Group 7B

Bhagwati Products SBR2 Sachin Someshwar Tarun Sonthalia

Limited Yash Ganeriwala Pham Nguyen Hong Nguyen
Question 1: Conduct a Porter Five Force Analysis of Micromax. What can we learn from it
in relation to yesterdays assignment and question 3 today
- A Porter Five Force Analysis of Micromax
Threats of new entrants: threats of new entrants: Low
Although the government has created a very favourable climate for foreign
direct investment (FDI) by allowing up to 100% FDI in the electronics
hardware manufacturing sector, new entrants have to bear very high
capital requirement costs as well as high technological investment cost
such as huge manufacturing costs, R&D costs and development costs are
necessary in order to attain economies of scale.
it is very difficult for new entratnts to enter this market with existing
firms.
Micromax has launched new models every month, giving stiff competition
to existing players as well as new entrants in the Indian market
Barriers like patents make it very difficult for new competitors
Customers are very loyal to existing brands
All leading companies are intensely competing with each other for market
share, therefore there will be heavy retaliation towards any new entry
Bargaining power of supplier: High
Micromax overly relies on key suppliers of required raw materials and open
sourcing. This can be illustrated by the fact that Micromax procured mobile
handsets from China and Taiwan containing many features that were being
offered for the first time in Indian market and the problem continues because
China was always bulk shipments. Moreover, the procurement of electronic parts
from China was very erratic and rarely matched up with the production cycle.
Threats of substitutes: low
Threats of substitutes are very low thanks to multifunctionality of smartphone.
Newly developed applications in the mobile phone industry have provided
consumers with novel experiences in their day to day lives and increased business
opportunities. Mobile solutions were helping rural communities overcome various

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 socio-economic challenges and when mobile devices are increasingly affordable.
Moreover, there are a lot of key drivers for enhanced mobile phone growth such
as very low mobile cellular prepaid tariffs
Smartphones do wide variety of functions so any products that specializes in
one of those individual functions can be termed as a substitute. There are some
substitutes like PDAs, IPAD, Netbooks or Laptops if the buyer concentrates on
one of the functions, such as digital camera can take better photos compared to
smart phones or laptops can surf the web better compared to smart phones.
However, smartphones are multi-functional, meaning that customers can do all
their stuffs with smartphones, therefore their threats of substitute are low
Bargaining power of buyers: Medium
Wide variety of phones, major brands and higher prices for latest phones
With many competitors offering similar packages, customers in this
industry are very price-sensitive and customers seek the best value for
money products
Quite low switching costs make it easy for customers to change products
they normally use
Demand for products in this industry is very sensitive based on the
economic growth, meaning that buyers can delay buying new models and
wait for prices coming down
Buyers have higher bargaining power and higher demands for extra
features
Intensity of existing rivalry: high
Major brands such as Samsung, Nokia Microsoft, Lava, Karbonn,
Xiaomi, Motorola and Sony dominate the market so it is hard for
competitors to compete and gain economies of scale and market share
Although there is not much differences in terms of their products,
companies still try to differentiate their products (applications and services
)
- What we learn from it
- Michale Porters Five Forces is a model used to explore the environment where a
company operates to create competitive edge. Thanks to opportunities, threats in the
companys external environment as well as understanding of industry structures,

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 company can give out competitive strategies and then management can decide how to
influence or to exploit particular characteristics of their industry.
Question 2: What generic strategy would you suggest Micromax to take? How should they
go about it?

Question 3: Should BPL/Micromax look for investment opportunities in new business

areas, such as air conditioners and microwave ovens to exploit its existing competencies or
should it more focus on penetrating overseas markets?
The fact is that product portfolio of Micromax was limited, and moreover, within that portfolio,
the mobile phone segment had seen an growth in the number of competitors, and then
Micromaxs market share had decreased Micromax should have new corporate strategy:
- Micromax should both penetrate overseas market and diversify into the white goods
segment where established players such as Samsung, LG, Videocon and Panasonic were
already there
- If Micromax aggressively diversify into the consumer durables segmeny, manufacturing
refrigerators, air conditioners, washing machines, they can optimally use the existing
production facilities, exploit present competencies and take advantage of the growing
market for these goods in developing countries. Another reason for aggressive
diversification is there is a growing market for these goods in developing countries where
disposable incomes were growing
- Besides, Micromax also need to use the additional production capacity to manufacture
the existing product mix of mobile phones, tablets and LED TCs and become an exporter
of this product mix to some neighbouring countries like Sri Lanka, Thailan, Philipines
and the Maldives or even the Middle East, Russia and Africa. In fact, Micromax was
already exporting to SAARC countries, giving Micromax solid foundation to build
demand already existed in many foreign markets.

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