LG Wenfan Wen: Follow policy to strengthen product development

“Over the past 20 years, the awareness and influence of our brand in the Chinese market have gradually increased, but the status quo is still a certain gap from our ideals, so my next step is to minimize this gap.” The LG Electronics Global White Power Business Unit Director Shen Wenfan gave the above evaluation of the current status of LG Electronics China in an exclusive interview.

The reason why this is so stated is because of the change in the status of Wen Wenfan. On January 1, 2013, he formally assumed the position of President of LG Electronics China, and was responsible for the sales, marketing and service of LG Electronics in the Mainland and Hong Kong. Let a member of the group's core leadership who has served LG Electronics for 27 years take over the business in China, and LG's determination to boost the Chinese market is evident.

Although Shen Wenfan repeatedly stated that he is only “preliminary understanding” of China’s business, it can be seen from the expression he had received during the interview that he already had ideas. Following China's policies, adhering to a consumer-oriented market service strategy and strengthening its own product quality and channel construction will become the focus of its “governance” LG Electronics China.

Future Development Follows the Step of China's Urbanization

According to information provided by LG, Shen Wenfan has served in LG Electronics for nearly 27 years. He has served as executive vice president and CEO of LG Electronics Appliances, general manager of LG India, and general manager of overseas business of LG Life Systems. While serving as the general manager of LG Electronics India, Shen Wenfan promoted the Indian market to become the export center of LG Global Operations, and LG's performance in the Indian region continued to rise.

Shen Wenfan said that during his previous three visits to China, he had in-depth dialogues with senior executives and colleagues of LG Electronics in China. “From them, he heard a lot of information on LG's development in China, the Chinese market, and cultural characteristics.” Shen Wenfan believes that comprehensive judgments based on this information can better solve the problem of LG Electronics' development in China.

Shen Wenfan’s LG Electronics China will be more localized in the future.

Shen Wenfan clearly stated that LG Electronics China's product development direction should be combined with the current major policy of the Chinese government. For example, the Chinese government has higher requirements on ecological protection. Therefore, LG China's next product development will also focus on To improve energy efficiency.

As China's new urbanization becomes the focus of the future, LG Electronics China will also take targeted measures.

It is understood that the "National Plan for Promoting the Healthy Development of Urbanization (2011-2020)" will be promulgated before and after the National "Two Conferences" this year. The plan involves the construction of more than 20 urban agglomerations, more than 180 prefecture-level cities and more than 10,000 towns in China. According to the principle of “maintaining large cities and focusing on small and medium-sized cities, it will gradually form a group of cities with large radiation effects and promote The requirements for the coordinated development of large, medium and small cities and small towns will promote the transformation of urbanization from speed expansion to quality improvement.

"In the next 10 years, the income of Chinese residents will continue to increase." Shen Wenfan said that LG Electronics China's products will be concentrated in the mid-to-high end product line in the near future, and the future development direction will follow the speed of China's urbanization. The market carries out corresponding product development.

Channel sinks into home appliances 2013 keywords

Based on the gap between ideals and reality, Shen Wenfan said that the next step is to increase the LG Electronics brand to a brand that Chinese consumers love and respect. The key is to stick to a consumer-oriented market service strategy.

In addition to strengthening the quality of its own products, "channel construction" will become the focus of the 2013 Wen Shenwen work.

In recent years, LG's product lines have been mainly concentrated in the first and second-tier markets, and there is no strategic layout of third- and fourth-tier cities. This has enabled LG Electronics to obtain a home appliance industry policy dividend of “Home Appliances Going to the Countryside” and “Old to New”. Less benefit. Moreover, compared with the domestic home appliance manufacturers to launch products targeting third and fourth-tier cities, the image of LG Electronics in the minds of consumers seems to be solidified as “high-end”, making its market share in the third and fourth-tier markets low, which directly affects LG Electronics China's performance.

Appliance analyst Liu Buyou said in an interview with the “Daily Economic News” that foreign brands are the main sales force in the primary and secondary markets. Today, the primary and secondary markets are already close to saturation, but the high prices of foreign brands have not been met. Consumers in the market are fully accepted, and they naturally have a disadvantage in the competition with domestic brands. According to data from Zhong Yikang, in the first half of 2012, the retail sales of LG air conditioners in the national market were far lower than domestic brands such as Gree, Midea and Haier.

Song Jiaoyi, CEO of LG Electronics' home appliances and mobile communications division in China, also admitted that in the first half of 2012, LG Electronics had a negative growth in China. However, starting from the third quarter of 2012, LG Electronics responded to China's call for “energy saving subsidies”, and 95% of products sold were energy-saving products, and business performance began to return to normal.

“LG Electronics China's channels should be deeper into third and fourth-tier cities.” Shen Wenfan made it clear that in terms of channels, LG Electronics’ 2013 keyword is “channel sinking”. Specifically, LG Electronics China will change its strategy of tilting its resources toward core stores. In the construction of third- and fourth-line channels, it will cooperate closely with local strong customers in the future to develop markets in the form of franchised stores. Outside the major strategic cities, distributors with small and medium cities and rural areas will also maintain strategic cooperative relations and expand circulation coverage.

However, Shen Wenfan also said that LG Electronics will not develop low-priced products for the three or four cities. "On home appliances, LG Electronics' strategy is to sink channels, but product positioning is still high-end."

In addition, LG Electronics China will also strengthen e-commerce channel construction. In 2011, LG Electronics established an e-commerce division. In March 2012, LG Electronics let the new seven-day electrical network operate on behalf of the Tmall, and opened an official flagship store in Tmall, and achieved sales of all LG electrical main categories in online channels. This measure has been very effective. The data shows that at present, LG Tmall flagship store is mainly based on black electricity, with monthly sales of 7 million to 8 million yuan. On the day of “double 11” in 2012, sales reached 10 million yuan.

"At present, sales of LG e-commerce channels already account for about 4% of LG's overall revenue in China. In 2013, it will strengthen cooperation with e-commerce." Song Jiaoqi said that e-commerce is an emerging channel. The chance is the same.

Mobile phones will fight for share in the high-end market

In the eyes of the outside world, after Wen Wenfan took office, his many years of operating capacity in emerging countries will bring new hope to LG Electronics China. In addition to home appliances, the mobile phone business will also become the focus of the future.

According to statistics, since 2010, LG's mobile phone business has been sluggish in China, and LG is no longer releasing new mobile phones. The entire mobile phone business is in the clear inventory phase. In October 2012, LG China was exposed to a large-scale abolition of the Department of Mobile Phone Services, in which sales staff proposed to cut 1,000 people.

At that time, LG Electronics China responded externally that this was a strategic adjustment of the market and the optimization of the organizational structure, including the optimization of the channel model, and the localization of the star models of the global market, inevitably leading to changes in some human resources. LG Electronics China also said that it will speed up the smart phone strategy, optimize its organizational structure to improve operational efficiency, and enhance its competitive advantage.

“In the process of transitioning to smart phones, LG’s entry is a bit late.” Shen Wenfan admits that the mobile phone business is currently experiencing a difficult period, but the Chinese market is the most important strategic area for the development of LG mobile phone business and the Chinese market. LG mobile phones "will not give up easily." Shen Wenfan emphasized that LG Electronics China will “face the Chinese market with a renewed determination to pursue its business”. The future strategic choice is to abandon the low end and continue to compete for a certain market share in the high-end market.

It is understood that LG Electronics' positioning on smart phones is "big screen, high-end, 4G." Shen Wenfan expects that in the second half of 2013, China's LTE (4G) market will gradually open up, which will be an opportunity for the LG mobile phone business. It is understood that 90% of the LG mobile phone production line in Pingze City, South Korea, is a smart phone, and 50% of smart phones are LTE (4G) mobile phones.

Shen Wenfan sees the current situation of the LG mobile phone business as "a tortoise-running race." "A turtle runs slowly, but as long as we work hard, we will succeed."