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Micromax: Preparing for the Chinese Invasion*

CASE STUDY, STRATEGY
ET Cases - GSMC, 15 Pages
AUTHOR(S) : Ranbir Singh Sodhi, Research Scholar, IIM, Raipur and Faculty, GIM, Goa, Dr. Vinita Sahay, Professor, IIM Raipur and Dr. Sanjeev Prashar, IIM Raipur

Case Preview

Micromax: Preparing for the Chinese Invasion

 

Founded in 1991 by Rajesh Agarwal (Rajesh), Micromax Informatics Limited (Micromax) got into handsets business only in 2008 based on suggestions from Rahul Sharma (Rahul). Rahul had joined Micromax along with two other friends and classmates, Sumeet Arora (Sumeet) and Vikas Jain (Vikas) in 1999 (as equal partners of Rajesh). Rahul had convinced his friends to get into the mobile handsets business. They had set an undated ambitious target that someday they would have a turnover of INR10 billion. They learnt early on that if they understood customers’ needs and offered what customers wanted at prices that were affordable, the customers would buy Micromax mobile phones. This philosophy had made them number one in tablets, number two in the smartphone market and number three in the overall handset category. While they had set their sights at dethroning Samsung (the Number one player) in India, the Chinese companies like Xiaomi, Huawei and Gionee had started looking at the Indian market for growth. The flash sales of Xiaomi in India have been fairly successful. Rahul was wondering what Micromax would have to do to fight the
Chinese invasion.

Introduction to Micromax

In 1991, Rajesh founded Micromax Informatics as a distributor of computer hardware. The company sold software, telecom services and computer hardware to organizations even a decade after being joined by his three friends. In 2008, they diversified into mobile handsets and they have not looked back since then. According to Counterpoint Research’s Q3 2013 Market Monitor, Micromax is the tenth largest handset supplier globally (Exhibit I)...........

Strategic Initiatives at Micromax

To help itself to scale up fast, Micromax concentrates on its core strengths – product development, design, marketing and branding. Micromax has been busy changing the rules of the game – be it in product designs or the pricing or use of cricket for branding. They virtually have a mobile at every INR100 interval...........

Product

Offering innovative products at the right price has been the essence of Micromax strategy, though it had been helped by several other factors. Micromax focused on understanding customers’ unmet needs and requirements and getting the innovative solutions manufactured at China. The task of product engineering is to find solutions for local needs at ‘value for money’ prices.

It’s a common observation that mobiles have to be recharged often. In India, many villages and towns have a very erratic electricity supply system. This insight made Micromax launch its first phone, X1i with a thirty-day battery life and priced at INR2,150, which was readily accepted in rural India............

Going to Market

Being new entrants, Micromax knew that not only would it have lower brand awareness among customers, but also lower bargaining power with the distributors and intermediaries. The industry trend was that the phone manufacturers paid low commissions to channel partners, a major cause for heart burn. According to Agarwal, Nokia gave 2 per cent of which about 1 per cent would be passed on to customers as discounts. This caused dissatisfaction to trade partners..............

Customer Service

To strengthen its after sales, Micromax invested in CRM. By automation it reduced the response time to two days (from seven days), though it targeted solving 80 per cent of the complaints the same day itself. It increased spare parts inventory instead of the previous JIT ordering system and increased the number of service centres from 436 in March 2013 to 745 in November and targeted 1250 by March 2014...........

Promotion (Communication & Branding)

Early on, Micromax decided to work on its weaknesses and strengthen its brand. Though it was considered as a maker of cheap handsets, the reality was that it did not have any model in the sub $30 range. In fact, Nokia had 80 per cent of this segment. Micromax planned to put in INR1000 million over two-year marketing spend. Its advertising agency Lowe Lintas came out with a new tagline – “Boring is out”. It roped in Akshay Kumar (Hindi movie superstar) as its brand ambassador...............

Pricing

The pricing strategy of Micromax is to offer good value to its customers in comparison with premium products of global brands. For example, if a handset of a MNC brand with an 8MP camera and super Amoled screen was priced around INR35,000 or more, Micromax offered its A90 at INR13,000. “If someone has this device, the other guy who has that expensive one wonders why am I paying so much,” says the Micromax Chief............

Indian Market

By 2010, the Indian cell phone industry was worth INR270 billion. About 80 million of the 100-120 million handsets that were sold annually were imported. By just focusing on handsets with special features, Micromax market share went up from 0.6 per cent to about 5 per cent (International Data Corporation or IDC) in a short span of two years. What also helped Micromax was its pricing strategy in addition to its integrated communication and distribution strategies. The bonus was, the straying and decline of Nokia...............

The Chinese Onslaught

The first wave saw Indian handset manufacturers using Chinese facilities to expand the smartphone market and eat share of the global players. The current wave has the Chinese companies entering the lucrative Indian market. In 2013, Indian smartphone market grew by 2.5 times over 2012. A Canalys report estimated the annual Indian smartphone market sales to be 35-40 million and growing at 129 percent while the Chinese market was nine to ten times larger at 360 million and growing at 108 percent............

Xiaomi

Xiaomi launched its first smartphone in August 2011 and in two years’ time; the Q2 2013 figures (Canalys report) show that with a market share of 5 per cent it has beaten Apple (4.8 per cent). Most of their phones look like Apples but are priced almost half. Xiaomi sold only online. It also had an interesting game plan. Based on the analysis of customer feedback, the company launchs a batch (100,000 units) of smartphones at noon (Beijing time) every Tuesday..............

Obi Mobiles

Obi Mobiles promoted by John Scully (Ex-CEO of Apple) was launched in India by Ajay Sharma a veteran who’s worked with HTC and Micromax. The handsets were manufactured and sourced from China. Obi launched Octopus S520 for INR11,990 and another five handsets priced in the INR4000 to INR8,000 range.............

Huawei

The world’s third-ranked smartphone player, Huawei has been there in the Indian market albeit a low market share of 1 to 2 per cent. To improve its image and to get a higher recall31, they partnered with IPL team, Royal Challengers Bangalore, as its main sponsor. This gave them exposure through team jerseys and other in-stadia media...............

Gionee

Gionee entered India in 2013 and is counting on maximising its value chain efficiency. This includes its critical R&D, manufacturing, and trained in-shop promoters of 3,500 multi-brand shops. While Gionee acknowledges the importance of pricing the product right, it preferred to differentiate their product on the hardware (simply better machines) and not the software add-ons.............

Exhibits

Exhibit I: Micromax – Revenues

Exhibit II: Micromax’s Product Portfolio

Exhibit III: The 100 Million Club: The Top 14 Mobile Markets by Number of Subscriptions

Exhibit IV: Mobile Phones Shipments

Exhibit V: Margins

Exhibit VI: World’s Top 5 Smartphone Vendors in Sales Units (in millions)

Exhibit VII: India’s Mobile Handset Market (Q1,2012)

Exhibit VIII: Micromax vs Xiaomi

Teaching Note Preview

Micromax: Preparing for the Chinese Invasion

 

Synopsis

This case focuses on the marketing strategies of Micromax Informatics Limited (Micromax). Micromax was founded in 1991 as a distributor of computer hardware by Rajesh Agarwal. In 1999, he was joined by three of his friends and based on a persuasive suggestion of one of them (Rahul Sharma), got into the mobile handset business in 2008. This was based on an observation that even the most popular brands of handsets launched by global players did not fully satisfy the local needs. Micromax was good in spotting opportunities based on identification of their potential customer’s unmet needs. Despite not having a manufacturing facility then or a large research and development setup, they have introduced various innovative solutions in the market. The handsets were manufactured in China. The small R&D team had its focus on product engineering and design. They first focused on the rural markets and then proceeded to the urban markets. They have been innovative in the handling of channels and also in their communication and brand building efforts. They used celebrities and sports (cricket) to help in building their brand. They are very strong believers in the value for money proposition. Keeping their ambitions and realizing their strengths they also launched their products abroad. Micromax is currently number one in tablets, Number two in the smartphone market and number three in the overall handset category in India. However, with the launch of Chinese mobile  phones in India, the stage was set for Chinese companies’ growth in India.

The case provides students with an opportunity to understand how entrepreneurial marketing orientation helps organizations scale up and how organizations with good consumer insights and marketing strategies can become major players in the market and achieve their growth dreams.

Teaching Objective

The objective of this case is to elucidate the importance of integrated marketing strategy. This case can be used to:

  • • Discuss how consumer insights can help an organization to come out with innovations that can help differentiate your product
  • • Illustrate how a small new entrant (Micromax) with an entrepreneurial spirit of seeking opportunities can help it grow from INR6.5 billion (USD128 Million) revenues in 2008-2009 to estimated INR75 billion (USD1.25 billion) by 2013-2014
  • • Demonstrate that, even if an organization is not the first-mover in a technology oriented industry, it can still become a dominant player in the market
  • • Highlight some of the marketing mix decisions taken by Micromax which helped them become one amongst the top two players in the Indian mobile handset and tablet market.

 

Case Positioning and Setting

The case is beneficial for discussions among students pursuing a postgraduate degree in management and who are interested in Marketing, Entrepreneurial Marketing, International Business and International Marketing. The course where this case has high relevance is Marketing.

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Abstract

This case focuses on the marketing strategies of Micromax Informatics Limited (Micromax). Micromax was founded in 1991 as a distributor of computer hardware by Rajesh Agarwal. In 1999, he was joined by three of his friends and based on a persuasive suggestion of one of them (Rahul Sharma), got into the mobile handset business in 2008. This was based on an observation that even the most popular brands of handsets launched by global players did not fully satisfy the local needs. Micromax was good in spotting opportunities based on identification of their potential customer’s unmet needs. Despite not having a manufacturing facility then or a large research and development setup, they have introduced various innovative solutions in the market. The handsets were manufactured in China. The small R&D team had its focus on product engineering and design. They first focused on the rural markets and then proceeded to the urban markets. They have been innovative in the handling of channels and also in their communication and brand building efforts. They used celebrities and sports (cricket) to help in building their brand. They are very strong believers in the value for money proposition. Keeping their ambitions and realizing their strengths they also launched their products abroad. Micromax is currently number one in tablets, Number two in the smartphone market and number three in the overall handset category in India. However, with the launch of Chinese mobile phones in India, the stage was set for Chinese companies’ growth in India.

The case provides students with an opportunity to understand how entrepreneurial marketing orientation helps organizations scale up and how organizations with good consumer insights and marketing strategies can become major players in the market and achieve their growth dreams.



Pedagogical Objectives

The objective of this case is to elucidate the importance of integrated marketing strategy. This case can be used to:

  • Discuss how consumer insights can help an organization to come out with innovations that can help differentiate your product
  • Illustrate how a small new entrant (Micromax) with an entrepreneurial spirit of seeking opportunities can help it grow from INR 6.5 billion (USD 128 Million) revenues in 2008-09 to estimated INR 75 billion (USD1.25 billion) by 2013-14
  • Demonstrate that, even if an organization is not the first-mover in a technology oriented industry, it can still become a dominant player in the market.
  • Highlight some of the marketing mix decisions taken by Micromax which helped them become one amongst the top two players in the Indian mobile handset and tablet market

Case Positioning and Setting

The case is beneficial for discussions among students pursuing a postgraduate degree in management and who are interested in Marketing, Entrepreneurial Marketing, International Business and International Marketing. The course where this case has high relevance is Marketing.


* GSMC 2016, IIM Raipur

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- Abstract
- Case Study
- Teaching Note (**ONLY for Academicians)
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