Indian Institute of Management Ahmedabad IIMA/MAR0451

Micromax at a Crossroads
It was the 1st of April 2014, but from the seriousness with which people went about their
work at Micromax‟s corporate office in Gurgaon, India, nobody would have guessed that it
was April Fool‟s Day. It was the start of the new financial year1, and the founders of
Micromax were scheduled to meet the various functional heads of finance, marketing and
other functions shortly. The agenda for the meeting was to review the company‟s
performance for the financial year that had just ended and set a plan for the coming year.
The leadership team would have to deliberate on a number of issues and make some
important decisions.

In financial year (FY) 2013-2014, the company had logged its highest ever sales revenue,
crossing INR 31.68 billion, which was more than double the previous year‟s sales revenue of
INR 14.86 billion.a In just five years, Micromax had grown to become the third largest mobile
company in India in terms of sales volume. Over the last couple of years, the company had
ventured into several new categories in consumer electronics and durables, and had also
entered overseas markets. While Micromax aspired to be a global brand, it also had to think
about whether it could move forward on multiple fronts.

In 2011, Micromax had planned an initial public offering (IPO) to help some of its private
equity investors partially exit from the company, but it had to withdraw the offer because of
a dip in the share market.2 However, more recently, investor confidence had increased and
this reflected in the performance of the share markets. Micromax had also grown
significantly during this period and now had to decide on the timing of its IPO.

Another aspect that had been discussed in the company and had come up at various forums
was the branding of Micromax. In the last few years, the company had grown as a brand,
which was reflected in growing sales, better channel relationships and greater consumer
acceptability. Though there was unanimity during in-house discussions on Micromax being
at par with the best brands across the globe, the perception was that it was still a fair
distance from its rivals such as Apple and Samsung. The recent figures from the Interbrand
Best Global Brands Survey for the year 2013b fuelled Micromax‟s ambition. As per the
survey, CocaCola, which had occupied the first place for the last 13 years, had now slipped
to third place, and the top spot had been taken by Apple. Also, Samsung stood at number
eight, above Sony, in the current list. The article also mentioned that around the year 2000,
Sony was comfortably ahead of Samsung. However, over the last few years, Samsung had
worked its way ahead and had overtaken Sony. This report had been a topic of discussion
and had left the founders and functional heads wondering if Micromax could replicate the
Samsung story and possibly beat it at its own game. Everyone felt that this was easier said

1 In India, the financial year starts on April 1 and ends on March 31 of the next year.
2 In October 2011, the S&P BSE Sensex opened at 16255; in March 2014, it closed at 22386.

Prepared by Professor Sanjeev Tripathi, Indian Institute of Management, Ahmedabad. Research

support by Kopal Agrawal Dhandhania and Priya Batra Kapoor is gratefully acknowledged.
Cases of the Indian Institute of Management, Ahmedabad, are prepared as a basis for classroom
discussion. They are not designed to present illustrations of either correct or incorrect handling of
administrative problems.
© 2014 by the Indian Institute of Management, Ahmedabad.
2 of 23 IIMA/MAR0451

than done and that sound planning and a strong strategy would be needed to execute this
goal.

THE COMPANY

Micromax was founded in 1991 by Rajesh Agarwal, a distributor of computer hardware for
brands like Dell, HP and Sony.c In 1999, three engineering graduates, Rahul Sharma, Vikas
Jain and Sumeet Kumar joined Agarwal as partners. In 2000, the company was named
Micromax Informatics Limited to reflect the business‟s shift from hardware distribution to
selling IT software and e-commerce products.

Initial Struggles

In 1999, the business of Micromax included selling IT software and e-commerce products. In
the enterprise solutions space, it was primarily associated with SAP.3 In the e-commerce
applications area, it sold business to business (B2B) and business to customer (B2C)
applications, with the United States being its main market. Later, in 2001, Micromax entered
the hardware business through a stroke of luck. On one occasion, the founders had made a
presentation at a technology workshop in India at which a professor from the University of
California was present. Impressed, he recommended them to the University.d This resulted
in an opportunity for Micromax to do research on embedded systems in collaboration with
the University of California. This experience allowed the company to branch out in to the
hardware business and create new products that brought them success.

The year 2002 brought another good opportunity Micromax‟s way. At that time, Nokia was
looking for a partner for its new venture in the machine-to-machine (M2M)4 business in
India. Since Micromax already had experience in the embedded systems area, it was the
obvious choice for Nokia. In this partnership, Micromax worked on fixed wireless terminals
(FWTs)5 based on global system for mobile communications (GSM)6 technology. This proved
to be a profitable business for Micromax; however, Nokia exited the M2M business shortly
afterwards. Micromax chose to continue the business under its own brand name, selling
wireless terminals to major cellular telecom operators such as Airtel, Vodafone and Idea.

Entering the Handset Business

Micromax entered the mobile phone business because of a small spark of innovation that
Sharma chanced upon in 2008. While the team was busy with the installation and repair of
Airtel payphones (i.e., the wireless terminals) in Behrampur, West Bengal, Rahul noticed
that one of the public call office (PCO) booths ran on a truck battery due to a lack of
electricity. The battery discharged at the end of the day, and the owner took it to a village 12
kms away to charge it overnight and brought it back the following morning. Through this
effort, the booth owner was able to make decent money despite the lack of electricity and

3 SAP is a German company that is a global leader in developing enterprise resource planning (ERP) systems.
4Machine-to-machine refers to technology that enables wireless or wired systems to communicate with other
devices of similar ability where a device is used for a specific purpose such as input, relay, process or output.
5FWT is a technology that allows telecommunication services through radio-based signals that are transmitted
and received through antennae.
6GSM or global system for mobile communications is a digital mobile telephony system used in many parts of
the world.
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poor network coverage in the area. This got Sharma thinking that if phones had to be
charged on a regular basis within a short span of time, there was no point in having them. It
inspired him to build a first-of-its-kind phone, „Micromax X1i — Mobile Ka Baap’, with a 30-
day battery back-up. This phone was launched in 2009 and was a runaway hit, especially in
rural and semi-urban areas. Buoyed by this success, Micromax threw itself wholeheartedly
into the mobile phone business, and by the end of the first six months, it had a market share
of 0.59%.e

The company also realised that there was an unmet need for affordable but feature rich
phones in the rural and semi-urban Indian market. Gradually, it approached these markets
with feature rich phones. Next, it expanded the offering to urban markets with smartphones
that had features comparable to global brands such as Apple, Samsung, Nokia and HTC. By
2010-11, Micromax had become the third largest player in the Indian handset market with a
market share of about 6.9%.f

In 2012, Micromax ventured into consumer electronics and started selling LED TVs, home
entertainment systems and Android dongles for televisions. By 2013, the company had a
product portfolio that embraced more than 60 models, ranging from feature rich dual SIM
phones and 3G Android smartphones to tablets, LED TVs, and data cards. As of 2013,
Micromax still held third place in mobile handset sales behind Nokia and Samsung in
India.g In the smartphone category, it was second largest smartphone brand and claimed to
have close to 20% share of the Indian market. In FY 2012-13, Micromax‟s sales revenue
doubled to INR 31.68 billion from INR 14.86 billion the previous year, and its operating
profit for FY 2012-13 was 2.5 times that of FY 2011-12. As of 2013, Micromax had 23 domestic
offices in India and its head office in Gurgaon. It had a pan-India presence, with a sales
footprint in more than 560 districts through 125,000 retail outlets and also operated in Nepal,
Bangladesh and Sri Lanka.

The Ingredients

Micromax started by offering cheap phones, specifically intended for rural areas. The brand
was associated with feature rich mobile phones that offered good value for money. It offered
consumers a chance to experience high-end features at a low price. Initially, there were
quality issues with the handsets but Micromax sorted them out. In a very short time, the
company beat some of the best known and established players in the Indian market and
occupied the third place in terms of total sales. Micromax used a number of ingredients to
succeed in its strategy, as described below.

Emphasis on Innovations

One of the strengths of Micromax was its emphasis on innovations. The company was the
first manufacturer in India to launch a phone with a 30-day battery life and phones with
dual SIMs.h After the dual SIM phones, it launched handsets that had dual reception for
GSM and CDMA networks. The company was also among the first to bring out handsets
with advanced features such as 3D surround sound, a proximity sensor, gravity sensor, light
sensor and universal remote control. Micromax invested in R&D to bring out handsets with
features that were previously not available to Indian consumers. It had a team that
developed ideas that were often labelled as outrageous and crazy.i “Micromax created a
whole ecosystem of uniqueness that other players had not touched upon,” said Anshul
Gupta, Lead Analyst, Consumer Devices, Gartner.j The company would launch as many as
one hundred models in a single year while its competitors struggled to launch 30-40 models.
4 of 23 IIMA/MAR0451

Micromax focused on a two-pronged strategy. On the one hand, it worked towards

developing new, innovative products, while on the other, it focused on cost reduction. It was
the first company in India to make affordable mobile phones with advanced features and
offered Qwerty phones, Android and touchscreen handsets at a fraction of the price of other
manufacturers.

Pricing

Pricing was an important part of Micromax‟s strategy. The company consciously worked to
offer handsets with advanced features at a low price. This was made possible by utilising
methods of low-cost Indian „jugaad‟.7 As an illustration, in manufacturing handsets, vertical
LCDs cost USD 12 each. The team at Micromax wrote a device driver programme that
would act as a translator between software and device hardware, and instead of putting up
the LCD vertically, made it horizontal, which resulted in the reduction of the cost of the LCD
to USD 3.xi

Micromax often used a target pricing approach, where it first decided the market price of a
phone with specific features and then made innovations to make it available at the right
price in the market. In general, Micromax‟s smartphones cost about half to one-third the
price of Samsung‟s smartphones.

Distribution Network

Micromax had a large distribution network similar to that of fast moving consumer goods
(FMCG) products, which reached Tier II and Tier III cities in India8. It sold in more than 560
districts through about 150,000 retail outlets. “We follow an FMCG model when it comes to
distribution, and the logic is that even in the most inaccessible parts, you should get a
Micromax,” said Agarwal.k On the distribution front, feature phones and smartphones were
treated as distinct strategic business units (SBUs) within the company. While feature phones9
followed a three-tier distribution approach with a super distributor, micro-distributor and a
retailer touching the lowest price bands, smartphones maintained a two-tier approach with
just the distributor and retailer. The main distributors sold products to more than 800 local
distributors, who in turn sold to several retail outlets. Micromax ran its international
business in Nepal, Bangladesh and Sri Lanka through partnerships with a local distributor
in each country. Also, as a large part of Micromax‟s sales were in rural areas, it had strong
sales service in these areas. Overall, Micromax had more than 370 after-sales service centres
within India and one each in Nepal and Sri Lanka.

Consumer Insight

Right from its early days when Sharma identified the need for a mobile phone with a long
battery life, the company thrived on sensing the needs of consumers and translating them

7Jugaad is a commonly used Hindi word meaning frugal innovation

8
Reserve Bank of India, which is the central bank for India, divides Indian cities into six tiers based on
population: those with a population of 100,000 and above are classified as Tier I, those with a population of
50,000 to 99,999 as Tier II, and those with a population of 20,000 to 49,999 as Tier III.
9A feature phone is a low-end device, often designed with one or more features such as internet access, a camera,
music player, etc, but without highly integrated apps, multitasking, etc. Smartphones are high-end devices that
offer cutting-edge technology and computer-like features. A smartphone typically runs on an advanced mobile
OS. Other typical smartphone features include internet connectivity via WiFi and 3G or 4G, a dual or quad-core
processor, a range of downloadable apps, a high-resolution camera and built-in GPS.
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into affordable products. Its success, whether it was with its dual SIM mobile phones or low-
priced smartphones, was the result of gathering the right insights from consumers. This was
illustrated by the success of Micromax X1i, with its long battery backup, and its dual SIM
phones, both of which evolved from understanding consumer needs.

Cricket Sponsorships

Micromax took a bet on cricket sponsorships, and from May 2010, invested in buying
sponsorship rights. Instead of making piecemeal investments, it invested heavily in cricket
sponsorships. It leveraged this by launching high decibel television campaigns that were
supported on the ground. Given the vast fan following cricket enjoyed in India, this strategy
resulted in high brand visibility for Micromax. Also, as cricket had traditionally been
sponsored by established brands, Micromax‟s association with the game gave it the image of
an established brand.

Indian Mobile Handset Market

Mobile telephony in India was provided by major operators such as Airtel, Idea, Reliance,
Tata Docomo, BSNL, Aircel, Tata Indicom, Vodafone, MTNL and Loop Mobile. The total
number of mobile phone subscribers in India in May 2012l was 929.37 million with a mobile
teledensity10 of 76.68%.

Industry reports suggest various trends related to the development and growth of the
Indian handset market (see Exhibits 2 and 3). The recent growth in the Indian mobile market
had been driven by the sale of handsets in the mid-price range of INR 2,000 to INR 5,000.
According to Analysys Mason,11 the contribution of these handsets had grown from 34.48%
(as of December 31, 2008) to 45.03% (as of December 31, 2009).m Low-priced handsets had
few features, while high-priced handsets were rich in features but not affordable to a large
population. The annual growth rate of mid-price range handsets was estimated at 26.07%,
while the growth rate of the overall mobile handset market was estimated at 20.93%.n Going
forward, the handset market was likely to grow mainly through replacements, with a minor
contribution from the addition of new users. Another factor contributing to the change in the
handset market was the introduction of network technologies such as 2G, 3G and 4G
technologies; these made fast internet available on-the-go to mobile users. A number of
mobile users were frequently upgrading their handsets in line with the constant
advancement in network technologies.o

Competition

The Indian mobile handset market was intensely competitive, with more than 150 device
manufacturers selling to consumers. The market could be broadly divided into three parts.
In the premium handset category, the biggest players were Apple and Samsung. In the mid-
tier, the largest players were Nokia, Samsung, HTC, etc., and at the lowest level, most of the
manufacturers focused on the low-cost feature phone market.

In the Indian handset market, Nokia had assumed market leadership pretty early in the
game and quickly had a virtual monopoly. However, in the last three to five years, with the

10Number of mobile users for every hundred individuals living in a particular area.
11Analysys
Mason is a quarterly newsletter that serves as a specialist adviser on telecoms, media and technology
worldwide.
6 of 23 IIMA/MAR0451

onslaught of various brands, its market share had shrunk. Apple‟s iPhone and smartphones
from Samsung were nibbling at its market in the premium segment. At the lower end,
brands like Micromax, ZTE, LAVA, Karbonn Mobile, Huawei and Spice were giving it
competition. Some of these brands were also providing value-for-money smartphones and
competing in the mid-price segment.

Nokia

Nokia was one of the earliest handset manufacturers in the GSM space. At one point of time,
it monopolised the Indian market; its success was said to be driven by products that were
designed keeping in mind Indian consumers and were considered durable. For example, its
handset Nokia 1100 had a long battery life, was dustproof and had a flashlight. However, it
was unable to keep pace with rapidly changing technology and consumer tastes and
eventually faced tough competition. Lately, it had tried to compete in the smartphone
market with Windows-based OS through the Lumia series, but the competition proved to be
too strong. Despite losing market share, Nokia was still the leading mobile vendor in India
in 2013, with an overall market share of 21.8%, closely followed by Samsung in second place
and Micromax in third.

Samsung

Samsung, a South Korea-based consumer electronics company, was known for its expertise
in the mobile phone business. Samsung‟s Android phones were bestsellers in India due to
their relatively affordable price, features and well-established brand name in the consumer
durables category. In 2013, Samsung was second in overall mobile sales with a market share
of 13.3%. However, in the smartphone category, Samsung was the leader with 43.1% market
share.

Apple

Apple was a late entrant to the Indian market. However, it had very high brand awareness
and a distinct brand image. Its iPhone had distinct features and was able to attract premium
customers to its fold. However, it was one of the costliest phones in the Indian market and
became a status symbol for the rich. It was not affordable to a large population, for whom it
remained an aspirational product.

Blackberry

The brand had specialised in selling business-cum-smart phones. It had earned a reputation
for being the ideal mobile for business executives since it offered business applications such
as „pushmail‟ and „document viewer‟. However, competition from smartphones by Apple,
Samsung, etc. impacted Blackberry‟s sales. In 2013, Blackberry occupied the fourth position
in the Indian market with a 4.7% share.

Other than these, there were players such as Karbon Mobile, HTC Corporation, Spice Mobile
and LG Electronics, which collectively had a 2-4% share of the market.

Micromax Consumer Electronics

Micromax had also ventured into other consumer electronics. In 2012, it started to expand its
portfolio and ventured into LED TVs, home entertainment systems and Android dongles for
televisions.
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Data Cards

Micromax began selling data cards in 2008 and progressed to selling three types of data
cards: EDGE-based, 3G-based and CDMA-based cards. In May 2013, the company launched
a new 3G USB modem with a speed of 14.4 mbps that gave users the experience of high
speed internet surfing, social networking, video streaming and gaming.

Funbook

Micromax launched Funbook tablets in April 2012. As of FY 2012-13, the company placed
second in tablet sales in India with a market share of 12.3%, just behind Aakash tablet by
Datawind, a UK-based hardware manufacturer, which had a market share of 15.3%. Apple‟s
iPad tablets had a market share of 11.7%.p

LED TV

Micromax launched its LED TVs in India on October 9, 2012. For this product, it set up its
own manufacturing facility with a capacity of 200 units per day and had plans to scale it to
500 units per day. It launched six LED TVs priced in the range of INR 15,990 to INR 129,990.
Micromax also introduced Smart Sticks along with the LED TVs. These smart sticks allowed
users to convert any TV with a high-definition multimedia interface (HDMI) port to a
monitor that could be used for browsing the internet, playing games, managing
applications, etc.

Audio System

The company also launched its audio systems on the same day as its LED TVs. The home
theatres were equipped with 5.1 surround sound speakers with peak maximum power
output (PMPO) of 4,000 watts and 5,000 watts, respectively, as well as USB and SD card
support. The 3D Blu-ray player was priced at INR 6,490 and supported 2D and 3D
video/audio formats.q In terms of features, the products from Micromax were comparable to
those of some of the established manufacturers and were available at a fraction of the price.
However, there were challenges in entering this category. First, the category had seen some
degree of stagnation in its growth rate. Second, some of the competitors, such as Sony and
Samsung, were well entrenched and it would not be easy to compete with them. Finally,
most of the competitors had developed extensive distribution networks over the years,
which could make it difficult for Micromax to compete. The competition in this category
primarily came from Sony, Samsung, Philips, Bose, JBL, Panasonic, Harman, Karbon, Teufel
Audio, Onkyo, etc.

The Electronic and Consumer Durables Market in India

The consumer durables segment could be divided into three broad categories: white goods,
brown goods and consumer electronics. The term white goods referred to large electrical
appliances that were commonly used in household applications, such as refrigerators, air
conditioners, etc. The term originated from the historical use of white enamel to coat the
outer surface of the products. Brown goods commonly referred to relatively smaller
appliances that were used in homes to accomplish everyday household tasks, for example,
ovens, coffee makers, chimneys, irons, etc. The origins of the term resided in the use of wood
or Bakelite for the cases in the past, which gave them a brown appearance. Lastly, consumer
electronics referred to electronic appliances intended for entertainment purposes such as
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digital cameras, televisions, personal computers, etc; in other words, these goods were not
regarded as necessities for every household.

The Indian consumer durables market was expected to reach USD 12.5 billion by FY 2015
from USD 7.3 billion in FY 2012.r The primary drivers of this growth from urban areas were
rising disposable incomes and an increase in the number of households. Electrification of
rural areas, rising demand due to the influence of urban centres, and easy access to
consumer durables were driving the demand from rural areas as well. In FY 2010-11, the
share of rural and urban markets in consumer durables was 35%and 65%, respectively. The
rural market was expected to grow at 25%from USD 2.1 billion in 2010 to USD 6.4 billion in
2015.s It was predicted that the growth of the Indian consumer durables industry would
primarily be driven by the growth of the rural markets.

Competitive Landscape

Air Conditioners

Air conditioner (AC) sales were largely responsible for the growth in the white goods
category in India. ACs were perceived as a high-end product, and penetration stood at 6.8%
in 2013. In FY 2012-13, 3.6 million AC units were sold in India. The segment had a 13%
share of the consumer appliances market in 2013. Rising incomes and an increasing demand
for split ACs were the key growth drivers.. The top three brands were LG Electronics, Voltas
and Samsung. Others included Daikin, Panasonic, Blue Star, Godrej, Onida, Videocon,
Whirlpool, Carrier, Haier, Sharp and Electrolux with a cumulative market share of 53%.t (See
Exhibit 7 for an overview of the AC market).

The market had seen high growth in recent years, largely as a result of increasing income
levels, number of households and urbanisation, and a growing trend towards more
comfortable lifestyles. The choice of AC was driven by such factors as energy efficiency, star
rating, brand, aesthetics, maintenance, cooling capacity, warranty, price, etc. Demand from
the commercial sector (e.g. offices, stores) was also rising. The expanding business process
outsourcing (BPO)/ knowledge process outsourcing (KPO) industry had earlier contributed
to the growth of the AC market in the commercial segment. This growth was now being
driven by commercial office spaces and stores.

Refrigerators

The Indian refrigerator market grew by 15% during FY 2010-11 with total sales of 8.4 million
units. There were two sections in the refrigeration segment: frost-free and direct cool. The
competitors could be divided into these two segments. In the frost-free segment, LG led the
market with a share of 31.5%, followed closely by Samsung with 28.4%. In the direct cool
segment, LG had a market share of 28.6%, followed by Godrej (20%), Videocon (17%), and
Whirlpool and Samsung, each with 15% market share.u The other significant brands were
Haier, Hitachi, Panasonic, Toshiba, Sharp and Gem. (See Exhibit 8 for an overview of the
refrigerator market).

Washing Machines

The washing machine market in India had been enjoying high growth. In 2010, it was as
high as 38%. Though it fell to 24%in 2011, sales in FY 2011 were 4.7 million units.v The semi-
automatic segment dominated the sales volume in India. The four major players, LG,
Samsung, Videocon and Whirlpool, had a combined market share of 74.6%. Godrej and
9 of 23 IIMA/MAR0451

Onida had a market share of six to eight percent. There were a number of other brands that
were struggling to find space in the market, such as Haier, TCL, Panasonic, Toshiba, Gem, T-
series, Maharaja, etc.(See Exhibit 9 for an overview of the washing machine market.

Data Cards

There were various brands offering data cards in the Indian market such as Alcatel, Beetel,
Byond Tech, D-Link, Digisol, Huawei, iBall, Intex, Lava, ZTE, and so on. This market was
quite fragmented but had the potential for high growth due to the increasing need for
internet on-the-go. With the increase in internet penetration in the country, the industry was
in a stage of dynamic growth and no clear industry estimates were available.

Tablets

According to industry reports, there were about 88 tablet brands competing in the Indian
market in 2012-13, and the market size was estimated at 2.66 million units. As per the global
research firm IDC, this figure was expected to grow to six million in FY 2013-14.w The
majority of the vendors imported Android tablets from China, with street prices ranging
from INR 5,000 to INR 15,000. First quarter data from CMR‟s India Quarterly Tablet PC
Market Review estimated that about 10,000 tablets were shipped daily and that the total
shipment for the quarter January-March 2013 was about 905,000 units.x

The trend in the market had indicated consolidation, and experts predicted that marketing
and quality control would be essential for brands to survive in the long run. Also, though
3G-enabled tablets made up only 23%of total sales during the first quarter of 2013, their sales
were expected to grow substantially in the future. As of 2013, Micromax occupied the
second position in terms of market share in this segment.

Colour TVs

Colour televisions (CTVs) formed about 30% of the consumer electronics market in India.
The CTV market grew with the introduction of high-end TVs such as LCD, LED and plasma
TVs, which began to replace conventional TV sets. Among the various TV brands in the
market, Samsung, LG, and Sony were the market leaders as of 2011, with a combined market
share of 61%. (See Exhibit 10 for an overview of the television market).

 Samsung Electronics India: Samsung, the leader in the Indian CTV market, had a
market share of 22.22% and sold close to a million television sets including LED, LCD
and plasma technologies in FY 2011. It also offered added features such as Smart TV, 3D
TV and HD.

 LG Electronics: LG had a market share of 21.78%, second only to Samsung. It offered a

wide portfolio of CTVs such as LED, LCD and plasma TVs, but its focus had been mostly
on 3D TVs.

 Sony Corporation: Sony, with a market share of 17.44%, sold 0.79 million units in 2011.
Its major focus was on LED TVs. Its strength was a strong brand image and an
association with quality. Sony also enjoyed a wide distribution network.

Other than these, there were smaller competitors such as Videocon, Panasonic, Toshiba,
Onida, Haier and Philips.
10 of 23 IIMA/MAR0451

Home Audio Systems

Home audio system sales had risen following a price drop in 2006-07. The audio system
market was fragmented, with consumer choice often decided by product features and sales
push. Major brands in this category were Sony, Philips, Samsung, LG, JBL, Lenovo, DigiFlip,
HP, Zebronics, Intex, UMAX, I ball, Bose, Panasonic, Onkyo, Sharp and Yamaha. A study by
the industry association Infocomm revealed that India was the fastest growing market for
audio-visual (AV) equipment, growing at 25%,and was expected to touch USD 5.1 billion by
2015, becoming the third largest market in the Asia-Pacific region.y

PLANS FOR THE FUTURE

As Micromax‟s top executives took their seats, they knew some tough questions awaited
them and realised that it was going to be a long meeting.

Global vs. Local

One area of debate was whether the company should continue to focus solely on India or try
to expand globally. While one group argued that there were tremendous opportunities
available in India, the other said that if Micromax wanted to be considered a global brand, it
had no option but to venture into other countries. The company‟s earlier expansion effort
had not been very fruitful. At one point of time, it had its offices in over 10 countries but had
to withdraw from some of them. The company had a sales presence in the South Asian
markets of Bangladesh, Sri Lanka and Nepal. While some believed that Micromax should
consolidate its position in these markets before entering new ones, others felt that it was the
right time to enter other markets, ranging from the US and Europe to the Middle East and
Africa. There was also a debate about the type of products/handsets that the company
should launch in these markets, from basic phones to advanced smartphones and tablets.

Mobile Phones vs. Electronic Consumer Goods

There was also considerable debate over which segment to concentrate on in the Indian
market. Should Micromax focus on handsets only or also look at opportunities in the
electronic consumer goods sector? The company had recently entered the electronic
consumer goods space; however, barring tablets, where it had enjoyed a fair degree of
success, it had not been easy going with respect to other electronic consumer products. The
competition in electronic consumer goods was quite tough, with the market keenly
contested by multinational corporations (MNCs) and some established Indian players as
well. However, those on the team who supported its entry into consumer goods always
cited the success of Micromax in the handset market, where it had faced similar conditions.
They said that Micromax should not focus on consumer electronics alone but should also
actively venture into electronic consumer durables such as refrigerators, washing machines
and air conditioners.

Positioning: Class vs. Mass

The other point of discussion was related to the positioning of Micromax products. The
debate revolved around whether Micromax could really target the top end of the market —
the people who normally purchased high-end products and were wedded to their iPhones
and Galaxy notes. The proponents of premium targeting said that the only way for
Micromax to improve its brand equity was by entering the high-end segment. Also, once the
credibility of the brand was established, it could increase its margins. The opponents of this
11 of 23 IIMA/MAR0451

strategy said that it was not possible for Micromax to target two different segments at the
same time. Due to its legacy, Micromax would have lower brand equity and this might
prove to be a handicap in the high-end market. Also, given the size of the market at the low
end and the retail strengths of Micromax, there was still a large market available in the
lower segments.

THE DECISION

The team had to make decisions related to Micromax‟s expansion quickly. They needed to
fuel the expansion with minimal resources, and this was not going to be easy. They would
also face other difficult challenges in the form of generating revenues, consolidating markets
and taking risks. They had to decide on a strategy and make other decisions as well —
whether to stay local or go global, the breadth of the product portfolio, and Micromax‟s
positioning. In addition to this, they also had to take a decision on Micromax‟s IPO.
Mircomax aspired to be a global brand and to occupy a place among the world‟s best
brands. Was it possible for it to achieve this dream?
12 of 23 IIMA/MAR0451

EXHIBIT 1
Key Financials of Micromax Informatics Limited

Particulars 2011-12 2012-13

(units in thousands)
Total operating revenue 13,611,600 31,069,300
Growth over prior year(%) -41.81 128.40
Net sales revenue 13,377,300 30,553,500
Growth over prior year(%) -41.81 128.40
Operating profit (EBIT) 10,787,300 26,934,300
EBITDA 10,802,400 26,948,900
Margin(%) 0.38 7.81
Net profit(loss) 150,400 1,903,500
Margin(%) 1.06 6.23
Total assets 8,225,700 12,767,600
Growth over prior year(%) 115.22 55.22
Total equity 4,155,300 6,058,700
Growth over prior year(%) 18.24 45.81
Source: ACE Knowledge Portal. Retrieved from http://www.acekp.in/financial-
highlights/221082, on September 2, 2014.

EXHIBIT 2
Indian Mobile Handset Market (in values)

Source: MarketLine. Retrieved from http://advantage.marketline.com/Product?pid=MLIP0765-

0011&view=d0e5, on September 2, 2014.
13 of 23 IIMA/MAR0451

EXHIBIT 3
Growth and Forecast in the Indian Mobile Handset Market

Source: Audio visual market will hit $5 b in 2 years. (2013, September 16). The Hindu Business
Line. Retrieved fromhttp://www.thehindubusinessline.com/industry-and-economy/info-tech/audio-
visual-market-will-hit-5-b-in-2-years/article5135160.ece, on September 4, 2014.

EXHIBIT 4
Market Share of Mobile Handsets for FY 2012

Source: Cyber Media. (2012).Voice and data annual survey. Retrieved from
http://www.cybermedia.co.in/corporate/media-room/194385/voice-data-survey-indian-mobile-
handsets-market-2012, on September 2, 2014.
14 of 23 IIMA/MAR0451

EXHIBIT 5
12
Size of the Consumer Durables Market over the Years

Source: Corporate Catalyst India. Consumer durables industry in India. Retrieved from
http://www.cci.in/pdfs/surveys-reports/Consumer-Durables-Industry-in-India.pdf, on September 2, 2014

EXHIBIT 6
Key Consumer Durables in India — Share by Volume

Share
Product
(%)
Colour Television Sets (CTVs) 30
Refrigerators 18
Air Conditioners 13
Washing Machines 5
Others 34

Source: Cygnus Quarterly Report 2007.

12The consumer durables market is estimated to expand at 14.8% to USD 12.5 billion in FY15 (from USD 7.3
billion in FY11). Rural and semi-urban markets are likely to contribute a majority of consumer durables sales.
15 of 23 IIMA/MAR0451

EXHIBIT 7
Overview of the Indian Air Conditioner Market

The market for air conditioners in India has been growing steadily. People's perception of this
category of product has witnessed a paradigm shift over the years. From being viewed as a luxury
product, it has now become a necessity in India's tropical climate, especially in the warmer areas and
urban centres of the country. According to industry estimates, in FY 2013-14,sales of room air
conditioners were pegged at 3.1 million units, amounting to about INR 78 billion. The market share of
the industry for the year 2013 and the share of split and window ACs are shown below.

Figure 7.1: Market Share of the AC Industry Figure 7.2: Market Share of Split and Window
ACs in India

Source: Corporate Catalyst India. Consumer durables industry in India. Retrieved from
http://www.cci.in/pdfs/surveys-reports/Consumer-Durables-Industry-in-India.pdf, accessed on September 3,
2014.
16 of 23 IIMA/MAR0451

EXHIBIT 8
Overview of the Indian Refrigerator Market
The Indian refrigerator market registered an annual growth of 15% for FY 2010-11. Total sales
stood at 8.4 million units in 2010-11, a 15% increase from 7.3 million units in 2009-10. Of the 8.4
million units, LG had a 29.3% market share. Samsung, Godrej, Videocon and Whirlpool were neck
to neck with 15-18% market share each. The top five brands together accounted for 65% of the
total market share. Other aggressive brands include Haier, Hitachi, Panasonic, Toshiba, Sharp and
Gem.

Refrigerators are no longer a boring utility appliance. Consumers look for features such as
aesthetics, design, healthy food preservation, hygiene, multiple cooling departments and green
technology. Energy-efficient refrigerators are made with inverter compressors, which conserve
energy and are environment friendly.

Source: India Brand Equity Foundation. (2011, November). Consumer durables. Retrieved from
http://www.ibef.org/download/Consumer_Durables50112.pdf, on September 3, 2014.
17 of 23 IIMA/MAR0451

EXHIBIT 9
Overview of the Indian Washing Machine Market

Washing machines, no longer a luxury appliance, are gaining ground as utilitarian products. The
emphasis has changed from just price consideration to design, quality, look, the "feel good" factor and
trends. The Indian washing machine market continues its high growth trajectory, though the annual
growth rate has come down from 38% in FY2010 to 24% in FY2011. Washing machine sales were at
4.7 million units in FY 2011. The market is dominated by four players — LG, Samsung, Videocon and
Whirlpool — with a combined share of 74.6%.
According to DuPont Research September 2013, 8.8% of Indian households own a washing machine;
urban households have a higher penetration at 27.5% while rural households are at just about 0.6%.
Brand-wise market share in the washing machine industry is presented in the chart below.

Figure 9.1: Market share in the Indian Washing Figure 9.2: Zone-wise sales of Washing
Machine Industry Machines in India
Source: Retrieved from http://www.currentweek.com/top-washing-machine-brands-in-india-their-market-trends/,
on August 30, 2014.
18 of 23 IIMA/MAR0451

EXHIBIT 10
Overview of the Indian Colour TV Market

The conventional TV market in India saw a decline of 33.3% in 2011, from 18 million TV sets to 12
million units (mainly contributed by Sony, Samsung and LG), on account of a shift towards LCD
technology.

The flat panel display television (FDP) market in India was estimated at 4.5 million sets in 2011. This
category, which includes LCD, LED, and plasma TVs, registered 50% growth over the previous year.
Samsung, LG and Sony are the dominant players in this category. Videocon, Panasonic and Toshiba
are fast gaining market share. Other aggressive players include Onida, Haier, Philips and Sansui.

Figure 10.1: Market Share in Indian Colour TV Figure 10.2: Indian FDP TV Market
Industry

Figure 10.3:LCDTV shipments from 2009 to 2012

Source: ADI Media. Retrieved from http://www.adi-media.com/PDF/TVJ/annual_issue/002-Color-

Televisions.pdf., on September 3, 2014.
19 of 23 IIMA/MAR0451

EXHIBIT 11
Key Parameters across Various Countries/Regions

Mobile Mobile- Internet

GDP Popu- cellular Landline penetration
subscrip-
Country/ (USD lation telephone penetration 2013 (% of
S. No

tions
billion) (billion) subscriptions 2013 (per 100 individuals
region a
(billion) e
2013 2014
b
c
per 100 inhabitants) using
2013 d f
inhabitants internet)
1 67.08 0.73 6.50
Bangladesh 150 159 105,051
2 Sri Lanka 95.50 12.72 21.90
67 21 20,315
3 Nepal 71.46 3.06 13.30
19 53 19,865
4 US 95.53 42.22 84.20
16,768 323 305,743
5 UK 123.77 52.88 89.84
2678 63 78,144
6 UAE 171.87 22.32 88.00
402 9 16,064
7 South Africa 147.46 9.16 48.90
351 53 77,826
8 India 70.78 2.31 15.10
1,877 1,267 886,304

Sources:

a)The World Bank. GDP (current US$). Retrieved from http://data.worldbank.org/indicator/NY.GDP.MKTP.CD,on

December 15, 2014.

b)Worldometers. (2017). Countries in the world by population. Retrieved from

http://www.worldometers.info/world-population/population-by-country/,on
December 15, 2014.

c-f)International Telecommunication Union website. Statistics. Retrieved from http://www.itu.int/en/ITU-

D/Statistics/Pages/stat/default.aspxon December 15, 2014.

.
20 of 23 IIMA/MAR0451

EXHIBIT 12
Key Global Telecom Indicators for the World Telecommunication Service Sector in 2014
(all figures are estimates)
Common-
Developed Developing Arab Asia & wealth of
Global Africa Europe USA
nations nations States Pacific Independent
13
States
Mobile cellular
subscriptions (in millions) 6,915 1,515 5,400 629 410 3,604 397 780 1,059
Per 100 people(%) 95.50 120.80 90.20 69.30 109.90 89.20 140.60 124.70 108.50
Fixed telephone lines (in
millions) 1,147 511 636 12 33 512 70 245 256
Per 100 people(%) 15.80 40.80 10.60 1.30 8.70 12.70 24.90 39.20 26.30
Active mobile broadband
subscriptions (in millions) 2,315 1,050 1,265 172 92 920 138 399 577
Per 100 people(%) 32.00 83.70 21.10 19.00 24.60 22.80 48.90 63.80 59.10
Mobile broadband growth
2013-14(%) N/A 11.50 26 43 19 21 15 12 16
Fixed broadband
subscriptions (in millions) 711 345 366 3 12 313 40 173 163
Per 100 people(%) 9.80 27.50 6.10 0.40 3.10 7.70 14.30 27.70 16.70

Source: © International Telecommunication Union. (May 2014).

13 Countries belonging to the erstwhile USSR.

21 of 23 IIMA/MAR0451

ENDNOTES

aMitra,M. (2013, May 3). Billion-dollar team: How Micromax is gearing up to touch the $1-
bn mark. The Economic Times. Retrieved from
http://articles.economictimes.indiatimes.com/2013-05-03/news/39009577_1_ceo-deepak-
mehrotra-crore-revenues-micromax, on August 30, 2014.

bInterbrand.
(2013). Best global brands. Retrieved from
http://www.bestglobalbrands.com/previous-years/2013,on December 14, 2014.

cMicromax Informatics Limited. Retrieved from

http://drop.ndtv.com/profit/gl/IPO/Dp623.pdf, on August 30, 2014.

dDon‟tbe impatient, especially with your employees. (2009, May 7). Rediff.com. Retrieved
from http://getahead.rediff.com/report/2009/may/06/dont-be-impatient-especially-with-
employees.htm, on August 30, 2014.

eJain, M. (2013). Micromax: At max. News Bulletin India. Retrieved from

http://newsbulletinindia.blogspot.in/2013/02/micromax-at-max.html, on August 30, 2014.

fIndia‟smobile market grew by 15% last year: Samsung, Micromax, HTC winners, Nokia
losing the fight. (2011, June 28). NextBigWhat.com. Retrieved from
http://www.nextbigwhat.com/mobile-market-share-report-2011-297/, on August 30, 2014.

gMicromax aims for the world with upcoming high-end smartphones. (2013, December 13).
[Reuters]Gadgets 360, NDTV.com. Retrieved from
http://gadgets.ndtv.com/mobiles/news/micromax-aims-for-the-world-with-upcoming-
high-end-smartphones-458336, on 30 August, 2014.

hD‟Monte, L., & Srivastava, M. (2014, August 7). How Micromax made it big in India. Live
Mint. Retrieved from
http://www.livemint.com/Industry/HAdRsdSfeXc5D3vuX6ojvO/How-Micromax-made-
it-big-in-India.html, on August 30, 2014.

iHow Micromax sells 1 million handsets every month. (2010, April 2). Rediff.com. Retrieved
from http://www.rediff.com/money/interview/tech-inter-how-micromax-sells-1-mn-
handsets/20100402.htm, on August 30, 2014.

jMitra, M. (2013, May 3). Op. Cit. Retrieved from

http://articles.economictimes.indiatimes.com/2013-05-03/news/39009577_1_ceo-deepak-
mehrotra-crore-revenues-micromax.

kIbid.
22 of 23 IIMA/MAR0451

lBhushan, K. (2012, July 5). India‟s mobile subscriber base rises to 929.37 million: TRAI. Digit.
Retrieved from http://www.digit.in/mobile-phones/india-s-mobile-subscriber-base-rises-
to-929-37-million-trai-10049.html, on August 30, 2014.

mIndian handset market — Survival of the fittest. (2011, April 7). Voice and Data. Retrieved
from http://www.voicendata.com/voice-data/news/168254/indian-handset-market-
survival-fittest, on August 30, 2014.

nIntroductiontelecommunications in India marketing essay. (2015, March 23). UK Essays.

Retrieved from http://www.ukessays.com/essays/marketing/introduction-
telecommunications-in-india-marketing-essay.php, on August 30, 2014.

oAvendus website. Retrieved from

http://www.avendus.com/Files/Fund%20Performance%20PDF/Avendus_Report-
India's_Mobile_Internet-2013.pdf, on August 30, 2014.

pCRN website. Retrieved from http://www.crn.in/crn/features/294929/tablet-trends-

changing-india, on September 4, 2014.

qFonearena website. Retrieved from http://www.fonearena.com/tech/india/micromax-

launches-range-of-led-tvs-home-theatres-and-3d-blu-ray-player/2671/, on September 3,
2014.

rCorporate Catalyst India. Consumer durables industry in India. Retrieved from

http://www.cci.in/pdfs/surveys-reports/Consumer-Durables-Industry-in-India.pdf,
accessed on September 3, 2014.

sIndiaBrand Equity Foundation. (2011, November). Consumer durables. Retrieved from

http://www.ibef.org/download/Consumer_Durables50112.pdf, accessed on September 3,
2014.

tRetrieved from http://www.currentweek.com/top-air-conditioner-brands-in-india-

growth-market-of-top-companies/, on August 30, 2014.

uADI Media. Retrieved from http://www.adi-media.com/PDF/TVJ/annual_issue/009-

Refrigerators.pdf, on August 31, 2014.

vADI Media. Retrieved from http://www.adi-media.com/PDF/TVJ/annual_issue/008-

Washing-Machines.pdf, on August 31, 2014.

wIndiantablet PC market revenue to cross $2 billion in 2013: Experts. (2013, October 3). The
Hindu Business Line. Retrieved from http://www.thehindubusinessline.com/industry-and-
23 of 23 IIMA/MAR0451

economy/info-tech/indian-tablet-pc-market-revenue-to-cross-2-billion-in-2013-
experts/article5196531.ece, on September 4, 2014.

xIndia ships 10,000 tablets every day; Datawind leads the market. (2013, June 6).
Telecomtalk.info. Retrieved from http://telecomtalk.info/india-ships10000-tablets-every-day-
datawind-leads-the-market/106632/, on September 4, 2014.

yAudio visual market will hit $5 b in 2 years. (2013, September 16). The Hindu Business Line.
Retrieved from http://www.thehindubusinessline.com/industry-and-economy/info-
tech/audio-visual-market-will-hit-5-b-in-2-years/article5135160.ece, on September 4, 2014.