How did nokia succeed in the indian mobile market


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How did nokia succeed in the indian mobile market

  1. 1. How Did Nokia Succeed in the Indian Mobile Market?Published: August 23, 2007 in India Knowledge@WhartonBy most accounts, India is among the worlds fastest-growing markets formobile phones. The country has some 170 million subscribers and adds 6million to 7 million more each month. (China, in contrast, adds 5 millionsubscribers, and the U.S. 2 million subscribers a month.) Recognizing this potential, severalglobal telecom giants jumped into the fray when the Indian government first opened up thecountrys 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 mobilephones (also called "handsets"). In specific segments, such as GSM telephony, Nokias marketshare in India is as high as 70%. (GSM, which stands for Global System for Mobile, is theworlds most popular standard for mobile communications.)How did Nokia take the lead in the Indian mobile phone market, ahead of companies such asEricsson, Motorola, LG and Samsung? According to company executives and industry experts,Nokias strategy combined focusing on the mobile phone market, establishing crucial distributionpartnerships, making early investments in manufacturing and brand-building, and developinginnovative product features -- such as mobile phones that could double as flashlights. RaviBapna, professor of information systems at the Indian School of Business in Hyderabad, says,"As far as Nokias India strategy is concerned, the numbers speak for themselves. The companyis a key cog in Indias wireless value chain, and it has used India as its emerging market lab."The Power of FocusD. Shivakumar, Nokia Indias vice president and country manager, believes that focus played akey role in the companys growth in India. "If 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. "But allthe other companies had something else to focus on, some other business. Nokia was completelyfocused on mobile phones; others had consumer electronics, home appliances, etc." Nokiasfocus was not just on handsets, of course. The mobile infrastructure business -- then part ofNokia India -- was equally important. But, as of April 1, 2007, Nokias joint venture withSiemens for mobile infrastructure has become an independent entity. Thus, Nokia India hasbecome even more sharply focused.Being ahead of the curve was another component of Nokias strategy. "We invested beforeeverybody else -- in the brand, in people, in distribution," says Shivakumar. Adds PankajMahendroo, president of the Indian Cellular Association: "Nokia invested in each vertical of thehandset ecosystem -- manufacturing, distribution and design R&D."Nokia has invested more than $1 billion in India so far, and company headquarters at Helsinkihas repeatedly said that more funds will be made available if required. The Indian company had
  2. 2. 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.)The Distribution EdgeInvestment in people is difficult to judge; every company claims to have the best talent in thebusiness. But when it comes to distribution, Nokias lead is clear. Today, India has some 95,000outlets that sell mobile phones. "In 50,000 of them -- and thats a conservative estimate -- onlyone brand is available, Nokia," says Shivakumar.Nokia started distributing its phones through a partnership with HCL (formerly HindustanComputers Ltd.), which had already built an extensive network for its own products. Recently,Nokia has decided to supplement that with its own distribution efforts. "Both companies realizedthat there was a tremendous growth opportunity and it was best that we utilized the resources ofboth organizations in an optimum manner," says Nokia India director of sales Sunil Dutt. "Wedecided that we would address some markets jointly, and that we would individually addresssome of the other markets."While Dutt does not spell out how the two partners will divide the markets, some clues exist inthe way demand is shaping up. In the cities where the market is maturing, buyers are looking atmore sophisticated mobile phones, such as Nokias E-series phones (which serve business users)and the N-series (which have multimedia features). In rural India -- which constitutes 70% of thepopulation -- affordability is an issue. So there is a different range for this constituency.The price points sometimes dictate the type of outlet. "As the [telecom] operator footprintexpands into different markets, all kinds of retail outlets get into selling mobile phones andairtime connections," says Dutt. "People who have been selling consumer electronics, STD boothowners and even cloth merchants get into this business." A stationery store stocks mobiles in acorner; a mom-and-pop grocery store moves beyond rice and lentils. "Then there are people withexisting businesses who decide to set up a separate shop only for mobile phones," he continues."And why do they feel the need to set up a different outlet? In this business, customerengagement … requires a completely different approach. Even the retail outlets realize this and[have started] separating the two businesses."Dutt notes that in the mature urban markets, "such as the metros and Tier I towns where mobilityhas been around for a few years, customer expectations are more evolved, and are continuouslyevolving. Our task here is to provide our people with relevant competency and skills sets." Nokiahas begun to set up concept stores -- seven so far -- in Indian cities. "At our concept stores, wehave tried to bring to life all the experiences that we offer at Nokia experiential zones across theworld," he adds.Investment in ManufacturingThe other big investment area that has set Nokia apart from other telecom firms is manufacturingfacilities and R&D. Nokia has several R&D centers and labs in India. More importantly, itestablished a $150 million handset manufacturing facility in Chennai in 2005. The total
  3. 3. production at this unit has crossed 25 million handsets. "Some 30% of our production is beingexported to neighboring countries," says Sachin Saxena, Nokia India director of operations incharge of the factory.Other companies, such as Motorola, LG and Samsung, have also lined up similar investments orare 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 awhole range of consumer electronics products. "Domestic manufacturing has worked to Nokiasadvantage," says Ravinder Zutshi, deputy managing director, Samsung India Electronics."Samsung India is looking at making its Chennai facility a global hub for its consumerelectronics products."Industry analysts note that Nokias strategy is potentially risky. When the going is good -- as it isnow -- the company can do well. But Samsungs approach is more flexible, these analysts note. Ifdemand for mobile phones were to slump, Samsung could switch its manufacturing lines to otherproducts. In contrast, Nokia Indias focus on mobile phones mirrors the priorities of its parentcompany. 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 mobiletelephony.Building the BrandAnother crucial aspect of Nokias investment strategy focused on building its brand. Here, thecompany ran into a problem. The Nokia range available in India extends from Rs 1,499 ($37) atthe lower end to Rs 45,000 ($1,125) at the high end. Marketing theory says a brand cannot be allthings to all people. This is the reason that Hindustan Unilever, with quality built around itsbrand, refused to match Nirma, which came out with a cheap detergent. This is also whyEveready, the battery manufacturer, refused to lower prices when faced with a Chinesechallenger in the dry cell market.But Nokia has a problem promoting other brands under its corporate umbrella. "Unlike theFMCG (fast-moving consumer goods) market -- where the product lifecycle is at least 10 andsometimes 50-100 years -- models have a lifespan of 15-24 months here," says DevinderKishore, Nokia Indias director of marketing. With such a lifecycle, promoting various modelswould 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 canreplace another while the branding remains the same, or is extended slightly with the E seriesand N series. "Nokia has done well to focus on the mother brand rather than on another 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 understoodthe Indian market by straddling all segments: the high, the middle and the low end. "Thecompany has created a ladder for consumers to climb from the low end to the middle end to thehigh end, while being fully assured that they will be with the mother brand Nokia."
  4. 4. Kapoor views the Nokia brand in terms of his proprietary "REAPS" model, which takes intoaccount five needs -- rational, emotional, aspirational, physical and spiritual -- of the Indianconsumer. "Nokia as a brand has been able to address all the five needs to various degrees atvarious stages," he says. "The rational need of quality versus price has been met across pricesegments with options. The emotional need of being able to keep in touch with near and dearones during times of joy and sorrow is being adequately fulfilled. The aspirational need with thenew 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 --whether they are18 or 80 -- being able to greet one another via SMS [text messages] during religious festivals."ISBs Bapna offers a prescription for Nokia. "Going forward with the premise that the mobileinfrastructure will serve as Indias information infrastructure -- given the lack of substitutephysical and digital infrastructure -- I would encourage Nokia to take a more active role innurturing content and application-creation communities that bring a range of services to alllayers of the population," he says. "Its in [Nokias] own interest to do so."Products for IndiaThe Nokia story in India has not been about grafting a model that has worked abroad. In factsome of its models -- the handsets, not the strategies -- are unique to India. Consider thisexample: It would probably be inconceivable to mobile phone users in the U.S. or Europe thattheir mobile phones should incorporate a flashlight, or torch. But in India -- where large numbersof the rural population do not have electricity, and power cuts are commonplace even in thecities -- having a torch built into a mobile phone is a distinct and tangible benefit. The Nokia1100, the first made-for-India phone, has been a runaway success. Manufactured at Chennai, it isalso being exported. The 1100 incorporates a torch, an alarm clock and a radio. "Innovation issomething which consumers reward in this market," says Shivakumar.Similar plans are in the works at Nokias three India R&D labs, which employ 700 people. Forobvious reasons, most of the activity is under wraps. Nokia is, however, willing to talk about the"shared" phone. This is, again, something that mobile phone users in affluent countries mightfind puzzling, but the concept is simple. For reasons of affordability, in rural areas a phone maybe shared by several people. The models being launched to cater to this need will have separateaddress books, individual billings and more. Will it work? People initially doubted the torchphone, too, but it became a popular product.Shivakumar offers some reasons to explain why he thinks the Indian market is different andneeds out-of-the-box thinking. "Fundamental consumer differences exist between India and othercountries," he says. "A cell phone is a huge style icon for the Indian masses: 62% of Indians buya cell phone because of its looks. That is something that is not true anywhere else in the world.Its as huge a style statement as your watch, pen, cufflinks or bag. Hence, the brand matters quitea lot."Second, it is a safety product for women in small towns, because with a cell phone you are intouch all the time; youre accessible. Next, it is a huge productivity vehicle. When somebody
  5. 5. calls you, you do not need to take your bike out; you dont need to take your car out. You make aphone call and its over."It 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 -- aplumber, 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 entertainmentdevice. You have music on it now, in terms of radio and stored music. The day is not far whenyou will see movie clips and TV. One of our products has that, so thats TV on the go."An Expanding MarketThe Indian market for mobile phones, in addition to its base of 170 million subscribers, is alsoone 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 beenpenetration-led, which means placing devices in consumers hands. The bulk of the growth goingforward will be replacement-led, where consumers come back for more. In India, consumers tendto change their phones faster than in most other places. 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. "Thecell phone could be the future bank -- a full branch of the bank. You dont need 20 people, asecurity guard or a vault. This is a passbook plus bank rolled into one. It can be your paymentsystem." Another possible use is navigation, where cell phones could be used to provide maps ofan area where the user is based. Such services, whenever they are launched, could help Nokiakeep going and growing in India.
  6. 6. Home Startups DealFlow Internet Mobile Technology Resources Jobs ForumMobile10 Things Nokia Should Do in India (and Emerging Markets) Wednesday, October 13th, 2010 by Pratyush PrasannaWe have covered Nokia in the past and lately, the coverage has not been favorable. Nokia – inspite of being the market leader both in terms of thought and share, has been steadily losing thebattle at both ends. In the smart phone segment, BB and to some extent Android have beengaining share in India and on the lower end we have the new entrants – Micromax, Zen Mobile,Lemon mobile, WynnComm have eaten Nokia’s lunch.So what does Nokia do – how does it adapt to this changing market and be in the game. Here area few steps I think can enable Nokia to be a significant player in the market today -1) Change the brand and attack the lower end phones – Why does Nokia have to change thebrand? Because the populace associates Nokia with a certain price point (which their sales say issynonymous with quality). The suggestion is not to lose the quality but to lose the price point e.g.Nano by Tata. Name it AIKON or something – but have an offering which hurts Micromax andits elk where it hurts most. Micromax and others arent sleeping – they have already startedpartnering with the big daddy – Google.
  7. 7. Nokia Market Share - The Writing is on the Wall2) Change the distribution model - Have you ever walked into a Nokia store. They usually arethe biggest bunch of ignorant snobs I have seen. I think it also kills choice – users think “we willget only Nokia there”. As many of us know Indian users care two hoots for customer servicewhile they buy the product (more on this in a later point).3) Change the commission to stockists - Because of the snobbish attitude they had because ofthe market share, the commissions Nokia pays to 3rd party stockists is among the lowest. I wentand asked a few small stores and each of them showed me non-Nokia phones at a particular pricepoint. On further questioning it turned out that Nokia phones get them the least margins. Nowonder they have lesser incentive to sell. Micromax, Lemon (the two I asked) paid more.4) Spend correctly on advertising – SRK is great. I am a big fan. Use him wisely – see the typeof ads Aamir does for Tata sky. Apart from that, have a different ad budget and targeting forlower end phones. Most of them talk about the deliverables (see videos etc) and the price –thereby associating quality of offering directly with a price point.5) Target Social networks – Wynncomm advertises Gmail and Facebook. Micromax has aFacebook button. I am sure there is a clientele that can benefit from just saying that “Yes we alsohave an application for Facebook” and maybe buy a phone for that. I also think the customerengagement on FB is almost non existent – not that the others have it – but you cant always be afollower and win right?6) Digital marketing – We covered a bit on their release of the N8 and the Nokia India teamfollowed up with a good response too. However I think they can go a long way in addressing thedigital marketing bit. I think they have a lot of terms thrown in the response (most of which a
  8. 8. common man wont understand – but I do – I worked at MS) and I think all that is to hide the shitthat they want to spray the deodorant on.7) Tie up with Mobile service providers - In a recent interview with the Livemint, the Nokia(India) head mentioned that tie-ups with Mobile service providers won’t work. I think that isdenying a very lucrative revenue stream to them. Why cant we explore other models like payupfront for the phone + and don’t pay for the first year (so that Discounted Cash flow at expectedrate of revenue makes up the costs) and give the scheme for low entry costs for users with a greatcredit history. Dismissing it with a “Never” is not the way to go about it (interview here).8 ) Sell the application store better - Nokia has an amazing app store. They also do believe thatapplications will be the future revenue growth drivers – refer post above. But they have not soldit AT ALL. Even crappy app stores from others get better eyeballs than Nokia Ovi (which I thinkhas great stuff there). They could also promote India specific apps – sometimes I think commonsense is not that common.9) Have real support – I can only quote personal experience but Nokia support experience justsucks. My brother bought a Nokia which stopped working a fortnight after the buying date.When he approached the Nokia store, they mentioned that they replace the handset with arefurbished phone and NOT a new phone – in the US this would have set the scene for a nicelittle lawsuit – unfortunately it doesn’t happen in India. The guys were thick-skinned enough tomention that he has to remain without a phone while they arrange for the refurbished one. Theyalso replaced his phone with ANOTHER N81 after 4 days which gave way after 4 more days. Hehas since filed a PIL and is waiting for them to revert.10) Take me to your leader – You heard the leadership speak about the future direction above. Idon’t’ think the direction is bad – its missing. Hopefully the change in Finland will have someeffect on the market here. Don’t get me wrong – there are some absolutely brilliant people inNokia in India. However it needs much more than that – especially from the leadership – to savea sinking ship.
  9. 9. The real Top 13 reasons why Nokia Lumia and Windows Phone will fail, not justin USA but across planetNokia was prominently featured at the CES show in the USA this week, the biggest consumerelectonics show of North America. Nokia CEO Stephen Elop was on stage a couple of times aswas Microsoft CEO Steve Ballmer. The brand new Nokia Lumia 900 won best product of theshow. And nicely on que, Forbes ran an article of the Five Reasons Why Windows Phone WillMake Big Splash in Smartphone Market. The article got a lot of attention and on first read, to therandom reader, it seems to make good arguments (I will deal with those later). The first point tomake, is that the author, E.D. Kain, had actually written a pair of articles about Windows Phone,this one yes in favor but also another one against.There have been many commentaries of the issue, perhaps the best direct response was by DonReisinger at eWeek. He gave 10 reasons why Windows Phone will fail. His arguments are verygood, but they are somewhat USA focused and still do not tackle some of the biggest reasonswhy Windows Phone - and Nokia Lumia - will fail. Lets take this issue logically, reasonably andwith facts, not just conjecture and opinion and hope and hype. And lets start where most sensiblemarketers start, not from the product but from the consumer. What is it that we, smartphonebuyers, want. And readers, this is again one of those ultra-long Tomi Ahonen essays, about16,000 words (more than a full chapter in a hardcover book) so go get yourself a good cup ofcoffee before you start. It will probably take you half an hour to complete this article but Ipromise you, it is stuffed with facts, stats, insights and goodies.Reason 1 - Messaging Madness: Nokia has a natural strength in messaging-oriented smartphones(the most used feature of all mobile phone owners from Africa to the USA is messaging,including smartphone owners). It is abandoned with the first 3 Lumia phones. Nokia voluntarilyforegoes a competitive advantage that it has always before taken advantage of. Thus Lumia willperform worse than Nokia smartphones have done before.Reason 2 - Camera Catastrophy - Nokia mobile phones have always been known for goodcameras, its flagship phones tend to have had the best cameras in the world. The camera is thesecond most used feature. The Lumia series is a downgrade of Nokia camera capability and willseverely disappoint past Nokia owners and not stand up to rivals today.Reason 3 - Look and Feel is not competitive. Nokia Lumia has gotten good reviews for itsappearance but nothing beyond that. And by its one form factor alone, it will not win manyconverts, but on the abandoned other form factors, and its lack of typical Nokia elements, it is adowngrade from what Nokia has been in the past, and yet is not competitive with rivals today.Reason 4 - Nokia Brand failure. Nokias brand has been damaged very badly in the past year.Whatever Nokia was able to do in 2010, today Nokia will do far worse, whether in the USA orrest of the world.Reason 5 - Windows Brand failure. The Nokia brand damage is recent and perhaps reversablebut Microsofts brand damage with Windows Mobile and Windows Phone has been sustained far
  10. 10. longer and been far more comprehensive. Microsoft has good brands such as Xbox and OfficeSuite but its Windows Brand is weak and in mobile, it is poisonous.Reason 6 - Input failure. The Nokia strength has been exceptional QWERTY keyboards. On theN9 using MeeGo Nokia was able to innovate with touch screen inputs. But Lumia has neither. Itis a cheap copycat of the iPhone style touch screen input and Lumia abandons natural Nokiastrengths while showing no competitive advantages.Reason 7 - Fails in variety of models. Nokia has traditionally been able to hold to the worldslargest smartphone market share - a year ago Nokia was literally not just bigger than the iPhone,it was bigger than the iPhone and all Samsung smartphones - combined. Now Samsung is doingthe Nokia with its expanding Galaxy portfolio while the three Lumia devices are near clones ofeach other. Nokia is again voluntarily abandoning a competitive advantage, which means Lumiawill perform less well than Nokia was able to do in the past.Reason 8 - fails on apps and app store. Nokias Ovi was the worlds second most used app storejust a year ago. That was replaced with Windows Phone, at best the 8th best ecosystem today,which still a year later has less than half the number of apps as Nokia currently still has on Oviand Symbian. Whatever you thought of Ovi and Symbian failing in apps, it is far worse onWindows Phone.Reason 9 - the OS is deficient. The Windows Phone OS can seem exciting when first seen withits Tiles but on short usage it reveals how limited and unfinished it is. The tech reviews afterusing Windows Phone (and Lumia) are quite consistent that Windows Phone is not yet ready forprime time. It may become so in the future, but its not yet nearly competitive with advanced OSplatforms out there.Reason 10 - regressing on features and services. Where Nokia smartphones tended not to be thecoolest and sexiest in recent years, at least Nokia was always known for stuffing everyconceivable tech feature onto its flagship phones. The joke was, that to see what will be on thenext iPhone model, just look at a 3 year old Nokia flagship. The Lumia is the first time ever, thatNokia has regressed in its features, severely. Not just pruning unnecessary tech bloat butliterally going back in tech, to specs that were normal on Nokia phones a year, two, even threeyears ago. That guarantees that any current owners of Nokia will find the Lumia a severedisappointment.Reason 11 - rejected by business/enterprise customers. I also discuss the enterprise/corporateside of the smartphone business. That market seems a great opportunity due to MicrosoftWindows OS and Office Suite integration with Nokia smartphones. Except that this is nothingnew. Nokia and Microsoft had done full Office Suite integration years ago and it helped Nokiaand Microsoft sell... zero more smarpthones into the enterprise space.Reason 12 - poisoned carrier relationships with Nokia. The handset industry is different from thePC industry or home electronics, in that the carriers/operators decide which phone succeeds andwhich fails (witness the short-lived Microsoft Kin). Nokia used to have the platinum-standardcarrier relationships a year ago. Those were burned by the CEO last year. Today Nokias carrier
  11. 11. relationships are the worst they have ever been.Reason 13 - poisoned carrier relationships with Microsoft. But even worse, is that Microsoftnever used to have good carrier relationships. And yet, with Windows Phone, Microsofts owndeparted exec admits Microsoft has been making those carrier relationships worse. So NokiaLumia trades the best carrier relationships to bad ones, and then partners with the company withthe worst relationships - that has been making them only worse last year.