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
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)
Ⅰ. Indonesia General Overview
245 Millions (July 2011 est.)
World top 4 (60% crowded in Java island)
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LG Electronics
Economy
Ⅰ. Indonesia General Overview
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
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
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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
Ⅱ. LG Electronics in Indonesia
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
Ⅱ. LG Electronics in Indonesia
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
Ⅱ. LG Electronics in Indonesia
LG Electronics
5. M/S
7/21
Ⅱ. LG Electronics in Indonesia
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
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
Ⅱ. LG Electronics in Indonesia
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
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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
Ⅲ. How did LGEIN become No1. in Indonesia?
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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.
Ⅲ. How did LGEIN become No1. in Indonesia?
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?
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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.
Ⅲ. How did LGEIN become No1. in Indonesia?
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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?
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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
Ⅲ. How did LGEIN become No1. in Indonesia?
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
Ⅲ. How did LGEIN become No1. in Indonesia?
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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
Ⅳ. Investment Environment
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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
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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 (%)
Ⅳ. Investment Environment
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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%
Ⅳ. Investment Environment
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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