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ABSTRACT
The Indian mobile handsets market witnesses today a number of leading brands namely Sony
Ericsson, Samsung, LG, Apple, HTC, Blackberry, Motorola, Acer along with many other new
entrants which flooded this market with many low-price editions and with fabulous features,
though Nokia is the first which created this market. Unlike the erstwhile radio industry,
television industry and many other electronics goods industry in India which grew with
marketing orientation from the stage of production concept to that of societal marketing
concept whereby the market leaders which were instrumental in creation of market turned
out to be victims of erosion of market in favor of rival companies, Nokia beat this growth
path in mobile handsets industry differently. Nokia took novel paths that not only kept on
strengthening its market potential but also caused its diversification serving sustainably the
interests of all the stakeholders from companies to consumers. The present paper is a case
study of Nokia’s success strategies during the years 2002 - 2006 in Indian mobile handsets
market driven purely by its own marketing orientation that suggests many management
lessons.
About 4 million new mobile handsets could be sold every month currently in India as the
Indian cellular telephony market is now adding close to 4 millions new mobile connections
(GSM as well as CDMA) every month1. This does not count the replacement market.
Naturally, handset manufacturers are working hard to ensure they don't miss the bus. Not that
there has been a large number of new entrants in this market segment but at the same time the
marketing practices have also diversified in tune with the rising competition level. Nokia, that
created this market, follows its own path and its own marketing philosophy which the present
study tries to bring forth for capturing the emerging management lessons from this case.
1. INTRODUCTION
The Indian mobile handsets industry is growing at nearly 50 per cent every year and 33
million new GSM handsets were sold in 2006. The Indian market for mobile phones, in
addition to its base of 170 million subscribers, is 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 has tremendous growth
potential. Most of the growth has been penetration-led, which means placing devices in
consumers' hands. The following chart no. – 1 indicates the present status of Indian telecom
sector.
Chart No. - 1: Showing Current Status Profile of the Telecom Sector in India4
S. No. Descriptions
1. Indian Telecom market is one of the fastest growing markets in the world.
2. With its 562.21 million Telephone connection as on December 31, 2009, it is the
second largest network in the world after China.
3. It is second largest wireless network in the world.
4. About 15 million connections are being added every month.
5. The target of 500 million telephones by 2010 has been achieved in
September 2009 itself.
6. Wireless telephones are increasing at faster rate. The share of wireless telephones as
on December 31, 2009 is above 93% of the total phones.
7. The share of private sector in total telephone is about 82.33%.
8. Overall tele-density has reached around 47.88%. Urban tele-density crossed 100%
mark whereas rural tele-density is at 21.19% which is also steadily increasing.
9. Broadband connections increased to 7.98 million by December 31, 2009.
The bulk of the growth going forward in India is 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. And
Nokia leads by a mile as obvious from the following table no.-1. Enamored of Nokia's
success in the Indian market, Harvard University invited Nokia India to talk on 'How Nokia
cracked open the Indian market?'
Table No.–1: Showing Leading Mobile Handset Cos.’ Market Share in India9
There are, however, over twenty one mobile handsets manufacturing companies operating
today in India as shown in the following chart no. 2.
Nokia’s strategic intent is to strive for leadership in the most attractive global
communications segments through speed in anticipating and fulfilling evolving customer
needs, quality in products and processes, as well as openness with people and to new ideas
and solutions. Based on its resources including technological know-how, market position and
continuous building of competencies, Nokia is well positioned to achieve its future goals.
Nokia is the world’s largest mobile phone manufacturer and one of the leading suppliers of
digital mobile and fixed telecom networks globally. The company also supplies solutions and
products for fixed and wireless datacom and multimedia as well as PC and workstation
monitors.
Nokia entered the Indian market10 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 high-end
telephones in smaller towns while going in for higher volumes in larger cities. The marketing
divisions of the company concentrated on making distributors sell high-end products in small
towns. Though, the distributors were skeptical to start with, by the end of 2004, the process
was streamlined and the results started to show...
The mobile phones industry in India is now driven by voice, multimedia and mobile services
for organizations. The tele-density in India has increased to 18.2% by last year i.e. 2009 itself
with mobile subscription rising to 148.77 million by that time. In many instances, the cell
phone has become the only basic telephone link of a household/enterprise in India, rather
than a landline phone. It was turning out to be more economical and efficient than fixed line
telephones. So, there was great scope for further expansion with reduction in the cost of
ownership.
By most accounts, India is among the world's fastest-growing markets for mobile phones.
The country5 adds 6 million to 7 million more each month to its existing 170 million
subscribers. 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.)4 Nokia took 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 strategy11 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. Nokia is a key cog in India's wireless value chain, and it has used India
as its emerging market lab.
In today’s competitive world putting the customer at the heart of the operation is strategically
important. Whilst some organizations in certain industries may follow anything other than the
market orientation concept, those that follow the market orientation8, societal marketing8 and
holistic marketing concepts8 have a greater chance of being successful. The present study
traces the marketing orientations as applied by Nokia in India and as described below.
4. DISCUSSIONS
Many MNCs ignored India in 1995 because of a pathetic 2 per cent telephone penetration, but
it was Nokia which saw the potential. So, in 2002, when the market took off, Nokia was
ready. Within four years of the start of the telecom boom, the $54.15-billion, Nokia had a
whopping 60 per cent share of the Indian market. At over $3.6 billion, it is by far India’s
largest MNC. The Indian mobile communications industry grew slowly in the first few years,
but Nokia never lost its belief in the market. Its efforts in India have really come to fruition
over the past few years, during which time it has seen phenomenal market growth. Towards
the end of 2006, there were more than 6 million new mobile subscribers signing up each
month more than the entire population of Finland! Despite this growth, mobile penetration in
India is still less than 15 per cent, so Nokia feels privileged that it really is helping to connect
people.
Nokia opened its first office in India in 1995 with very few people. By 2004, it had grown to
591 employees, by 2005 to 1,609, and by the end of last year i.e. 2009 it had opened a
production facility in Chennai and employed a total of 6,494 people. Opening the Chennai
facility was a significant milestone for Nokia, because while previously it had software R&D,
sales and marketing activities in India, this was the first time it had entered the hardware
market. Nokia understands that India has a good future in manufacturing, too, because of its
skilled workforce. Thus in about fifteen years time since the introduction of an industry,
many erstwhile industries like radio industry, television industry etc. saw its market pioneer
move from production concept of marketing to societal marketing concept in order to sustain
in the market and yet some of the giant players were wiped out of the market, Nokia are
consolidating its approach according to production concept of marketing. It did not tread the
beaten path of the industry by changing its marketing approach from the tradition production
concept to societal concept. Rather it stuck at the ultimate concept of holistic marketing and
implemented it thoroughly continuing even today after fifteen long years of life of the mobile
market in India.
An important part of Nokia’s strategy12 in India is the recognition that the market is not
defined by its size alone. Many people see India only as a low-cost phone market, but the
reality is very different. It is actually quite a diverse market with all possible consumer
segments represented. This is well illustrated by the fact that the high-end Nokia N-series
multimedia devices have become very popular, and last year India was, in fact, the fourth
largest market for these products of Nokia. For Nokia, the mobility industry is also about
bringing positive change and becoming a part of the society in which it works. In 2006,
Nokia commissioned The Mobile Development Report, which analyzed the mobile phone
usage among urban and rural users. The findings have given it a new understanding of
products, protocols and services that could be designed to enhance the lives of users. It has
been a great pleasure for Nokia to work with local organizations in India on this.
Every market is unique. India does have similarities with high-growth markets such as China
and some parts of the Middle East, Africa or Latin America, but it is also very much its own
market with its own unique characteristics. In developed economies, mobile telephony started
as a complementary service. But in high-growth markets such as India, many people make
their first call on a mobile device and even access the Internet for the first time on a phone.
Even if Nokia’s roots are in Finnish soil, during the decades that Nokia has become a truly
global company it has naturally adopted behaviors from many other countries. It adopted the
Indian customs with which it traded. This comes through in Nokia’s business culture and in
the way it operates in India. Nokia products are made for Indian customers. India is currently
Nokia’s third largest market in terms of net sales, and it is expected that it will soon be its
second largest market after China. Nokia continues to see new opportunities in mobility and
the Internet and, in turn, it has contributed significantly to the economic growth of India and
the quality of life of its citizens.
5. CONCLUSIONS
The Indian market is huge and diverse. Rural India especially brings a lot of unexploited
opportunities along with its own set of challenges. The mobile communications sector has
been one of the first to tap this potential and cater to its needs. Mobile phones have come a
long way in connecting rural India where wired connections are still a dream. Nokia's success
can definitely be attributed to its well-thought-out strategy and innovative products specific to
the Indian market. Nokia made products for India. Through investment in manufacturing,
building the brand with the power of focus and distribution edge Nokia captured expanding
Indian market. Nokia’s business strategy, management style and its marketing savvy have
earned it the respect of its peers. In 2004, Nokia was chosen as 'the most respected consumer
durables company' in India by the weekly magazine Business World. Its strengths are
extensive product range constituting large portfolio of phones, anticipating consumer trends
early,’ amazing branding, focused marketing exercise, aggressive price ranges, distribution
strategy among others.
Nokia, however, lost its edge when GSM's rival technology, CDMA, made its entry in 2003.
That was because the Finnish major had concentrated on GSM technology and was losing
ground to CDMA handset makers which was its major weakness. With less than 25 per cent
of India having coverage is the major challenge now for Nokia. This industry's spectacular
growth in India is attracting the attention of several international brands which Nokia should
bear in its mind. Another challenge that is to appear before Nokia is the fact that in order to
remain competitive, this industry could see several mergers and acquisitions, roll out
obligation and substantiate equity holding in more than one Telecom Company coupled with
enormous opportunities emerging for the low cost handset manufacturers along with low
tariffs, infrastructure development for mobile communication.
Nokia’s phenomenal success and its continuous galloping run in the Indian market leaves
many issues to be pondered over by both the practicing managers and the students.
6. REFERENCES