Nokia in India - Part 2

Wednesday, December 26, 2007

This is the second part of my article on Nokia's Indian presence. You can also read it from Sramana Mitra's website for which this piece was written.

As we saw in the prequel to this piece, India is a very attractive market for handset vendors. Nokia, is perhaps the best prepared to address this exploding market. So, what does Nokia have going for it in India?

By virtue of being one of the early birds and backing it up with sustained quality, Nokia once commanded about 80% of the market share. It is hence the most recognized mobile brand-name in the country.

  • Its market share has eroded now to 55%. But with many other big companies like Samsung, LG, Sony-Ericsson and Motorola becoming more competitive, we should understand that 55% is still very high (in fact, higher than its global market share of about 40%). What is more is that the company has the potential to sustain this share through the revolution.
  • The company has a staggering 90,000 distributors all around India. Essentially, it has its footprint in 90% of the country’s retail stores. Besides, there are 30,000-35,000 stores exclusively selling Nokia phones.
  • Nokia has a manufacturing plant near Chennai, 50% of whose output is consumed internally. Surprisingly, the Finnish giant is able to sustain higher manufacturing costs in India to compete against cheaper Chinese phones.
  • The company introduced phones models (Nokia 1100 and 1110) that have been doing very well in the Ultra-low cost handset (ULCH) market at around $50. While the margins may be much lower than the other higher-end phones, this has helped stem competition from the Chinese vendors apart from Motorola that was denting its share. Interestingly, world number two handset maker Samsung has consciously walked away from ULCH market. It wants to be the preferred phone for feature-phone users.
  • Phone designs are customized for India. Globally designed handsets are slightly modified to suit the local needs. The Nokia 1100 has a torch and is dust-resistant in its Indian avatar.
  • The company took this customization to the next level by opening a design studio in Bangalore together with Srishti School of Art, Design and Technology. The studio is set-up to explore a range of design trends and themes that suit the country and other emerging markets. The hope is also to research into usage models and its design implications.

While these points illustrate Nokia’s dominance and its understanding of the Indian market better than any other vendor, the last point highlights its adaptability. The company has, through this initiative, demonstrated its will to retain its leadership position in India.

As I mentioned in my previous article, the demographics of the Indian mobile buyer is rapidly changing. Only a company which understands this and creates a niche for itself can thrive in the next few years. On my observation of the Indian consumer, ABI analyst and friend, Shailendra Pandey says, “In India, the points of caution that you have mentioned do apply to Nokia, but at present these apply even more to other handset vendors (especially the other big four - Motorola, Samsung, LG and Sony Ericsson). This therefore again puts Nokia in a stronger position.” I will agree with him. These are the initiatives that give it the true ‘global’ label.

In August this year, Nokia announced that India surpassed U.S as its second biggest market next to China. As India’s mobile handset market grows, Nokia’s position can only get better.

Posted by Vijay Nagarajan at 9:00 AM  

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