The Hindu Business Line : Banking on Kim

K. R. Kim is back. The Korean, who was earlier LG’s top honcho, will now be pitting the Videocon brands against the Korean chaebols and other multinational brands in the Indian market. Taking up an assignment post retirement with the Dhoots of Videocon as Vice-Chairman and CEO of Videocon Industries, this time his India stint will be even more challenging than the last 10 years when he was with LG Electronics India and was responsible for making the brand dominant in the consumer electronics segment.

The 63-year-old veteran’s job on hand is to turn around Videocon and its brands and bring about operational efficiencies within the organisation. Strengthening the brands in the domestic market as well as creating global brands is his mandate and he would balance the portfolio with equal revenues being generated from both the markets. “Today consumer electronics contributes revenues to the tune of Rs 6,000 crore and our target is to have a 50:50 split in revenues between the Indian and global markets. It is going to be a big challenge as I have to first change the mindset of this company,” states Kim, who has been in India for less than a month.

To begin with, Kim is planning a rationalising exercise and bringing all the Videocon brands under a single company. Apart from Videocon the rest of the brands exist either as divisions or separate companies within the Videocon group and the purpose is to consolidate them all under a single company of Videocon Industries. Today it is the Videocon brand which is the strongest followed by Electrolux, Kenstar and Kelvinator; the others like Akai and Hyundai are struggling in the Indian market.

“We have to see how each brand performs in the next one year. Today Videocon is the most successful brand in the company’s portfolio while Hyundai is the unsuccessful one. In the next one year we may have to kick out the unsuccessful brands,” says Kim, known for his master branding strategy. Hyundai Electronics, which is a division within the company, is likely to face the axe unless it improves its performance within a year. With revenues of Rs 250 crore, Hyundai is a ‘push’ brand unlike the other Korean brands which enjoy customer pull in the Indian market. Akai India too has been a division within Videocon and has been using its distribution strength to build the brand in the country.

Streamlining the multi-brand strategy followed by Videocon Industries all these years, the new CEO is expected to bring all the brands under the Videocon umbrella and improve efficiencies within the company. Adds Kim, “Today, each brand is under a different company and under these circumstances it is difficult to be competitive and be productive. I would like to have all the brands under one company.”

Videocon: Aiming to retrieve market share

All this time the brands of Videocon, Sansui, Akai, Kenstar, Kelvinator, Electrolux and Hyundai were separately handled as distinct SBUs and the respective heads were responsible for both topline and bottomline performance. They reported to Group President Venugopal Dhoot. All the functions — Sales, Marketing, Finance, Purchase, Legal, IT, Audit — were also separately reporting to the respective business heads with separate plans and budgets for each. All the brands had a distinct product line-up in keeping with the multi-brand strategy adopted and the brand architecture.

At the same time the other big task on hand is to change the mindset and operational efficiencies within the company. As Kim says, “First I have to change the mindset and have a simple organisation to help focus on the quality and efficiencies within the company.” Videocon has been slipping in its market shares compared to its heyday when it enjoyed a leadership position in the mid-’90s along with other homegrown players such as BPL and Onida. Over the years, the Koreans have been dominating the durables segment and Videocon has lost out on the kind of innovations it was known to pioneer.

Reminisces a former employee of Videocon, Nabankur Gupta, Head of Nobby Brand Architects & Strategic Marketing Consultants, “`Videocon was seen to be an innovator with every new product which came into the market. It was the first one to bring in the automatic washing machines and the frost-free refrigerators in the country. But such innovations have died away over the years.”

But now with the former LG chief at the helm, Videocon might just return to its glory days. But there is still a lot of catching up to do. In a major category, such as flat colour TVs for instance, LG holds fort with a 27.5 per cent volume share while Videocon has a mere 9 per cent share in the category, according to market estimates. Even in the air-conditioner segment the gap looms large with LG enjoying a 25 per cent share and Videocon having an 11 per cent share. In frost-free refrigerators, LG leads with a 25 per cent share while Videocon is struggling with a 6 per cent share in the category. However, in washing machines LG currently with a 22 per cent share has Videocon closely trailing with a 21 per cent share.

Videocon is poised to enter the mobile telephony business and has been trying to buy Motorola’s business. It has already roped in former LG man (H. S. Bhatia) to handle the business. “Mobile phones is a growing market and initially we will outsource the models from Taiwan and China and after a year start manufacturing in India,” says Kim.

According to a former LG employee, Ajay Bajaj, who is currently Product Business Head for ACs and Washing Machines, Videocon Group, “As long as resources are channelled in the right direction, it is possible for Videocon to overtake anybody. Being one of the oldest companies it had added some flab but as soon as some amount of operational excellence comes in, it would be raring to go.”

Analysts say that in spite of Videocon’s shares shrinking, its brands continue to have some equity in certain segments with the durable business. While the flagship brand of Videocon has its strengths in washing machines, air-conditioners and colour TVs, Electrolux is known for its frost-free refrigerators and microwaves while Kelvinator’s expertise is in direct cool refrigerators. Sansui is best known for its colour TVs while Kenstar has equity for its small appliances and air coolers. “We can have different trade channels for each of our brands and thereby have an extensive retail presence today,” adds Bajaj, who believes in replicating the LG strategy for Videocon as well. “In LG too we had different models for the different trade channels and even in Videocon we intend attacking all the trade channels with our different brands,” says Bajaj.

Meanwhile, Videocon has already initiated the consolidation process by having product verticals for each category and clubbing all the brands under them. “We have already put the product verticals in place. Most of the companies existed as divisions and by having product-based verticals we will now ensure that there is no internal competition among the brands,” says Eric Braganza, Chief Operating Officer, Electrolux.

Now Kim has the onus of delivering results post the restructuring within the company. “Videocon is a huge organisation with 20,000 people and changing them will not be easy. It will take time but I know they can do it,” says Kim. A Korean beating the Koreans at their own game is not going to be that simple but with Videocon hiring Kim, it is making an attempt to get back its glorious days.

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Videocon eyeing Motorola’s handset biz
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