Two very interesting pieces caught my attention in the latest issue of Businessworld and bought back memories of having participated in those battles and return with similar lessons. The first dealt with the fight between LG and Samsung and the second between Toyota and Honda. Coming 6-7 months into the slowdown,both make quite fascinating reading. The last time I drove down the Greater Noida highway to the LG factory, it was mid-summer of 2006. Across various divisions, we made audacious presentations to take the season by radioactive storm. LG turned it down as they were changing tack, the new CEO Shun was seeking to re-position LG from being a mass-market leader to a mass-premium player ( a new segment most companies in boom-time India had created to chase both volume and value - to keep the mass and attempt the premium or viceversa - to whip the cream and drink the milk at the same time). Samsung in the meantime was attempting the reverse. I remember that after my Samsung presentation, I was told that the dealer budgets had now increased from 0.5% to 2.5% of the 4% allocated to advertising and promotion, signifying a shift in strategy to tactical incentivisation. Of course, we managed to attack the regional offices for our share of monies, but the strategic shift stayed in my mind for some time. I thought highly about Korean flexibility. Sony and Phillips in contrast weren't as nimble- sticking to steady premium-technology positioning for years. Both never attempted a price cut or looked at the mass markets.
It seems today, as the article says, that the positioning shifts attempted by LG and Samsung have not yielded the desired results. LG has skidded off its leadership plank and given way to Videocon while Samsung has slipped further. The trade, which was used to LG's agression suddenly needed to look at a new mass player and it helped that Videocon was around to fill the gap. Probably LG's Kims' move to Videocon helped too. Samsungs' consumers were also left confused - as is the wont of any premium brand when it goes mass. The slowdown was a final nail.
The drive to Toyota on the Mysore road is great and the sight of thousands of cars parked in the plant at Bidadi is exhilarating. Have only seen the Maruti, Gurgaon and the Daewoo,Noida plants, so in incomparison this looked much larger. We had to leave our cell-phones at the out-gate and walk the distance to the factory office. IN times of google maps and satellite pics, I thought it was a little archaic. Inside the plant, I saw Japanese excellence at work and learnt the truth about their brillance. The incredibly achieved brand swap of Qualis-Innova is a marketing case study. Toyota doesn't introduce a new model till its existing model has outgrown its profit and volume targets. So, its in it for the long haul. I thought this was a good strategy. After all, where was the hurry ?But the last three years have proved it wrong, or so it seems.
According to the piece alarmingly titled ' On the wrong track',it seems it is losing the battle in India. The Camry costs 21 lacs in India and only 10 lacs in the US. For an economy thats 15 times our size, how do they manage to buy the same car at less than half the price? Assembled locally with a similar 44% imported content, the Accord at 17 lacs is only 7 lacs more expensive than in the US . The 4 lac price differential is hurting volumes. The Corolla Altis, the new car launched phasing out the version I have, is priced above the Honda Civic (and should be!) but the absence of a car in the C segment to compete with the City and one to compete with the CRV are doing Toyota's slow expansion philisophy no good. The plan to launch an A seg car in 2011 will also put Toyota much behind in the race, considering Skoda launched one last year,GM two years back, Mercedes (a beauty at 55 lacs! ) and Honda is intending to do it next yr.
As GM contemplates bankruptcy, as Ford shares drop below $1, and as internationally, Toyota expects its first operating loss in 70 years, inspite of being so very conservative, it will be interesting how, like my team Chelsea, it makes a comeback.
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