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Road ahead for domestic mobile handset manufacturers

Group 5
Aishwarya S Aravind Ganesan Bhavesh Vijay Dharmendar S K Divya Rajesh Kumar Rohit Arya
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New domestic handset manufacturers have grown Exceptionally in the last 5 years

Market share in 2004-2005


Nokia LG Sony Ericsson Motorola Samsung others Nokia LG

Market share in 2010-2011


Samsung GFive Sony Ericsson 3% 3% 3% 5% 4% 7% 45% 2% Micromax Karbonn RIM Spice

Maxx Mobiles

11% 11% 9% 4% 3% 62%

8% 20%

Current Domestic handset manufacturers have grown at 15 Times the rate at which the market has grown Period 2008-2011 Domestic players 160.3% International players 10.79%
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Source: Group5, Section:E Intellectual property and News articles

growth in disposal income for products and services of glocal market provides immense potential for products targeting this segment of customers
Disposable income for products and services using four tiered structure of markets
Bottom (<90K) Local (90K-2Lacs) Glocal (2-10 Lacs) Global (>10lacs)

2005

2015

2025

Source: Group5, Section:E Intellectual property and Mckinsey report on growth in Indian middle class

With increase in glocal market, domestic manufacturers should start producing more products which are near world class but at lower price than international brands
Global
World class quality and features % of domestic players models2.82%

Global

Glocal

Near world class quality and features Price 7-15k % of domestic players models13.2%

Local

Local quality at local prices Price 2-7k % of domestic players models-60.4%

Glocal

Bottom

People who can afford only the least expensive products Price <2k % of domestic players models68.13%
Source: Group5, Section:E Intellectual property and www.compareindia.in.com

Local

Bottom

2011

2025

Institutional Voids

Political Environment
Differential VAT structure Delay in 2G rollout due to scam Budget implications

Economic Environment
Deep pocket of foreign players Increase in disposable income Fluctuation of exchange rates

Social Environment
Perception of low quality Increased demand for Internet on the go Mobiles gradually becoming style statement

Technological Environment
Inclination towards Smartphone Category Gradual shift towards 3G High product and Features variety
Source:Group5, Section:E Intellectual property

Domestic Players can further leverage their local market Knowledge and skills to increase penetration

Economic
Foreign Investments Sourcing from China at $16

Social
Village First Strategy Innovative marketing strategy Provided cheap platform for social networking Collaboration with youth centric brands

Political
1% Excise duty retained Tax exemption on R&D expenditure increased by 33% Easy Credit policy due to the status of infrastructure industry

Technological
Low cost product innovation Flexibility towards technology Phone with built in projector by Spice

Leveraging Institutional voids


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Source:Group5, Section:E Intellectual property

Cost leadership is the strategy that will work under current market conditions
18000 16000 14000 12000 10000 8000 6000 4000 2000 0 -2000 0

Price

present

Opportunity region
8 10

4 Features

Size of bubble is representative of number of models in that price range


Source: Group5, Section:E Intellectual property and www.univercell.in

Rivalry is moderate, need to stock latest handset to meet end user Demand, high penetration in rural India increases Competition and network operators diversifying put pressure on manufactures But still supplier power is low because of large size of manufacturers

Intensity of competition
Weak Strong

Scores: 1=Weak driver . 5=Strong driver

Degree of rivalry

Buyer power 4 3 2 1 0

Supplier power

Substitutes

New Entrants

Source :Group5, Section:E Intellectual property and Global top 10 mobile phone companies

Conclusion

Market has grown at an excess of 10% in the last 8 years and expected to continue
Major growth drivers are rural markets and replacement handset sales Products which have features comparable to high end mobiles at lower cost will be the strategy that domestic handset manufacturers have to implement Market dynamics provide opportunity for domestic players to leverage institutional voids Market is still attractive for new entrants Product and factor market provide evidence of opportunity in local and glocal segments

Domestic handset manufacturers need to develop high end mobiles at lower cost to capture majority market share from current market leaders

Source: Group5, Section:E Intellectual property

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Thank you

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