The document discusses Nokia's distribution network in India. It describes Nokia's partnership with HCL Infosystems (HCLI) to distribute Nokia phones through a multi-level network of redistribution stockists, dealers, and retailers across India. It provides details on the roles of channel partners, margins at different levels, infrastructure requirements, and support provided by Nokia to distributors.

1. 2010NOKIA DISTRIBUTION NetworkSubmitted to :Mr.Asif ZameerAssisstant Professor, MarketingFORE School of Management, New DelhiSubmitted by :Ashutosh Kumar Jha (91011)Faraz Khan (91033)Nishant Singh (91039)Roshan Sonthalia (91045)Smriti Gupta (91054)Stuti Gupta (91056)<br />Table of Contents TOC \o \"
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\h \z \u Introduction PAGEREF _Toc271922117 \h 4Mobile phone industry in India PAGEREF _Toc271922118 \h 4Nokia in India PAGEREF _Toc271922119 \h 5Nokia distribution structure in India PAGEREF _Toc271922120 \h 6Role of Channel Partners PAGEREF _Toc271922121 \h 8Margins at each level PAGEREF _Toc271922122 \h 10Distributors Coverage Plan PAGEREF _Toc271922123 \h 11Infrastructure required by distributor PAGEREF _Toc271922124 \h 11Support provided by the company to the distributor PAGEREF _Toc271922125 \h 13Credit/ Payment terms PAGEREF _Toc271922126 \h 14Major Problems Faced by the distributors PAGEREF _Toc271922127 \h 14Major Points of conflict PAGEREF _Toc271922128 \h 15Major Problems/ Issues identified PAGEREF _Toc271922129 \h 16Recommendations PAGEREF _Toc271922130 \h 17Refrences PAGEREF _Toc271922131 \h 18People Contacted PAGEREF _Toc271922132 \h 19<br />Terms and Abbreviations used<br />Nokia - Nokia India Pvt. Ltd.

2. RDSS – Redistribution Stockist Supplier

3. HCLI – HCL Infosystems

4. Dealers – Mobile phone retailersIntroduction <br />Integral part of 4P’s f marketing mix is ‘place’. Having a great product is useless till its made available to potential customers at right places and at right time. Considering a country like India with not only a large but also economically, climatically and socially diverse landscape to be covered amplifies the problem manifolds. A distribution network for products rises above importance levels to become bare necessity for the existence of any company. The success of the channel design depends upon the reach and efficiency of the network any organization develops and maintains and ease with which any potential customer is able to find the product. Efficiency of the distribution cost and type of channel partners form and integral part of this.<br />Mobile phone industry in India<br />The mobile phones industry made a slow start in India in 1995. Several private players who had entered the industry in 1995 exited in the next few years due to the unfriendly telecom policies of the Indian government, high licensing fees and absence of a proper telecom regulatory body. The growth in the subscriber base of mobile phones remained sluggish initially, reaching the 1 million milestone in 1998. In 1999, the Government of India announced a new telecom policy. This policy planned to provide telephones on demand by 2002.<br />Among other things, the policy allowed unrestricted private entry into almost all mobile service sectors. The government allowed cellular mobile service providers to share infrastructure with other operators. It also allowed existing operators to migrate from fixed license fee to one-time entry fee with revenue sharing. This policy helped many private operators to break even faster. By 2001, the demand for mobile services was growing well. The private companies concentrated on providing basic telephone services to consumers. The number of mobile phones crossed five million by 2001 and doubled to 10 million in 2002. Since then, India has reached almost 35% teledensity with metros having 100% teledensity and over 450mn mobile connections across India. <br />Nokia in India<br />Nokia entered the Indian market in 1994. The first ever GSM call in India was made on a Nokia 2110 mobile phone on its own network in 1995. When Nokia entered India, the telecom policies were not conducive to the growth of the mobile phone industry. Nokia also had to face tough competition from other powerful global players like Motorola, Sony, Siemens and Ericsson.<br />Nokia as a company has expanded at a very fast pace in India. Over the past decade, Nokia has captured nearly 60% of India’s $5.6 billion handset market, of which about 25% are rural consumers. In 2006, Nokia set up a manufacturing facility in India, 2006, which allows it to manufacture and sell low-cost phones. It also adapted its phones to suit the local conditions. To further increase its popularity, the company has increased its number of customer care centers and caters to rural India with vans staffed with sales reps. It has also introduced social innovations such as access to crop prices, weather forecasts, and English lessons.<br />However due to staunch competition the market share has decreased slightly in 2006. However it is expected to grow as it has plans to expand in the rural market. India has around 95,000 outlets that sell mobile phones. In around 50,000 of them only one brand is available that is Nokia.<br />317754063500Achievements of Nokia:<br />Nokia Company released first mobile with Hindi menu in 2000<br />They have come up with Wi-Fi mobile which is called Nokia communicator in 2004<br />In 2006 this company has started huge mobile manufacturing plant in Sriperambathur nearby Chennai.<br />Nokia Company has joined with Malayalam Manorama to launch first India’s vernacular News.<br />Nokia distribution structure in India<br />When it comes to distribution, Nokia's lead is clear. Today, India has some 1,10,000 outlets that sell mobile phones. Out of these, according to companies own conservative estimates, 50,000 stores have only one brand available – Nokia.<br />Nokia started distributing its phones through a partnership with HCLI (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. Nokia believed that there was a tremendous growth opportunity and it was best exploited when the resources utilization of both companies was optimized. Nokia and HCLI have decided to develop a go-to-market strategy to jointly address the coverage needs of the urban and widely dispersed rural areas, while rest are handled individually. Nokia has always been secretive about its operation and strategies and have not spelt out clearly how the two partners have divided the markets, but some do 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's 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. Different types of retail fronts selling Nokia mobiles are :<br />Nokia concept stores<br />A one-stop shop for mobile users has been brought into existence to provide an opportunity for consumers to “experience the product “before purchasing it. Trained Nokia personnel would brief customers about various handsets and features. The store would have the entire range of Nokia devices in all categories including latest range of mobile enhancements and exclusive Nokia merchandise apart from handsets.<br />The new Nokia Concept Stores represent a rebranding of the previous Nokia Professional Centers. Nokia has so far been rolled out 9 Concept Stores in India with only Mumbai and Bangaluru having 2 concept stores. Other Concept stores in India are located in Gurgaon, Indore, Jaipur, Hyderabad and Chennai. <br />These stores would help Nokia strengthen it brand and at the same time save costs that it incurs in distributing to the dealers. Although it would have to bear the costs of training the employees but the transportation cost would be greatly reduced. It would also give the company the advantage of exclusivity. Since it has been opened in only metro and important cities, therefore, it would not be subject to state sales tax, if the CFA is located in the same city.<br />Nokia Priority Dealers<br />Nokia Exclusive Stores namely PRORITY DEALERS are all franchised outlets .The franchisee must fulfil certain criteria, for example, in the case of an existing store that would be converted to a priority dealer, there must be a certain number of footfalls, the location of the store should be prime real estate in that region, and certain other standards.<br />Nokia provides support to these outlets in the form of help in visual merchandising, furniture etc. against a certain deposit by the owner which is refundable at the end of the contract if need be.<br />Multi Brand Dealers<br />Apart from its Nokia Priority dealers and concept stores, the company distributes its product to many organized multi-brand mobile stores with nation-wide presence in India and recognized for their service and price discounts. Few of the major players are <br />Hotspot

5. Univercell

6. The Mobile store

7. RPG CellucomBesides these there are individual mobile retailing stores as well as wide variety of retail stores like electronics goods dealers, Stationary shops, etc who have started selling mobile phones over past few years. HCLI has also established over 150 Nokia Care Centers managed by HCLI and franchisee operations. <br />Role of Channel Partners<br />4072890135255Nokia <br />Nokia manufactures its mobile in Chennai manufacturing plant and then it transfers to nokia’s mother depot which is located in Gurgaon. They also provide assistance in selection of channel partners like redistributors, Dealers, Franchisees, etc. Besides this they provide monetary assistance in Store development for Nokia Priority dealers, help in promotion of products on mass scale as well as in store and training of the sales force of partners at every level.<br />HCLI<br />HCLI Info has been handling distribution of Nokia phones for 10 years. The agreement was due for renewal in August, 2006 and was renegotiated beforehand. Again on January28th’ 2009 a new agreement for territory division was signed between Nokia and HCLI. Nokia business accounts for 52% EBIT of HCLI. <br />HCLI currently has 30,000 channel partners (dealers), some of which it will transfer to Nokia. The pilot phase was launched in Mumbai and Bangalore to test the new distribution model. The absence of any other distribution partner ensures that there will be no price-cutting. In both the territories, Nokia phones were made available for a uniform price. <br />HCLI starts distributing Nokia’s product from Gurgaon depot. HCLI takes order from 4 redistributers appointed in Delhi to cover North, South, East and West zones and then it supplies the product to the dealers with the help of RDSS (Re-Distribution stockiest supplier).<br />HCLI also takes care of appointing partners and operation of Nokia Care centres. Currently there are care centres in more than 180 cities across India.<br />Re-Distribution stockiest supplier (RDSS)<br />There are 6 RDSS in Delhi NCR region with territories divided as North, South, East and West Delhi, Noida and Gurgaon. RDSS are supposed to operate only in their designated territorial zone. In case of conflict HCLI acts as the arbitrator.<br />RDSS, assisted by Nokia, also take responsibilities like recruiting sales force, training and developing. Stocking norms of Nokia- HCLI agreement says that HCLI depot should have 7 days supply, RDSS in city should have 5 days of supply. <br />Dealers<br />Nokia Priority dealers, Multi brand and individual dealers in Delhi NCR are all served by RDSS. Dealers are explained the features of every new launch mobiles, different schemes and offers by Nokia’s representatives. Re-supplies are always just a phone call away and the delivery is made within a few hours. Besides, Nokia assists most dealers in the region in the store set-up and design. The price points sometimes dictate the type of outlet. <br />Stock norms define that for how many days worth of stock does any level in the supply chain should have. These norms are defined by Nokia only. Given below are the stock norms:<br />The expected target to be fulfilled by the particular level is determined by the following formula:<br />Expected target = (30 / No. of working days) * Stock Norm for that level<br />Margins at each level<br />The margins for the Nokia distribution segment have not been disclosed separately but are clubbed with the overall contribution of the office automation and telecom segment. Tentative margins found on the basis of discussions with dealers were :<br />2% Margin8% Margin10% MarginMargin not declared18% Margin<br />Nokia and HCLI have never publicly declared their margins. Nokia business is the largest contributor to HCLI’s revenues and profits. Nokia product distribution was the largest contributor to HCLI’s sales (about 72% in FY2009). As a percentage of PBIT however, the share of Nokia distribution was at 61%. Since 2006, when Nokia took over 50% distribution channel from HCLI, revenue growth has almost been flat.<br />When comparing with its competitors, Nokia offers almost half to one-eighth margins on its phones. Compared to 2% offered to dealers by Nokia, LG and Motorola offer around 8-10% and Samsung 18%. But still dealers prefer to go with Nokia as it has much more surer sales and have excellent support from RDSS and the company. <br />Distributors Coverage Plan<br />HCLI being the first level intermediary between Nokia and dealers, HCLI collects the goods from mother depot in Gurgaon and supplies to 5 RDSS across Delhi and Noida. Gurgain depot itself functions as RDSS for the Gurgaon. HCLI agents deliver the ordered mobile sets to RDSS within 4hrs of receiving orders. Mother depot maintains stock capable of catering to atleast 7 days of demand in its covered territory.<br />In turn, RDSS ensures the delivery of goods within 4 hrs of the order made, sometimes even quicker. Night time orders are delivered net day morning. As each RDSS is given a small geographic territory, making quick deliveries does not prove to be hard. Although territories are geographically small, the number of retail stores in each zone make them commercially attractive to operate in. The small delivery time and close-knit relations with RDSS allows dealers to even order the mobile pieces as and when customer walks in demanding the handset. <br />Again compared to this, Nokia’s rivals have appointed much more number of distributors in each region. Samsung has 15 or more distributors to cover Delhi NCR region. But Still Nokia manages to give services better than its competitors.<br />Infrastructure required by distributor<br />Nokia’s sole distributor currently in India is HCLI. Their deal was first inked over a decade ago just when Nokia was entering into Indian telecom market which was perceived to be ready to take a big leap forward. Nokia wanted an established partner with proven record in handling distribution across India. HCLI had an excellent wide-reaching distribution channel and support centers. This partnership helped Nokia in having a focused approach towards increasing penetration to Rural & Semi-urban areas and improvement in market share across the country.<br />Nokia-HCLI have not declared any of their agreement details on public domain and hence its not known what infrastructure HCL is supposed to maintain as per the agreement or what infrastructure they have dedicated or use for servicing Nokia. Few details available in public domain are:<br />Service provider for the repair of Nokia Mobile Phones in India

8. Pan India service network in 21 L3 locations equipped with state of art equipments

9. Mobile care vans across the country to increase remote coverage

10. Nokia repair facility

11. 100+ repair benches with 75K handsets/ month repair capacity

12. L4 repair capabilityHCLI maintains the mother warehouse located Gurgaon.<br />Support provided by the company to the distributor<br />Nokia has an extensive support program dedicated to providing key benefits to HCLI and RDSS agents and qualified mobile phone dealers throughout Delhi. Nokia offers qualified dealers unprecedented access to Nokia's products and support services to better satisfy customer needs for Nokia products. It offers the tools and point-of-purchase support dealers need to deliver the best possible customer solutions to Nokia end users. Nokia also offers dealers extensive merchandising support such as counter top displays, product brochures, demonstration phones and a Nokia premier dealer plaque<br />Point of Sales(POS) system : Nokia provides point of sale systems and software to dealers to help them manage their selling activity better. It encourages dealers to move away from their cash registers to IT managed account system. Almost all the Priority dealers have moved from cash registers to POS systems.<br />In-shop Branding<br />Schemes : The concept of mobile recycling was first introduced by Nokia, a campaign was launched to encourage people to give their damaged Phones to Nokia care, & avail the discount on buying a new one. Besides, Nokia offers multiple schemes to push sales of lagging mobile models. These schemes come in form such as added cash bonus of Rs.300-1500/ set for selling a 5 specific lagging set in 4 days. <br />Retail element: Nokia assists priority dealers by assisting in the payments for the retail element part of their stores while the dealer is supposed to take care of the expenditure incurred on the services other than the retail element. The service charge payments for the retail element could be split into 'core' and 'additional' elements, with dealers paying pro-rata with for only those services they all have use of, and an additional element for any extras it specifically requires.<br />Sales Collaterals : Nokia provides promotional collaterals and brochures to the dealers directly to help in promoting sales. They regularly send in posters and pamphlets of latest releases, updated brochures and handset fact-sheets to assist dealers in closing the sales.<br />Training the dealers : Nokia sends in its executives to dealers to train them on the features and selling points of new launches and handset models not performing to their potential. Mostly these tasks are taken up by the delivery executives who also inform the dealers about their latest launches and the feature sets of these phones.<br />Dealer encouragement schemes : Nokia has cash rewards to promote and motivate the dealers. They offer cash rewards for making predetermined level of sales fortnight which may ranges from Rs.500 to Rs.5000. For their high performing dealers they offer all expenses paid local/foreign holiday trips. <br />Credit/ Payment terms <br />Nokia operates of quick delivery and quick payment terms with RDSS and mobile dealers. Deliveries are made super-quick, 4-5 hrs, and payments are supposed to be made quickly too.<br />Nokia and HCLI have been under long term contract which has been in place for over a decade now, with terms and conditions having been revised twice in this period. Margin and credit period agreement between Nokia and HCLI have never been declared publicly. But its speculated that its revenue sharing model based on total sales in a particular period.<br />Nokia having a very strong brand and market presence, exhorts tremendous power in market. It allows a very small credit period to the RDSS which in turn squeeze dealers, giving them equally small credit period. RDSS are allowed a credit period of 7 days, which in turn give dealers also 7 days credit period only. Although dealers moan about the short credit period, the power Nokia has in market and demand for Nokia phones makes it imperative that dealers carry Nokia mobile phones in their stores.<br />Again on this front, Nokia has tighter norms compared to its rivals. Samsung and LG offer double the credit period offered by Nokia. Samsung and LG offer 15 days credit period, compared to Nokia’s 7 days.<br />Major Problems Faced by the distributors<br />Terms and condition of the deal between Nokia and HCLI has never been revealed in the public domain. Hence, the problems faced by HCLI are not known publicly. Since, the deal to divide distribution territories was signed in 2006, there has been some issues for HCLI. HCLI shares have suffered on share market. Nokia has also refused to confirm or deny plans on appointing distributors for the territories under its control after the revised agreement.<br />On its part RDSS are quite happy with their functioning. They are satisfied with the products, quantum of sales and promotional support provided by the company.<br />Even dealers spoke very highly of Nokia. Multiple dealers were contacted and not a single one had any problem with Nokia’s distribution or service. Some dealers in other states were also contacted and they also had nothing to report on the problem front.<br />A few minor issues that possibly could become concern in future were :<br />Credit period given by Nokia is very low compared to its competitors – just 7 days compared to 15 days offered by Samsung and LG

13. Margins offered are very low compared to competitors who could become larger player over new few years. Nokia offers just 2% margin to dealers compared to around 10% offered by LG and 18% offered by Samsung

14. The damage piece policy has been cause of concern for some dealers/ RDSS. Although minimal damaged pieces have been reported over years, if any physically damaged handset is found, it sometimes leads to dealer/RDSS having to bear with it. Major Points of conflict<br />There has been no point of conflict reported by RDSS or the dealers over the years. Nokia-HCLI have marked the territories very effectively and have been strict in ensuring that territories are not encroached upon by dealers or RDSS. There has also been no conflict amongst channel partners at different levels or channel partners at same level. Payments, delivery of goods ordered and services have also been impeccable.

15. Relations between Nokia and HCLI are deeply ingrained in their system and if there has ever been any conflict or disagreement, it has never been reported in any open forum.Major Problems/ Issues identified<br />With market scenario changing, smart phones are increasing their share of total mobile phones market. Although Nokia too has presence in this segment, but with multiple recent offerings launched by Blackberry, Apple and Samsung market is set to become more competitive for Nokia. Compared to Nokia all these companies are offering better credit terms and margins and this may lead to dealers and RDSS moving over to these competitors.

16. Dealers reported Nokia’s executives never try to pressurize them in keeping their phones on prominent displays or push sales when customer walks into the store. On the contrary, LG, Samsung and other rival brand’s sales executives repeatedly exhort dealers to keep their products in prominent displays. They even ask the dealers to push their handsets when customer asks for Nokia. Till now Nokia has done strong promotion and relied on the pull of its products and brand to make the sales. But in future, as the market gets competitive, Nokia will find this tougher and should start forming strategy to counter such moves of its competitors.

17. Service centers of Nokia are managed by HCLI in assistance with Nokia personnel. Although, defects and problems in handsets have been very low compared to competitors, the handling of service has not been impeccable. Service centers usually take time and at some centres have long waiting list. This makes customers to move to cheaper and convenient local mobile repair shops. As parts used are not genuine and sometimes results in handset damage, customers end up blaming Nokia as much as they blame Local shop. Recommendations<br />Review the margins offered to dealers and RDSS periodically taking in consideration the competitive structure of the market

18. Review the credit period allowed to dealers and RDSS periodically taking in consideration the competitive structure of the market

19. Have a multiple complaint channels as channels tend to get choked due to the bulk of complaints coming in everyday. Nokia Priority dealers can be used as centres where complaints can be registered and can be dealt in an organised way

20. Nokia has to be make its sales executives more pushy keeping in mind the tougher competition from previously smaller players like LG and Samsung