Lg in Bric Countries

Would the lessons LG learned in Brazil and India be helpful in making the transition from emerging to developed markets?

By the mid-90s the economic situation in Brazil was getting better than it was before. The GNP increased from less than 20 percent to 39 percent, industrial sector produced wide range of domestic products for the market and exports ( for example consumer goods like cars, paper, steel, cement, TVs and refrigerators). That means that at the time LG started entering Brazilian market, people were able to afford more goods which is a good information for LG, but on the other hand Brazilian domestic market was growing so conclusion may be that people trusted their own brands more than the foreign one especially without any brand awareness or reputation.

Of course all this does not mean that Brazil suddenly became a developed country - unequal distribution of wealth and income didn't give everybody equal opportunities. This means that despite of money inflow, many people remained lower class with not many means to live.

The political situation in Brazil wasn't good either. Country was facing hyper-inflation, unemployment and general low standard of living which resulted in misery and dissatisfaction of the people. Attempts to overthrow regime did not improve the situation and economical plans for the future were a fiasco.

As it can be seen LG's entry to this market came along with many difficulties. Not only the general situation influenced the company but also factors like:

- Import tariffs

- Huge competition

- Low brand awareness

- Unstable currency

- Unstable exchange rates

- Gray goods sold 5 times cheaper

- Managing marketing and finance

Despite of the problems LG decided to stay and expand in Brazil, not paying much attention to the money lost due to volatile exchange rate. Actually, they were able to balance the accounts receivables and payables to build hedge against exchange rate fluctuations. LG also joined the government in the battle against gray market, to be able to build strong brand name and awareness.

LG was also able to overcome the marketing problem by recognizing the opportunity in sports events sponsorship. This gave them instant brand recognition and revenues.

Customization was another great step - they focused on cultural and social dimension of people's lives, which is extremely important for people in Brazil, as they are rather collective than individual society, which is proved by scoring only 38/100 points on a Hofstede's "individualism" bar. They stand up for each other, they like to socialize like for example on sport events or carnival. LG was able to recognize it and use for their own advantage.

In 1993, LG decided to make a move towards the Indian market which was also experiencing some growth at that time. It was moving forward when it came to foreign investments, exchange regimes, reduction in tariffs and other trade barriers, modernization of financial sector and adjustments in country's fiscal policy. By that time the poverty started to decrease, which means people were more affluent and satisfy with life and the whole country started going into the right direction. It seemed like a perfect opportunity for LG.

At the beginning, it wasn't that easy though. LG's partner could not bring additional funds - which taught LG not to be so trusty with joint ventures in emerging markets, unfortunately that was their only choice, as government only allowed entrance to India via local partnerships. As it turned out, the reformation of this decision took place, and LG was able to establish themselves as an independent company and start manufacturing goods like TVs, white goods and air conditioners. Again, they focus on customization of their product to address individual needs of the customer - products were unique and fulfilled all the demands. The managing director of LG said: "We knew it was important, for example, not to downgrade the Indian market and instead to treat it just as seriously as we would any developed market. This meant preparing a full strategy and emphasizing good-quality products, the best