Micromax: Phone for masses going globalCase writing

1/31/2014 IIM RanchiC Aishwarya (M068/12) Submitted to: Prof. Sasadhar Bera

ABSTRACT

Micromax, an Indian mobile handset manufacturer started

operation in Gurgaon as an embedded software design firm. It then moved to PC

hardware business and later on entered cellphone manufacturing rolling out its first

product in 2008. In a short span of five years, it had created a brand name for itself and

is in 2nd position next only to Samsung, in this highly competitive mobile handset

industry. It was able to achieve this success because of rightly tapping consumer’s

needs, product customization with an efficient supply chain. It also continuously focuses

on 360 degree branding and channel marketing. Recent developments are that it is

going to start assembling its units in Gurgaon which was initially done in China. Also, the

company is aiming to go global by starting to enter European and other foreign markets.

This case details about the operational success of Micromax and its marketing

strategies and takes a step further to evaluate its strategic decision of going global.

PROBLEM STATEMENT

Micromax is a brand for the masses producing cheap phones. This is how it captured a

major rural and lower-strata income market. But now it is aiming to go global with a

phone in premium segment, Canvas. This diverse shift of focus from inexpensive

phones for masses to the premium segment for high end market is a point in question

which decides the future of the company. Is this decision to play against its strength of

low price handset market right, is what the case evaluates.

LEARNINGS

This case is aimed at learning the marketing strategies of Micromax for its branding and

also celebrity ambassadors. It also needs the application of strategy concepts for

evaluations of its move towards global market with premium segment phones. It is on

the whole marketing cum strategy case study.

CASE:

INTRODUCTION

Micromax, an Indian mobile handset manufacturer started operation in Gurgaon as an

embedded software design firm. It then moved to PC hardware business and later on

entered cellphone manufacturing rolling out its first product in 2008. In a short span of

five years, it had created a brand name for itself and is in 2nd position next only to

Samsung, in this highly competitive mobile handset industry. It was able to achieve this

success because of rightly tapping consumer’s needs, product customization with an

efficient supply chain. It also continuously focuses on 360 degree branding and channel

marketing. Recent developments are that it is going to start assembling its units in

Gurgaon which was initially done in China. Also, the company is aiming to go global by

starting to enter European and other foreign markets.

BACKGROUND: CELL PHONE INDUSTRY

The market of a feature phone is improving in numbers in the market inspite of the huge

upsurge of the Smartphone market. The reason for this is that the overall mobile phone

market has only reached the surface. The total mobile handsets penetration is only

about 26% of the total population where India is the second largest country in the world

in terms of population next only to China. This results to nearly 400 million unique

mobile subscribers as specified by Telecom Regulator Authority of India (TRAI).

These feature phones cater to the needs of the subscribers in Tier 2 and Tier 3 cities

since the development of technology infrastructure is meager in these cities.

The recent upsurge in the Smartphone market in India is poised to grow further, giving

out clear signs of market performance between January – April 2013, selling 9.4 million

Smartphones compared to 6.6 million in the previous fiscal quarter. The overall mobile

handsets market grew by 11.1% on y-o-y basis.

The Korean mobile handset maker Samsung is leading the market in Smartphones,

while the Indian phone makers Micromax and Karbonn grab the next two spots. The

growth of these

Indian players came at the loss of Nokia and Sony Corp, which

were once the market leaders in the industry.

The feature phone user migration is driving the growth of the entry level Smartphones.

This is resulting in migration towards low-range Smartphones by Indian Manufacturers.

This ultimately is leading to the users stick to the respective makers projecting that the

Smartphone market in India is forging ahead to new heights.

Feature phone market in India has matured and there is a rising tremendous potential

growth for smartphones. This is encouraging the new entrants such as Micromax and

Karbonn come up with Smartphones for the entry level users who would like to

experience the sophisticated mobiles.

MICROMAX: THE IN AND OUT

Micromax commenced the manufacturing of the mobile phone operations in 2008 when

various multinationals ruled the industry. Having understood the ever-changing

consumer preferences combined with the latest technologies, Micromax has

differentiated itself from the other players with the low pricing strategies.

Micromax is one of the biggest product technology successes

India has witnessed lately. It is already the country’s second-

largest mobile phone seller in terms of volume, next only to Samsung. At the time of the

launch of its operations, the mobile market was dominated by noted players which

include Samsung, Nokia, Sony Ericcson, LG and other key companies. But then India

missed a player who could cater to the needs of Indians specifically. When Micromax

was surveying among local customers to identify their specific needs, it has only made

boosted their conviction because many of the global mobile phone sellers are

introducing the best-selling models to the Indian market but were failing to address the

local needs.

All these developments started with a battery of a truck in 2007, in the power deprived

city of Baharampur, West Bengal. Mr. Rahul Sharma happened to see an AirtelPay

Phone being powered by a truck battery. The PCO owner would every night carry the

battery 12 km to an adjoining village on his bicycle, charge it overnight, and carry it back

to Berhampur in the morning. Rahul was amused by the innovative application to cope

up with the tough conditions that was employed by the payphone operator. His interest

grew more when he learnt that the operator was able to earn some pennies for his

living. Rahul, based on his experience of innovation which arose from constraint,

launched Micromax, which was a first phone with a battery back-up of one month, called

X1i. In a country like India, which suffers from power deficiency, this stood as a

marvelous invention.

The key feature that made Micromax popular in the low-end segment is its value-for-

money proposition in any project the company takes up. It is also revelled that the

compa ny’s engineers always engage in pushing themselves beyond the limits to

explore the potential of the mobile phone beyond voice, data and SMS.

This unrelenting and superior focus on the product engineering towards catering to the

local needs has served the company giving good results. For instance, Micromax was

the first in the country to launch a phone supporting two GSM SIM cards. Today,

majority of Micromax handsets have this feature whereas the competitors still struggle to

do so.

In the initial stages, Micromax mainly focused on rural markets,

says its co-founder Vikas. He also reveals that this allowed the

company to build an unparalleled network of distributors and retailers which has

become the key to its meteoric success.

Its next target segment was the youth. For this segment who wants 24/7 connectivity,

the company released a QWERTY phone with several attractive social media

applications and chat, excluding e-mail. The company counts around 7 QWERTY

models in its product portfolio that support a range of different features, serving different

markets. Later in 2011, Micromax foraged into the phablet market with its Canvas

series. The company has also entered the smartphone segment and tries to spread a

message that technology and innovative solutions can be obtained at affordable prices.

In the present day scenario, the company is taking steps towards foraying actively into

the urban markets. Its first phone launched in this segment was the popular Bling which

was endorsed by the Bollywood actress Twinkle Khanna. Bling was built keeping in

mind the mind fashion conscious urban women. This handset was a big hit with more

than a million handsets sold so far in the country, establishing firmly Micromax’s arrival

into the urban landscape.

With the next big change coming from the application ecosystem fuelled by high-

bandwidth connectivity, Micromax concentrates on apps that will do the best, which

enables people to do a lot of things on the go because these are the ones that will serve

the daily needs of the consumer.

Micromax withdrew its 4.66 billion rupees initial public offering on 28 July 2011, due to

high volatile market. The board recommended the withdrawal so as to focus on new

product development and launches.

In October 2013, Micromax announced that Hugh Jackman, the well proclaimed

Hollywood actor will be endorsing its new launch Micromax smartphone Canvas Turbo.

Micromax would soon roll out Android 4.3 JellyBean for selected phone models which

include a wide range of its Canvas smartphone variations.

Marketing Strategy for roping in Hugh Jackman:

When Micromax first came out with the Canvas phone

advertisement starring Hugh Jackman, it made people stand up and take notice of its

increasing ambitions to become a global player and the desire to find a new position in

the market. But the crux of the issue lies here that can Micromax really herald a new

trend for the Indian markets and brands? The presence of a global face as a brand

ambassador ensures an immense publicity creating a positive buzz about the brand,

helping to capture the mind of the consumers. Adding to it, if the company has global

aspirations, it helps to create a presence in the foreign markets as the brand forays

ahead with the positive image of the ambassador.

Such sort of an advertisement is a sure-shot way of repositioning in the market. Prior to

this Micromax was seen as a cheaper brand mobile phone manufacturer which is now

trying to be perceived as a global brand. People who would otherwise balk at an Indian

product would see it differently if it comes with the backing of a famous Hollywood face,

Hugh Jackman.

Pre-globalisation the Indian viewer was oblivious to what went on outside the national

borders and the brands were also national which is why Indian celebrities were the

preferred choice. Ever since the days of Doordarshan advertisements, made by Indians

to be consumed by Indian with a distinct lack of foreign flavours. This trend has

continued unchallenged for the past few decades mainly because no one saw any real

need to break away from it. And now it has become deeply ingrained into the Indian

psyche.

From the outside the Indian market seems upwardly mobile with more and more people

willing to splash out on expensive premium items but the reality is that it is still a

privileged few who can afford to bet on hiring a foreign celebrity to woo such a small

section of the population, is indeed a risky move. The marketer needs to fully

understand the pros and cons of entering the market with such advertisement as there is

a risk that it would have only limited appeal. Even global brands such as Aishwarya Rai,

Sonam Kapoor and Freida Pinto are apprehensive to star in their Indian specific

advertisements as they know that there is a high probability that the consumers would

not relate with foreign ambassadors who speak a different language and do not look

Indian.

Even among the elite who have the power to buy premium

goods, there is a very high probability that many do not know

who Hugh Jackman or Penelope Cruz is. That is entirely due to culture and environment

that we have grown up in surrounded by Sharukh Khan, Salman Khan and the likes.

It is only the current generation among whom these names are considered to be

common knowledge and that is because of the exposure that they have had due to

cable TV, English movies and sitcoms. So, if there is a product that is geared specifically

towards such a market, there is a good chance that an advertisement with a known

foreign celebrity would get you the attention and help you stand apart from the crowd.

Strategic impact:

There are many plus points of hiring a foreign brand ambassador but very few

companies have actually gone along that road. Among several other reasons, the

important thing is that not many Indian companies have the financial ability to entice a

global face as its ambassador. Nor are Indian companies so famous globally that they

compete in global markets except for IT companies which doesn’t need these marketing

gimmicks. Other reasons include a mentality of safety first approach by hiring Indian

celebrities such a actors and cricketers, relying on the trusted formula of success.

Another issue is that such stars can only be associated with high priced premium

products which are not currently sold by many Indian companies. However, hiring a

foreign star for a mid range product would only further create confusion in the brand

positions and not reap the intended benefits.

The way ahead:

The Indian market is not currently ready for such advertisements on a widespread scale

both from the point of view of advertisers and viewers though there is a huge potential

to grow in this direction. Brands that cater specifically to such a crowd and have

products like clothes, watches or mobile phones have a good opportunity of utilizing

foreign celebrities to woo these customers.

It is an interesting avenue for advertisers to explore but the

product, the brand, the ambassador and the target market

should all be in sync with each other. Ultimately a good advertising campaign is not

necessarily about a celebrity as shown by Airtel’s ‘Har friend zaroori hota hai’, so even if

there is no brand ambassador a good advertisement will still drive home the message.

Also, for a brand like Micromax, it is rather advisable to concentrate on the profitable

Indian Mass Market rather than the risky exploration of Global Markets when there are

giants like Apple, Samsung and the likes ruling the game of cutting edge mobile handset

providers. Micromax should capture one market and then enter into another as there is

too much space for growth in these mobile phone markets instead of diversifying rapidly

to global markets without tapping the current business to its full potential.

Questions:

1. Discuss the marketing strategies of Micromax?

2. What are the problems Micromax is facing? Is the strategic move of Micromax

right to go global?

3. Is Hugh Jackman the right person to be picked as brand ambassador to fulfill the

motives of Micromax?

4. What do you think Micromax should do?

References:

http://en.wikipedia.org/wiki/Micromax_Mobil e

http://www.dazeinfo.com/2013/07/09/smartphone-market-india-growth-2013 /

http://yourstory.com/2011/08/the-story-of-micromax-mobiles-meteoric-rise-by-co-founder-

vikas-jain - techsparks-2011-grand-finale /

http://www.rediff.com/getahead/slide-show/slide-show-1-gadgets-and-gaming-can-hugh-

jackman-sell - micromax-canvas-turbo-a250/20131031.ht m

http://tech.firstpost.com/news-analysis/from-cheap-brand-to-hugh-jackman-the-unlikely-

micromax - story-215542.htm l

http://www.firstbiz.com/corporate/why-micromax-signed-hugh-jackman-as-its-brand-

ambassador - 46135.htm l

http://www.thehindubusinessline.com/features/weekend-life/micromaxs-hugh-bet/article5297559.ec e

http://www.socialsamosa.com/2013/11/social-media-case-study-how-micromax-mobiles-teaser-went - viral-for-the-first-time /

Appendices:

The story of how Micromax went viral with the unleashing of Hugh Jackman as the Brand Ambassador: