How Did Nokia Succeed in the Indian Mobile Market
By most accounts, India is among the world fastest growing markets for mobile phones. The country has some 170 million subscribers and adds 6 million to 7 million more each month. 2 million subscribers a month.) Recognizing this potential, several global telecom giants jumped into the fray when the Indian government first opened up the country telecom market to private enterprise in 1994. Among them, one company Finland based Nokia forged ahead of rivals and today commands a 58% market share for mobile phones (also called In michael kors outlet online specific segments, such as GSM telephony, Nokia market share in India is as high as 70%. (GSM, which stands for Global System for Mobile, is the world most popular standard for mobile communications.)
How did Nokia take the lead in the Indian mobile phone market, ahead of companies such as Ericsson, Motorola, LG and Samsung? According to company executives and industry experts, Nokia strategy combined focusing on the mobile phone market, establishing crucial distribution partnerships, making early investments in manufacturing and brand building, and developing innovative product features such as mobile phones that could double as flashlights. Ravi Bapna, professor of information systems at the Indian School of Business in Hyderabad, says, far as Nokia India strategy is concerned, the numbers speak for themselves. The company is a key cog in India wireless value chain, and it has used India as its emerging market lab. Power of Focus
D. Shivakumar, Nokia India vice president and country manager, believes that focus played a key role in the company growth in India. you look at the [mobile phone] landscape in 1995, anybody could have succeeded if they had done the same things as Nokia did, he says. all the other companies had something else to focus on, some other business. Nokia was completely focused on mobile phones; others had consumer electronics, home appliances, etc. Nokia focus was not just on handsets, of course. The mobile infrastructure business then part of Nokia India was equally important. But, as of April 1, 2007, Nokia joint venture with Siemens for mobile infrastructure has become an independent entity. Thus, Nokia India has become even more sharply focused.
Being ahead of the curve was another component of Nokia strategy. invested before everybody else in the brand, in people, in distribution, says Shivakumar. Adds Pankaj Mahendroo, president of the Indian Cellular Association: invested in each vertical of the handset ecosystem manufacturing, distribution and design R has invested more than $1 billion in India so far, and company headquarters at Helsinki has repeatedly said that more funds will be made available if required. The Indian company had revenues of more than $3.5 billion in 2006, which means there is also money to be reinvested. (The company does not disclose its profit numbers.)
Investment in people is difficult to judge; every company claims to have the best talent in the business. But when it comes to distribution, Nokia lead is clear. Today, India has some 95,000 outlets that sell mobile phones. 50,000 of them and that a conservative estimate only one brand is available, Nokia, says Shivakumar.
Nokia started distributing its phones through a partnership with HCL (formerly Hindustan Computers Ltd.), which had already built an extensive network for its own products. Recently, Nokia has decided to supplement that with its own distribution efforts. companies realized that there was a tremendous growth opportunity and it was best that we utilized the resources of both organizations in an optimum manner, says Nokia India director of sales Sunil Dutt. decided that we would address some markets jointly, and that we would individually address some of the other markets. Dutt does not spell out how the two partners will divide the markets, some clues exist in the way demand is shaping up. In the cities where the market is maturing, buyers are looking at more sophisticated mobile phones, such as Nokia E series phones (which serve business users) and the N series (which have multimedia features). In rural India which constitutes 70% of the population affordability is an issue. So there is a different range for this constituency.
The price points sometimes dictate the type of outlet. the [telecom] operator footprint expands into different markets, all kinds of retail outlets get into michael kors outlet online selling mobile phones and airtime connections, says Dutt. who have been selling consumer electronics, STD booth owners and even cloth merchants get into this business. A stationery store stocks mobiles in a corner; a mom and pop grocery store moves beyond rice and lentils. there are people with existing businesses who decide to set up a separate shop only for mobile phones, he continues. why do they feel the need to set up a different outlet? In this business, customer engagement requires a completely different approach. Even the retail outlets realize this and [have started] separating the two businesses. notes that in the mature urban markets, as the metros and Tier I towns where mobility has been around for a few years, customer expectations are more evolved, and are continuously evolving. Our task here is to provide our people with relevant competency and skills sets. Nokia has begun to set up concept stores seven so far in Indian cities. our concept stores, we have tried to bring to life all the experiences that we offer at Nokia experiential zones across the world, he adds.
The other big investment area that has set Nokia apart from other telecom firms is manu michael kors outlet online facturing facilities and R Nokia has several R centers and labs in India. More importantly, it established a $150 million handset manufacturing facility in Chennai in 2005. The total production at this unit has crossed 25 million handsets. 30% of our production is being exported to neighboring countries, says Sachin Saxena, Nokia India director of operations in charge of the factory.
Other companies, such as Motorola, LG and Samsung, have also lined up similar investments or are in the process of setting up manufacturing units, but Nokia has had a clear head start. Also, the Chennai factory is devoted to handsets, whereas other companies are planning to make a whole range of consumer electronics products. manufacturing has worked to Nokia advantage, says Ravinder Zutshi, deputy managing director, Samsung India Electronics. India is looking at making its Chennai facility a global hub for its consumer electronics products. analysts note that Nokia strategy is potentially risky. When the going is good as it is now the company can do well. But Samsung approach is more flexible, these analysts note. If demand for mobile phones were to slump, Samsung could switch its manufacturing lines to other products. In contrast, Nokia India focus on mobile phones mirrors the priorities of its parent company. Nokia traditionally was in a whole range of businesses from toilet paper to power. But in 1993, CEO Jorma Ollila decided to sell off everything else and concentrate on mobile telephony.
Another crucial aspect of Nokia investment strategy focused on building its brand. Here, the company ran into a problem. The Nokia range available in India extends from Rs 1,499 ($37) at the lower end to Rs 45,000 ($1,125) at the high end. Marketing theory says a brand cannot be all things to all people. This is the reason that Hindustan Unilever, with quality built around its brand, refused to match Nirma, which came out with a cheap detergent. This is also why Eveready, the battery manufacturer, refused to lower prices when faced with a Chinese challenger in the dry cell market.
But Nokia has a problem promoting other brands under its corporate umbrella. the FMCG (fast moving consumer goods) market where the product lifecycle is at least 10 and sometimes 50 100 years models have a lifespan of 15 24 months here, says Devinder Kishore, Nokia India director of marketing. With such a lifecycle, promoting various models would mean watching money go down the drain in a couple of years.
Instead, Nokia is promoting platforms music, for instance. With this approach, one model can replace another while the branding remains the same, or is extended slightly with the E series and N series. has done well to focus on the brand rather than on brand, says Jagdeep Kapoor, chairman and managing director of Samsika Marketing Consultants. Kapoor, who has written several books on brand management, says that Nokia has understood the Indian market by straddling all segments: the high, the middle and the low end. company has created a ladder for consumers to climb from the low end to the middle end to the high end, while being fully assured that they will be with the mother brand Nokia. views the Nokia brand in terms of his proprietary model, which takes into account five needs rational, emotional, aspirational, physical and spiritual of the Indian consumer. as a brand has been able to address all the five needs to various degrees at various stages, he says. rational need of quality versus price has been met across price segments with options. The emotional need of being able to keep in touch with near and dear ones during times of joy and sorrow is being adequately fulfilled. The aspirational need with the new models and features and the look good approach has helped the brand become a sought after, must have brand. The physical need has been taken care of through size and comfort. And, finally, the spiritual need has been met through (local) languages and people they are 18 or 80 being able to greet one another via SMS [text messages] during religious festivals.
ISB Bapna offers a prescription for Nokia. forward with the premise that the mobile infrastructure will serve as India information infrastructure given the lack of substitute physical and digital infrastructure I would encourage Nokia to take a more active role in nurturing content and application creation communities that bring a range of services to all layers of the population, he says. in [Nokia’s] own interest to do so. for India
The Nokia story in India has not been about grafting a model that has worked abroad. In fact some of its models the handsets, not the strategies are unique to India. or Europe that their mobile phones should incorporate a flashlight, or torch. But in India where large numbers of the rural population do not have electricity, and power cuts are commonplace even in the cities having a torch built into a mobile phone is a distinct and tangible benefit. The Nokia 1100, the first made for India phone, has been a runaway success. Manufactured at Chennai, it is also being exported. The 1100 incorporates a torch, an alarm clock and a radio. is something which consumers reward in this market, says Shivakumar.
Similar plans are in the works at Nokia three India R labs, which employ 700 people. For obvious reasons, most of the activity is under wraps. Nokia is, however, willing to talk about the phone. This is, again, something that mobile phone users in affluent countries might find puzzling, but the concept is simple. For reasons of affordability, in rural areas a phone may be shared by several people. The models being launched to cater to this need will have separate address books, individual billings and more. Will it work? People initially doubted the torch phone, too, but it became a popular product.
Shivakumar offers some reasons to explain why he thinks the Indian market is different and needs out of the box thinking. consumer differences exist michael kors outlet online between India and other countries, he says. cell phone is a huge style icon for the Indian masses: 62% of Indians buy a cell phone because of its looks. That is something that is not true anywhere else in the world. It as huge a style statement as your watch, pen, cufflinks or bag. Hence, the brand matters quite a lot.
it is a safety product for women in small towns, because with a cell phone you are in touch all the time; you accessible. Next, it is a huge productivity vehicle. When somebody calls you, you do not need to take your bike out; you don need to take your car out. You make a phone call and it over.
is also a driver of a lot of economic activity. If you go down the roads of Gurgaon and Delhi, you will find that lots of people have written their [mobile] phone numbers on the walls a plumber, an artisan, a carpenter, a tailor. I think the whole service sector has gotten a huge lift, thanks to this. This has killed the visiting card business. It is also the ultimate entertainment device. You have music on it now, in terms of radio and stored music. The day is not far when you will see movie clips and TV. One of our products has that, so that TV on the go.
The Indian market for mobile phones, in addition to its base of 170 million subscribers, is also one of the most cost effective in the world. Call rates in India are among the lowest anywhere making a mobile phone call costs two cents in India, compared with about four cents in China. The market also has tremendous growth potential. So far, most of the growth has been penetration led, which means placing devices in consumers hands. And whenever they change their phone, 60% are willing to pay a higher price.
Shivakumar offers examples of future services that might be delivered over cell phones. cell phone could be the future bank a full branch of the bank. You don need 20 people, a security guard or a vault. This is a passbook plus bank rolled into one. It can be your payment system. Another possible use is navigation, where cell phones could be used to provide maps of an area where the user is based. Such services, whenever they are launched, could help Nokia keep going and growing in India.