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Micromax Business Model and Strategy

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A Presentation of the Business Model,Corporate Level,Business Level and Functional Level Strategies of the Indian Mobile Giant-Micromax

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Micromax Business Model and Strategy

  1. 1. Introduction • Founded in 1991 by Rajesh Agarwal • 2008 Micromax joined the mobile handset market. • Micromax is currently the 2nd largest smartphone company in India. • Micromax sells around 2.3 million Mobility Devices every month. • It had revenue of around Rs 10,000 crore in the year 2014-15.
  2. 2. MISSION • To successfully overcome the technological barriers and constantly engender “life enhancing solutions”. VISION • To develop path breaking technologies and efficient processes that incubate newer markets, enliven customer aspirations and continue to make Micromax a trusted market leader amongst people. • Ideology stems from its rooted belief in “ Innovation” and delivering “nothing short of the best”
  3. 3. BUSINESS MODEL
  4. 4. • Value Proposition – The USP of Micromax is offering feature rich smart phones at very affordable prices. – Having higher commission for retailers and distributors (5%) • Strategic resources – Market Knowledge – Sustainable partnership with Chinese manufacturers; distributors/retailers. • Dynamic Process – Quick Launch of Mobile models QUALITATIVE COMPONENTS
  5. 5. Organizational Capability Profile • Financial Capability – Maintaining without any debt and their credit policy • Marketing Capability – Marketing and sales workforce/Market research • Operations Capability – Supply chain & Distribution Channel • Human Resources Capability – Strong top management
  6. 6. CORE COMPETENCY • Cost Control • Outsourcing
  7. 7. REVENUE STREAMS Selling electronic goods like mobile phone, tablet , LED TV (8% of the top line) etc. Micromax is set to venture into the services business eg. areas of education, health and security, through partnerships Quantitative components
  8. 8. COST CONTROL Asset light business model Low working capital Partnership with MediaTek Reducing Research and Development Cost
  9. 9. Profitability • Rs 190-crore net profit, 6.1 per cent of its Rs 3,106 crore revenue in 2012-2013. • Its profit before tax was Rs 280 crore, about 9 per cent of revenue. • 2014-15 , revenue increased 39% Micromax Profit Margin-6.1% Samsung Profit Margin-13.22% Apple Profit Margin- 21.42%
  10. 10. • Who it serves? - Serves both the rural market by providing products with long battery life and urban market by providing them with various choices at affordable prices. • What it provides? – Smartphones, – Tablet computers – 3G datacards – LED televisions
  11. 11. • How it makes money? – Most of its revenue comes from selling mobile phones. – Micromax has started manufacturing LED Television sets and tablet computers from April 2014. 650 1650 2400 1600 3106 7200 0 1000 2000 3000 4000 5000 6000 7000 8000 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Revenue(₹ crore) Revenue(₹ crore)
  12. 12. How it provides its products/Services? • Three-tier distribution network • Through Amazon (Yu brand) State-level distributors (60+) local distributors (800+) retail outlets (1, 25,000 )
  13. 13. Environmental Scanning
  14. 14. SWOT Analysis STRENGTH -Promise to provide an economical handset -Capitalised on the local market knowledge -Extensive distribution -No debts WEAKNESS Has limited global presence -Not preferred by Tech-Savvy people -Customers perceive it as Low price means low quality OPPORTUNITIES -Market Expansion -E commerce -Introduction of 4G -Wearable technology and Virtual reality THREATS -Competition from national & global players. -Dynamic tech environment
  15. 15. Porter’s 5 Force Model
  16. 16. Bargaining power of Buyers-Low to medium • Diverse customers • Switching cost-Low • The increasing number of choices and very little differentiation of products • Availability of information aids buyer’s bargaining ability
  17. 17. Threat of new entrants-Medium • Patents- 250,000 Active Patents. • Capital requirement- Medium • Time needed to set-up- Medium to High • Brand loyalty-Low (But Brand name is important) • Already existing competition to gain market share among the big players.
  18. 18. Bargaining Power of Suppliers-Medium to High • Number of suppliers Chipset – Low(Qualcomm-66% and Mediatek-17% ) Operating System- Android(Open source),iOS, Windows • Cost of switching- High • Comparative share in the business-Medium to High
  19. 19. Degree Of Rivalry- Medium • The Concentration Ratio Top 4 companies have - 60% share Samsung-23% Micromax-17.9% • Smartphone Market growth-19% • Competitors constantly at short intervals launch new variants , Models , Versions and better features. • Response time of Competitors towards customers demands and expectation lowering day by day
  20. 20. Threat of Substitutes - LOW – Communication tech has reached to stagnation – Wire to Wireless Saturation – Only disruptive substitutes : Touch Pads, BookPads with VoIP facilities – Nascent emergence of Wearable Technology – No Significant Tech existing to wipe out Mobile and Smartphone industry any time soon
  21. 21. Corporate Level Strategy • Directional: – Expansion in market: from rural to urban and now international level – Diversification: Entered into TV segment – Capital budgeting: they thought of an IPO for $500 million but later on pulled back No debt in balance sheet
  22. 22. Business level strategy • Unique Fusion of cost reduction and product differentiation – 30days battery – Dual sim – Slimmest phone • Segmentation according to rural needs.
  23. 23. Functional Strategy • Marketing: • Distribution channel and Celebrity endorsements • Following a Frontal and Flanking attack strategy. • Human Resources: Recruited high potential top management. • R&D : technology follower, setting up new plants. Outsourcing reduces the cost.
  24. 24. Recommendations • Corporate level: Expansion into countries like Indonesia. Can have own retail outlets (Forward integration) • No need for IPO until there is huge need for cash. • Business Level: Focus on Differentiation • Functional Level: More Service centers & software updates to increase the customer responsiveness.

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