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Micromax vs The Chinese Incursion

CASE STUDY, MARKETING MANAGEMENT
Institute of Management Technology, Ghaziabad, 10 Pages
AUTHOR(S) : Gunjan Malhotra, Assistant Professor and Aniruddha Saladi, PGDM Student (batch 2017-19), Institute of Management Technology, Ghaziabad

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Micromax vs The Chinese Incursion

On August 22nd 2017, Micromax Informatics Ltd., the Indian mobile handset company declared they will be aiming to regain their volume leadership by winning 10% market share over the coming months.1 According to Rahul Sharma co-founder of Micromax, they plan to achieve it by strengthening their position in INR9,000 to INR15,000 category. He said that they would focus on what Micromax is known for – ‘Innovation at the right price’.2 Established in 2000, Micromax entered the mobile phones market in 2008 with an innovative business model. It catered to the budget phones segment of the market with their price efficient phones and even introduced features that made their product stand out – like Micromax Hue, a phone which offered 30 days of usage (battery backup) on a single charge.3 In 2014, it took Samsung’s place as the market leader but, lost their market share to Chinese brands beginning from 2015, when Oppo, Vivo, etc., entered India. Micromax planned to regain their footing in the Indian mobile handset market by the end of 2017. What was the innovation and the business plan that helped Micromax to succeed? How did the Chinese brands defeat Micromax? What could Micromax do to regain its glory? What were its plans to stay afloat in the ever-growing Indian mobile handset market?

INDIAN MOBILE HANDSET MARKET

The Indian wireless telecom sector has grown tremendously from 635 million to 1186 million users in 2017 (Exhibit I). And in conjunction with this growth, there has also been the emergence of many mobile handset manufacturing companies. Out of those companies, Micromax has experienced the largest variation in its market share, from once beating out Samsung down to 20% market share in 2014 to losing its market to Chinese manufacturers........

MICROMAX AND ITS RISE

Micromax Informatics was founded by a team of four – Rahul Sharma, Vikas Jain, Sumeet Arora, and Rajesh Agarwal. The enterprise was run for a while by Sanjay Kapoor, former CEO of Bharti Airtel’s Indian operations who left the firm in 2015. Vineet Taneja, former country head for IT and mobile businesses at Samsung’s India unit also headed Micromax till 2016. With these visionary leaders at the helm, Micromax grew rapidly...........

Market Strategy

Micromax’s strategy was to deliver ‘Indian’ flavor along with the best of mobile phone technology to the average Indian customer. Rahul Sharma, the co-founder, chanced upon the ‘pain point’ of the lack of communication facilities in villages across the country, which gave him the idea to deliver the right value at the right price........

Research & Development

In 2010, Sequoia Capital provided $43 Million to Micromax and TA Associates funded them with $45 Million. These funds were mostly used for Research and Development (R&D), which resulted in unique offerings like the phone which claimed a whole month of battery life.............

Affordability

India doesn’t have a huge market for high-end phones. As of 2018, the majority of the market still buys feature phones (in India, feature phones still account for about 80% of all handset sales) although mid-range phone market was expanding exponentially........

ENTRY AND RISE OF CHINESE PLAYERS

India is the world’s 2nd largest smartphone producer after China, with a 3.6 time increase in the annual production of mobile phones, amounting to 11 million in 2017 (Exhibit III(A) and III(B)). This rapid growth saw the emergence of a lot of local brands spearheaded by Micromax. These companies started eating into the market shares of global giants such as Samsung, Motorola and Nokia mainly due to the competitive price of their product offerings (refer Exhibit II)..............

Competition

Micromax’ major competitors were the Chinese brands like Xiaomi, Gionee, Oppo and Vivo which operated in an overlapping price range. Motorola, now taken over by Lenovo, had emerged as a major game changer..........

Roadblocks to Sustained Growth

The company was started in 2000 and it started selling phones in 2008. In 2015, when the company was quickly gaining ground and was all set to beat Samsung to become the industry leader, the founders hired managers from outside, which caused a dissonance between the existing leadership and the new hires.........

Chinese Players in the Indian Economy

In 2015, around 15 Chinese companies entered the Indian mobile phone market. In 2016, they had 15% of the market but by the 1st quarter of 2017, they had started edging out both domestic vendors and established vendors like Samsung and even the likes of Apple to win over 51% of the Indian market (Exhibit IV).............

MICROMAX FIGHTS BACK

Micromax made a strong attempt to gain back its position at the top of the rankings by launching a new campaign called ‘Nuts, Guts & Glory’ in 2016. This 3.0 version of the original campaign wasn’t exactly a roaring success. The campaign was launched in 2016, around the same time Micromax launched 15 new smartphone models (including 2 variants of its super successful canvas series, Evok series of budget smartphones and Bharat series of entry-level phones), along with LED TVs, two Tabs and a new logo............

DECISION DILEMMA

Micromax’s CEO, Rahul Sharma, stated in an interview that they plan to hit both the premium and budget segments strongly in 2017. There were manufacturers like Samsung, Oppo, Vivo, etc., who’ve already established themselves in these segments and competing with them might be a difficult job for Micromax in 2018............

Assignment Questions

I. Analyze the factors responsible for the rise of Micromax in the Indian handset market that led it to beat Samsung as the market leader. What are the specific strategies followed by Micromax in the process?

II.............

Exhibits

Exhibit I: Growth in the Total Telecom Subscribers in India (in million)

Exhibit II:Market Shares of Mobile Phone Manufacturers, India 2014

Exhibit III(A): Micromax Market Share (from 2009 to 2016)

Exhibit III(B): Micromax Smartphone Market Share

Exhibit IV: Growing Market Share of Chinese Mobile Handset Companies in India

Teaching Note Preview

Micromax vs The Chinese Incursion

Synopsis

Micromax entered the smartphone market in India in 2008 and by 2013 became the market leader, defeating Samsung. Its point of differentiation was the cheaper manufacturing costs owing to the production process being outsourced to China, which in turn allowed it to price its products lower than the other companies in India. It also catered to the budget buyers segment of the market, who make up the majority of the mobile users in India. But from 2015, it had steadily lost its market share to the same Chinese companies who entered the Indian market with their own mobile brands, namely Oppo, Vivo and Xiaomi. They now own above 51% of the mobile phones market in India and Micromax has had to become a market follower from being a market leader.

Micromax now plans to stay afloat by expanding into other sectors like the TV market, into the service sector, and focusing on growing in countries like Russia where they’re already one of the market leaders. Micromax’ CEO Rahul Sharma in a recent interview stated that they plan to hit both budget and premium sectors this year and have a concrete plan for succeeding..............

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Abstract

Micromax entered the smartphone market in India in 2008 and by 2013 became the market leader, defeating Samsung. Its point of differentiation was the cheaper manufacturing costs owing to the production process being outsourced to China, which in turn allowed it to price its products lower than the other companies in India. It also catered to the budget buyers segment of the market, who make up the majority of the mobile users in India. But from 2015, it had steadily lost its market share to the same Chinese companies who entered the Indian market with their own mobile brands, namely Oppo, Vivo and Xiaomi. The Chinese companies now own above 51% of the mobile phones market in India and Micromax has had to become a market follower from being a market leader. What was the innovation and the business plan that helped Micromax to succeed? How did the Chinese brands defeat Micromax? What could Micromax do to regain its glory? What are their plans to stay afloat in the ever-growing Indian mobile handset market?

Pedagogical Objectives

The case will help students to:

  • Understand the various strategies Micromax has used in the past and what it had planned for the future
  • Assess the change in the consumer behaviour with respect to the increasing telecom market
  • Apply various frameworks to assess the companies in the market
  • Make recommendations as to the different strategies Micromax can implement

Case Positioning and Setting

The case is suitable for use in MBA and executive MBA courses on Marketing Management and general management. It analyses the issues faced by Micromax during its comeback with innovation in Indian mobile handset markets. The case is intended as an opportunity for students to understand the concept of product differentiation; market challenger or leader or follower; segmentation, targeting and positioning strategies; increasing trends in foreign investment and how they affect the existing businesses.



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