【精品】最新麦肯锡天津LG发展战略咨询报告(英文课件(PPT 117页)

1、CONFIDENTIALDeveloping a Winning Strategy for the Microwave Oven Business in ChinaLG Electronics Tianjin Appliances Co., LtdFinal progress reviewApril 9,2001This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the clie

2、nt organization without prior written approval from McKinsey & Company. This material was used by McKinsey & Company during an oral presentation; it is not a complete record of the discussion.010326SH_120703_085v5i第1页，共117页。THE JOINT LG/McKINSEY TEAM HAS COMPLETED THE PROJECT WITHIN 5 WEEKSModulesKe

3、y activitiesMarket Demand/ForecastForecast potential market by segment through refining market segmentation, understanding key growth drivers, and modeling market growthLGE performance assessmentConduct internal data collection within LGEDevelop sound understanding of value proposition based on avai

4、lable market research including branding and consumer surveyStrategic development opportunitiesAnalyze different product mix optionsGather information on branding and marketingConduct channel diagnosisAnalyze value chain costsCompetitorDevelop competitive assessment for microwave oven competitorsCon

5、duct interviews with distributors, retailers, government agencies, competitors to collect competitor information ConsumerConduct consumer survey via external research house in 6 specified cities and 1 rural area to understand consumer purchasing behaviorEnd productsMarket demand forecast by areas an

6、d product typeCurrent organizations strengths and weaknessesCurrent processes and incentive systems strengths and weaknessesLGE aspirations for future growthHigh level recommendation on product mixBrand positioning status and recommendationsChannel mix diagnosis and high level channel prioritization

7、Detailed breakdown comparison on costs, COGS in particularAnalysis on overall competitive environmentDetailed information on competitor performance including sales, branding, pricing, channel mix and incentivesKey competitors COGS analysisStrengths and weaknesses of each competitor group and the imp

8、licationsDetailed analysis on consumer purchasing pattern2010326SH_120703_085v5i第2页，共117页。TODAYs DISCUSSION The Microwave oven market in China will continue its strong growth and should reach 7.5 million units in 2003. Primary regions will be Central China, followed by South and Southwest China. Oth

9、er regions should develop as income grows. Computer grill and mechanical grill should further increase their share as prices decline. Four customer segments are found from market research: Premium buyers, basic brand buyers, rational technophile, and generic buyers. All segments, except premium buye

10、rs, are highly price-sensitive, thus skewing market demand towards low-end products. At the same time, reliable performance, ease of use, and good after-service are important across segments.The competition in China is already intense and will continue to increase, as Galanz and Midea have huge ambi

11、tions in the market. In addition, the severe overcapacity (about 45%) will continue to force prices downwards thus threatening profitability for all but the lowest cost players. LG has built a successful platform for growth, becoming #2 in China, although far behind Galanz, by focusing on premium pr

12、oducts and in the Beijing area. Faced with the issue of further growth and improving profitability, LG now needs to choose between a high growth strategy, with the objective of becoming the leading player and to reach breakeven in 2005, or to remain a premium niche player for the foreseeable future.

13、 To achieve the aspiration of becoming a profitable #1 Player in China, LG needs to launch 5 strategic initiatives: (1) launch a three step regional expansion, first from Beijing to Wuhan, (2) introduce entry products to cover all price points while continuing to introduce high end products to creat

14、e margins, (3) improve channel coverage by increasing the distributor network and the sales force resources, (4) increase significantly advertising spending while optimizing media mix, (5) reduce aggressively cost by leveraging economies of scale.3010326SH_120703_085v5i第3页，共117页。TODAYs DISCUSSION Th

15、e Microwave oven market in China will continue its strong growth and should reach 7.5 million units in 2003. Primary regions will be central China, followed by South and Southwest China. Other regions should develop as income grows. Computer grill and mechanical grill should further increase their s

16、hare as prices decline. Four customer segments are found from market research: Premium buyers, basic brand buyers, rational technophile, and generic buyers. All segments, except premium buyers, are highly price-sensitive, thus skewing market demand towards low-end products. At the same time, reliabl

17、e performance, ease of use, and good after-service are important across segments.The competition in China is already intense and will continue to increase, as Galanz and Midea have huge ambitions in the market. In addition, the severe overcapacity (about 45%) will continue to force prices downwards

18、thus threatening profitability for all but the lowest cost players. LG has built a successful platform for growth, becoming #2 in China, although far behind Galanz, by focusing on premium products and in the Beijing area. Faced with the issue of further growth and improving profitability, LG now nee

19、ds to choose between a high growth strategy, with the objective of becoming the leading player and to reach breakeven in 2005, or to remain a premium niche player for the foreseeable future. To achieve the aspiration of becoming a profitable #1 Player in China, LG needs to launch 5 strategic initiat

20、ives: (1) launch a three step regional expansion, first from Beijing to Wuhan, (2) introduce entry products to cover all price points while continuing to introduce high end products to create margins, (3) improve channel coverage by increasing the distributor network and the sales force resources, (

21、4) increase significantly advertising spending while optimizing media mix, (5) reduce aggressively cost by leveraging economies of scale.4010326SH_120703_085v5i第4页，共117页。THE MWO MARKET IN CHINA HAS GROWN TO 4.4 MILLION SETS 1997 - 2000 China MWO retail sales volume Thousand sets 1997199819992000CAGR

22、 = 32%source: Light Industry Information Center, component manufacturers, Galanz, LG, team analysis, SIC Team estimation based on component purchases minus inventory and export volume for Galanz MWO management estimation based on sales volume of Galanz 20 largest distributors3,8005010326SH_120703_08

23、5v5i第5页，共117页。PENETRATION IS DRIVEN BY INCOME INCREASE 2000 penetration rate by region RMB, percent Penetration rate Percent Annual disposable income RMB 1991 - 1999 SH penetration rateRMB, percent Penetration rate Percent Annual disposable income RMB ShanghaiBeijingGuangdongChongqingSource:China St

24、atistic Yearbook6010326SH_120703_085v5i第6页，共117页。BASED ON THE EXPECTED INCOME GROWTH, 18% ANNUAL GROWTH RATE IS EXPECTED FOR TOTAL CHINA MICROWAVE OVEN MARKET IN THE NEXT 5 YEARS Key assumptionsIncrease of penetration rate in urban areas from 14% in 2000 to 30% in 2005Increase of urban household num

25、bers from 99 million in 2000 to 114 million in 2005Total China microwave oven market forecast Thousand unitsSource: Team analysis 20002001E2002E2003E2004E2005ECAGR = 18%Low estimate = 3,800Low estimate = 8,4647010326SH_120703_085v5i第7页，共117页。HUA BEI (NORTHERN CHINA) REGION HAS BEEN THE LARGEST MARKE

26、T FOR MWO IN CHINA*Estimated by LG sales branches Source:SIC Total China sales volume YYSCThousand sets, percent Hua Bei and Hua Dong still account for more than 60% of the whole marketHowever, sales in Xi-Nan, Dong Bei, and Hua Chung has grown even more rapidly 100% = 6528477601,032Beijing Shanghai

27、 GuangzhouShenyang19971998199920002000 total China sales revenue YYSCRMB thousands, percent 762,591779,450667,818753,6791997199819992000ChengduWuhan3.05.22.37.247.734.6%29.542.16.77.88.35.67.813.09.54.035.430.534.127.54.711.212.310.23.67.0Beijing Shanghai ShenyangWuhanChengduGuangzhou3.0100% = 9.09.

28、012.011.028.031.01,5842000 plus selected hypermarkets*8010326SH_120703_085v5i第8页，共117页。BASED ON THE INCOME DEVELOPMENT, DEMAND FORECAST ANALYSIS SHOWED THAT CENTRAL AND SOUTHERN REGION WILL HAVE THE HIGHEST GROWTH China total urban household number increase by 30% per annum from 2001 - 2005Disposabl

29、e income per capita in total China urban areas increase by 6% per annum from 2001 - 2005Market size forecast by regionThousand sets; percent100% =19972005E2000CAGR Percent Key assumptions Source:Team analysis, China Statistic Yearbook BeijingShanghaiGuangzhouShenyangWuhanChengdu1,9309,8004,400181712

30、23193420HIGH ESTIMATE9010326SH_120703_085v5i第9页，共117页。Market size of each regionThousand setsBEIJING, SHANGHAI AND WUHAN WILL BE THE LARGEST MARKETS IN 20054651,02820002005Chengdu region4531,98320002005Wuhan region23656120002005Shenyang region1,0552,23320002005Beijing region7541,85320002005Guangzhou

31、 region1,3992hanghai regionHIGH ESTIMATE10010326SH_120703_085v5i第10页，共117页。ALTHOUGH REGIONS OTHER THAN BEIJING ONLY ACCOUNT FOR SMALL SHARE CURRENTLY, TREMENDOUS GROWTH AND HEALTHIER MARGIN ARE EXPECTED THERE2001 - 2005 growth potential CAGRProfitability LG 2000 gross margin percent Mar

32、ket size todayShanghaiBeijingGuang-zhouChengduShenyangWuhanHIGH ESTIMATESource:LG, team analysis11010326SH_120703_085v5i第11页，共117页。SALES FROM SINGLE FUNCTION PRODUCTS HAS SHIFTED TOWARDS MECHANICAL GRILL PRODUCTS *Estimated by LG sales branches Source:SIC Total China sales YYSCThousand sets, percent

33、 100% = 6338477751,032SensorComputer grillMechanical grillSingle1997199819992000Sales revenue YYSCRMB thousands, percent 100% = 629,680728,891592,880707,582SensorComputer grillMechanical grillSingle function 199719981999200022.01,58431.047.02000 plus selected hypermarkets*12010326SH_120703_085v5i第12

34、页，共117页。RECENT BUYERS TEND TO BUY MORE MECHANICAL GRILL PRODUCTS THAN BEFOREType of MWO boughtPercentSingle functionMechanical grillComputer grillTemperature* controlDont knowAll ownersRecent buyers*Those who purchased in past 12 months*Part is subset of computer grillSource:AMI customer survey13010

35、326SH_120703_085v5i第13页，共117页。PRODUCT TYPE MIGRATION RELATES MORE TO THE PRICE DROP1997 - 2000 product evolution RMBPercentSales of mechanical grill products has increased a lot due to the price drop. Computer grill products are expected to grow quickly for the same reason in near future Price of me

36、chanical grill product in YYSCPrice of single function products in YYSCPercent of mechanical grill to single function products in YYSC Source:SIC14010326SH_120703_085v5i第14页，共117页。DEMAND FORECAST ANALYSIS SHOWED THAT COMPUTER GRILL PRODUCTS WILL HAVE THE HIGHEST GROWTH RATE FOR THE NEXT FIVE YEARS P

37、rice of computer grill products will go down to RMB 540 - 560 in 2005Price of mechanical grill will go down to RMB 470 - 490 in 2005Price of single function will go down to RMB 360 - 380 in 2005Market size forecast by product typeThousand sets 100% =199720002005E2004E2003E2002E2001EKey assumptionsCA

38、GR PercentComputer grillMechani-cal grillSingle function1,9004,4009,8008,6007,5006,4005,40018201914Source:Team analysis, China Statistic YearbookHIGH ESTIMATE15010326SH_120703_085v5i第15页，共117页。WITH THE OVERALL PRICES DROP, MECHANICAL GRILL PRODUCTS ARE GOING TO GAIN MORE IMPORTANCE OVERTIME 2001 - 2

39、005 growth potential CAGRProfitability LG marginal profit in percent of sales Market size today Single functionMechanical grillComputer grillHIGH ESTIMATEMarket size in 2005 Single function products have little room for further price reduction, with material cost reduced by 5 % p.a., thus having imp

40、roving profitability 16010326SH_120703_085v5i第16页，共117页。TODAYs DISCUSSION The Microwave oven market in China will continue its strong growth and should reach 7.5 million units in 2003. Primary regions will be Central China, followed by South and Southwest China. Other regions should develop as incom

41、e grows. Computer grill and mechanical grill should further increase their share as prices decline. Four customer segments are found from market research: Premium buyers, basic brand buyers, rational technophile, and generic buyers. All segments, except premium buyers, are highly price-sensitive, th

42、us skewing market demand towards low-end products. At the same time, reliable performance, ease of use, and good after-service are important across segments.The competition in China is already intense and will continue to increase, as Galanz and Midea have huge ambitions in the market. In addition,

43、the severe overcapacity (about 45%) will continue to force prices downwards thus threatening profitability for all but the lowest cost players. LG has built a successful platform for growth, becoming #2 in China, although far behind Galanz, by focusing on premium products and in the Beijing area. Fa

44、ced with the issue of further growth and improving profitability, LG now needs to choose between a high growth strategy, with the objective of becoming the leading player and to reach breakeven in 2005, or to remain a premium niche player for the foreseeable future. To achieve the aspiration of beco

45、ming a profitable #1 Player in China, LG needs to launch 5 strategic initiatives: (1) launch a three step regional expansion, first from Beijing to Wuhan, (2) introduce entry products to cover all price points while continuing to introduce high end products to create margins, (3) improve channel cov

46、erage by increasing the distributor network and the sales force resources, (4) increase significantly advertising spending while optimizing media mix, (5) reduce aggressively cost by leveraging economies of scale.17010326SH_120703_085v5i第17页，共117页。MICROWAVE CONSUMER SURVEY DESIGNGeography coverageUr

47、ban area of Beijing, Shanghai, Guangzhou, Tianjin, Shenyang, Chengdu, WuhanSample sizeTotal 875 samples in urban area who are decision makers in microwave In each location In Beijing, Shanghai, Tianjin: 100 MWO owners, 50 MWO potential buyers (in next 12 months) eachIn Guangzhou, Shenyang, Chengdu,

48、Wuhan: 60 MWO owners, 40 MWO potential buyers (in next 12 months) eachMethodologyDoor-to-door random samplingFace-to-face interviewField periodMarch 9 - 16, 2001Detailed explanation18010326SH_120703_085v5i第18页，共117页。FOUR DISTINCTIVE CUSTOMER SEGMENTS ARE DERIVED FROM THEIR RESPECTIVE KEY BUYING FACT

49、ORS100% = 875 microwave oven owners plus potential buyersPrice sensitive consumers take up more than half of the marketPremium buyersMost care of performance, design and qualityLeast price sensitive and has highest incidence of using premium brands, e.g., National and sophisticated models, e.g., com

50、puter grill1Basic brand buyersLooking for reliable brand for quality assurance2Rational technophilesKnowledgeable buyers who understand what they need from a microwave ovenCare less about brand, more price sensitive, requiring a lot of product information to make the purchase decision3Generic buyers

51、Buyers who are nervous to handle the microwave ovenLook for simple machine and need good after-sales support4Source:AMI customer survey19010326SH_120703_085v5i第19页，共117页。WHILE PRICE SENSITIVITY DIFFERS ACROSS SEGMENTS, RELIABLE PERORMACE, EASE OF USE, AND GOOD AFTER-SALES SERVICE ARE KEY FOR EACH SE

52、GMENTRanking of KBFsReliable performanceLow priceEase of useGood after-sales serviceFamous brandLots of featuresNice appearanceAdvanced technologyWord of mouthProduct promotionPremium buyersBasic brand buyersRational technophilesGeneric buyersTop 5 KBFsSource:AMI customer surveyTotal urban20010326SH

53、_120703_085v5i第20页，共117页。CUSTOMER DEMAND IS SKEWED TOWARDS LOW-END PRODUCTS EXCEPT FOR PREMIUM BUYERSMWO bought by current ownersProduct typeSingle functionTotal urbanPremium buyerBasic brandRational technophilesGeneric buyerMechanical grillComputer grillTemperature control*Dont know*Part is subset

54、of computer grillSource:AMI customer survey21010326SH_120703_085v5i第21页，共117页。TODAYs DISCUSSION The Microwave oven market in China will continue its strong growth and should reach 7.5 million units in 2003. Primary regions will be Central China, followed by South and Southwest China. Other regions s

55、hould develop as income grows. Computer grill and mechanical grill should further increase their share as prices decline. Four customer segments are found from market research: Premium buyers, basic brand buyers, rational technophile, and generic buyers. All segments, except premium buyers, are high

56、ly price-sensitive, thus skewing market demand towards low-end products. At the same time, reliable performance, ease of use, and good after-service are important across segments.The competition in China is already intense and will continue to increase, as Galanz and Midea have huge ambitions in the

57、 market. In addition, the severe overcapacity (about 45%) will continue to force prices downwards thus threatening profitability for all but the lowest cost players. LG has built a successful platform for growth, becoming #2 in China, although far behind Galanz, by focusing on premium products and i

58、n the Beijing area. Faced with the issue of further growth and improving profitability, LG now needs to choose between a high growth strategy, with the objective of becoming the leading player and to reach breakeven in 2005, or to remain a premium niche player for the foreseeable future. To achieve

59、the aspiration of becoming a profitable #1 Player in China, LG needs to launch 5 strategic initiatives: (1) launch a three step regional expansion, first from Beijing to Wuhan, (2) introduce entry products to cover all price points while continuing to introduce high end products to create margins, (

60、3) improve channel coverage by increasing the distributor network and the sales force resources, (4) increase significantly advertising spending while optimizing media mix, (5) reduce aggressively cost by leveraging economies of scale.22010326SH_120703_085v5i第22页，共117页。GALANZ IS THE LEADING COMPETIT