Wednesday, April 6, 2011

Nokia and its competition in India




In our last week's reading, the article that struck me the most was 'Competitor Analysis: Understand Your Opponents'.

A quote from the article that got me thinking was
remember that your real competition - the ones that can kill your business - may not come from the handful of established companies you wrestle with everyday. It may come instead from an unanticipated source

In my blog post, I'll try to analyze how the dominant player in the Indian market - Nokia, was challenged as a handset provider by a few small and then unknown companies.

Ever since Nokia entered the Indian market, it had been a market leader. As with the rest of the world, they had acquired over 60% of the market and had become synonymous with mobiles. As one of the articles referenced below mentioned - "Indians did not go to buy a mobile phone. They went to buy a Nokia". This is extremely true and I stand proof to this. As I was paid my first ever salary, I went straight to a Nokia store and bought myself a cool color screen Nokia. Boy, I was proud of myself then. When Nokia started out, the phone models were expensive and so was the cost of ownership of a mobile phone. But as the telecommunication market became more competitive, so did the handset market. Nokia responded pretty well and started manufacturing low-cost models that aimed to satisfy the most basic needs of consumers. If the phone could make and receive calls, send text messages, live long enough without running out of juice - it was considered a good phone. All other features were optional and not a deal maker / breaker, as far as Indians were concerned. The proliferation of mobiles into the rural areas was what made these basic product features the most desired.

But since the last few years, Nokia's dominance in the Indian market is questioned by a bunch of newcomers. I'll try to place this on a timeline. Some of the big trends that Nokia managed to miss completely include 'dual sim' phones and low-cost color phones.
While Nokia kept producing low-cost basic models, there was a revolution in the Chinese markets. A few chip manufacturers started to sell the most basic form of chipsets required to produce a mobile phone. They provided the chipset, sometimes even the casing, and sometimes even with the software. They mass-manufactured these chipsets and hoped to help companies with shorter 'time to market'. A few Indian entrepreneurs realized that these phones had a feature that the emerging mobile phone users of India badly wanted - 'dual sim'. Dual sim-card phones allow a user to insert two SIM cards in the phone and allows having the user two different numbers. This was a growing need that Nokia missed, as one of the articles mentioned. As these small companies started producing the low cost dual sim phones, the Chinese companies manufacturing the chipsets became better and took the chipsets one notch up - by offering low-cost color phones. Nokia did have color phones, but they were not playing the low-cost color phone space.
The small firms that started out with dual-sim phones now started to offer low-cost color phones. These firms, initially lacked the distribution, after-sale service and brand value compared to Nokia. But for the cost driven Indian consumers, it was ultimately features at low cost which mattered and not the brand. This, they showcased to the market when within one year, Nokia's market fell by a sharp 10% and these small handset companies rose to 14%.

As the article notes, the competition for Nokia did not come from Samsung or LG or Motorola. The competition came from completely unknown and non-established brands and within a couple of years, then ate a large share of the pie from Nokia. This example once again establishes how important strategy is to a firm and how the firm should always be attentive to the market. Much like how a gazelle is always attentive of its surroundings. Fail to understand the surroundings and you're bound to be eaten up.

As I think about this, I realize Nokia has taken a beating in most of the markets. Despite this beating, it still holds the largest market-share in handsets, but this dominance might not last long. Does everyone think that Nokia as a company stagnated in the past few years? Does it seem to everyone that Nokia as a firm took some time off to relax and lost its drive? One way or another, the coming years will surely decide if Nokia still stands or it takes a great fall.
As for me, I still have my first Nokia phone and I think I'll cherish it for my lifetime.

References
Indian handset makers challenge Nokia
Handset: Leaders in Making
Foreign made Indian handsets
Nokia's biggest rival: Desi phones

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