has 20 R&D centres worldwide and has subsidiaries in 76 countries. Established in 1997, LG Electronics India (LGEI) is a wholly-owned subsidiary of LG Electronics, South Korea. It is one of the leading companies in consumer electronics, home appliances and computer peripherals in India. It has a turnover of almost US$ 1000 million in India. LGEI’s sales are increasing with a CAGR of 40 per cent over the past five years.

LG is the market leader in various segments like colour TVs, microwave ovens, frost-free refrigerators, washing machines and air-conditioners, with market shares of 26.2 per cent, 41.2per cent, 37.9 per cent, 34.1 per cent and 34 per cent respectively.

LG Electronics India received the Occupational Health & Safety Management System OHSAS18001:1999 certification from the British Standards Institution (BSI), India, for a systematic approach towards Occupational Health and Safety Management System.

LGEI exported goods and services worth US$ 40 million in 2003. The major export markets for LGEI are the Middle East, West Africa and Central Asia.


Distribution networkLG has adopted the regional distribution model in India. All the distributors work directly with the company. This has resulted in quicker rotation of stocks, and better penetration into the B, C, and D class markets.

LG also follows the strategy of stock rotation, rather than dumping stocks on channel partners.

LG has over 46 branch offices and another 110 area offices across the country. LG had set a target of developing 2,000 dealers in 2004, in addition to the existing 3,000 dealers all over India.


LG CHANNEL PARTNERS

CFA’s

• The number of C/F agents as of 31st May,2004 is 28.

• They are spread across 20 states in India.

• The company dispatches the goods to C/F on consignment basis.

• At the same time, these C/F agents all work on contract basis.

• They get paid as per the amount they stock.

DISTRIBUTORS

• The company appoints distributor for selective cities where the markets are small but require more focus and attention. Distributors are required to conduct sales and marketing on behalf of the company in these markets serving to all the required company stores.

• The company sends goods to the distributor on outright sale basis.

• It is the duty of the distributor to send his people into the field to book the orders and also execute them through their own delivery vehicles.

• The distributor has to maintain his own sales, delivery and accounts people for smooth working of his unit and is served by the nearest C/F for all his requirements.

• The distributor is given a margin of max 17.5%


Delivery Schedule

• Takes 1 day for CFA’s to service reorder within their zone

• Distributor too caters to the demand in his area within 48 hours from the

time of receiving the order

• If goods have to be procured from the warehouse then it takes 8 days (avg) for the goods to arrive at the C/F or distributor and delivered to the stores.

• No inventory management system in place with the MBO’s (Multi brand

outlet)

•‘LG Shoppe’ and franchisee showrooms do have a system in place to consolidate their inventory and sales with the company main office

Ordering

•The retailers order their requirements directly to the concerned distributors. •The distributors source the orders from the company warehouses, which are

connected directly with each of the 43 branches.

•The mother warehouse in Greater Noida caters to the needs of all the regional warehouses.

•It is the responsibility of the C/F agents to supply tothe distributors as per their requirements.

•If any reorder do come in during the month then the regional warehouse that entertains them properly services them.


Planning & Forecasting

•The company goes for annual forecasts on the basis of the previous year’s

sales and also current trends.

•These sales forecasts are then disaggregated into monthly sales plans.

•The logistics and the production people meet every 15days, and on the basis of sales as well as past inventory, they freeze production for the next 15 days.

•In case the sales in the previous period have not been up to the mark, and the inventory levels are high, the production is halted and stock of the situation is taken.

Reverse Logistics

•The company accepts returns from their retailers as well as company owned stores

•The job of bringing back the defects again rests with local distributor and C/F that collects them from the shop

•They are entered and kept separately at the warehouse and proper stock is maintained and sent to warehouse

•The damaged goods are dispatched to the warehouse periodically. The damaged goods received from the distributor are credited to his account and as such are only accepted after thorough examination by the local sales executive.


Sales Organization Structure

Average Inventory Size At Retailers

Rs 70 lacs

Order Cycle

7-8 days

Credit Period

15 days

Market Research

Conducted for Customers, Channel Members , General market survey Research is conducted once in three months They generally cover Qualitative and analytical research

CHANNEL CONFLICTS AND COOPERATION


Managiong DirectorNational Sales HeadRegional ManagerBranch ManagerArea ManagerSale Executive

The first type of channel conflict may arise because of the co-existence of the following:

•LG owned exclusive outlets

•MBOs (multi brand outlets)

•Another type of conflict could be a result of institutional sales being sourced by both:

•The company itself

•The dealers who want to meet targets

•Internal conflicts:

•The branch managers, who look after all products in a particular region, and product group managers, who look after particular products, often monitor the same dealers in a region, thereby leading to conflicts.

Company Background

Sony India Pvt.Ltd


Company: Sony India Pvt. Ltd.

Managing Director:

Mr. Masaru Tamagawa

Date of Establishment:

November 17, 1994

Location: A-31, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi - 110044, India.

Staff Strength: 728

Share Capital: Rs. 550 million

Share Holding: 100% subsidiary of Sony Corporation, Japan

Branch Offices: Delhi, Haryana, Mumbai, Bangalore, Chennai, Kolkata, Hyderabad, Vijayawada, Jaipur, Chandigarh, Lucknow, Pune, Ahmedabad, Indore, Cochin, Coimbatore, Ghaziabad, Guwahati, Mangalore and Ranchi

Business Activities:

Marketing, Sales and After-Sales Service of electronic products & software exports Products: Televisions, Hi-fi Audios, Home Theater systems and DVD players, Personal Audio (CD/Cassette Radio Players and Walkman®), Audio Video Accessories, Car Audio and Visual Systems, Notebooks, Gaming Consoles, Camcorders and Digital Still Cameras, Digital Imaging Accessory (Batteries, Chargers, Microphone, Photo Printers), Mobile Phones, Recording Media and Energy Devices, Broadcast and Professional products.


One of the most recognized brand names in the world today, Sony Corporation, Japan, established its India operations in November 1994, focusing on the sales and marketing of Sony products in the country. In a span of 15 years Sony India has exemplified the quest for excellence in the world of digital lifestyle becoming the country’s foremost consumer electronics brand. With relentless commitment to quality, consistent dedication to customer satisfaction and unparalleled standards of service, Sony India is recognized as a benchmark for new age technology, superior quality, digital concepts and personalized service that has ensured loyal customers and nationwide acclaim in the industry.

With brands names such as BRAVIA, BRAVIA Theatre, Cyber-shot‚ Handycam®, VAIO, Walkman®, Xplod, Memory Stick™‚ PlayStation®. Sony has established it self as a value leader across its various product categories of Audio/Visual Entertainment products, Information and Communications‚ Recording Media, Business and Professional products.

In India, Sony has its footprint across all major towns and cities through a distribution network comprising of over 5000 dealers and distributors, 240 exclusive Sony outlets and 19 direct branch locations. Manned by customer friendly and informed sales persons, Sony’s exclusive stores ‘Sony Center’ are fast becoming the most visible face of the company in India.

Sony India also has a strong service presence across the country with 20 company owned and 190 authorized service centers and 16 exclusive demonstration centers. A distinctive feature of Sony’s service is their highly motivated and well-trained staffs that provide the kind of attentive and sensitive service that is rare today.

Sony is committed to ensuring that both the products and the marketing activities employed truly make a difference to people’s lifestyles and offer them new dimensions of enjoyment.


Distribution NetworkDecisions with respect to distribution channel focus on making the product available in adequate quantities at places where customers are normally expected to shop for them to satisfy their needs. Depending on the nature of


the product, marketing management decides to put into place an exclusive, selective or intensive network of distribution, while selecting the appropriate dealers or wholesalers.

Sony being the company which positions itself as a seller of durable andhigh-end products, it is practicing selective distribution of its products from theselective dealers i.e. SONY World. Apart from this there are grey-markets inIndia and other countries where a practice of intensive market coverage ispracticed, and the products in these kind of markets normally do not posses allthe features and benefits which Sony offers e.g. warranty and guarantee.

Sony distributes its products in various channels. It uses Zero-level Channel, one level channel and two-level channel.

In India, Sony has used the method of one-level distribution channel.This means that, customer buys their Sony product from the retailers recognized by Sony, and these retailers buy the products directly from the company itself.i.e.


SONY CHANNEL PARTNERS

• There are 21 C & F agents in India

• They are spread across 21 states in India.

• The company dispatches the goods to C/F on consignment basis.

• At the same time, these C/F agents all work on contract basis.

• They get paid as per the amount they stock.

DISTRIBUTORS


• Sony creates a non-competitive zone between itself and its channel partners and among channels parts as well.

• It doesn’t supply to those to whom its distributors supplies to

• It appoints only one distributor for a given location.

• Dealer margin was undisclosed.

• Also Sales executive from Sony visit distributors often to keep them updated on new products and changes in prices and to build a strong relationship.

ORDERING

Planning & Forecasting

The planning & forecasting is done on the sales based on the past trends i.e Y/Y (year on year) & Q/Q (quarter on quarter) basis.

The channel members order the respective quantity via common software given to all the channel members. They can order 1 unit also as there is no minimum or maximum order conditions, also they can order on daily basis, weekly basis etc as there is no condition of time duration for ordering the goods.

Delivery ScheduleThe delivery is done via a logistic partner & totally it depends on the order from the channel members. The average order cycle time is 7 days. As and when the order comes, the logistic partner or the C/F agent delivers the respective goods.


Sales Organization Structure

Average Inventory Size at Retailers

Depending upon the movement at the retailers

Order Cycle

7 days

Credit Period

15 -30 days

Market Research

Conducted for Customers, Channel Members , General market survey They undertake both primary and secondary research The research frequency depends upon product launch & sales forecast

CHANNEL CONFLICTS AND COOPERATION


• Sony creates a non-competitive zone between itself and its channel partners and among channels parts as well.

• It doesn’t supply to those to whom its distributors supplies to

• It appoints only one distributor for a given location.

• The dealers are not allowed to sell below a certain price

Findings

We conducted a market research to find out the perception of these brands in the minds of the end consumers regarding the various activities undertaken by both the companies

Sample size : 224

Period of research: 10/22/2010 - 10/31/2010

Mode of research: Questionnaire

The questionnaire were mailed to the respondents and it was also posted on social networking sites such as Facebook, Orkut, Linked in.

The Questionnaire has been provided in the annexure.


Here as our respondents SONY emerges as leader in market share with a 2% edge over LG.

As per the respondents Samsung take the third position followed by other brands and Phillips, Akai grabs the last position with a just 3% market share.


Retail chains here proves to be the most preferred choice of end consumers for their purchases, however super markets are not much far behind ,also internet is slowly becoming a significant contributor to the sales.


As it is very clear from the responses that most of the people are very happy with the buying experience at the retailers.

Retailers are proving to be delivering the value proposition promised by the companies, this can be related to the proper training and feedback provided by the companies


The labelling/ product information is very good as per the consumers. This may be an outcome of the market research they do.

Customers get wide range of price choices to select from at the reatailer.


80% of the respondents find LG/Sony easy to locate which means the retail network is very good

Approx 70% of the respondents are happy with the staff at the retailers outlet i.e they are well trained & groomed.

80% of the respondents are happy with the delivery pattern


More than 75% of respondents were happy with the overall quality of service the retailers provide

The advertisement done by Sony/LG does not mislead the customer

59% of the respondents agreed with the hassle free replacement of goods if the good were defective


There is slight aggressive practice with respect to the sales at the retailers outlet. 62% of the respondents disagreed with the aggressive practice & 38% were not happy with the practice


72% of the respondents never faced any problems with respect to the TV, which is a very healthy sign for both the company.

CONCLUSIONS


ANNEXURE- 1

Questionnaire

(For Dealer’s/Retailer’s/Franchisee)

Person contacted: …………………………………………………………..

Name of dealer: ……………………………………………………………..

Address: ………………………………………………………………..

Tel. No.: …………………………

1) What are the different brands which you keep in stock?

2) Which brand is most asked by the customers

i) LG ii) SONY iii) Samsung iv) Videocon v) others

3) What is your average sales/month?

4) Which brand do you recommend to the customer and why?

5) Do you get any credit period from the company?

a) YES b) NO


If Yes, What is the credit period you get:

i) Upto 15 days ii) 15-30 days iii) >30 days

6) What is your average order size?

7) What are the margins that you get from the company?

8) What is the average order cycle time taken by the company?

i) < 5 days ii) 5-10 days iii) > 10 days

9) Where would you rank the services/assistance provided to you by the company/s

Very

Good

Good Satisfactory Poor Very

poor

Delivery Time

Quality Maintenance

Incentives

Promotional activities

Condition of Product

Ease and Flexibility of placing

Order

Transporter’s Behavior

Customers Orientation

Commercial Terms


Services of Sales Persons

10) How will you rate the efficiency of your sales persons

a) Very Good b) Good c) Satisfactory d) Poor e) Very poor

11) Does company provides you with any assistance by means of promotional activities?

a) YES b) NO

If Yes,

i) Numbers

ii) Timing

iii) Quantity of promotions.

12) Do you provide appraisals to your sales persons?

a) YES b) NO

If Yes, on what Parameter

ANNEXURE- 2


1. Which Brand of TV you have in Your house?

Sony

Lg2.If No then which TV brand are you using?

Samsung

Sansui

Akai

Videocon

Philips

Onida

Other3. When did you purchase the Sonly/LG TV?

1 Month

6 Months

12 Months

More than 12 Months4. From where did you buy this T.V

Supermarket

Discount Store

Departmental Store

Retail Chain

Internet

Any other6. Overall, to what extent are you satisfied with (RETAILER) when it comes to buying [PRODUCT]?

1 2 3 4 5

very bad very good


7. Innovation: Retailer continuously offers a wide enough choice of new products & innovative ideas that meet your needs

1 2 3 4 5

very bad very good

8. Reliability: TV sold by the retailer are reliable1 2 3 4 5

very bad very good

9. Product labeling: Product information provided by the company on the label/packaging is clear, accurate & sufficient.

1 2 3 4 5

very bad very good

10. Enough choice of Prices: Retailer offers a wide enough choice of TV’s at different prices.

1 2 3 4 5

very bad very good

11. Ease of Purchase: It is quick & easy to find the Sony/LG TV at the retailer.1 2 3 4 5

very bad very good

12. Staff: The staff at the retailer is well informed about the product & is helpful to you when you need it.

1 2 3 4 5

very bad very good

13. Delivery Fulfillment: Products are delivered as per the purchase order.1 2 3 4 5

very bad very good

14. Overall: Retailer offers quality of service overall1 2 3 4 5

very bad very good

15. Advertising from the company/retailer does not deceive, mislead or omit relevant information

1 2 3 4 5

Totally Agree Totally Disagree

16. Defective Good: Retailer/company would agree to replace, repair, reduce the price or give you your money back if the product was defective.

1 2 3 4 5


17. Aggressive Practice: You have felt unduly pressurized to buy the TV at the retailer.


1 2 3 4 5


18. Clear contract terms: When a written contract is provided by the retailer, the contract terms are fair.

1 2 3 4 5


19. How many problems have you experienced in the past 12 months with Sony/LG TV.

None

Once

Twice

Thrice

Multiple


ANNEXURE- 3


Sales & Distribution Project LG-SONY

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