Assignment Of Marketing Management ON Case Study Analysis on Pricing Strategy of NOKIA

Submitted To: Prof. Sonali Singh

Submitted By: Sancheeta Tendulkar

History and growth of mobile phone industry in India

The real transformation came in the scenario of Indian telecom industry after announcement of National telecom policy in 1994. The mobile services were commercially launched in India in August 1995. In the initial 56 years the average monthly subscribers additions were around 0.05 to 0.1 million only and the total mobile subscribers base in December 2002 stood at 10.5 millions. However, after the number of proactive initiatives taken by regulator and licensor, the monthly mobile subscriber additions increased to around 2 million per month in the year 2003-04 and 2004-05. In the last few years there has been a huge exponential growth with addition of about 10 to 15 million subscribers per month to customer base. In the initial days of mobile phone in India in mid 1990s the grey market accounted for 80 per cent of the mobile phone sales due to a huge price differential between the legally imported and the grey market phones. Even as the government slashed the duties at the same time various mobile manufacturers reduced their rates to induce the customers to buy a phone from authorized phone shop. Today the grey market comprises very small share of market. When mobile phones were introduced in India in the mid-90s, US based Motorola, Sweden's Ericsson and Finland's Nokia dominated the handset market in India. Over the years, the old order has changed today players like Samsung, LG, Apple, Virgin, HTC, Huawei, Haier are all competing for a place in the market. Apart from this there is also a competition from imported unbranded Chinese mobiles which are avaible with lot many features of a typically high end say Nokia mobile but, at a substantially lesser price. After the initial dominance of Nokia from 1990s till 2002, a change occurred in Indian market hen CDMA technology was launched in the year 2003. At this point the Korean brands namely Samsung and LG established themselves after they tied up with CDMA operator Reliance Infocomm. This was a breakthrough in Indias mobile phone industry since, people were able to get mobile phones with Reliance connection only for a initial cost of about Rs. 500/-. This opened up a mass market for mobile manufacturers in India. Gradually all the major players like Nokia, Motorola came up with their CDMA models and have been able to regain their market share.

In the last few years India has witnessed a revolution in mobile phone market with about 8 to 10 million subscribers being added to the customer base each month. The major reasons for this boom have been: 1. Falling tariff rates of telecom service providers . 2. Fall in the prices of mobile handsets. 3. Increase in the reach of service providers covering ever nook and corner of the country.

Scenario of Mobile phone industry

Following are the highlights of mobile phone industry in India as on December, 2009: 1. The penetration of mobile phones stands at about 30%. 2. 81% of mobile users are in urban area. 3. Indias rural teledensity stands at about 12.6% 4. India has about 517 million subscribers by December, 2009. 5. It is forecasted that sales of mobile handsets in rural India will grow at CAGR of around 17% from 2009 to 2012 Above figures clearly indicate that although mobile phones might have made significant inroads into the urban market & urban market may start moving towards saturation but, still lot of potential is to be explored in the rural segment Also to understand the satisfaction level which users of above brands express, we look at a consumer satisfaction survey, the results of which are shown below. The survey was done on Indian Urban mobile phone users with Sample size of N=5,775. Models LG Motorola Nokia Samsung Sony-Ericsson Users Likely to recommend 57.6% 41.0% 68.6% 55.7% 65.3%

The result shows Nokia users are the most satisfied with their product followed by Sony-Ericsson and LG. The results of above survey are important since, mobile phone is a device which is frequently replaced in few years time, so, the brand which provides maximum

satisfaction to users will be able to maintain high loyalty and hence, maintain its market share. A segregation of Indian market on the basis of price bands is shown below. We can see that mobile phones are available in various price bands from Rs. 2,000/- & less up to Rs. 50,000/-

A close study of the product offered by various companies reveals following: 1. Companies like HTC, Apple, Vertu have products only for the high end market of Rs. 15,000/and more. 2.On the other hand there are players like Usha lexus whose product fall in the lower category with their products being available in price range of minimum of Rs. 1,900/- to maximum Rs. 5,900/-. Also, Virgin mobile falls in the same category. 3. Players like Onida have mobiles in lower prices (Rs. 2,000/-) to middle price range (till Rs.9, 900/-). 4. Players like Motorola, Nokia, LG and Sony Ericsson have mobile phones avaible in all different price range and hence, are able to target all the different segments of the market.

NOKIA
Nokia, as a manufacture of mobile communication devices, was succeeded in administrating marketing strategies in India markets. The reason is that Nokia delivers better products which cater to the needs and preferences of Indian consumers.

Nokia - Made in India A detailed analysis

In April 2005, Nokia India, a subsidiary of Finland-based Nokia, announced that it was setting up a manufacturing facility for mobile devices in Chennai, the state capital of Tamil Nadu in southern India. Nokia planned to invest US$ 100-150 million in the facility, where the production was expected to begin in the first half of 2006. Pekka Ala Pietil, President and Head of Customer & Market Operations, Nokia Corporation said, Establishing a new factory in India is an important step in the continuous development of our global manufacturing network.4 India was ideal for Nokia's new production facility. Each mobile handset has more than 400 parts and the average production capacity of each manufacturing unit of Nokia is around 20 million units. This level of manufacturing involves a total of 8 billion components per annum, requiring strong logistical support. Nokia's manufacturing facility needed to be located close to a major international airport or sea port for quick supply of components. India met all these requirements, and also enjoyed cheap manpower costs and proximity to the rapidly growing Asia Pacific markets. Besides, Nokia was the market leader in mobile communication devices in India. The company has been carrying out sales & marketing, customer care and research & development activities in the country. Nokia considers India to be one of its most important markets. The company's Code Division Multiple Access (CDMA) 5 facilities is located in Mumbai and provides software and technical support to CDMA consumers in India and other Asia Pacific countries. In 2004, Nokia was chosen as the most respected consumer durables company by Businessworld6. The magazine wrote, This Finnish Companys debut at the top of the heap says two things.

One, that its strategies - including ones like developing a phone specifically for India - are respected. But, more importantly, Nokia's win is also an endorsement of the importance of the ubiquitous cell phone as a durable in today's world. After all, unlike its competitors, most of which offer a slew of durables, Nokia is mostly a cell phone company. In 2005, Nokia was recognized as the Brand of the Year by the Confederation of Indian Industry, India's apex industry association. The company was chosen for this award because of its high brand recall, well established distribution channels and being 'most preferred' by the consumers.

About Nokia
Nokia was founded in 1865 by Fredrik Idestam in Finland as a paper manufacturing company. In 1920, Finnish Rubber Works became a part of the company, and later on in 1922, Finnish Cable Works joined them. All the three companies were merged in 1967 to form the Nokia Group. In the late 1970s, Nokia started taking an active interest in the power and electronics businesses and by 1987, consumer electronics became Nokia's major business. Nokia created the NMT mobile phone standard in 1981 and launched the first NMT phone, Mobira Cityman, in 1987. The company delivered the first GSM network to Radkilinia, a Finnish company in 1991, and in 1992, Nokia 1011 - a precursor for all Nokia's current GSM phones - was introduced. In the 1990s, Nokia provided GSM services to 90 operators across the world. Another significant move of the company during this period was the divestment of its non-core operations like IT. The company focused on two core businesses - mobile phones and telecommunications networks. Between 1992 and 1996, the company exited from the rubber and cable businesses as well... Nokia entered the Indian market in 1994. The first ever GSM call in India was made on a Nokia 2110 mobile phone on its own network in 1995. When Nokia entered India, the telecom policies were not conducive to the growth of the mobile phone industry. The tariffs levied on importing mobile phones were as high as 27%, usage charges were at Rs.16 per minute and, at these high rates, consumers did not take to mobile phones. Nokia also had to face tough competition from other powerful global players like Motorola, Sony, Siemens and Ericsson...

Nokia was quick to learn from its mistakes and adopted strategies to regain its lost market share. Globally, during the first quarter of 2005, the company's sales reached 7.4 billion euros, with the company selling 54 million phones during the period. In India, Nokia continued its leadership in GSM with a market share of 74% in March 2005. Nokia also surpassed Samsung in color mobiles in the GSM segment, recording a share of 55% in the same month Nokia reorganized itself at the global level in 2004. At this point, a multimedia division was formed. The division's Indian operations concentrated on promoting the concept of highend telephones in smaller towns while going in for higher volumes in larger cities. The marketing division of the company concentrated on making distributors in small towns sell high-end products. Though, the distributors were skeptical to start with, by the end of 2004, the process was streamlined and the results started to show.

Market segmentation

There are different types of mobiles for different needs of an individual. Nokia targets the entire segment with his variety. Top Segment----------------Classy Products Middle Segment-----------Best alternative Low End Segment---------High Tech Product at Low Price

Pricing Strategy of NOKIA

Skimming Pricing:
Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first and then lowers the price over time. It is a temporal version of price discrimination/yield management. It allows the firm to recover its sunk costs quickly before competition steps in and lowers the market price. Price skimming is sometimes referred to as riding down the demand curve. The objective of a price skimming strategy is to capture the consumer surplus. If this is done successfully, then theoretically no customer will pay less for the product than the maximum they are willing to pay. In practice it is impossible for a firm to capture this entire surplus. Nokia applies skimming strategy with all the products.

Premium pricing, penetration pricing, economy pricing, and price skimming are the four main pricing policies/strategies. They form the bases for the exercise.