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)