LG Electronics in Indonesia - ASEAN-KOREA · PDF fileLG Electronics in Indonesia . LG...

LG Electronics in Indonesia

Contents

Ⅰ. Indonesia General Overview

Ⅱ. LG Electronics in Indonesia

Ⅲ. How did LGEIN become No1. in Indonesia?

Ⅳ. Investment Environment

2011. 10. 28

Indonesia General Overview Ⅰ

LG Electronics

Climate

Population

Religion

Over 17,000 islands including Java, Sumatra, Kalimantan, Sulawesi, Irian Jaya Land

Typically tropical climate (Average Temperature 28℃),

Dry season (Apr~Sep), Rainy season (Oct~Mar)

Muslim 87%, Christian 9%, Hinduism 2% (Catholic , Buddhism)


245 Millions (July 2011 est.)

World top 4 (60% crowded in Java island)

1/21

LG Electronics

Economy


Imports : $127 billion (2010)

Exports : $158 billion (2010)

2/21

GDP Growth (%)

GDP /capita (US$)

Inflation rate (%)

Min. Wage (Rp. K)

(%)

Foreign Reserve (US$ B)

Foreign Debt (US$ B)

Interest Rate (%)

FX Rate (1U$ Rp)

I T E M ‘2007

6.2

1,775

6.3

901

(10.0)

51.6

136.7

9.5

9,150

‘2008

6.2

11.1

51.6

9.2

9,678

1,815

135.0

973

(8.0)

‘2009

4.3

2.8

66.1

6.5

10,200

2,350

152.7

1,084

(11.0)

‘2009 ‘2009

6.0

7.0

96.2

6.5

9,100

3,005

157.5

1,190

(10.0)

‘2010

petroleum, tin, natural gas, nickel, timber, bauxite, copper, coal, gold, silver Natural

Resource

LG Electronics in Indonesia Ⅱ

LG Electronics

Maintaining Solid No.1

Development & Expansion

Envision the Future

’10 ~

’05~’06

’90~‘96

’97~’04

’07 ~ ’09

Establishment

• 1990 : Established LGEIN

(REF Mfg, CTV Mfg, Domestic Sales)

• 1995 : Established LGEDI

(VCR and MNT Mfg) • Product Development in each

factory

• Branches expansion

• LGEDI and LGEIN merger

become LGEIN

• Set Up new Vision

• Product Leadership

Achieving No.1

• Dominated domestic market

• Increasing productivity and capacity

Ⅱ. LG Electronics in Indonesia 1. Company History

3/21

LG Electronics

Factory 1

Port

Airport

40 km

65 km

General Information

60 km

MKT’G Office

25 km

Location

MNT TV & Monitor

Media

(MM2100 Industrial Complex)

(Legok, Tangerang)

Factory View

Factory1

Factory 2

Factory 2

LPDI

AV : 9Mil/year

MNT : 3Mil/year

TV : 4Mil/year

REF : 2Mil/year

1) Space

Item Factory 1 Factory 2 Total

Land 17 ha 21 ha 38 ha

2) Capa

2. Factory Status

4/21


LG Electronics

3. Sales Network (Domestic)

*DSC = Direct Service Center

**ASC = Authorize Service Center

5/21

Samarinda

Jambi

Lampung

Kendari

Lombok Cirebon

Yogyakarta

Malang

Branch

SVC Center

Ujung Pandang

Medan

Pekanbaru

Palembang

Banjarmasin

Bandung

Jakarta1,2,3,4

Semarang

Bali

Padang

Manado

Batam

Surabaya

Kediri

Sumatra

Java

Kalimantan

Sulawesi

West Papua

Pontianak

Aceh

Jember

Denpasar

Branches DSC* ASC** Dealer

25 52 116 1,400


LG Electronics

4. Sales Network (Export)

2011 Export Sales U$1.3B

6/21

Asia 23%

Europe & CIS 24%

Middle East & Africa 20%

Australia 16%

Middle of America & South 9%

USA & North 8%

Export 78 Countries and 150 Buyers


LG Electronics

5. M/S

7/21


M/S of LG M/S of Top Three Players (Value, %) Product

NO. 1 player NO. 2 player NO. 3 player

LCD

CTV

HTS

REF

WM

RAC

PDP

BD-P

MNT

2010

32.2

45.6

34.9

43.0

51.0

30.7

26.3

29.5

34.9

35.7

19.3

28.1

27.0

12.0

19.0

25.0

16.2

24.1

23.2

28.1

14.3

25.0

19.9

11.0

12.0

10.8

11.8

19.4

13.0

13.1

Source : GFK

Mobile

31.0

39.3

34.0

43.0

27.0

31.2

26.4

32.0

35.2

2.0

LED 25.8 41.5 29.9 11.8

How LG became No. 1 in Indonesia? Ⅲ

LG Electronics 8/21

9. Organization Background

LGEIN

National

Culture

LGEIN has diverse cultures and background

and we build strong and powerful

organization

Orientation

Biz Organization

Function


LG Electronics

Innovation Mind-set

Innovation Program System, to build awareness, control and monitoring and reward system.

LG Code of Ethics as our business principle that must implemented in every management activity.

Domestic Network Organization, Strong Capability of Branch Manager and Admin Head (ADH), Rotation Program

Hipo Program, Sales Incentive system, and diverse allowance

Strong Management Principle

Strong Org. Network

Motivation Program

Build Cross Culture Integration, Open Culture Atmosphere and Harmony Labor Union Relationship

Cross Culture Management

Ⅲ. How did LGEIN become No1. in Indonesia? 1. Summary

9/21

LG Electronics

2. Strong Organization Network

Sales Div

Regional 1

Bandung

Semarang

Jogjakarta

Cirebon

Regional 3

Makasar

Kendari

Manado

Surabaya

Kediri

Sales Div

Medan

Pekanbaru

Palembang

Batam

Jambi

Padang

Banjarmasin

Samarinda

Pontianak

Aceh

Lampung

Jember

Denpasar

Jakarta 3

Jakarta 2

25 Branch

25 Branches for covering Indonesia market

Strong experiences of BM and ADH

Leader Rotation program

Jakarta 1

Regional 2 KAM


10/21

LG Electronics

3. Management Principle

Corporate Internal Audit Group strengthen LG Code of Ethics implementation for all

management activity.

Socialization

Goal LG Code of Ethics

Understanding

Activity

Consensus Implementation Monitoring

and Improvement

Commitment from

Employee & Supplier

Clear guidance and

supported by regulation

Run properly and

system improvement

To Employee :

E-bulletin,

education and

sticker

To Suppliers :

Communication

letter and brochures

Agreement Letter

by Employee

Agreement Letter

by Supplier

Make bidding

procedure and

regulation

Put LG Code of

Ethics on Collective

Labor Agreement

Make LGEIN hotline

Evaluation &

regular audit

Employee survey

& Supplier visit to

get feedback

F/U Audit result

and feedbacks.


11/21

LG Electronics

Internal Audit Activity

Regular Audit • Regular Audit,

• HO& Factory : 23 times year

Branches : 20 times/year, SVC: 3 times/year

F/U Audit

Result

Employee

Survey

Supplier Visit

Ethics

Campaign

• Recommendation implementation and

progress monitoring

• 15 cases

• Survey to employee of LG Code of Ethics

implementation

• Twice a year

• In order to get any feedback or bottleneck during

LG Code of Ethics implementation

• Twice a year

• Education, Pre-Post Test for new employee (once

a year)

• Poster Competition (Once a year)

• Newsletter (every 2 month)

Preventive Action

3. Management Principle Ⅲ. How did LGEIN become No1. in Indonesia?

12/21

LG Electronics

4. Innovation Mind-Set

Rewarding Awareness and Set Up

Control and Review Execution and Monitoring

- Final evaluation and Rewarding for

best innovation project (monthly and

yearly).

- Review with Leaders and Top

Management

- Gr. Head should control the progress

of innovation activity

- Progress status put on KPI and

review on KPI meeting (monthly)

- Innovation Training (for new employee)

- Set yearly target (individual and Group

on KPI)

- Each employee or Team

execute innovation project as

registered

Innovation

System

- PIC Team (VI Gr.) will assist them to

create and finish the project.


13/21

LG Electronics

Project Target Reviewed Reward

KPI/ Score Card Group Head Monthly Yearly

TDR Group Level

Cross Function Monthly, Quarterly Yearly

1P1P

(1 Person 1 Project 1) Each employee Quarterly Yearly

BWP

(Best Work Practices) Each Employee Monthly Yearly

One Point Improvement Each Employee Twice a Month Monthly

4. Innovation Mind-Set Ⅲ. How did LGEIN become No1. in Indonesia?

14/21

LG Electronics

5. Motivation Program

Sales Incentive Hipo Retention Program Diverse Allowance

Set up Incentive program to motivate and creating

innovative and competition environment

Sales Allowance

Position Allowance

Hipo Allowance

Hipo Retention Incentive

- For R&D

- For Non R&D

Target Incentive

Digital Incentive

Bonus System


15/21

LG Electronics

6. Cross Culture Management

Open Culture Atmosphere

Integration Program

Labor Union Relations

One Team Spirit Workshop (yearly),

between Local Leader and Top Mgt

Quarterly Integration program (quarterly),

among Leader, FSE, and members

Collective Labor Agreement

Bonus System

CSR Activity

Partnership Programs (Family Day,

Sport Games, Mudik Lebaran Holidays,

Hobby Support, Factory Visit, Refreshing Room)

Open Communication between Leader

and Top Mgt (monthly)

Bipartite Meeting with Labor Union (monthly)

CA Meeting (monthly)

VOE (Voice of Employees) Management


16/21

Investment Environment Ⅳ

LG Electronics

1. High Potential in Domestic Market

• Sustainable growth market

- GDP : US 707 billion in 2010

→ The third fastest growing economy in Asia, the largest economy in Southeast Asia

- Much less affected by Global financial crisis than its neighboring countries in 2009

- Indonesia’s Economy grew by 4.5% in 2009 , 5.6% in 2010, 6% in 2011

- Nominal per-capita GDP is expected to quadruple by 2020 according to a Standard Chartered report


17/21

LG Electronics

2. Fast Growing Market Ⅳ. Investment Environment

Demand

CAGR

(’09~’14)

Total

‘09 ‘10 ‘11 ‘12

7%

12%

14%

15%

8%

10%

‘14

4,217 4,989 5,231 5,642 6,827

(Mil. USD)

Market demand is increasing continuously

Source: ’08~09:gfk data, ’10~: team analysis

MC : GSM Only

Hand Phone

Home Entertainment

(LCD TV, PDP TV, AV)

Air Conditioner Home Appliances

(Ref. W/M)

Others

18/21

LG Electronics

3. Sound economic fundamentals

• Good Financial health

- Debt to GDP ratio : 83% in 2001 → 26% in 2010

→ the lowest among ASEAN countries (aside from Singapore)

- Ranked 1st among Asia Pacific sovereigns for best fiscal balance (Standard & Poor’s)

- Upgraded credit rating to BB+ with a stable outlook (2010, Fitch)

- Listed as one of the top 10 most attractive destinations for foreign direct investment

(UNCTAD World’s Investment Prospects Survey)

Public Debt/ GDP (%)


19/21

LG Electronics

4. Labor Force and low wages

• Abundant labor power

- Portion of economically active people : 66.5% (2011 est)

→ 0-14 years : 27.3%, 15-64 years : 66.5%, 65 years and over : 6.1%

- 120M people (over 50% of the population) is under 29 years old

- Literacy : 90.4%

- labor costs are the lowest among ASEAN

- University majors : noticeable skew toward finance/ economics at 28%

engineering/sciences at 27.5%


2008 year

20/21

LG Electronics 21/21

• Good international schools

- JIS, SIS, Korean school, ACG, AUSTRALIAN, El SHADDAI, GLOBAL JAYA , NEW ZEALAND ……

• Big Korean community

- 31,760 Koreans in 2009, 13th-largest population of overseas Koreans

- Many Korean restaurants and Korean markets

• Highly developed modernized city zone (Jakarta)

- Plenty of hyper markets such as Lotte mart, Carrefour etc.

- Many great restaurants for Indonesian, American, Chinese and European cuisines.

- Plenty of sports and entertainment

→ Golf, tennis, enjoying a live concert…

• Cheap living cost

- The cost of living is much more affordable than other counties.

→ $,1000 per month in the suburban and rural areas of Indonesia

$1,500 per month in the major cities

(Excluding apartment rent, Driver/maid salary)

- Driver salary $200, maid salary $100

5. Personal experience as expatriate Ⅳ. Investment Environment

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