LG boosts high-end products to meet target

LG boosts high-end products to meet target

The Jakarta Post, Jakarta

In a bid to meet this year's sales target, LG Electronics
Indonesia (LGEIN) is planning to boost the production of its
high-end products, as data has shown that wealthy consumers were
not affected by the March fuel price hike.

In its first semester performance report, LGEIN, the local
subsidiary of South Korean LG Electronics Inc., projected to
triple the production of plasma TVs, flat-screen TVs and
projection screens from 2000 units last year to 6,000.

The move is aimed at boosting the company's sales to achieve
its US$380 million target this year.

"We are now going for the middle- and upper-income consumers,
but still want to maintain our market share with low-end
products," LGEIN Area Sales Manager Hendru Susilo, who handles
sales outside Java and Bali islands, said at a press conference
on Thursday.

The firm's sales from January to June only reached $180
million, 10 percent off its target of $200 million.

LGEIN Area Sales Manager for Java and Bali Iwan Sutanto
pointed to domestic consumers' weakening purchasing power as the
main reason for lower sales.

"The fuel price hike, the strengthening U.S. dollar against
the rupiah and a series of disasters in this year's first
semester have weakened the people's purchasing power," he said.

Instead of reducing production capacity, Iwan explained, the
company preferred to focus on increasing its "unique sales point"
products to attract wealthy consumers.

LG has long been a market leader for computer monitors,
washing machines and air conditioners in Indonesia. It currently
controls 35 percent, 19 percent and 16 percent of the market
shares, respectively.

However, the company has had to endure barriers to expansion
here.

LGEIN Manager for General Affairs Adji Wiratma said the
heavily damaged roads surrounding the company's plant in
Tangerang, Banten, would discourage potential buyers.

"The roads connecting Karawaci, Legok and Cirarab in Tangerang
are the only way to access our factory. But the road conditions
are very poor. Despite that, the local administration has not
been able to address the problem," he complained.

Adji said 3.9 kilometers (km) of the 11.1 km road was badly
damaged with some holes up to two meters in diameter all along
the way. The road condition greatly hurts efficiency as vehicles
are unable to easily get in and out.

LGEIN along with 23 large companies and dozens of small and
medium enterprises in the area have suffered losses due to the
poor infrastructure.

"It takes half an hour to go just 3.9 kilometers on the ruined
section of road. The heavily damaged road puts off potential
clients/buyers as they doubt whether the products will still be
in good condition after getting battered about in the trucks as
they leave the factory," Adji said.

He warned that if the government or local administrations did
not repair the road soon, LG headquarters in Korea might consider
closing its Indonesian operation.

"What if the headquarters decides to move the factory to
another country with better infrastructure?" he asked.

In addition to the artificially high cost of doing business as
a result of corruption and illegal fees, bad infrastructure has
been a major problem that contributes to a weak investment
climate in the country. (006)