It was back in $2002,$ the consumer electronics was well established in the urban part of India, so much so that the Urban growth was capped at $5\%.$ However, consumer electronics manufacturers started to see a new trend. They saw that the growth was higher in the rural markets and so was the revenue and profits. A survey conducted in $2002$ by Francis Kanoi, a market research firm, indicated that nearly $63\mathrm{.}1\%$ came from cities and rural areas having a population of less than $1$ million. The growth rate of these areas was about $25\%!$ This was possibly due to higher disposable income and good agricultural output in those areas. So$,$ it became imperative for the electronics manufacturers during that time to focus on the rural markets and LG India was one of them.

Objective: To achieve higher penetration in the rural markets and achieve efficient logistical solutions Challenge: Little or no information about the target market for the companies Strategy: LGEIL $($LG electronics India limited$)$ adopted a few strategies that proved instrumental for them to enter the rural markets. Firstly, they made changes in their offerings for the rural market. For example, they offered coloured televisions for INR $8000$ in these rural markets and, focused on removing any unappealing features to match the needs of rural customers. Furthermore, they reduced the number of TV channels for rural customers to lower theirs and the customer$’$s costs. LG India also made changes in its marketing and distribution structure for their rural customers and adopted a unique structure best suited for these customers. It designed a pyramidal sales structure by decentralizing its distribution structure.

Earlier the rural dealers were serviced through LG India$’$s branch offices, this is not working well in the rural markets. And so$,$ the company further fragmented its current structure.

New distribution structure: By $2005,$ the company already had $51$ branch offices and $78$ RAOs! And eventually, one RAO started representing of $2-3$ districts or $2-3$ RSOs in the country. Furthermore, these regional sales officers working in RAO were from the same locality and so$,$ had better knowledge about areas, culture and language in their region. To further assist RAOs, the offices were computerized this enabled the RAO to stay on top of their inventory, payments, etc. and essentially made the entire decision making faster. Also, where earlier the computer representative from head office had to manually visit these places to analyse various advertisements spots, now was done directly through the exchange of pictures from an RAO.

Lastly, the remote area officers were given independent decision$-$making powers to develop their own marketing and promotional strategies in their territories. For example, during a cricket season, the families were given Plasma televisions for a trial period of $15$ days in exchange of a specific price. Naturally, after using the product some customers would show interest and end up purchasing the product. The sales representatives extended tailor$-$made finance schemes to their customers to improve the numbers for the company. RAOs were also responsible for their own independent marketing and promotional activities in the area.

Results: These strategies helped LG India to penetrate deep into the rural markets and improve sales.

Their market share for refrigerators in the rural markets jumped to $24\%$ in $2004$ from $16\%$ in$\mathrm{ 2}003.$ In some areas, LG India made sales $40-45\%$ higher in $2004$ than in the previous year. It helped them develop relations with the rural dealers who were earlier not a part of their network.

Q$1$: Briefly discuss Rural Performance Index$-$Rural Innova$8$on Index Matrix. Which quadrant you identifyy LG$’$s strategy findng in$.$ Explain your reasoning.

Q$2$: Discuss Ansoff Matrix and highlight which of the strategies as identifiedd by Ansoff is LG considering for its expansion. Discuss the appropriateness of new distribution strategy to meet the expansion goals. 

Q$3$: Comment on the effectivenesss of $4$ A$’$s in rural marketng mix with reference to LG$’$s objective of achieving higher penetration in the rural markets