Executive Summary
This report provides an analysis and evaluation of the Micromax mobiles division and its position with respect to competitors. Micromax has entered into the mobile handset business in 2008 and has primarily focused on producing low cost mobiles for rural markets but over years it has diversified into various segments and currently it holds 9% market share and is the 3rd biggest player in the Indian mobile market. We have analyzed the various micro and macro environmental factors that affect the Micromax mobile business and made a SWOT framework. The analysis draws attention to the opportunity that Micromax can use its ability to produce low cost multifunctional mobiles to expand its business in other countries having conditions similar to India.
We have also done a consumer behaviour analysis by surveying 89 users of which 88% of the users rated that Friend’s Suggestions or Vendor’s Suggestions as deciding factors as of highest priority, Other factors considered were Advertisements, Brand Loyalty. 50% of users believed Micromax is “Value for Money”. But 48% users said they wouldn’t buy Micromax because of its after sales services and perceived Micromax as a low quality product.
The report also evaluates various competitors of Micromax. Samsung with 32% market share stood as market leader followed by Nokia with 28%. Karbonn mobiles was in 4th position after Micromax. This report also gives insights on their target segment, marketing strategies, strengths and weaknesses. Geography, Demography, Psychographic and behavioural dimensions were analysed while segmenting the Indian mobile market. Micromax has targeted various segments such as rural,youth, urban woman etc… Micromax has positioned its product as “value for money” by offering multifunctional mobiles at affordable cost.
About Micromax
Micromax is an Indian consumer electronics company and manufactures mobile telephones, tablets, data cards and LED televisions with headquarters located at Gurgaon, Haryana and has 23 domestic offices across the country and international offices in Hong Kong and Dubai. Micromax is one of the most fascinating success stories in the Indian consumer electronics industry. Started as an IT software company in the year 2000 working on embedded platforms, Micromax entered the mobile handset market in 2008. Currently it is the 12th largest handset manufacturer in the world and occupies the third position (by volume) in the mobile handset market in India (sells two million devices a month) and has a revenue of $626 million1. Its products are organized within the divisions:
- Data cards (3G data cards, Wi-Fi routers)
- Funbook tablet PC’s
- Phones (canvas smartphones, bolt smartphones)
- Consumer electronics (TV, audio players, smart sticks)
Product Description: Mobile Division
Micromax’s portfolio embraces more than 60 models today, ranging from dual- SIM phones to QWERTY, touch-enabled smart-feature phones and 3G Android Smartphones. They have a range of mobiles targeting various customer segments such as Bling (style conscious urban women), Ninja (android phone for working professionals), Modu (technology enthusiasts), Superfone (people who want applications) and Canvas (a big screen android Smartphone with quad core processor for multitasking). The range of their prices vary from Rs. 954 for Micromax X104 to Rs. 19,290 for the Canvas 42.
Globally, Micromax caters to a varied target audience having their focus majorly on the youth. Their overseas product portfolio is tailor-made to suit the needs and aspirations of the growing consumer base in the international markets.
SWOT Analysis
External Analysis
The external analysis is subdivided into the two parts (1) Micro Environment, looking at Micromax from an industry perspective, and (2) Macro Environment, looking at Micromax from a meta environmental level level.
Micro Environment
Competitors: Micromax’s largest and most important competitors in mobile segment are NOKIA (FN), SAMSUNG (KR), APPLE (US), SONY (JP) and LG (KR) as well as major Chinese manufacturers and several other domestic players. There is excessive competition in this sector. There are many strong and aggressive competitors offering similar services. The consumer has a lot of choice. However, since the mobile phone service industry is growing at a stable rate there are a large number of customers and therefore there is little pressure to take customers from competitors. The mobile phone service companies have high fixed costs. As a result of this they try to increase their productive capacity which leads to intense competition (Economies of Scale).
Suppliers: When it started out, the company picked handsets from China, rebadged them and sold them in the Indian market. By getting products manufactured in China, Micromax could offer products at a price about 40 per cent less than what other global players were offering3. But now it has moved to new mix and match strategy – getting some products manufactured in China and other countries, sourcing components from abroad and manufacturing some of the newer lines in India. The basic strategy of Micromax has been ‘affordable innovation’ so it has carefully selected its vendors in terms of prices.
Customers: Micromax has entered the market by choosing the target customers who are left out (deemed unattractive) by the giants. Initially it has made phones for rural market with all the features at affordable prices. Then their strategy moved on to target lower end of the segmentation spectrum and then they slowly expanded to serve other market segments. They have a range of mobiles targeting various customer segments such as Bling (style conscious urban women), Ninja (android phone for working professionals), Modu (technology enthusiasts), and Superfone (people who want applications) canvas (a big screen android phone). It also has carefully maintained the prices of mobiles so as to maintain its image as an affordable phone. But the Cost of switching of customers from one mobile brand to another is low. So there is very little Brand loyalty.
Substitutes: Tablet may be considered as a substitute for mobile (smartphones). New Entrants: New entrants can easily replicate the strategy of sourcing products from cheap Chinese markets and repackaging it for local sales. This is one of the major threats for Micromax. There are various new entrants in Indian mobile segment in the recent times such as Lava, Karbonn, Spice mobiles, Fly Mobiles, Videocon, Zen mobiles, Intex etc. All of them are domestic players and offer mobiles in all the price bands that Micromax offers. Now, there is literally every possible handset available from low-end to high-end devices – be it the feature or the price of the mobile devices.
Macro Environment
The Indian telecommunications and mobile electronics market has been shown to have a highly steep growth curve and emerges as one of the key sectors responsible for India’s economic growth during the last decade.
Political
- Regulations imposed by government play major role in shaping mobile industry
- Regulations to curb possible health issues related to mobile usage
- Permission by government for usage of land for development of infrastructure
- Regulations on service provider for mobile
- Rising per capita income of Indian people
- Fall of rupee has created a potential export market in developing countries of Eastern Europe, South America and Africa
- Effect of recession is minimum for the mobile market
Sociological – Sales of mobiles is widely affected by the social sentiments of the people.
- Status symbol
- Peer pressure
- Connects people
- Demographic dividend
Technology – The mobile phone industry has seen a great deal of technological change and will continue to do so. Some of the recent changes are:
- Rise in smartphone technology
- 3G connectivity
- Rise in number of mobile apps due Open source Mobile application development (Android)
Internal Analysis
Strengths
Pricing effectiveness: One of the major strengths of Micromax is that it delivers a feature rich handset at considerably low prices, much below the average market standard in the smartphone domain. On drawing a comparative analysis of the most high-end products for Samsung, Nokia and Micromax, the difference is quite visible.
Innovation effectiveness and ability to produce on time: First to launch Marathon battery mobile phones with a 30-day battery life4, phone which is programmable as a universal remote control, gravity phones are some of the features which have increased the popularity of Micromax. Also Micromax takes barely a month or two to launch products, another big international brand requires roughly 18 months for a similar product to go through the retail pipeline.
Distribution effectiveness: Operate with both B2C and B2B model of distribution with improved margins for dealers and distributors. This has helped in achieving a wide dealer and distributor network effectively increasing market penetration. o
So under it we will Offer higher margins to dealers up to 15 %, which is higher than the industry average of 6-10% at present
- Offering its distributors a higher margin of 5% as compared to 2% of Nokia and others.
- Involved in corporate selling through corporate tie ups with major corporate and will be providing them at a less than market price
Promotion effectiveness: The motive of its strategy is to increase its visibility in the urban markets and in order to do so Micromax has incorporated a much focused promotion strategy which targets specially the youth via collaboration with channels like MTV and celebrities endorsing their brands. Also, it has planned to be more active online on Facebook, Twitter and other social networking sites as it’s a low cost promotion making global presence and tool having international market.
Weaknesses
Poor Customer Service: Unfortunately, Micromax too suffers from the one big folly that ails Indian consumer technology companies – inferior customer support. Micromax’s low cost and VFM strategy has got it this far, but if it has to take on the biggies like Samsung and Nokia, customer service is one area the company has to immediately work on. This could be the deal maker or breaker, going forward.
Weak brand image in urban areas: Micromax initially targeted small towns and rural areas; however; currently, it is expanding its horizon to newer territories. Micromax has still not been able to establish itself well in the urban market as its main concentration had been on the rural population.
Perception as low quality mobile phones: Micromax has a manufacturing unit set up in China which has strengthened this perception among people.
Integration of external and internal analysis (SWOT framework)
SWOT Summary
Strengths – Opportunities: As mentioned before the fall of rupee has created a potential market in developing countries of Eastern Europe, South America and Africa. Micromax has a strong promotion strategy as it has been witnessed in India. The same it can apply to increase its visibility across the boundaries and exploit the global markets.
Weaknesses – Opportunities: The initial target of Micromax was small towns and rural areas. This has created a weak brand image for the company. But given its efficient distribution network and promotion strategies it is slowly increasing its strong hold over the urban market also.
Strengths – Threats: There is a risk of replication of business model by competitors, the strategy of sourcing products from cheap Chinese markets and repackaging it for local sales. Thus it is always required to keep a strong vigil on the developments happening in the mobile market. Micromax has created a strong base in the Indian industry and is growing fast. It is also looking to exploit international markets. Moreover innovation has been the company’s major strength. So, it is interesting to observe how it overcomes the threats with its strengths.
Weaknesses – Threats: There are many strong and aggressive competitors offering similar services. The consumer has a lot of choice. There is a weak brand image for Microsoft in the urban areas. Also the customer services offers are not very great. These are some of the major concerns that Micromax needs to address for it to be a major player in the mobile market.
Factors Affecting Consumer Behavior
Cultural Factors
Culture can be defined as “The arts and other manifestations of human intellectual achievement regarded collectively”. It is the fundamental determinant of a person’s wants and behaviour. Each culture consists of sub-cultures that provide more specific identification and socialization for their members. Concerning particularly to the Indian context, one the major sub-cultural factors that influence the customer is the Corporate Culture which is relatively new to the consumer as compared to the western markets.
