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How Did Nokia Succeed in the Indian Mobile Market?
Published: August 23, 2007 in India Knowledge@Wharton

By most accounts, India is among the world's fastest-growing markets for
mobile phones. The country 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 Indian government 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 GSM telephony, Nokia's market
share in India is as high as 70%. (GSM, which stands for Global System 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 as
Ericsson, Motorola, LG and Samsung? According to company executives and industry experts,
Nokia's strategy combined focusing on the mobile phone market, establishing crucial distribution
partnerships, making early investments in manufacturing and brand-building, and developing
innovative product features -- such as mobile phones that could double as flashlights. Ravi
Bapna, 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 company
is 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 a
key 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 all
the other companies had something else to focus on, some other business. Nokia was completely
focused on mobile phones; others had consumer electronics, home appliances, etc." Nokia's
focus 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 with
Siemens for mobile infrastructure has become an independent entity. Thus, Nokia India has
become even more sharply focused.

Being ahead of the curve was another component of Nokia's strategy. "We invested before
everybody else -- in the brand, in people, in distribution," says Shivakumar. Adds Pankaj
Mahendroo, president of the Indian Cellular Association: "Nokia invested in each vertical of the
handset ecosystem -- manufacturing, distribution and design R&D."

Nokia has invested more than $1 billion in India so far, and company headquarters at Helsinki
has repeatedly said that more funds will be made available if required. The Indian company had
revenues 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 the
business. But when it comes to distribution, Nokia's lead is clear. Today, India has some 95,000
outlets that sell mobile phones. "In 50,000 of them -- and that's a conservative estimate -- only
one brand is available, Nokia," says Shivakumar.

Nokia started distributing its phones through a partnership with HCL (formerly Hindustan
Computers 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 realized
that there was a tremendous growth opportunity and it was best that we utilized the resources of
both organizations in an optimum manner," says Nokia India director of sales Sunil Dutt. "We
decided that we would address some markets jointly, and that we would individually address
some of the other markets."

While Dutt does not spell out how the two partners will divide the markets, some clues exist in
the way demand is shaping up. In the cities where the market is maturing, buyers are looking at
more 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 the
population -- 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 footprint
expands into different markets, all kinds of retail outlets get into selling mobile phones and
airtime connections," says Dutt. "People who have been selling consumer electronics, STD booth
owners and even cloth merchants get into this business." A stationery store stocks mobiles in a
corner; a mom-and-pop grocery store moves beyond rice and lentils. "Then there are people with
existing 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, customer
engagement … 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 mobility
has been around for a few years, customer expectations are more evolved, and are continuously
evolving. Our task here is to provide our people with relevant competency and skills sets." Nokia
has begun to set up concept stores -- seven so far -- in Indian cities. "At our concept stores, we
have tried to bring to life all the experiences that we offer at Nokia experiential zones across the
world," he adds.

Investment in Manufacturing

The other big investment area that has set Nokia apart from other telecom firms is manufacturing
facilities and R&D. Nokia has several R&D centers and labs in India. More importantly, it
established a $150 million handset manufacturing facility in Chennai in 2005. The total
production at this unit has crossed 25 million handsets. "Some 30% of our production is being
exported to neighboring countries," says Sachin Saxena, Nokia India director of operations in
charge of the factory.

Other companies, such as Motorola, LG and Samsung, have also lined up similar investments or
are 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
whole range of consumer electronics products. "Domestic manufacturing has worked to Nokia's
advantage," says Ravinder Zutshi, deputy managing director, Samsung India Electronics.
"Samsung India is looking at making its Chennai facility a global hub for its consumer
electronics products."

Industry analysts note that Nokia's strategy is potentially risky. When the going is good -- as it is
now -- the company can do well. But Samsung's approach is more flexible, these analysts note. If
demand for mobile phones were to slump, Samsung could switch its manufacturing lines to other
products. In contrast, Nokia India's focus on mobile phones mirrors the priorities of its parent
company. 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 mobile
telephony.

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) at
the lower end to Rs 45,000 ($1,125) at the high end. Marketing theory says a brand cannot be all
things to all people. This is the reason that Hindustan Unilever, with quality built around its
brand, refused to match Nirma, which came out with a cheap detergent. This is also why
Eveready, the battery manufacturer, refused to lower prices when faced with a Chinese
challenger in the dry cell market.

But Nokia has a problem promoting other brands under its corporate umbrella. "Unlike the
FMCG (fast-moving consumer goods) market -- where the product lifecycle is at least 10 and
sometimes 50-100 years -- models have a lifespan of 15-24 months here," says Devinder
Kishore, 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 can
replace another while the branding remains the same, or is extended slightly with the E series
and 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 understood
the Indian market by straddling all segments: the high, the middle and the low end. "The
company has created a ladder for consumers to climb from the low end to the middle end to the
high 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 into
account five needs -- rational, emotional, aspirational, physical and spiritual -- of the Indian
consumer. "Nokia as a brand has been able to address all the five needs to various degrees at
various stages," he says. "The rational need of quality versus price has been met across price
segments with options. The emotional need of being able to keep in touch with near and dear
ones during times of joy and sorrow is being adequately fulfilled. The aspirational need with the
new 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,
finally, the spiritual need has been met through (local) languages and people --whether they are
18 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 mobile
infrastructure 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 in
nurturing content and application-creation communities that bring a range of services to all
layers 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 fact
some of its models -- the handsets, not the strategies -- are unique to India. Consider this
example: It would probably be inconceivable to mobile phone users in the U.S. or Europe that
their mobile phones should incorporate a flashlight, or torch. But in India -- where large numbers
of 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 Nokia
1100, the first made-for-India phone, has been a runaway success. Manufactured at Chennai, it is
also being exported. The 1100 incorporates a torch, an alarm clock and a radio. "Innovation is
something 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. For
obvious 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 might
find puzzling, but the concept is simple. For reasons of affordability, in rural areas a phone may
be shared by several people. The models being launched to cater to this need will have separate
address 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 and
needs out-of-the-box thinking. "Fundamental consumer differences exist between India and other
countries," he says. "A cell phone is a huge style icon for the Indian masses: 62% of Indians buy
a 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 quite
a lot.

"Second, it is a safety product for women in small towns, because with a cell phone you are in
touch all the time; you're accessible. Next, it is a huge productivity vehicle. When somebody
calls you, you do not need to take your bike out; you don't need to take your car out. You make a
phone 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 -- a
plumber, 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
device. You have music on it now, in terms of radio and stored music. The day is not far when
you 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 also
one 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 been
penetration-led, which means placing devices in consumers' hands. The bulk of the growth going
forward will be replacement-led, where consumers come back for more. In India, consumers tend
to 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. "The
cell 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 payment
system." Another possible use is navigation, where cell phones could be used to provide maps of
an area where the user is based. Such services, whenever they are launched, could help Nokia
keep going and growing in India.
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Mobile


10 Things Nokia Should Do in India (and Emerging Markets)

         Wednesday, October 13th, 2010
         by Pratyush Prasanna

We have covered Nokia in the past and lately, the coverage has not been favorable. Nokia – in
spite of being the market leader both in terms of thought and share, has been steadily losing the
battle at both ends. In the smart phone segment, BB and to some extent Android have been
gaining share in India and on the lower end we have the new entrants – Micromax, Zen Mobile,
Lemon mobile, WynnComm have eaten Nokia’s lunch.

So what does Nokia do – how does it adapt to this changing market and be in the game. Here are
a few steps I think can enable Nokia to be a significant player in the market today -

1) Change the brand and attack the lower end phones – Why does Nokia have to change the
brand? Because the populace associates Nokia with a certain price point (which their sales say is
synonymous with quality). The suggestion is not to lose the quality but to lose the price point e.g.
Nano by Tata. Name it AIKON or something – but have an offering which hurts Micromax and
its elk where it hurts most. Micromax and others arent sleeping – they have already started
partnering with the big daddy – Google.
Nokia Market Share - The Writing is on the Wall

2) Change the distribution model - Have you ever walked into a Nokia store. They usually are
the biggest bunch of ignorant snobs I have seen. I think it also kills choice – users think “we will
get only Nokia there”. As many of us know Indian users care two hoots for customer service
while they buy the product (more on this in a later point).

3) Change the commission to stockists - Because of the snobbish attitude they had because of
the market share, the commissions Nokia pays to 3rd party stockists is among the lowest. I went
and asked a few small stores and each of them showed me non-Nokia phones at a particular price
point. On further questioning it turned out that Nokia phones get them the least margins. No
wonder they have lesser incentive to sell. Micromax, Lemon (the two I asked) paid more.

4) Spend correctly on advertising – SRK is great. I am a big fan. Use him wisely – see the type
of ads Aamir does for Tata sky. Apart from that, have a different ad budget and targeting for
lower end phones. Most of them talk about the deliverables (see videos etc) and the price –
thereby associating quality of offering directly with a price point.

5) Target Social networks – Wynncomm advertises Gmail and Facebook. Micromax has a
Facebook button. I am sure there is a clientele that can benefit from just saying that “Yes we also
have an application for Facebook” and maybe buy a phone for that. I also think the customer
engagement on FB is almost non existent – not that the others have it – but you cant always be a
follower and win right?

6) Digital marketing – We covered a bit on their release of the N8 and the Nokia India team
followed up with a good response too. However I think they can go a long way in addressing the
digital marketing bit. I think they have a lot of terms thrown in the response (most of which a
common man wont understand – but I do – I worked at MS) and I think all that is to hide the shit
that they want to spray the deodorant on.

7) Tie up with Mobile service providers - In a recent interview with the Livemint, the Nokia
(India) head mentioned that tie-ups with Mobile service providers won’t work. I think that is
denying a very lucrative revenue stream to them. Why cant we explore other models like pay
upfront for the phone + and don’t pay for the first year (so that Discounted Cash flow at expected
rate of revenue makes up the costs) and give the scheme for low entry costs for users with a great
credit history. Dismissing it with a “Never” is not the way to go about it (interview here).

8 ) Sell the application store better - Nokia has an amazing app store. They also do believe that
applications will be the future revenue growth drivers – refer post above. But they have not sold
it AT ALL. Even crappy app stores from others get better eyeballs than Nokia Ovi (which I think
has great stuff there). They could also promote India specific apps – sometimes I think common
sense is not that common.

9) Have real support – I can only quote personal experience but Nokia support experience just
sucks. My brother bought a Nokia which stopped working a fortnight after the buying date.
When he approached the Nokia store, they mentioned that they replace the handset with a
refurbished phone and NOT a new phone – in the US this would have set the scene for a nice
little lawsuit – unfortunately it doesn’t happen in India. The guys were thick-skinned enough to
mention that he has to remain without a phone while they arrange for the refurbished one. They
also replaced his phone with ANOTHER N81 after 4 days which gave way after 4 more days. He
has since filed a PIL and is waiting for them to revert.

10) Take me to your leader – You heard the leadership speak about the future direction above. I
don’t’ think the direction is bad – its missing. Hopefully the change in Finland will have some
effect on the market here. Don’t get me wrong – there are some absolutely brilliant people in
Nokia in India. However it needs much more than that – especially from the leadership – to save
a sinking ship.
The real Top 13 reasons why Nokia Lumia and Windows Phone will fail, not just
in USA but across planet

Nokia was prominently featured at the CES show in the USA this week, the biggest consumer
electonics show of North America. Nokia CEO Stephen Elop was on stage a couple of times as
was Microsoft CEO Steve Ballmer. The brand new Nokia Lumia 900 won best product of the
show. And nicely on que, Forbes ran an article of the Five Reasons Why Windows Phone Will
Make Big Splash in Smartphone Market. The article got a lot of attention and on first read, to the
random reader, it seems to make good arguments (I will deal with those later). The first point to
make, is that the author, E.D. Kain, had actually written a pair of articles about Windows Phone,
this one yes in favor but also another one against.

There have been many commentaries of the issue, perhaps the best direct response was by Don
Reisinger at eWeek. He gave 10 reasons why Windows Phone will fail. His arguments are very
good, but they are somewhat USA focused and still do not tackle some of the biggest reasons
why Windows Phone - and Nokia Lumia - will fail. Lets take this issue logically, reasonably and
with facts, not just conjecture and opinion and hope and hype. And lets start where most sensible
marketers start, not from the product but from the consumer. What is it that we, smartphone
buyers, want. And readers, this is again one of those ultra-long Tomi Ahonen essays, about
16,000 words (more than a full chapter in a hardcover book) so go get yourself a good cup of
coffee before you start. It will probably take you half an hour to complete this article but I
promise you, it is stuffed with facts, stats, insights and goodies.


Reason 1 - Messaging Madness: Nokia has a natural strength in messaging-oriented smartphones
(the most used feature of all mobile phone owners from Africa to the USA is messaging,
including smartphone owners). It is abandoned with the first 3 Lumia phones. Nokia voluntarily
foregoes a competitive advantage that it has always before taken advantage of. Thus Lumia will
perform worse than Nokia smartphones have done before.

Reason 2 - Camera Catastrophy - Nokia mobile phones have always been known for good
cameras, its flagship phones tend to have had the best cameras in the world. The camera is the
second most used feature. The Lumia series is a downgrade of Nokia camera capability and will
severely disappoint past Nokia owners and not stand up to rivals today.

Reason 3 - Look and Feel is not competitive. Nokia Lumia has gotten good reviews for its
appearance but nothing beyond that. And by its one form factor alone, it will not win many
converts, but on the abandoned other form factors, and its lack of typical Nokia elements, it is a
downgrade from what Nokia has been in the past, and yet is not competitive with rivals today.

Reason 4 - Nokia Brand failure. Nokia's brand has been damaged very badly in the past year.
Whatever Nokia was able to do in 2010, today Nokia will do far worse, whether in the USA or
rest of the world.

Reason 5 - Windows Brand failure. The Nokia brand damage is recent and perhaps reversable
but Microsoft's brand damage with Windows Mobile and Windows Phone has been sustained far
longer and been far more comprehensive. Microsoft has good brands such as Xbox and Office
Suite but its Windows Brand is weak and in mobile, it is poisonous.

Reason 6 - Input failure. The Nokia strength has been exceptional QWERTY keyboards. On the
N9 using MeeGo Nokia was able to innovate with touch screen inputs. But Lumia has neither. It
is a cheap copycat of the iPhone style touch screen input and Lumia abandons natural Nokia
strengths while showing no competitive advantages.

Reason 7 - Fails in variety of models. Nokia has traditionally been able to hold to the world's
largest smartphone market share - a year ago Nokia was literally not just bigger than the iPhone,
it was bigger than the iPhone and all Samsung smartphones - combined. Now Samsung is 'doing
the Nokia' with its expanding Galaxy portfolio while the three Lumia devices are near clones of
each other. Nokia is again voluntarily abandoning a competitive advantage, which means Lumia
will perform less well than Nokia was able to do in the past.

Reason 8 - fails on apps and app store. Nokia's Ovi was the world's second most used app store
just a year ago. That was replaced with Windows Phone, at best the 8th 'best' ecosystem today,
which still a year later has less than half the number of apps as Nokia currently still has on Ovi
and Symbian. Whatever you thought of Ovi and Symbian 'failing' in apps, it is far worse on
Windows Phone.

Reason 9 - the OS is deficient. The Windows Phone OS can seem exciting when first seen with
its 'Tiles' but on short usage it reveals how limited and unfinished it is. The tech reviews after
using Windows Phone (and Lumia) are quite consistent that Windows Phone is not yet ready for
prime time. It may become so in the future, but its not yet nearly competitive with advanced OS
platforms out there.

Reason 10 - regressing on features and services. Where Nokia smartphones tended not to be the
coolest and sexiest in recent years, at least Nokia was always known for stuffing every
conceivable tech feature onto its flagship phones. The joke was, that to see what will be on the
next iPhone model, just look at a 3 year old Nokia flagship. The Lumia is the first time ever, that
Nokia has regressed in its features, severely. Not just pruning unnecessary tech 'bloat' but
literally going back in tech, to specs that were normal on Nokia phones a year, two, even three
years ago. That guarantees that any current owners of Nokia will find the Lumia a severe
disappointment.

Reason 11 - rejected by business/enterprise customers. I also discuss the enterprise/corporate
side of the smartphone business. That market seems a great opportunity due to Microsoft
Windows OS and Office Suite integration with Nokia smartphones. Except that this is nothing
new. Nokia and Microsoft had done full Office Suite integration years ago and it helped Nokia
and Microsoft sell... zero more smarpthones into the enterprise space.

Reason 12 - poisoned carrier relationships with Nokia. The handset industry is different from the
PC industry or home electronics, in that the carriers/operators decide which phone succeeds and
which fails (witness the short-lived Microsoft Kin). Nokia used to have the platinum-standard
carrier relationships a year ago. Those were burned by the CEO last year. Today Nokia's carrier
relationships are the worst they have ever been.

Reason 13 - poisoned carrier relationships with Microsoft. But even worse, is that Microsoft
never used to have good carrier relationships. And yet, with Windows Phone, Microsoft's own
departed exec admits Microsoft has been making those carrier relationships worse. So Nokia
Lumia trades the best carrier relationships to bad ones, and then partners with the company with
the worst relationships - that has been making them only worse last year.

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How did nokia succeed in the indian mobile market

  • 1. How Did Nokia Succeed in the Indian Mobile Market? Published: August 23, 2007 in India Knowledge@Wharton By most accounts, India is among the world's fastest-growing markets for mobile phones. The country 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 Indian government 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 GSM telephony, Nokia's market share in India is as high as 70%. (GSM, which stands for Global System 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 as Ericsson, Motorola, LG and Samsung? According to company executives and industry experts, Nokia's strategy combined focusing on the mobile phone market, establishing crucial distribution partnerships, making early investments in manufacturing and brand-building, and developing innovative product features -- such as mobile phones that could double as flashlights. Ravi Bapna, 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 company is 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 a key 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 all the other companies had something else to focus on, some other business. Nokia was completely focused on mobile phones; others had consumer electronics, home appliances, etc." Nokia's focus 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 with Siemens for mobile infrastructure has become an independent entity. Thus, Nokia India has become even more sharply focused. Being ahead of the curve was another component of Nokia's strategy. "We invested before everybody else -- in the brand, in people, in distribution," says Shivakumar. Adds Pankaj Mahendroo, president of the Indian Cellular Association: "Nokia invested in each vertical of the handset ecosystem -- manufacturing, distribution and design R&D." Nokia has invested more than $1 billion in India so far, and company headquarters at Helsinki has repeatedly said that more funds will be made available if required. The Indian company had
  • 2. revenues 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 the business. But when it comes to distribution, Nokia's lead is clear. Today, India has some 95,000 outlets that sell mobile phones. "In 50,000 of them -- and that's a conservative estimate -- only one brand is available, Nokia," says Shivakumar. Nokia started distributing its phones through a partnership with HCL (formerly Hindustan Computers 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 realized that there was a tremendous growth opportunity and it was best that we utilized the resources of both organizations in an optimum manner," says Nokia India director of sales Sunil Dutt. "We decided that we would address some markets jointly, and that we would individually address some of the other markets." While Dutt does not spell out how the two partners will divide the markets, some clues exist in the way demand is shaping up. In the cities where the market is maturing, buyers are looking at more 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 the population -- 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 footprint expands into different markets, all kinds of retail outlets get into selling mobile phones and airtime connections," says Dutt. "People who have been selling consumer electronics, STD booth owners and even cloth merchants get into this business." A stationery store stocks mobiles in a corner; a mom-and-pop grocery store moves beyond rice and lentils. "Then there are people with existing 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, customer engagement … 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 mobility has been around for a few years, customer expectations are more evolved, and are continuously evolving. Our task here is to provide our people with relevant competency and skills sets." Nokia has begun to set up concept stores -- seven so far -- in Indian cities. "At our concept stores, we have tried to bring to life all the experiences that we offer at Nokia experiential zones across the world," he adds. Investment in Manufacturing The other big investment area that has set Nokia apart from other telecom firms is manufacturing facilities and R&D. Nokia has several R&D centers and labs in India. More importantly, it established a $150 million handset manufacturing facility in Chennai in 2005. The total
  • 3. production at this unit has crossed 25 million handsets. "Some 30% of our production is being exported to neighboring countries," says Sachin Saxena, Nokia India director of operations in charge of the factory. Other companies, such as Motorola, LG and Samsung, have also lined up similar investments or are 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 whole range of consumer electronics products. "Domestic manufacturing has worked to Nokia's advantage," says Ravinder Zutshi, deputy managing director, Samsung India Electronics. "Samsung India is looking at making its Chennai facility a global hub for its consumer electronics products." Industry analysts note that Nokia's strategy is potentially risky. When the going is good -- as it is now -- the company can do well. But Samsung's approach is more flexible, these analysts note. If demand for mobile phones were to slump, Samsung could switch its manufacturing lines to other products. In contrast, Nokia India's focus on mobile phones mirrors the priorities of its parent company. 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 mobile telephony. 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) at the lower end to Rs 45,000 ($1,125) at the high end. Marketing theory says a brand cannot be all things to all people. This is the reason that Hindustan Unilever, with quality built around its brand, refused to match Nirma, which came out with a cheap detergent. This is also why Eveready, the battery manufacturer, refused to lower prices when faced with a Chinese challenger in the dry cell market. But Nokia has a problem promoting other brands under its corporate umbrella. "Unlike the FMCG (fast-moving consumer goods) market -- where the product lifecycle is at least 10 and sometimes 50-100 years -- models have a lifespan of 15-24 months here," says Devinder Kishore, 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 can replace another while the branding remains the same, or is extended slightly with the E series and 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 understood the Indian market by straddling all segments: the high, the middle and the low end. "The company has created a ladder for consumers to climb from the low end to the middle end to the high end, while being fully assured that they will be with the mother brand Nokia."
  • 4. Kapoor views the Nokia brand in terms of his proprietary "REAPS" model, which takes into account five needs -- rational, emotional, aspirational, physical and spiritual -- of the Indian consumer. "Nokia as a brand has been able to address all the five needs to various degrees at various stages," he says. "The rational need of quality versus price has been met across price segments with options. The emotional need of being able to keep in touch with near and dear ones during times of joy and sorrow is being adequately fulfilled. The aspirational need with the new 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, finally, the spiritual need has been met through (local) languages and people --whether they are 18 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 mobile infrastructure 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 in nurturing content and application-creation communities that bring a range of services to all layers 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 fact some of its models -- the handsets, not the strategies -- are unique to India. Consider this example: It would probably be inconceivable to mobile phone users in the U.S. or Europe that their mobile phones should incorporate a flashlight, or torch. But in India -- where large numbers of 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 Nokia 1100, the first made-for-India phone, has been a runaway success. Manufactured at Chennai, it is also being exported. The 1100 incorporates a torch, an alarm clock and a radio. "Innovation is something 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. For obvious 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 might find puzzling, but the concept is simple. For reasons of affordability, in rural areas a phone may be shared by several people. The models being launched to cater to this need will have separate address 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 and needs out-of-the-box thinking. "Fundamental consumer differences exist between India and other countries," he says. "A cell phone is a huge style icon for the Indian masses: 62% of Indians buy a 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 quite a lot. "Second, it is a safety product for women in small towns, because with a cell phone you are in touch all the time; you're accessible. Next, it is a huge productivity vehicle. When somebody
  • 5. calls you, you do not need to take your bike out; you don't need to take your car out. You make a phone 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 -- a plumber, 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 device. You have music on it now, in terms of radio and stored music. The day is not far when you 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 also one 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 been penetration-led, which means placing devices in consumers' hands. The bulk of the growth going forward will be replacement-led, where consumers come back for more. In India, consumers tend to 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. "The cell 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 payment system." Another possible use is navigation, where cell phones could be used to provide maps of an area where the user is based. Such services, whenever they are launched, could help Nokia keep going and growing in India.
  • 6. Pluggd.in Home Startups DealFlow Internet Mobile Technology Resources Jobs Forum Mobile 10 Things Nokia Should Do in India (and Emerging Markets) Wednesday, October 13th, 2010 by Pratyush Prasanna We have covered Nokia in the past and lately, the coverage has not been favorable. Nokia – in spite of being the market leader both in terms of thought and share, has been steadily losing the battle at both ends. In the smart phone segment, BB and to some extent Android have been gaining share in India and on the lower end we have the new entrants – Micromax, Zen Mobile, Lemon mobile, WynnComm have eaten Nokia’s lunch. So what does Nokia do – how does it adapt to this changing market and be in the game. Here are a few steps I think can enable Nokia to be a significant player in the market today - 1) Change the brand and attack the lower end phones – Why does Nokia have to change the brand? Because the populace associates Nokia with a certain price point (which their sales say is synonymous with quality). The suggestion is not to lose the quality but to lose the price point e.g. Nano by Tata. Name it AIKON or something – but have an offering which hurts Micromax and its elk where it hurts most. Micromax and others arent sleeping – they have already started partnering with the big daddy – Google.
  • 7. Nokia Market Share - The Writing is on the Wall 2) Change the distribution model - Have you ever walked into a Nokia store. They usually are the biggest bunch of ignorant snobs I have seen. I think it also kills choice – users think “we will get only Nokia there”. As many of us know Indian users care two hoots for customer service while they buy the product (more on this in a later point). 3) Change the commission to stockists - Because of the snobbish attitude they had because of the market share, the commissions Nokia pays to 3rd party stockists is among the lowest. I went and asked a few small stores and each of them showed me non-Nokia phones at a particular price point. On further questioning it turned out that Nokia phones get them the least margins. No wonder they have lesser incentive to sell. Micromax, Lemon (the two I asked) paid more. 4) Spend correctly on advertising – SRK is great. I am a big fan. Use him wisely – see the type of ads Aamir does for Tata sky. Apart from that, have a different ad budget and targeting for lower end phones. Most of them talk about the deliverables (see videos etc) and the price – thereby associating quality of offering directly with a price point. 5) Target Social networks – Wynncomm advertises Gmail and Facebook. Micromax has a Facebook button. I am sure there is a clientele that can benefit from just saying that “Yes we also have an application for Facebook” and maybe buy a phone for that. I also think the customer engagement on FB is almost non existent – not that the others have it – but you cant always be a follower and win right? 6) Digital marketing – We covered a bit on their release of the N8 and the Nokia India team followed up with a good response too. However I think they can go a long way in addressing the digital marketing bit. I think they have a lot of terms thrown in the response (most of which a
  • 8. common man wont understand – but I do – I worked at MS) and I think all that is to hide the shit that they want to spray the deodorant on. 7) Tie up with Mobile service providers - In a recent interview with the Livemint, the Nokia (India) head mentioned that tie-ups with Mobile service providers won’t work. I think that is denying a very lucrative revenue stream to them. Why cant we explore other models like pay upfront for the phone + and don’t pay for the first year (so that Discounted Cash flow at expected rate of revenue makes up the costs) and give the scheme for low entry costs for users with a great credit history. Dismissing it with a “Never” is not the way to go about it (interview here). 8 ) Sell the application store better - Nokia has an amazing app store. They also do believe that applications will be the future revenue growth drivers – refer post above. But they have not sold it AT ALL. Even crappy app stores from others get better eyeballs than Nokia Ovi (which I think has great stuff there). They could also promote India specific apps – sometimes I think common sense is not that common. 9) Have real support – I can only quote personal experience but Nokia support experience just sucks. My brother bought a Nokia which stopped working a fortnight after the buying date. When he approached the Nokia store, they mentioned that they replace the handset with a refurbished phone and NOT a new phone – in the US this would have set the scene for a nice little lawsuit – unfortunately it doesn’t happen in India. The guys were thick-skinned enough to mention that he has to remain without a phone while they arrange for the refurbished one. They also replaced his phone with ANOTHER N81 after 4 days which gave way after 4 more days. He has since filed a PIL and is waiting for them to revert. 10) Take me to your leader – You heard the leadership speak about the future direction above. I don’t’ think the direction is bad – its missing. Hopefully the change in Finland will have some effect on the market here. Don’t get me wrong – there are some absolutely brilliant people in Nokia in India. However it needs much more than that – especially from the leadership – to save a sinking ship.
  • 9. The real Top 13 reasons why Nokia Lumia and Windows Phone will fail, not just in USA but across planet Nokia was prominently featured at the CES show in the USA this week, the biggest consumer electonics show of North America. Nokia CEO Stephen Elop was on stage a couple of times as was Microsoft CEO Steve Ballmer. The brand new Nokia Lumia 900 won best product of the show. And nicely on que, Forbes ran an article of the Five Reasons Why Windows Phone Will Make Big Splash in Smartphone Market. The article got a lot of attention and on first read, to the random reader, it seems to make good arguments (I will deal with those later). The first point to make, is that the author, E.D. Kain, had actually written a pair of articles about Windows Phone, this one yes in favor but also another one against. There have been many commentaries of the issue, perhaps the best direct response was by Don Reisinger at eWeek. He gave 10 reasons why Windows Phone will fail. His arguments are very good, but they are somewhat USA focused and still do not tackle some of the biggest reasons why Windows Phone - and Nokia Lumia - will fail. Lets take this issue logically, reasonably and with facts, not just conjecture and opinion and hope and hype. And lets start where most sensible marketers start, not from the product but from the consumer. What is it that we, smartphone buyers, want. And readers, this is again one of those ultra-long Tomi Ahonen essays, about 16,000 words (more than a full chapter in a hardcover book) so go get yourself a good cup of coffee before you start. It will probably take you half an hour to complete this article but I promise you, it is stuffed with facts, stats, insights and goodies. Reason 1 - Messaging Madness: Nokia has a natural strength in messaging-oriented smartphones (the most used feature of all mobile phone owners from Africa to the USA is messaging, including smartphone owners). It is abandoned with the first 3 Lumia phones. Nokia voluntarily foregoes a competitive advantage that it has always before taken advantage of. Thus Lumia will perform worse than Nokia smartphones have done before. Reason 2 - Camera Catastrophy - Nokia mobile phones have always been known for good cameras, its flagship phones tend to have had the best cameras in the world. The camera is the second most used feature. The Lumia series is a downgrade of Nokia camera capability and will severely disappoint past Nokia owners and not stand up to rivals today. Reason 3 - Look and Feel is not competitive. Nokia Lumia has gotten good reviews for its appearance but nothing beyond that. And by its one form factor alone, it will not win many converts, but on the abandoned other form factors, and its lack of typical Nokia elements, it is a downgrade from what Nokia has been in the past, and yet is not competitive with rivals today. Reason 4 - Nokia Brand failure. Nokia's brand has been damaged very badly in the past year. Whatever Nokia was able to do in 2010, today Nokia will do far worse, whether in the USA or rest of the world. Reason 5 - Windows Brand failure. The Nokia brand damage is recent and perhaps reversable but Microsoft's brand damage with Windows Mobile and Windows Phone has been sustained far
  • 10. longer and been far more comprehensive. Microsoft has good brands such as Xbox and Office Suite but its Windows Brand is weak and in mobile, it is poisonous. Reason 6 - Input failure. The Nokia strength has been exceptional QWERTY keyboards. On the N9 using MeeGo Nokia was able to innovate with touch screen inputs. But Lumia has neither. It is a cheap copycat of the iPhone style touch screen input and Lumia abandons natural Nokia strengths while showing no competitive advantages. Reason 7 - Fails in variety of models. Nokia has traditionally been able to hold to the world's largest smartphone market share - a year ago Nokia was literally not just bigger than the iPhone, it was bigger than the iPhone and all Samsung smartphones - combined. Now Samsung is 'doing the Nokia' with its expanding Galaxy portfolio while the three Lumia devices are near clones of each other. Nokia is again voluntarily abandoning a competitive advantage, which means Lumia will perform less well than Nokia was able to do in the past. Reason 8 - fails on apps and app store. Nokia's Ovi was the world's second most used app store just a year ago. That was replaced with Windows Phone, at best the 8th 'best' ecosystem today, which still a year later has less than half the number of apps as Nokia currently still has on Ovi and Symbian. Whatever you thought of Ovi and Symbian 'failing' in apps, it is far worse on Windows Phone. Reason 9 - the OS is deficient. The Windows Phone OS can seem exciting when first seen with its 'Tiles' but on short usage it reveals how limited and unfinished it is. The tech reviews after using Windows Phone (and Lumia) are quite consistent that Windows Phone is not yet ready for prime time. It may become so in the future, but its not yet nearly competitive with advanced OS platforms out there. Reason 10 - regressing on features and services. Where Nokia smartphones tended not to be the coolest and sexiest in recent years, at least Nokia was always known for stuffing every conceivable tech feature onto its flagship phones. The joke was, that to see what will be on the next iPhone model, just look at a 3 year old Nokia flagship. The Lumia is the first time ever, that Nokia has regressed in its features, severely. Not just pruning unnecessary tech 'bloat' but literally going back in tech, to specs that were normal on Nokia phones a year, two, even three years ago. That guarantees that any current owners of Nokia will find the Lumia a severe disappointment. Reason 11 - rejected by business/enterprise customers. I also discuss the enterprise/corporate side of the smartphone business. That market seems a great opportunity due to Microsoft Windows OS and Office Suite integration with Nokia smartphones. Except that this is nothing new. Nokia and Microsoft had done full Office Suite integration years ago and it helped Nokia and Microsoft sell... zero more smarpthones into the enterprise space. Reason 12 - poisoned carrier relationships with Nokia. The handset industry is different from the PC industry or home electronics, in that the carriers/operators decide which phone succeeds and which fails (witness the short-lived Microsoft Kin). Nokia used to have the platinum-standard carrier relationships a year ago. Those were burned by the CEO last year. Today Nokia's carrier
  • 11. relationships are the worst they have ever been. Reason 13 - poisoned carrier relationships with Microsoft. But even worse, is that Microsoft never used to have good carrier relationships. And yet, with Windows Phone, Microsoft's own departed exec admits Microsoft has been making those carrier relationships worse. So Nokia Lumia trades the best carrier relationships to bad ones, and then partners with the company with the worst relationships - that has been making them only worse last year.