SEOUL, 17 June — Tae-Kil Kang, the vice president of LG Electronics, has confirmed the strong relationship between LG Electronics and its agents in the Kingdom, Al-Naghi Group, the exclusive agent for household appliances, and Shaker Group, the agent for LG air-conditioning systems. Speaking to Arab News, Kang said that the performance of both agents and their sales forecasts for the past two years were satisfactory. Shaker Group, for example, has increased air-conditioning sales from $15 million in 1998 to $50 million in 2000 which is a highly competitive figure in the local market. Al-Naghi Group also made substantial increases in its sales of household appliances.

During the interview, Kang spoke about LG’s plans to permit its agents in other countries to sell its products in the Saudi market. WTO regulations prohibit exclusive agencies. Any sudden changes are unlikely because of the relationship between the company and its agents. The LG Electronics agent in the UAE, already a WTO member, for example, has experienced no competition from LG agents from outside the UAE.

The LG vice president made these statements to allay the fears of Saudi companies that foreign firms may move into the Kingdom’s market after Riyadh joins the WTO. In addition, Young Soo Kim, executive vice president of LG Electronics, said that LG recognizes the Saudi market as the largest in the Middle East for household appliances

LG Electronics Regional Office in Jeddah provides advisory and marketing support to its agents as it does to others in the region. The LG products are marketed all over the Middle East and this year the company will launch such new products as digital TV, digital projector, crystal TV and plasma TV.

The LG Electronics operations in Saudi Arabia, according to official figures, is over $100 million a year and the aim is to increase sales up to $130 million this year. The increase in sales will be achieved by both agents adopting a joint plan.

The scheme to introduce air-conditioning systems operated from outside the house will be carried out after marketing surveys and studies implemented in collaboration with the agent. The owner can switch on his air-conditioner by a code in his mobile phone from any place outside his home. “Within a month, we will be able to determine the demand for the new product and the potential consumers.” Hamad M. Malik, director of marketing for the Middle East and Africa, said. “It is important to study the volume of demand and the potential consumers for any market because the price of products depends upon demand. For example, LG Electronics refrained from introducing certain types of refrigerators and washing machines because of their cost. Once demand increases, prices fall.”

Mohammed Arshad, marketing manager of LG Electronics in the Kingdom, said that LG Electronics along with its agents in Saudi Arabia have been concentrating recently on upgrading after-sales services and the plan is to be on the Internet for direct customer accessibility. Answering a question about LG Electronics plans to manufacture LG products in Saudi Arabia, Arshad said that there was a study under way for the manufacture of air-conditioners.

Household appliance sales in the Kingdom are around SR900 million with refrigerators sales topping with 35% of the  market share and washing machines at 26%. Household appliances fall into three categories:

a) Long-life items such as refrigerators, cooking stoves and washing machines,

b) Support items such as blenders and vacuum cleaners,

c) Electronic items such as TVs, VCRs, cassette recorders and irons.

Saudi manufacturers are currently producing long-life items such as refrigerators for 20% of the Saudi market with the remaining imported. Saudi Arabia’s open market policy, non-monopoly and national products matching international standards led to encouraging prospects for sales of long-life items with annual sales approaching SR1 billion.

Lead in digitals

Kun Kuo, LG Electronics vice chairman and executive director, said that the strategic goal for LG Electronics was to be second to none in digital technology in the 21st century. LG Electronics will, in addition to its already advanced products, introduce flat screens, digital and plasma TVs. Moreover, LG Electronics has entered into a contract with a German company for the distribution of plasma TVs.

LG: Heir to Gold Star

Gold Star, the electronics giant, burst onto the scene a year after the end of the Korean war when it introduced the first transistor followed by a fan and refrigerator. In its early days, the company was subsidized and thus boosted its sales; it sold more than 1 million sets and began export of its products to the US and Japan.

Between 1966 and 1978, the company made real progress. Most significant was its production of the first black & white TV in Korea after which the company went public. Its first plant and research center was then build and its export figures reached $100 million.

This was followed by the production of washing machines, cooking stoves and communications equipment.