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8/19/2019 How Micromax Rose to Prominence
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Competition & Strategy ProjectMicromax Mobiles
By
Group 9
1501068 – Aniket Phadnis
1501076 – Dhvanil Zaveri
150108 – !aushik "ath1501090 – Pradeep #eena
150110$ – %aura&h Bose
1501107 – !aran %in'h
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DECLARATIO
!e "ereby certi#y t"at all o# $s "a%e e$ally contrib$te' o$r e(orts to t"is
project) To t"e best o# o$r *no+le'ge, t"e project report 'oes not contain any
$ncre'ite' so$rces ot"er t"an t"e explicit re#erence ma'e in t"e bibliograp"y
Signe'-.
/01/123 4 Ani*et P"a'nis/01/152 4 D"%anil 6a%eri/01/137 4 8a$s"i* at"/01/191 4 Pra'eep Meena/01//1: 4 Sa$rab" ;ose/01//15 4 8aran Sing"
Intro'$ctionMicromax is c$rrently t"e largest In'ian Mobile p"one company) It starte' o( as a
so#t+are company calle' Micromax In#ormatics limite' in t"e year 7111 by a
gro$p o# #o$r #rien's) It initially operate' as an IT So#t+are Company operating in
t"e embe''e' 'e%ices 'omain) In 7113, Micromax entere' t"e mobile p"one
mar*et) T"e company is c$rrently "ea'$artere' in mar*et s"are '$ring t"e ?rst "al# o# its existence) ;y 71/1, it +as one o#
t"e largest 'omestic companies ma*ing "an'sets) Micromax #oc$se' on lo+
pricing to compete +it" establis"e' international bran's s$c" as Apple an'
Sams$ng) T"e initial inspiration #or t"e #o$n'ers to enter t"e lo+ cost #eat$re
p"one segment in In'ia +as t"e #re$ent po+er c$ts in r$ral areas) Apparently
one o# Micromax@s #o$n'ers sa+ a p$blic call oce being po+ere' by a tr$c*
battery beca$se o# t"e po+er c$ts) T"$s an i'ea to intro'$ce a lo+ cost p"one
+it" an exten'e' battery li#e trans#orme' into t"eir ?rst p"one B/i, +"ic" "a' a
mont" long battery bac*$p)
Micromax aspires to become t"e contin$ation o# t"e In'ian yo$t"@s li#estyle an'
personality) T"e company "as a lot o# ?rsts to its cre'it an' "as a "istory o#
$ir*y pro'$cts s$c" as t"e a#orementione' :1 'ay battery bac*$p p"ones, D$alSIM '$al stan'by p"ones, !ERT *eypa' p"ones, $ni%ersal remote control
p"ones an' t"e ?rst $a' core b$'get smart p"one) T"e pro'$ct port#olio o#
Micromax to'ay boasts o# more t"an 21 mo'els ranging #rom #eat$re p"ones to
tablets to LED tele%isions an' 'ata car's)
Micromax is no+ t"e /1t" largest smartp"one %en'or in t"e +orl') T"e pro'$ction
Micromax mobile p"ones is carrie' o$t by oxconn in C"ina) T"$s, Micromax is
able to ta*e a'%antage o# lo+ labor cost in C"ina an' t"e economies o# scale
ac"ie%e' by oxconn) Micromax sells t"ese pro'$cts at lo+ costs in t"eir target
mar*ets) T"is is one o# t"e main reasons #or t"e s$ccess o# Micromax in s$c" as"ort perio')
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Since t"e pro?t margins are lo+, Micromax@s strategy to ac"ie%e pro?t is t"ro$g"
increase' %ol$me o# sales) T"ey targete' t"e r$ral c$stomers as t"eir target
mar*et) T"is segment "a' a lot o# potential an' +as consi'erably $npenetrate')
Micromax also p$t a'e$ate e(orts into t"eir a'%ertising an' mar*et strategy)
Micromax a'opte' t"e slogan, Fot"ing li*e anyt"ing@) T"ey sponsore' a %ariety
o# sports an' b$siness e%ents to gain %isibility) Domestic as +ell as international
celebrities +ere bro$g"t on boar' as bran' ambassa'ors #or t"eir p$blicity
campaign)
PEST ANALYSIS
Political
T"ere "as been a "$ge p$s" by t"e go%ernment to increase t"e mobile
penetration in In'ia) All major ser%ices s$c" as irrigation an' ban*ing ser%ices
"a%e been s"i#te' to mobile plat#orm) T"is "as bro$g"t an $rge in r$ral an'
$rban pop$lation to $se p"ones #or major reasons an' t"ereby increasing t"e
sales o# mobile p"ones in In'ia)
Apart #rom t"is, se%eral go%ernment initiati%es "a%e incenti%iGe' In'ian
man$#act$rers to pro'$ce in In'ia, amongst +"ic" is FMa*e In In'ia@ campaign)
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O%er t"e past H years t"e a%erage gro+t" in 'isposable income an' cons$mer
expen'it$re is increasing by more t"an 2)H>)T"e economic 'e%elopment o# t"e
co$ntry bot" in t"e r$ral an' $rban mar*et ma*es it a 'esirable 'estination #or
mobile p"one companies)
Social
A#ter examining t"e 'emograp"ic 'istrib$tion in t"e co$ntry, +e obser%e rapi'
gro+t" o# yo$t" pop$lation in Tier I an' Tier II cities) T"is becomes #a%orable #or
t"e Smartp"one in'$stry as 2:> o# smartp"one $sers are $n'er t"e age o# 70)
T"is is one o# t"e contrib$ting #actors to t"e increase in 'eman' #or #eat$re
p"ones experience' in t"e recent past)Micromax "as in%este' "ea%ily in t"e
eat$re p"ones segment an' are c$rrently t"emar*et lea'er in t"is segment)
Social attit$'e to+ar's smartp"one $sage "as c"ange' 'rastically o%er t"e
years) o+ c"il'ren as yo$ng as /1./7 years are getting access to smartp"ones)
Technological
T"e mobile p"one in'$stry is a %ery inno%ati%e segment +it"in t"e ICT sector
an' t"e smartp"one "as no+ become t"e stan'ar' con?g$ration among t"e
'i(erent types o# mobile 'e%ices) Tec"nical c"ange an' ne+ pro'$ct proli#eration
"a%e ma'e t"is in'$stry extremely 'ynamic) T"ere is eit"er a pro'$ct
'i(erentiation in terms o# 'ynamic 'esign or %ertical inno%ation +it" selecte'
#eat$res li*e +eig"t, !i?, M$ltito$c", secon'ary camera etc) Inno%ation an'
pro'$ct 'i(erentiation are important in t"is pro'$ct segment to ac"ie%e long
term s$stainability an' "ence cannot be o%erloo*e')Micromax nee's to stay
a"ea' o# t"e tec"nological an' inno%ation c$r%e) It "as set $p a Researc" an'
De%elopement center in ;eijing,
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Conclusion-
rom t"e PEST Analysis, mobile in'$stry seems to be a %ery promising in'$stry
+it" "ig" gro+t" opport$nities) All t"e #actors in t"e external en%ironmental
#actors s$pport t"e pro'$ction an' sale o# mobile p"ones) !it" go%ernment
ta*ing se%eral initiati%es in t"is aspect along +it" t"e gro+ing income an' b$ying
be"a%ior o# In'ia, PEST analysis gi%es a goo' #o$n'ational reasons #or Micromax
to o$ris")
Porter’s fve orces
Barriers to Entr !L"#$% T"e JS an' C"inese mar*ets "a%e reac"e' sat$ration
point) T"is "as le' to many Smartp"one man$#act$rers to loo* to+ar's In'ia)In'ia is one o# t"e #astest gro+ing mar*ets in Asia an' !orl' all aro$n') T"ere
are t"ree ne+ companies entering t"e mar*et e%ery mont") T"e possible reasons
#or s$c" lo+ barriers to entry are
/)
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companies c"ose to c$t 'o+n t"e prices o# t"eir ags"ip Smartp"one p"one in
t"is #eat$re p"one segment) T"e a'%antage is passe' on t"e b$yer)
/) ;ac*+ar' Integration T"ere is a lo+ t"reat o# bac*+ar' integration #rom
t"e b$yers) One o# t"e cases is t"at o# t"e mobile operators li*e i'eocon
t"at starte' man$#act$ring p"ones $n'er t"eir o+n bran') T"ese p"ones"o+e%er "a%e not been so pop$lar among c$stomers
Po&er o Su))liers !*"+E,ATE$% T"e s$pplier po+er is mo'erate in case o#
components li*e t"e microprocessors $alcomm an' IntelK, p"ysical memory,
C tec"nology an' special screens CorningK 'i(erentiate t"e ?nal pro'$cts an'
a(ect t"eir selling price an' margins) T"ese nic"e s$ppliers are mostly
concentrate') In a''ition, t"ere is large n$mber o# players in t"e mar*et, +"ic"
gi%es t"em m$ltiple opport$nities an' c$stomers)
/) S+itc"ing costs =o+e%er in case o# so#t+are stac*, operating system an'
'esign re$irements mobile man$#act$rers "a%e a mo'erate s+itc"ing
cost) Example . P"ones r$nning +in'o+s mobile operating system can
s+itc" to an'roi' easily)
7) ;ac*+ar' Integration T"is possibility is lo+ #or lo+.cost #eat$re p"ones as
t"e cost inc$rre' #or %ertical integration is %ery "ig") In a''ition, t"ere
+o$l' "a%e to be a lot o# in%estment in t"e R&D as +ell as patent
ac$isitions #or nic"e tec"nologies) T"is +o$l' ta*e time an' co$l' a(ect
t"e selling prices as t"e inp$t costs go $p)
Threat o sustitution !Lo&$% T"e t"reat o# s$bstit$tes is lo+ as alternate
pro'$cts li*e tablet, laptops an' Personal Digital assistants 'o not $ite o(er t"e
same #$nctionality as t"e p"one) T"e b$l*iness o# a tablet in a''ition to t"eir
non.calling #$nctionality ma*es it 'ic$lt to replace a p"one e%en t"o$g" it "as
been gro+ing in pop$larity)
T"e p"one o(ers a better price.per#ormance ratio as compare' to its s$bstit$tes)
Mobile p"ones are portable comm$nication 'e%ices, +"ic" are in'ispensible) Its
$bi$ito$s nat$re ma*es it %ery 'ic$lt to s$bstit$te
,ivalr among com)etitors !'I('$%
/) In'$stry ann$ally in H o# 71/0) D$ring 71/0, t"e total
s"ipments amo$nte' to /11 million $nits) T"is gi%es a pict$re o# t"e pace
o# t"e in'$stry gro+t") More t"an /11 players #rom In'ia, C"ina, Jnite'
States & So$t" 8orea compete in t"e In'ian mar*et)
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7) Intense Competition T"e retail %ol$me brea*'o+n c"art belo+ s"o+s t"e
n$mber o# companies +it" t"eir mar*et s"are) T"is s"o+s t"at t"ere is
%ery "ig" competition amongst t"e competitors to gain maxim$m mar*et
s"are by %ol$meK in t"e In'ian mar*et)
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8/19/2019 How Micromax Rose to Prominence
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Ex"ibit 4 Company s"ares "istoric retail %ol$me brea*'o+n
E$romonitor passportK
:) Lo+ Margins T"e income is $s$ally 0.2> o# t"e sales re%en$e) T"is is %ery
lo+ in t"e %al$e c"ain) Micromax - 2)//>, La%a - 0)21>) Only "ig" en'
Smartp"one li*e Apple "as a "ig"er pro?t margin 7/)H7>K
Conclusion
T"e o%erall Smartp"one in'$stry is not attracti%e #or any existing company gi%en
-.
• ;arriers to entry are lo+)
• Po+er o# b$yers is "ig"
• Po+er o# s$pplier t"o$g" mo'erate ,t"ere are concentrate' s$ppliers #or
some "ig" per#orming an' 'i(erentiating "ar'+are systems li*e screens
an' microprocessors
• T"reat o# s$bstit$tion is lo+ #or no+)
• T"e ri%alry among competitors is "ig" as t"e margins are lo+) A lot o#
companies are ?g"ting #or a s"are by %ol$me in a similar b$t booming
mar*et) T"is "as ca$se' intense competition in lo+ cost #eat$re p"onesegment)
al$e C"ain Analysis-
T"e %al$e c"ain analysis o# a company is an important tool to
$n'erstan' "o+ t"e 'i(erent acti%ities $n'erta*en by t"e ?rm res$lts in
creating %al$e #or t"e en' c$stomer) T"e eciency o# a ?rm in creating
%al$e #or its en' c$stomers reects eit"er in t"e increase in !TP by t"econs$mers, or in re'$ction in costs) Eit"er +ay, t"e 'i(erent %al$e c"ain
acti%ities 'etermine t"e pro?tability o# t"e ?rm) I# t"e ?rm creates
signi?cant %al$e #or its c$stomers, it +ill lea' to increase in t"e +illingness
to pay !TPK 4 +"ic" in t$rn enables t"e ?rm to sell its pro'$cts at a
premi$m) On t"e ot"er "an', cost re'$ction in %ario$s %al$e c"ain
acti%ities by t"e ?rm enables it to *eep t"e total pro'$ction cost lo+, an'
in t$rn "elp it sell its pro'$ct at a lo+ price) A #rim may create a cost
a'%antage eit"er by re'$cing t"e cost o# t"e in'i%i'$al %al$e c"ain
acti%ities, or by recon?g$ring t"e entire %al$e c"ain) Once t"e %al$e c"ain
is i'enti?e', a cost analysis can be per#orme' by assigning cost to t"e
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R&DInbo$n'Logistics
O$tbo$n'
Logistics
Mar*eting
A#tersalesser%ice
%al$e c"ain acti%ities) T"e major cost 'ri%ers relate' to t"e %al$e c"ain
acti%ities are- Economies o# scale, learning, capacity $tiliGation, lin*ages
among acti%ities, interrelations"ips among b$siness acti%ities, 'egree o#
%ertical integration, timing o# mar*et entry, ?rm@s policy o# cost lea'ers"ip
or 'i(erentiation, geograp"ical location an' instit$tional #actorsreg$lation, $nion acti%ity, tax etcK) A ?rm creates cost a'%antage by
better controlling t"ese cost 'ri%ers t"an 'o t"e competitors) !"ile t"e
external in'$stry an' en%ironment analysis "elps $s $n'erstan' t"e
in'$stry, o# +"ic" t"e ?rm $n'er consi'eration is a part o#, t"e %al$e c"ain
analysis "elps $s $n'erstan' t"e so$rce o# pro?tability o# t"e ?rm +it"in
t"e in'$stry relati%e to its competitors) It is to be note' t"at t"e total
pro?tability enjoye' by any ?rm in a gi%en in'$stry is a #$nction o# bot"
t"e in'$stry it is part o#, an' t"e 'istincti%e acti%ities $n'erta*en by t"e
?rm +"ic" gi%es it an a'%antage . or 'isa'%antage 4 o%er its ri%als an'
competitors in t"e in'$stry)
T"is is especially tr$e #or t"e smartp"one in'$stry in In'ia +"ic" is
gro+ing at a staggering /7> CA
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an' Apple spen' se%eral billions o# 'ollars in R&D ann$ally) T"ey pass on
t"ese R&D costs to t"e c$stomers by selling "an'sets at a premi$m +"ile
*eeping ot"er inp$t costs lo+) !"ile it is possible #or companies li*e Apple
an' Sams$ng to in%est so "ea%ily in R&D on t"e acco$nt o# t"eir 'eep
poc*ets, t"e same may not be possible #or ne+ players entering into t"ein'$stry) Micromax initially entere' into t"e smartp"one in'$stry in 7113
+it"o$t a 'e'icate' R&D center) T"e company a'opte' a non.tra'itional
b$siness mo'el, +"ereby t"ey so$rce' ?nis"e' goo's #rom t"eir C"inese
man$#act$rer oxconn) Design speci?cations +ere pro%i'e' to oxconn
an' e%en t"e pilot testing o# t"e pro'$cts +as 'one at s$pplier@s #acility in
C"ina) Jn'er t"is strategy t"ey 'i' not re$ire R&D, neit"er co$l' t"ey
start man$#act$ring in In'ia $ntil t"ey ac"ie%e' economies o# scale
a'%antage in man$#act$ring)=o+e%er, t"is strategy +o$l' not be able to
generate consistent pro?tability in t"e long r$n beca$se any competitor
co$l' imitate s$c" a strategy) To ens$re long term pro?tability Micromax
nee'e' to 'e%elop in."o$se R&D an' man$#act$ring capabilities in In'ia)
!it" t"at %ie+ in min', Micromax opene' its ?rst R&D center in
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All t"ese R&D acti%ity +ill $ltimately lea' to increase in !TP #or Micromax
pro'$cts, +"ic" +ill enable it to enjoy "ig"er margins on its pro'$cts in
t"e coming years)
Inoun9 Logistics%
!"en Micromax starte' its jo$rney in 7113, t"e mobile p"one
mar*et in In'ia +as pretty m$c" a seller@s mar*et) =o+e%er, +it"
'eman's increasing consistently since t"en, t"e mobile p"one mar*et
$n'er+ent a ra'ical c"ange) O%er t"e last #e+ years se%eral ne+ players,bot" local an' global, "a%e entere' t"e in'$stry) T"e competition is
intense, especially in t"e lo+ an' me'i$m range smartp"one segments)
T"e pro'$cts o(ere' in t"is segment are mostly $n'i(erentiate', an' t"e
competitors engage in ?ercely conteste' price +ars) T"e *ey to enjoying
"ealt"y pro?tability in t"is in'$stry is to *eep t"e costs lo+) T"is is +"y
inbo$n' logistics becomes s$c" an important %al$e c"ain acti%ity #or a
company li*e Micromax)
Micromax imports most o# its pro'$cts #rom its OEM s$pplier in
C"ina) Cost o# p$rc"asing ?nis"e' goo's constit$te 59> o# t"e total
expense o# Micromax) T"e real clinc"er #or Micromax +as to tie $p
l$crati%e 'eals +it" Tier I r$ng man$#act$rers locate' in C"ina +"o are
associate' +it" global bran's li*e Apple, Sams$ng, o*ia etc) oxconn,
+orl'@s largest contract man$#act$rer, #or instance, "as been associate'
+it" Apple) Similarly, ;D, +"ic" +or*s on some Micromax "an'sets, "as
been associate' +it" o*ia) Typically Micromax or'ers 011,111 mobile
"an'sets at t"e entry le%el #rom t"eir man$#act$rers in C"ina) T"e %ol$me
gro+t" ens$res better cost eciencies, an' t"$s "elp Micromax get
%ol$me 'isco$nts #rom its s$ppliers) S$c" excl$si%e contracts +it"s$ppliers enable' Micromax to *eep t"e o%erall proc$rement cost lo+) T"is
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cost a'%antage o# Micromax ga%e it a competiti%e e'ge o%er its ri%als in
t"e ?ercely conteste' lo+ margin smartp"one segment)
!"en Micromax starte' o$t in 7113 t"e mobile "an'set in'$stry
+as still gro+ing in In'ia) It +as not possible #or a ne+comer li*e
Micromax to start its pro'$ction in In'ia beca$se it +o$l' not get t"e
%ol$me sales re$ire' to ac"ie%e economies o# scale) So, t"ro$g"
excl$si%e contracts +it" s$ppliers Micromax +o$l' import ?nis"e' goo's
#rom C"ina, +"ile *eeping t"e cost o# proc$rement lo+) Se%eral ot"er
external #actors also "elpe' t"e ca$se o# Micromax an' similar ot"er local
players li*e Intex) T"e lo+ +age rate in C"ina "elpe' man$#act$rers li*e
oxconn inc$r lo+ man$#act$ring cost) As a res$lt, Micromax co$l' also
'eman' lesser prices #rom s$pplier) =o+e%er t"e scenario c"ange' in t"e
last co$ple o# years) T"e minim$m +age rate in C"ina +as "i*e' by
/:):>) T"is +as major s"oc* to all t"e man$#act$rers in C"ina as itres$lte' in increase in man$#act$ring costs, +"ic" t"ey passe' on to t"eir
b$yers li*e Micromax) T"$s proc$rement o# ?nis"e' goo's #rom C"ina
became a lot costlier) On top o# it Micromax "a' to inc$r signi?cant
expense in import an' excise '$ty +"ic" amo$nte' to abo$t /:>)
=o+e%er, a recent c"ange in t"e import tari( "as ma'e it c"eaper #or
In'ian companies to man$#act$re in In'ia) As part o# t"e Ma*e in In'ia
campaign, t"e import '$ty o# component importsC8D.Completely
8noc*e' Do+nK "as been re'$ce' to j$st />, +"ile t"at on import o#
?nis"e' goo's "as remaine' $nc"ange' at /7>) T"is means t"at it +ill belot c"eaper #or In'ian companies to import ra+ materials #rom abroa' an'
man$#act$re in In'ia) Ta*ing a'%antage o# t"is #a%orable tax policies,
Micromax opene' its ?rst assembly plant in R$'rap$r in 71/H) Since t"en
it "as anno$nce' plans to b$il' t"ree more man$#act$ring #acilities in
In'ia by 71/3) Micromax plans to s"ip its entire pro'$ction line to In'ia by
71/3) =a%ing no+ ac"ie%e' t"e %ol$me sales re$ire' to ac"ie%e
economies o# scale a'%antage, by man$#act$ring in In'ia Micromax +ill be
able to 'ri%e 'o+n t"e cost #$rt"er +"ic" +o$l' enable it to enjoy "ig"er
pro?tability in t"e #$t$re)
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"utoun9 logistics%
T"e +are"o$sing an' 'istrib$tion o# ?nis"e' goo's constit$te
o$tbo$n' logistics) It incl$'es %ario$s acti%ities li*e transportation,
material "an'ling, an' pac*aging, comm$nication, an' in#ormation
systems) !"en Micromax starte' o$t it pic*e' "an'sets #rom C"ina,reba'ge' t"em an' sol' t"em in In'ia) D$ring t"at perio' smartp"one
in'$stry in In'ia +as still in its in#ancy) !"ile t"e rest o# t"e +orl' +as
?nally catc"ing $p +it" t"e smartp"one craGe, 'eman' in In'ia +as still
'ri%en by #eat$re p"ones) =a%ing starte' o$t +it"o$t any man$#act$ring
#acility in In'ia o# its o+n, Micromax co$l' t"ere#ore #oc$s all its e(orts on
setting $p an extensi%e 'istrib$tion net+or* t"ro$g"o$t t"e co$ntry) A
signi?cant aspect o# Micromax@s s$ccess is its 'istrib$tion net+or*) T"is is
somet"ing t"e company in"erite' rig"t at t"e time o# inception) Micromax
+as #o$n'e' in /99/ by Rajes" Aggar+al +"o +as a 'istrib$tor o# global
"ar'+are bran's li*e =P, Dell, Compa) T"e company le%erages itsalrea'y establis"e' 'istrib$tion net+or* to spee' $p t"e la$nc" o# ne+
pro'$cts in t"e In'ian mar*et) So, +"ere Micromax ta*es barely a mont"
or t+o to la$nc" pro'$cts, anot"er big international bran' re$ires
ro$g"ly /3 mont"s #or a similar pro'$ct to go t"ro$g" t"e retail pipeline)
T"is gi%es t"em a signi?cant a'%antage o%er its ri%als li*e Intex) T"is is
beca$se s$ccess in t"e lo+ price' lo+ margin smartp"one segment
'epen's majorly on t"e n$mber o# ne+ pro'$cts la$nc"e' by t"e players
an' also t"e spee' at +"ic" t"ese pro'$cts are bro$g"t to t"e c$stomers
t"ro$g" t"e retail c"ain) Its alrea'y existing 'istrib$tion net+or* "elpe'
Micromax to expan' its presence t"ro$g"o$t t"e co$ntry)Anot"er reason #or Micromax@s s$ccess in 'istrib$tion is t"at t"e
company speci?cally so$g"t to target segments o# t"e In'ian smartp"one
mar*et +"ic" +as still $npenetrate' by t"e global players) E%er since its
inception, Micromax@s strategy "as been to target t"e still $ntargete'
r$ral segment) =$ge gro+t" potential in t"is mar*et segment meant t"at,
being t"e ?rst mo%er, it co$l' generate signi?cant %ol$me sales by
bringing o$t a(or'able smartp"ones +it" longer battery li#e) Electricity is
a major problem in r$ral In'ia t"ere#ore, Micromax@s o(ering o# %al$e #or
money smartp"ones +it" longer battery li#e +as a big "it among In'ianr$ral cons$mers);y increasing t"e siGe o# t"e battery to /311 mA",
Micromax +as able to to$t a stan'by time o# :1 'ays #or t"e B/i) An' at
t"e rat"er a(or'able price o# Rs) 7,/01, t"e p"one +as a big s$ccess in
r$ral In'ia) T"e extensi%e presence o# Micromax in Tier II an' Tier III cities
"a%e "elpe' Micromax consistently increase its mar*et s"are year.on.year
by selling "$ge %ol$mes o# lo+ price' lo+ margin smartp"ones)
In Tier I cities Micromax speci?cally targete' yo$t" pop$lation by
bringing o$t ne+ an' inno%ati%e #eat$re p"ones li*e sel?e p"one, camera
p"one etc) T"ro$g"o$t t"e co$ntry it "as set $p extensi%e 'istrib$tionnet+or* an' retail c"annel) Micromax "as :H s$per.stoc*ists, H01
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'istrib$tors an' 00111 retailers sprea' across t"e co$ntry) S$c" an
extensi%e 'istrib$tion c"annel "as "elpe' Micromax generate sales in
excess o# one million $nits a mont") It "as also recently opene' /01
excl$si%e stores, calle' QExperience Gones, #or t"e $rban pop$lation)
Micromax also sells its p"ones t"ro$g" lea'ing mobile stores li*e EGone,Croma, Reliance !eb !orl', Reliance Digital, Planet M, T"e mobile stores
etc) Players li*e Micromax also enter into l$crati%e contracts +it" t"ese
retailers +"ic" enable t"em to re'$ce t"eir in%entory t$rnaro$n' time,
+"ile *eeping t"e 'istrib$tion costs lo+er t"an t"e competitors)or t"e
;7C mo'el, "ig"er margins $p to /0 per cent +ere o(ere' to t"e 'ealers,
+"ic" +as "ig"er t"an t"e in'$stry a%erage o# 2 per cent to /1 per cent)
An' 'istrib$tors +ere o(ere' "ig"er margins t"an +"at o*ia o(ere') T"is
"elpe' t"em penetrate t"e mar*et 'eeper into t"e $rban mar*ets) In ;7;
mo'el, +"ere corporate selling +as in%ol%e', tie $ps +it" major corporate
"o$ses sa%e' t"e margins o# t"e 'istrib$tors an' Micromax co$l' pro%i'e
t"e corporate "o$ses a lesser price t"an t"e mar*et) T"$s, t"e target
mar*et o# pro#essionals +as reac"e') To #$rt"er expan' its reac" in t"e
In'ian mar*et an' penetrate t"e r$ral mar*et, Micromax is also b$n'ling
its pro'$cts +it" telecom ser%ice pro%i'ers li*e Aircel #ollo+ing in t"e
#ootsteps o# ot"er players in t"e in'$stry)
Online c"annel is gra'$ally becoming t"e most #a%ore' 'istrib$tion
c"annel among global tec"nology giants li*e Motorola, Sams$ng, Apple,
Biaomi etc) In'ian "an'set ma*ers are increasingly selling t"eir ne+smartp"ones t"ro$g" online c"annels, "oping to mimic t"e rob$st sales
t"at Biaomi an' Motorola "a%e reporte' in In'ia by tapping t"e cost
a'%antage an' 'irect cons$mer connect t"at t"e me'i$m o(ersSelling
online only "elps "an'set companies *eep greater control on c"annel,
'istrib$tion an' s$pply c"ain, +"ile *eeping mar*eting an' pricing policies
separate) It also "elps bran's stay lean an' at t"e same time target
millions in $rban an' s$b$rban In'ian mar*ets) =a%ing a'opte' t"e
online.only selling mo'els, C"inas Biaomi an' JS.base' Motorola "a%e
alrea'y manage' to grab abo$t /> an' 0> mar*et s"ares, respecti%ely,+it"in mont"s o# entering a complex geograp"y li*e In'ia +"ere b$il'ing a
soli' oine 'istrib$tion net+or* ta*es time an' is costly) ollo+ing t"is
online only 'istrib$tion mo'el, Micromax la$nc"e' its $re*a bran' o#
smartp"ones t"ro$g" a s$bsi'iary) 70111 'e%ices +ere sol' in secon's
o%er t+o as" sales in AmaGon) T"$s Micromax, t"ro$g" its *no+le'ge o#
t"e In'ian mar*et an' its cons$mers, +as able to le%erage bot" t"e oine
an' online c"annel o# 'istrib$tion to increase its sales an' mar*et s"are
o%er t"e years)
http://economictimes.indiatimes.com/topic/Xiaomihttp://economictimes.indiatimes.com/topic/Motorolahttp://economictimes.indiatimes.com/topic/Motorolahttp://economictimes.indiatimes.com/topic/Xiaomi
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*ar6eting% T"e biggest c"allenge #or Micromax imme'iately a#ter entering t"e
In'ian mar*et +as to c"ange t"e bran' i'entity perception among
cons$mers) Percei%e' as a C"inese bran' intitially, Micromax +as a
pre#erre' bran' in t"e r$ral areas an' #or t"e same reasons +as notconsi'ere' 'esirable in t"e $rban areas) To penetrate t"e $rban mar*ets,
an image correction +as re$ire' an' a bran' strategy nee'e' to #a'e t"e
memories o# o*ia #rom t"e min's o# t"e cons$mers) !it" t"at %ie+ in
min' Micromax increase' its a'%ertising an' mar*eting expen'it$res
mani#ol') A%erage mar*eting an' a'%ertising expenses o# Micromax is
abo$t //> o# t"e total expenses, compare' to t"e in'$stry a%erage o# 5>)
Micromax "a' a 'eep $n'erstan'ing o# t"e In'ian mar*et +"ic" ga%e
t"em a signi?cant a'%antage o%er any o# t"eir tra'itional competitors) It
targete' t"e r$ral mar*et an' came $p +it" pro'$cts t"at +o$l' be a big
"it among r$ral c$stomers) Micromax@s JSP o# selling a(or'able, %al$e #or
money pro'$cts +it" longer battery li#e +as an instant s$ccess as it
appeale' to t"e r$ral c$stomers)
=o+e%er, similar %al$e proposition +o$l' not able to 'ri%e $p t"e
'eman' #or Micromax smartp"ones in t"e $rban an' semi.$rban mar*et)
So, t"ey spent big on celebrity en'orsements an' cric*et sponsors"ips to
increase %isibility o# t"e bran') At ?rst t"ey targete' t"e yo$ng $rban
#emale pop$lation by bring o$t t"e bling series o# "an'sets) Micromax
rope' in a #ace t"at +as consi'ere' elegant an' nic"e, T+in*le 8"anna)Micromax grabbe' t"e insig"t t"at
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aggressi%e mar*eting an' a'%ertising st$nts 'i' not gi%e Micromax any
signi?cant e'ge o%er its ri%als, it 'i' "elp t"e bran' increase its %isibility
in t"e In'ian mar*et)
Ater Sales Service%A#ter sales ser%ice constit$te one o# t"e most important %al$e
creating acti%ity #or tec"nology companies li*e Micromax beca$se o# "ig"
in%ol%ement pro'$cts sol' in t"e mar*ets) Typically in In'ia, t"e sale o#
"ig" in%ol%ement tec"nology.'ri%en pro'$cts li*e smartp"ones is 'ri%en
to some extent by t"e a%ailability o# ser%ice centers in t"e c$stomer@s
%icinity) T"at is +"y, all t"e major players in t"e smartp"one in'$stry are
starting to in%est "ea%ily to re%amp an' impro%e t"e existing t"e a#ter
sales ser%ice in#rastr$ct$re in t"e co$ntry)
Micromax, li*e its competitors, "a%e ma'e "$ge in%estments ina#ter.sales ser%ice an' "a%e opene' more t"an :51 ser%ice centers in
'i(erent parts o# t"e co$ntry) Micromax "a%e recently establis"e' a
ser%ice #actory in e+ Del"i +"ic" pro%i'e a compre"ensi%e range o#
ser%ices, incl$'ing c"ipset an' PC; replacement ser%ice) T"e ser%ice
#actory s$pports t"eir mo'$lar componentK ser%ice centers an' ASCs by
s$pplying necessary in%entory an' s$pporting t"eir tec"nical teams in
or'er to re'$ce t$rnaro$n' time) Tec"nical an' process orientation
training is gi%en to all t"e mo'$lar an' ASC ser%ice centers, t"$s "elping
to impro%e t"e le%el o# ser%ice $ality) T"is $ic* t$rnaro$n' time "as
been a *ey 'i(erentiating #actor Micromax +it" respect to its competitors
li*e Intex, La%a, 8arbonn etc) !"ile percentage o# calls to ser%ice centers
#rom o%erall installe' base "as come 'o+n by a #actor o# t+o, o%erall
complaints pen'ing #or more t"an 7/ 'ays "as come 'o+n by a #actor o#
?%e) T"ese "a%e res$lte' in consi'erable ser%icing cost re'$ction #or
Micromax) A#ter sales ser%ice increase t"e !TP to pay #or Micromax
pro'$cts an' strengt"en relations"ip +it" existing c$stomers, t"$s lea'ing
to an increase in t"e bran' e$ity)
Conclusion%!"en Micromax starte' its jo$rney in 7113, smartp"one mar*et in
In'ia +as still in its in#ancy) Cons$mers +ere a'apting to +"at +as being
o(ere') So it +as pretty m$c" a seller@s mar*et) Early entrants into t"e
in'$stry li*e Sams$ng, o*ia an' Apple sol' smartp"ones at a premi$m
beca$se o# t"e associate' bran' i'entity) =o+e%er, since t"en bot" t"e
mar*et an' t"e in'$stry "as $n'ergone a ra'ical c"ange) T"e smartp"one
in'$stry is gro+ing at a staggering /7> CA
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#$rt"er "elpe' t"eir ca$se) T"e mar*et gra'$ally trans#orme' into a
b$yer@s mar*et +it" t"e gra'$al increase in 'eman') Especially t"e lo+
an' me'i$m price' segment o# t"e smartp"one in'$stry is ?ercely
compete' by 'i(erent players) irms engage in price +ars, an' companies
are re$ire' to implement cost.competiti%e b$siness mo'el to ens$reconsistent pro?tability)
rom t"e %ery beginning Micromax@s strategy "as been t"at o#
a(or'able inno%ation) It targete' t"e r$ral an' semi.$rban segment o# t"e
mar*et, +"ic" +as still $npenetrate' at t"at time, an' too* a'%antage o#
t"e rapi'ly gro+ing smartp"one mar*et to increase its mar*et s"are by
generating consi'erable %ol$me sales in t"e r$ral mar*et) It tailore' its
pro'$cts to t"e re$irement o# t"e r$ral people) Electricity being t"e
major iss$e in r$ral areas, Micromax came o$t +it" p"ones "a%ing %ery
long battery li#e) In t"e $rban mar*et it targete' t"e gro+ing yo$t" an'#emale pop$lation by la$nc"ing #eat$re p"ones) eat$re p"ones is t"e
#astest gro+ing segment in t"e smartp"one in'$stry, an' Micromax
la$nc"e' p"ones li*e sel?e p"one, camera p"one etc, to appeal to t"e
yo$ng cons$mers in Tier I an' Tier II cities) Recently Micromax "as opene'
$p a R&D #acility in
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71/3) C$rrently it "as one man$#act$ring #acility in R$'rap$r, an' is in t"e
process o# setting $p t"ree more) In."o$se man$#act$ring capability +ill
'ri%e 'o+n t"e costs #$rt"er an' impro%e pro?tability in t"e coming years)
71/1 71// 71/7 71/: 71/H
.01
1
01
/11
/01
711
")erating Perormance In9icators ; *icroma4
DSO DIO DPO Cas" Cycle Operating cycle
71/1 71// 71/7 71/: 71/H
.71
./1
1
/171
:1
H1
01
21
51
Cash Ccle
Micromax Intex
Excl$si%e contracts +it" s$ppliers an' 'istrib$tors "as "elpe'
Micromax spee' $p its cas" con%ersion cycle o%er t"e years) !"ile ?%e
years ago Micromax@s cas" con%ersion cycle o# H1.01 'ays +as #ar greatert"an t"e in'$stry a%erage, to'ay Micromax "as been able to re'$ce its
cas" con%ersion cycle to a meagre 3 'ays) T"is is lo+er t"an t"at o# Intex,
Micromax@s biggest competitor in t"e lo+ range smartp"one segment)
T"e cost re'$ction ac"ie%e' in 'i(erent %al$e c"ain acti%ities,
mainly inbo$n'.o$tbo$n' logistics an' a#ter sales s$pport, "as "elpe'
Micromax enjoy "ig"er pro?tability margins +"en compare' to its
competitors li*e Intex) T"e grap" belo+ s"o+s t"e %ario$s pro?t margins
o# Intex an' Micromax o%er t"e years)
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71 / / 7 1 /7 7 1/ : 71 / H1
0
/1
/0
71
70
PB+ITA as < o total income
Micromax Intex
71 / / 71/ 7 71 / : 71 / H1
7
H
2
3
/1
/7
/H
PAT at < o total income
Micromax Intex
Micromax capitaliGe' on a rapi'ly gro+ing smartp"one mar*et an'
targete' t"e r$ral segment o# t"e mar*et, +"ic" +as still $npenetrate' at
t"e time, to 'ri%e $p %ol$me sales o# its pro'$ct an' increase t"e mar*et
s"are) =a%ing a 'eep $n'erstan'ing o# t"e In'ian cons$mers an' t"eenjoying t"e a'%antage o# being t"e ?rst mo%er enable' Micromax to
expan' its presence in t"e In'ian as +ell as global mar*et) D$ring t"e last
$arter o# 71/H, Micromax became t"e largest smartp"one man$#act$rer
in In'ia by %ol$me) Alt"o$g" Sams$ng regaine' t"e top position in mar*et
s"are in 71/0, Micromax is still gro+ing strong an' is c$rrently on 7n'
position) =o+e%er, a c"ange o# strategy is re$ire' i# Micromax is to
s$r%i%e in t"e in'$stry an' enjoy consistent long term pro?tability) Almost
all t"e %al$e c"ain acti%ities t"at eit"er le' to re'$ction in cost, or
increase in !TP #or Micromax cannot gi%e t"e company a s$staine' longterm a'%antage o%er its ri%als) T"is is beca$se most o# t"e core %al$e
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c"ain acti%ities o# Micromax can be imitate' by its competitors in t"e long
r$n) ;esi'es, t"e cost o# p$rc"asing ?nis"e' goo's #rom C"ina "as also
gone $p '$e to increase in labor +age rates an' $n#a%orable 'ollar
$ct$ation) To enjoy long term s$stainable pro?tability in a 'ynamic
in'$stry li*e cons$mer electronics, inno%ation is o# $tmost importance)Increasing its R&D expenses in t"e #$t$re +ill enable Micromax to
compete e%en in t"e premi$m p"one segment +"ere it can enjoy "ig"er
margins) It "as also 'e%elope' in."o$se man$#act$ring capability in In'ia,
+"ic" +ill #$rt"er bring t"e cost 'o+n an' increase t"e pro?tability
margin)
Micromaxs gro+t" strategy "as #ollo+e' t"ree clear stages) !"en it
starte' o$t, t"e company pic*e' "an'sets #rom C"ina, reba'ge' t"em an'
sol' t"em in t"e In'ia mar*et)In t"e secon' stage, it realise' t"e nee' to
'o extensi%e researc" in terms o# In'ian cons$mers 'eman's an' pro'$ct'e%elopment)o+ it "as crosse' o%er into a ne+ p"ase, +"ere t"e
company "as starte' #ollo+ing a mix.an'.matc" strategy . getting some
pro'$cts man$#act$re' in C"ina an' ot"er co$ntries, so$rcing
components #rom abroa' an' man$#act$ring some o# t"e ne+er lines in
In'ia) Only time +ill tell +"et"er Micromax is able to le%erage t"is
ne+#o$n' strategy to enjoy long term pro?tability)
RI analysis
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8/19/2019 How Micromax Rose to Prominence
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Service
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Selling!Ama>on$
Ater
Sales
Service
,esearch = +evelo)ment% !"at ga%e Micromax a competiti%e a'%antage o%er
its ri%als li*e Intex is t"e spee' at +"ic" it +as able to intro'$ce ne+ pro'$cts to
t"e mar*et) Moreo%er, $ Tele%ent$res, a s$bsi'iary o# Micromax, "as recently
?le' #or #o$r patents on "ar'+are inno%ation 'esign) =ence t"is reso$rce is
valuale to t"e company as it +o$l' 'ictate t"e mar*et s"are in t"e coming
years as tec"nology impro%es an' t"e company nee's to stay a"ea' in t"e
tec"nological c$r%e) It is not rare beca$se almost all companies "a%e an R&D
'epartment)
E4clusive contract &ith su))lier% ) Excl$si%e contracts +it" s$ppliers li*e
oxconn allo+s Micromax to enjoy %ol$me 'isco$nt on its import o# ?nis"e'
goo's +"ic" res$lts in consi'erable cost re'$ction) T"e contract also enablesMicromax to t"e get t"e a'%antage #a%o$rable cre'it policies +it" t"e s$pplier)
T"is reso$rce "as "elpe' micromax to re'$ce t"e selling price an' pass on t"e
a'%antage to t"e b$yer) It is valuale to t"e company as it 'ri%es en' sales)
=o+e%er, it is not in imitable as company can r$n o$t o# contracts anytime or
competitors can get into contracts +it" s$ppliers t"emsel%es) T"e reso$rce is
non.s$bstit$table
Asset Light Business *o9el% T"e online retail penetration "as "elpe'
Micromax to set $p an asset lig"t b$siness mo'el in its %al$e c"ain) T"is "as
"elpe' t"e company to re'$ce spen'ing excessi%ely on capital expen'it$re li*e
pro'$ction #acilities an' store o$tlets) T"is sa%ing in in%estment co$l' be $se' in
ot"er acti%ities li*e R&D an' bran'ing) T"e pro?ts realiGe' co$l' be rig"t a+ay
$tiliGe' in mar*eting t"e pro'$cts, t"$s expe'iting t"e %al$e c"ain process)T"is
ma*es it a %al$able reso$rce to t"e ?rm) ;$t it is neit"er rare or in.imitable
E4clusive stores !e4)erience >ones$% Micromax "as /01 experience Gones
sprea' across t"e co$ntry) =ere c$stomer can get t"e loo* & #eel o# t"e 'e%ices)
T"ese centers +ill pro%i'e c$stomers +it" $ni$e pro'$ct experience, somet"ing
t"ey miss +"en b$ying #rom online retail c"annels) T"is en"ances bran' i'entity
an' cre'ibility o# t"e company) It establis"es long term c$stomer relations"ips &
sa%es cost o# ac$iring ne+ c$stomers +"ic" is more t"an retaining t"em)=o+e%er t"is is not t"e only mar*eting c"annel, "ence it is s$bstit$table
8/19/2019 How Micromax Rose to Prominence
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Service un9ling% Micromax is also b$n'ling its pro'$cts +it" telecom ser%ice
pro%i'ers li*e Aircel #ollo+ing in t"e #ootsteps o# ot"er players in t"e in'$stry)
T"is gi%es t"em "ig"er penetration in t"e In'ian mar*et) It also "elps t"e
company to loc* in c$stomers #or /.7 years) T"is is in imitable in t"e s"ort r$n as
it ta*es co$ple o# years to get into contract +it" telecom companies)
E4clusive "nline Selling% Online only 'istrib$tion mo'el, Micromax la$nc"e'
its $re*a bran' o# smartp"ones t"ro$g" a s$bsi'iary) 70111 'e%ices +ere sol' in
secon's o%er t+o as" sales in AmaGon) T"$s Micromax, t"ro$g" its *no+le'ge
o# t"e In'ian mar*et an' its cons$mers, +as able to le%erage bot" t"e oine an'
online c"annel o# 'istrib$tion to increase its sales an' mar*et s"are o%er t"e
years)
Ater Sales Service% Micromax, li*e its competitors, "a%e ma'e "$ge
in%estments in a#ter.sales ser%ice an' "a%e opene' more t"an :51 ser%ice
centers in 'i(erent parts o# t"e co$ntry) Micromax "a%e recently establis"e' a
ser%ice #actory in e+ Del"i +"ic" pro%i'e a compre"ensi%e range o# ser%ices,
incl$'ing c"ipset an' PC; replacement ser%ice) $ic* t$rnaro$n' time in
ser%icing "as been a *ey 'i(erentiating #actor Micromax +it" respect to its
competitors li*e Intex, La%a, 8arbonn etc) T"is reso$rce is %al$able as it pre%ents
c$stomers to s+itc" bran's) Also a#ter sales ser%ice cannot be replace') It is a
part o# c$stomer retention strategy)
Competitor 'ynamics
Com)etitor Analsis
All major companies in t"e in'$stry "a%e t"e same common reso$rces an' t"e
same set o# s$ppliers) T"e "ar'+are an' t"e c"ipsets $se' in t"e p"ones are
almost similar) T"e primary reso$rces $se' in t"e smartp"ones are CPJ, C"ipset,
8/19/2019 How Micromax Rose to Prominence
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*otivation-
rom a strategic point o# %ie+, t"ere is no better mar*et #or mobile p"ones t"an
In'ia) T"e "$ge potential mar*et +it" 3/7 million potential $sers by 71/9 is
"ar'ly #o$g"t by all competitors) Mobile p"one companies are li*ely to in%est Rs
201 crore by Marc" an' pro'$ction o# "an'sets in %al$e terms is expecte' tocross Rs H1,111 crore by t"e en' o# c$rrent ?scal) T"is j$st 'escribes t"e sta*es
p$t by t"e in'$stry on In'ia.
Ca)ailit
C$rrently all t"e major competitors "a%e t"e reso$rce an' talent capability to
compete in t"e mar*et) ot a great le%el o# expertise in nee'e' by t"e
companies beca$se t"e majority o# pro'$ction is o$tso$rce' to C"inese an'
Tai+anese man$#act$rer) ;$t t"e economic bac*ing by t"e in%estors an' parent
companies is s$bstantially large) Micromax got N /)7 'ollars in%estment #rom
Alibaba, Biaomi a C"inese competitorK is %al$e' at N 01 billion an' it is in%esting"ea%ily on In'ia) Intex mobiles also in%este' /111 crore r$pees in b$il'ing plants
in Rajast"an)
Current Business *o9el
Inbo$n'O$tbo$n'
Logistics Excl$si%eContracts
Lo+ Costs
Man$#act$ring in
C"inaLo+ Price
Lo+
T$rno%er
time Mar*et
S"areloo' mar*et
+it" p"ones
;ran' propagation $sing
;ran' Ambassa'or an' Asia
C$pAggressi%e mar*eting an'
A'%ertising Strategy
Targeting nic"e
segments s$c" as r$ral
an' #emale
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?uture Business *o9el
"TC"*E
T"e o$tcome o# s$c" intense ri%alry "as been intense price +ars) T"is "as le' to
+a#er t"in margins in t"e in'$stry) Almost all t"e companies are s$(ering '$e to
t"is *in' o# lo+ margin operation) Micromax net pro?t +as j$st 2)/ > in t"e year
71/:./H, +"ile La%a an' 8arbonn "a' a pro?t margin o# 0)2 > an' 9)/ >
respecti%ely) So any 'ip in prices or increase in costs can "$rt t"ese companies
?nancially) T"e mobile companies are le%eraging t"e 'eep poc*ets o# t"e
in%estors to gain maxim$m possible mar*et s"are, "o+e%er se%erely losing o$t
on pro?ts)
Inbo$n'
O$tbo$n'
LogisticsLo+ Price
Lo+ Cost
In =o$se
Man$#act$ring
R & DMar*eting an'
;ran'ing
Mar*et S"are
Pro?t
!TP
Price