By Most Accounts

8/3/2019 By Most Accounts

1/6

By most accounts, India is among the world's fastest-growing markets for mobile phones. Thecountry has some 170 million subscribers and adds 6 million to 7 million more each month.(China, in contrast, adds 5 million subscribers, and the U.S. 2 million subscribers a month.)Recognizing this potential, several global telecom giants jumped into the fray when the Indiangovernment first opened up the country's 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 "handsets"). In specific segments, such as GSMtelephony, Nokia's market share in India is as high as 70%. (GSM, which stands for GlobalSystem for Mobile, is the world's 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,Nokia's 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 Nokia's India strategy is concerned, the numbers speak for themselves. The companyis a key cog in India's wireless value chain, and it has used India as its emerging market lab."

The Power of Focus

D. Shivakumar, Nokia India's vice president and country manager, believes that focus played akey role in the company's 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." Nokia'sfocus 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's 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 Nokia's 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 hadrevenues 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 Edge

Investment in people is difficult to judge; every company claims to have the best talent in thebusiness. But when it comes to distribution, Nokia's lead is clear. Today, India has some 95,000


2/6

outlets that sell mobile phones. "In 50,000 of them -- and that's 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 Nokia's 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 Manufacturing

The 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 totalproduction 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 a


3/6

whole range of consumer electronics products. "Domestic manufacturing has worked to Nokia'sadvantage," 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 Nokia's strategy is potentially risky. When the going is good -- as it isnow -- the company can do well. But Samsung's 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 India's 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 Brand

Another crucial aspect of Nokia's 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) 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 India's 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 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."

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,


4/6

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."

ISB's Bapna offers a prescription for Nokia. "Going forward with the premise that the mobileinfrastructure will serve as India's information infrastructure -- given the lack of substitute

physical 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. "It's in [Nokia's] own interest to do so."

Products for India

The 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 the

cities -- 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 Nokia's 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 torch

phone, 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.It's 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; you're accessible. Next, it is a huge productivity vehicle. When somebodycalls you, you do not need to take your bike out; you don't need to take your car out. You make aphone call and it's 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 entertainment


5/6

device. 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 that's TV on the go."

An Expanding Market

The 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 don't need 20 people, a

security 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.

Here's what you think...Total Comments: 7

#1 Nokia Vs. Samsung, LG, Motorola, Etc.

Truly, Nokia is a trusted brand in India, so it has a reasonably fair resale value. And it has a very broad market segment. However, success forNokia vis-a-vis other brands can be attributed to its well-focused view on the Indian market.By: Abhijeet Sarkar, Crompton Greaves LtdSent: 06:25 AM Sun Aug.24.2008 - AU

#2 Nokia's Success

The Indian market is huge and diverse. Rural India especially brings a lot of unexploited opportunities along with its own set of challenges. Themobile communications sector has been one of the first to tap this potential and cater to its needs.Mobile phones have come a long way in connecting rural India where wired connections are still a dream. Nokia's success can definitely beattributed to its well-thought-out strategy and innovative products specific to the Indian market. Understanding the market pays.By: Merrin Kurian,Sent: 06:43 AM Sun Oct.05.2008 - AU

#3 Nokia's Success

Nokia believes in innovation more than any other brand and hence it is always ahead of other brands.By: Arun Roy, Bobsbanter.comSent: 05:55 AM Tue Mar.03.2009 - AU
http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4220#tophttp://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4220http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4220


6/6

#4 Samsung Offensive

I think the marketing plans of Nokia are a little confused. The mother brand concept is albeit a little loose and vulnerable to niche attacks. Themain premise of Nokia is quality and durability.The decision to involve Shahrukh Khan for marketing, the tie-up with Airtel, and then taking two steps back on both these initiatives shows a lackof direction. Samsung, however, has been very aggressive and purposeful with its Aamir Khan ads.The next one or two years will be very interesting as the Samsung offensive pans out and we see how Nokia is able to defend its market share.

By: Vivek Pandey, ISBSent: 05:10 PM Mon Aug.31.2009 - AU

#5 Indian Mobile Market

No doubt, mobile phones have helped India in many ways. There isn't a section of people that has not benefited by the arrival of mobile phones.Now is the time to take mobile phones to a different level. It can potentially become the Unique ID, the bank, the payment service provider, thehealth service facilitator,(by keeping the basic data in the mobile and retrievable with a code by the doctors), the entertainer. Imagination andcreativity are the limit.I would say that the mobile has been the invention of the century.I am sure the Nokias of the world are listening and working on this.By: Mahadevan Balakrishnan, Research StudentSent: 01:24 AM Thu Dec.31.2009 - IN

#6 Better Ways to Promote Nokia Phones

The only way to succeed in the Indian market is to provide better customer service and make a brand image. Indians trust Honda for two-wheelers and a lot of brands only compete through customer satisfaction.Here what really matters is reliability, and you need to show these things.By: Vishwa Pandey, FranconnectSent: 06:24 AM Mon Jun.14.2010 - IN

#7 Latest Rs Symbol in Nokia Devices

Is the latest Rs symbol available in Nokia devices? If not, when will

By Most Accounts

Documents

Transcript of By Most Accounts