THE STUDY ON MARKETING STRATEGY

OF

MICROMAX IN INDIA

A CASE STUDY

ARUN SHIVSHANKAR AGARWAL

201815685

POST GRADUATION DIPLOMA IN BUSINESS ADMINISTRATION

MARKETING

SCDL

2018

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 DECLARATION BY THE LEARNER

This is to declare that I have carried out this project work myself in part fulfilment of the Post
Graduate Diploma in Business Administration Program of SCDL. The work is original, has
not been copied from anywhere else and has not been submitted to any other
University/Institute for an award of any degree / diploma.

Date : 2nd October, 2020 Signature :

Place : Mumbai Name : Arun Shivshankar Agarwal

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 Table of Contents
Sr Chapter Page Number
1 Introduction 4
2 Objective & Scope 5
3 Theoretical Perspective 6
4 Methodology & Procedure of Work 7
5 Analysis of Data 15
6 Limitations 23
7 Findings, Inferences and Recommendations 24
8 Conclusion 33
9 Will it fight back ? 34
10 References 43

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INTRODUCTION

Micromax, a name that wasn’t probably heard a decade before, and had already given
goose bumps to big players like Nokia or Samsung. Mr. Agarwal might have had great
expectations when he started Micromax, in 1991, as a hardware distributor; but he had
no idea whatsoever that it would turn out to be mobile handset company threatening the
market-share of mobile handset giants.

The evolution of this hardware distribution company into a mobile handset company may
be destined but its success largely depends upon the strategy used to convert the threats
into opportunities.

The strategy to convert threats into opportunity and combining innovation with common
sense has reaped great dividends to this company.

However, the success was short-lived and Micromax could not sustain its leadership in the
Indian Markets, as they failed to keep upto the innovation and upgradation.

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OBJECTIVE & SCOPE

The mobile handset market in India is one of the fastest growing markets which have been
primarily dominated by multinationals like Nokia, Samsung etc. However, there is an
Indian player – Micromax Mobile in the horizons which has been rising fast and is posing
stiff challenge to the big players in the market.

This article we will be looking into the marketing strategies which have resulted in the
success story.

 We hereby intend to find out the success strategy of Micromax who is not only
facing competition with MNC’S but also from local brands
 Through this, case study discusses Micromax in relation with Michael Porter’s Five
force theory.
 Why parallel brands/competitors of Micromax like Karbonn, Lava and others
could not rise as fast as Micromax did ?
 We also want to draw out conclusion as to how a small player like Micromax can
seize a major amount of market share from big players like Nokia and Samsung.
 We intend to formulate the success of Micromax into a general success theory
applicable for smaller players.
 Finally, we would like to ascertain the reason for its failure and look at the reasons
for why it could not sustain its leadership position for long.
 Can Micromax, once again regain its lost position ?

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THEORETICAL PERSPECTIVE

It was in 2008 that four friends, Rajesh Agarwal, Sumeet Arora, Rahul Sharma and Vikas Jain,
came together and decided to diversify their IT
hardware distribution business and start making
mobile phones.

The move towards selling handsets was a natural

progression.

The team of friends saw that the MNC brands were

not selling phones that suited Indian consumers' requirements. This void had to be filled.

So in April 2008, they forayed into the handset market.

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METHODOLOGY & PROCEDURE OF WORK

Birth of the new Micromax.

Prior to the Mobile revolution in 2008, Micromax’s big break came in 1999, when Nokia signed
them up as an all-India distributor for machine-to-machine devices – essentially landlines,
Nokia-32, that were customized to run in a mobile network.

By 2004, it became the largest Nokia distributor worldwide for these products. But the same
year Nokia decided to exit this segment.

Micromax nearly faced extinction; but it decided to turn this threat into opportunity.

So far, they had been customizing a Nokia instrument. Now, they decided to build and sell the
whole thing themselves – that too, 40 percent cheaper than Nokia 32.

Airtel became its first client.

By 2007, business peaked and Micromax sales soured to 2,50,000 devices.

Then the mobile revolution took over.

Again, Micromax was surrounded by the threat of extinction.

But Micromax was smart enough to seize this threat and convert it again into an opportunity.

Within six months, it hopped onto the mobile bandwagon.

It realized that the mobile market was going to be big and only five big players like Nokia,
Samsung, LG, Sony and Motorola would not be able to address the wants of the entire market.

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Overcoming Porter’s Five Forces.

In 1979, Michael Porter brought a revolution in the strategy field by his signature essay “How
Competitive Forces Shape Strategy” in which he modeled an industry as being influenced by
five forces. The fig 1.1 summarises the study of Michael Porter.

We would use this model to study the forces acting upon Micromax during its entry in the mobile
handset industry in 2008.
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This opportunity was very well utilized by Micromax.

With the exit of low-cost dual/triple sim Chinese mobiles, there was a void created in the
Indian market.

Micromax and other Indian manufacturers came up to fill this void.

Micromax was one of the many challenger brands that hopped the mobile bandwagon.

Whereas all the other Indian competitors were concentrating either on a “me too” or “keeping it
real fake” strategy or playing the price game, Micromax went about the business differently.

It stressed on product innovation for the low end price conscious user.

It broke the concept of “innovation comes at a price”.

Micromax knew that competing on price along with the big market giants like Nokia, Samsung
or LG would not get them anywhere.

It wanted to create and own its own categories.

So Micromax went rural.

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Innovation was the key to Micromax’s success.

Realizing that most Indian villages and towns do not get enough electricity to even recharge a
phone daily, Micromax increased the size of the battery and was able to tout a standby time of
30 days for its first handset X1i.

This model, which was priced at an affordable price of Rs.2150, was a big success in rural India.
The unexpected success of X1i gave birth to the strategy of Micromax.

It then built itself on the strategy of identifying its target segment and customizing the product
around them. With this strategy, Micromax has churned out blockbuster models with uncanny
precision.

All of them carry two differentiators:

an affordable price and a set of features

targeted at a particular segment.

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The greatest challenge for Micromax was to create a brand in the cluttered environment. Where
others were engaged in the price war, Micromax engaged itself in the innovation and
differentiation strategy.

Its strategies were built on idea-led differentiation, offering customers something that will
resolve human conflicts.

Its ultimate assignment was to serve the customer’s real desire and to communicate their
stability. Its goal was to own the market and not just sell their product. It has managed to expand
as well as narrow the market.

In other words, Micromax managed to do both in efforts to create and own a market.

Since its inception Micromax has been practicing a disciplined strategic creativity. Micromax’s
breakthrough idea proposition wasn’t dual sim mobile phone but to launch the product in
northern (Tier-1 and Tier-2) market.

The inevitable move would have been launching the same in the urban market.

It is not only the product innovation that paid off, but also the strategic positioning of the product
in the market that gave Micromax the strategic breakthrough.

It could have flooded the market with its unique value-added mobile phones but it has practiced
strategic patience. Now, it has started exhibiting its comprehensive product pipeline.

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Interestingly, Micromax’s strategic initiatives are comprehensive in nature. It would have
launched its marketing campaign with a celebrity, but it waited for the right time to accentuate
its strategic thrust.

It is ruthlessly following the thumb rule of strategic discipline clear about what not to do. Its
strategies as well as tactics demonstrate that marketing warfare is a game of strategic choices.
It has mastered when to pull the trigger on and when to pull it back.

Amidst tough competition, one aspect that needs attention is how Micromax grew so fast in such
a short time. It was not a cake walk.

Although Micromax ventured into the handset market in 2008, it already had a B2B business in
place, which gave them an automatic exposure to the market truths and psychology of the
consumers.

This helped them understand what the market would desire in their handset. The ability to see
what the customer needs and to swing their supply chain gives Micromax the edge over its local
competitors.

At Micromax, the idea was to fulfill the unfulfilled by harnessing already available technologies
and a little common sense. Developing an edge on the distribution front was also what the top
honchos at Micromax worked on to succeed in India.

The prime reason for this was to reach out to the non-connected rural and smaller locations,
which were still untouched by rivals.

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The company also paid great attention to keep their channel partners pleased, up and running.

With the system in place, it was not long when the company entered the urban market through
phones like the Q2, which marked the entry of Micromax into the QWERTY category.

With an attractive price tag of just Rs. 4000, it became a runaway hit. By changing the rules of
the game, Micromax developed a short term sustainable competitive advantage.

If innovation and the speed to market were the only two criteria ruling the industry, one doesn’t
need to look far of who has a high probability to take over the lead in the near future.

Micromax neither had the brand awareness of a Nokia that would lead to customers asking
for its phones from retailers, nor the clout to force massive volumes through distributors. Yet it
also saw that commissions given by phone manufacturers to their channel partners were often
very low (approximately 2%), leading to a lot of dissatisfaction.

This is what they decided to capitalise on.

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So Micromax decided to give a 5 percent commission to each of its distribution chain partners—

the 34 “super-distributors”,

the 450 distributors and

the 55,000 retailers.

But there was a catch — it would not offer any credit.

Instead distributors are expected to complete an online bank transfer to Micromax before getting
any of its phones to sell further on. As a result, they were not plagued with dead inventory,
periodic schemes or issues around “price protection”.

The retailer only picked up what he saw demand for. And because their money was involved,
partners tended to work harder.

But having a lean, cash-based supply chain means Micromax had to be much more accurate and
faster in its forecasting as compared to its bigger competitors.

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ANALYSIS OF DATA

Micromax Realized What MNC Mobile Brands Couldn’t .

Micromax Mobile needs no introduction today. In a very small span of time, it went on to
become India’s third largest selling company by volume after Nokia and Samsung (IDC Report).

Brand’s success can be attributed to its ability to understand the need of the market, aggressive
marketing with a budget of Rs.100 crore and smart distribution channel management.

As per IDC report Micromax displaced LG to become third largest selling mobile handset
company in India with a market share of 6%.

Nokia was market leader with 62% share and Samsung on second place with 8% market share.
The company sold more than a million handsets a month to become a Rs.1600 cr worth brand.

The company has presence in more than 500 districts and 90,000 retail outlets. The company
started its Mobile handset business in 2008 and the challenge was to establish an identity in a
market dominated by big MNCs Like Nokia, Samsung, LG and Motorola.

The company realized the fact that there are certain unmet needs still there in the market which
is not being addressed by big brands. Micromax’s strategy, since their inception has been to
identify the unmet latent needs of people and come up with a product which no one else has and
thus fits well with the consumer need.

It didn’t bank on price competition only rather it catered to the needs of people unaddressed by
MNC brands.

Micromax initially targeted rural market and once it established its presence went on to lure
urban youth.

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Differentiation-Key strategy:

Micromax has a lot of “firsts” to its credit in their product portfolio.

It was the first to introduce:

 Handsets with 30 days battery backup(Micromax X1i),

 Handsets with Dual SIM / Dual Standby,
 Handsets Switching Networks (GSM – CDMA) using gravity sensors,
 Aspirational Qwerty Keypad Handsets,
 Operator Branded 3G Handsets, OMH CDMA Handsets, etc

It’s gaming phone Gameolution has caught the fancy of youngsters.

This phone works like wireless wifi which works on motion sensor technology and can convert
PC/Laptop in gaming device.

Then it came up with MTV music phone MTV X360 with Yamaha amplifiers targeted at music
loving youth.

Thrust on Dual SIM Phones:

It understood the need the market and gave thrust on DUAL SIM phones. Most of its phones
are Dual SIM .

Intense competition has led to stiff fall in call rates and operators keep on coming with various
offers to lure customers. Thus customers do not want to remain loyal to one and desire to avail
best available offers at any time.

With dual SIM phones they can keep their one number constant and another one changing to
avail the best offers. This led to increase in popularity of Dual SIM phones and Micromax has
grabbed substantial market in this category.

Surprisingly Nokia didn’t hear this need and didn’t have any Dual SIM in its brand portfolio.
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Aggressive Marketing & Smart Distribution Channel Management:

The company realized the fact that it’ll have to build the brand and bring awareness in a market
where people don’t rely on
unbranded phones.

The company went for aggressive

marketing sponsored many
cricketing events and allocated the
budget of Rs.100 crore for ATL &
BTL activities.

The company also roped in

Bollywood Actor Akshay Kumar as
Brand Ambassador.

Feature Rich phones at affordable price:

India is a price sensitive market and people aspire to have feature rich products at low price.
Micromax made it possible and thus people B&C category towns grabbed Micromax phones as
it was laden with features but not heavy on pocket.

Its QWERTY phones came below Rs.5000.

All said and done the company has few challenges to tackle too.

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It had to build trust among people in product performance and after sales service. Nokia &
Samsung had a very strong after sales service centers.

While formulating the success of Micromax into a general success theory applicable for smaller
players one can say that competitive advantage by is the key success factor for Micromax.

Competitive advantage can be explained as value addition by Micromax is more than its
competitors.

Willingness to pay can be assessed mainly in terms of product differentiation, innovation.

Other local competitors are at competitive parity as compared with Micromax’s competitive
advantage.

Micromax becomes successful in finding perfect fit for the target market as compared with local
competitors.

Mobile handset market Rivalry among the existing competitors is mainly due to price
discounting, New product introduction, advertising campaign, service escalation.

But Micromax could be successful due to product differentiation which mainly fits to the target
customer requirement.

Micromax followed a unique strategy of targeting and positioning to enter the Indian Market.
Micromax concentrated on the rural market first. It was a unique strategy as the convention
followed by marketers is to concentrate on the urban markets then to move to the rural markets.

The success of X1i egged the company to aggressively make further inroads into the market.
However, tapping the rural market had its set of difficulties, namely in the logistics section as
far as servicing was concerned.

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Micromax approached this difficulty by working on an effective distribution network.
According to a report in Forbes India (March 5,2010), Micromax created a distribution network
comprising of 34 super distributors, 450 distributors and around 55,000 retailers.

Unlike many challenger brands, Micromax was careful in its product strategy. Although all
Micromax products were towards the lower end of the pricing spectrum, the brand was focusing
on adding more features at a reasonable price.

The focus was more on value than price.

Innovation, Cost-Effective, Credible and an Insightful R&D are given high emphasis at
Micromax in the telecom vertical. Their product range generally has some USP which offered
more value to the consumers.

The company in their website claims to have invested heavily in the product development. The
brand boasts of launching many firsts in the market like

- 30-day battery life

- Affordable QWERTY phones

- Affordable Double Sim

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Growth through Strategic Alliance:

1.With BSNL

Apart from the mobile handset market, Micromax hit the news for its alliance with BSNL. State-
owned Bharat Sanchar Nigam Ltd.
entered into an agreement with
Micromax for sale and distribution of
3G data card to its subscribers. As per
the agreement, Micromax would sell
and distribute 3G data cards in the form
of USB to the BSNL subscriber in
various cities.

2. With MTNL

In another venture, Micromax launched the India’s first

operator branded 3G mobile phone H360, in association
with MTNL. The H360, pre-loaded with applications to
enable video calls, mobile TV, social networking,
wireless business solutions through web browsing and
other Internet-based services.

3. TA associates

The success of Micromax prompted US private equity group TA Associates to buy less than
20% of the firm for around $45 million (Rs210 crore today) in December, valuing it above $225
million and indicating confidence in its growth potential.

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Micromax also managed 4Ps (Product, Price, Place, Promotion) strategy for the Success.

1. Product

Micromax has been effective in creating a splash with most of the products launched.
The range that they have covered varies quite a large variety. Right from the handsets
with 30 days battery backup, dual SIM, handsets switching networks (GSM -CDMA)
using gravity sensors, aspirational QWERTY keypad handsets to operator branded 3G
handsets to the most exciting OMH CDMA Handsets, etc.

Micromax in fact has the ability to catch the attention of consumers in a market where
there is a new set almost every month

2. Price

Micromax specialized in entry-level and mid-segment handsets priced between Rs1,800

and Rs2,400 when it started selling the devices in 2008, confining itself to small towns
and rural areas in the first 12-18 months.

Encouraged by its success, the firm expanded to larger cities and now has a distribution
network of 55,000 retailers, which it plans to scale up to 70,000 by the end of March as
part of its strategy to raise sales to 1.5 million handsets a month.

3. Place

Micromax is one of the leading Indian Telecom Companies with 23 domestic offices
across the country and international offices in Hong Kong, USA, Dubai and now in
Nepal.

Micromax has invested Rs100 crore to set up a plant in Baddi in Himachal Pradesh as it
feels outsourcing manufacturing completely leaves the door open for supply-side
uncertainties. Production will be scaled up from an initial 50,000 per month.

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4. Promotion

Having gained traction, Micromax is also working on a strategy to create awareness in

the metros, which includes tying up with MTV for co-branded phones.

Micromax has also tied up with a Bollywood celebrity – Akshay Kumar as as brand
ambassador.

Micromax has also tied up some pretty big brands like Yamaha for enhancing their audio
experiences and the X360 comes with an MTV branding and exclusive content and
recently the sponsorship of IPL 2010 has given the product a big fillip.

Micromax definitely was an

upcoming product in the mobile
marketing sector. It had become a
brand to reckon with in a very
crowded market and with the
recent technological innovations
in the telecom sector the future seems to hold opportunities galore for the company.

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LIMITATIONS

In 2010, the company introduced a line of tablets, namely, the Funbook series.

Soon after, with the advent of the android software, Micromax launched its android powered
smartphone, the Micromax A60.

There are several reasons behind the popularity experienced by Micromax.

The founders of the company had identified a few key secrets to have a successful startup. They
realised that while most people have staggering desires, it does not take much to satisfy the
necessities.

Micromax made quite a niche for itself as a company which understands its consumers.

By focussing on the needs of its target group of consumers, the company came to be known as
the one-stop destination for innovation for the masses.

Micromax went all out at the beginning of the decade in order to establish itself as a serious
competitor in the mobile phone industry.

In fact, they even got Hugh Jackman, the Hollywood star to advertise their brand, thus becoming
the first Indian smartphone company to sign an international brand ambassador. They launched
a number of advertisement campaigns with prominent Bollywood stars like Akshay Khanna and
Twinkle Khanna.

By 2015, Micromax was the second-largest smartphone company in India, after Samsung. For
a humble little startup, it was quite a feat to beat all the large names in the market, such as Nokia
and LG. By this time, the company had captured over 22% of the market.

Unfortunately, Micromax’s hard-earned fame was not there to last.

Over the second half of the decade, the company was slowly pushed out of the limelight and
into oblivion.

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FINDINGS, INFERENCES AND RECOMMENDATIONS

In 2015, Micromax saw a slump in market share and lost its coveted position as India’s leading
smartphone manufacturer to rival Samsung.

Micromax’s market share in smartphones

reportedly dropped from 22 per cent in Q4 2014
to 14.1 in the corresponding quarter of 2015
(see Table on India market share).

Micromax was facing turbulent times as sales had

plummeted, and several top executives had
resigned from their positions.

And the company was struggling to keep up with

the booming but highly competitive smartphone
market in India.

“What the Indian brands did to global brands two years ago, Chinese phone-makers are doing
to Indian brands now and, over the next year, we see tremendous competition for Micromax and
other Indian smartphone makers,” commented Tarun Pathak, analyst at Counterpoint
Technology Market Research.

The management team of Micromax needs to come up with a new game-plan if it wants to fight
back and regain the company’s share of this buzzing market, said some analysts.

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Domestic and global success
Micromax was originally incorporated in 2000 as an IT company. It was only in 2008 that the
company started manufacturing mobile phones when its founders — Rahul Sharma, Vikas Jain,
Rajesh Agarwal, and Sumeet Arora — decided to expand and distribute their IT hardware
business.

Though a late entrant into the thriving Indian

smartphone market, Micromax differentiated
itself by offering feature-rich smartphones at
affordable prices.

It launched the Canvas 2 A110 — the first

dual-core smartphone to hit the Indian market
— in the budget category. With a price point of
$150, the Canvas 2 was a game-changer for the
company.

Reportedly, Micromax imported handsets from

China and rebranded and launched them in the Indian market at lower prices. Its disruptive
price-points helped the company gain an edge over its competitors.

Having tasted success in the domestic market, Micromax went global and launched its products
in countries such as Russia, Bangladesh and Sri Lanka.

In the second quarter of 2014, Micromax ousted Samsung as the largest mobile phone company
in India in terms of number of units sold,
grabbing a 17 per cent market share.

It was the first Indian smartphone brand to

rank among the top ten global handset vendors
with a market share of 1.8 per cent during the
first quarter of 2015 (see Table on global market share of Micromax).

The company shipped a total of 81,58,000 devices during that period.

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Tough times
Micromax experienced a bumpy ride in 2015.

The smartphone maker lost nearly 8 per cent in market share between December 2014 and 2015.
Intense competition, spurred by the onslaught of new entrants from China, reportedly hit the
company’s shipments, which were down 12.1 per cent year on year, and 23.5 per cent quarter
on quarter, in the fourth quarter of 2015 (see graphic on smartphone vendors' market share in
India). Chinese OEMs, such as OPPO3, from which Micromax sourced phones, started flooding
the Indian market, offering high-end smartphones at affordable prices.

In addition, home-grown rivals such as Intex

Technologies (India) Ltd. and Lava International
Ltd started giving Micromax a run for its money.

According to industry analysts, though Micromax

maintained a steady flow of new launches at
regular intervals, its products brought nothing new
to the table.

On the other hand, rivals such as Samsung, Lenovo Group Ltd Xiaomi Inc and LeTV launched
smartphones with cutting edge technology .

Experts felt that the company’s vast but similar product line-up was more a liability than an
advantage.

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 In 2014, in order to drive the company’s expansion
plans forward, the co-founders stepped back and
hired professional managers from outside to lead the
company. They appointed Vineet Taneja, an industry
veteran who had marketed handsets for rivals such as
Samsung, as the company’s CEO.

Another top-level induction was that of Sanjay

Kapoor, former CEO of Bharti Airtel, one of the
country’s largest telecom operators. He joined as Chairman of the board.

However, differences cropped up between the promoters and the top management team and led
to the chairman and the heads of finance, sales and R&D quitting in 2015.

The CEO quit soon after, in early 2016. Kapoor resigned in August 2015. Three more top-level
executives also left the company soon after his resignation. In January 2016, Taneja too quit the
company. “The promoters want to control the business and have not left much free space for the
professionals, which has led to so many exits,” remarked a top official who left Micromax.

The internal conflicts reportedly affected the company’s attempts to raise funds for expansion.

Micromax struggled to attract investors, who were key to its plan of investing in software, R&D,
and hardware design.

In May 2015, Chinese e-commerce giant Alibaba reportedly walked away from its huge $1.2
billion investment plan in Micromax citing a lack of clarity in the company’s growth plans.

Given the lack of investment, Micromax was unable to raise enough money for independent
design and development.

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The road ahead
In April 2016, in an aggressive bid to consolidate its position in the growing Indian smartphone
market, Micromax unveiled a new logo and tagline, launched new handset models, and started
its own e-commerce portal. The company expected to sell about 56 million mobile phones in
India by March 2017 and figure among the top five brands in the world by 2020. Additionally,
it invested in three new manufacturing units in India to ramp up domestic production and reduce
dependence on outsourcing.

According to some analysts, the cross-functional teams at Micromax had a tough job ahead. To
remain competitive, the company had to continue to invest significantly in R&D, sales, and
marketing and customer support. The management had to rope in strategic investors to serve on
its board as lack of substantial investment might force the company to scale down its R&D
projects. Another challenge for the management would be to pursue strategic acquisitions and
investments in India and abroad.

The task for the product development team would be to diversify product lines and identify and
respond to changing customer preferences and demands in a cost-effective and timely manner,
said experts. They said that in order to recover lost ground in the Indian smartphone market,
Micromax needed to release fewer but value-for-money smartphones in terms of specifications
and features and invest more in R&D.

“For Micromax to reverse its unexpectedly dismal fortunes, it needs to put in strong leadership
which can keep an eye on quality control and after-sales service as well as sculpt a clear agenda
for the future, especially in an environment of vicious competition,” said journalist Rajiv Rao.

On the other hand, the marketing team had to focus on furthering the Micromax brand and target
high-growth avenues for the mobile handset business. The challenge for the HR team would be
to recruit efficient senior managers and other key personnel who could impact the company’s
ability to develop, maintain, and expand its operations. Experts felt it was high time Micromax
came out with a robust strategy to tackle these issues and regain its market position.

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What are the main reasons behind the failure of this bright star?

There are several factors because of which Micromax failed to last.

One of the major reasons for its downfall is the launch of the Reliance Jio 4G.

The smartphone market is highly competitive and is subject to rapid developments in short spans
of time.

In order to stay ahead of the curve, it is imperative to keep updated with all the newer
technologies which are being developed and to upgrade your existing products in response to
that.

Micromax primarily operated in the 3G sphere.

They had about 40 different mobile phones, all based on the 2G and 3G technology.

Their primary mistake was that they did not venture into the 4G market at the right time.

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With the advent of Reliance Jio, the mobile data industry in India was completely revolutionised.

Before Jio, the majority of the population either did not have access to mobile data or had very
limited access to mobile data. Not only that, but the internet data that was available was also
charged at a premium. Only a certain class of the population had access to this.

When Jio first launched, Reliance provided free 4G internet and calls to the entire population.
From not having access to the internet, people were given free 4G data for months on end.

The entire approach to the use of mobile data changed. Within a very short period of time, most
people shifted to Jio.

This is where the game changed for Micromax.

You see, the technology is such that you cannot run 4G data on a phone which is meant for 3G.

As a result, Micromax users started shifting to other companies which offered 4G phones in the
same price range.

By the time Micromax realised what the problem was, they already had a significant inventory
of the older 3G phones.

They missed the signs of the upgrade to 4G and lagged behind.

It was not possible to dump the entire inventory and newly manufacture 4G phones.

Thus, Micromax started losing its market share.

By 2016, the market share had fallen to 9% and by 2018, they only had 3.4% of the market.

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The second major factor which played a role in deciding Micromax’s fate was the advent
of Chinese smartphones into the market.

Micromax took inspiration from Chinese companies to manufacture their designs and
equipment.

Soon, however, Chinese companies like Oppo, Gionee, Vivo and Xiaomi realised the
opportunity presented by the huge consumer base in India and decided that it was time to enter
into this market.

These companies studied the market and identified the point of entry as the offline retailers
across the country. They used this opening and entered into the Indian market.

Backed by superior financial power, these companies provided incentives to retailers in order
to promote their products.

Micromax managed to hold on against its Chinese competitors on account of its network in
India.

They used to manufacture domestically and had existing factories and assembly lines across the
country.

This is where they found an edge over the other companies.

Once the Make in India campaign came into force, the Chinese companies like Oppo, Gionee,
Xiaomi and Vivo took inspiration and started assembling their products in India too.

This annihilated the comparative advantage that Micromax enjoyed and put them on equal
grounds again.

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The third reason for Micromax’s downfall was the fact that it did not focus on innovation
and development of technology.

As a technology company, the primary focus should always be on the development of products
so that you can give your customers the most advanced technology available on the market.

In order to do this, you need to invest in research and development, rather than just focusing on
production and marketing.

The Chinese companies were experts in both hardware and software. They proved that it is
indeed possible to provide a high-quality product with all the latest features at an affordable
price. These companies focused on innovation and product development along with marketing,
and produced superior products.

Micromax, on the other hand, always focused on quantity over quality.

Most of their smartphones were of average quality. They also compromised on memory space
and performance in order to maintain a low price. Once people realised that there were other
options out there which offered them a better product at the same price, they switched over to
those companies.

Micromax thus lost out on market share.

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CONCLUSION

The fact remains that a successful business has to have a significant comparative advantage in
order to survive in the long run. Micromax’s only comparative advantage was its low price.
Without any real advantage in terms of product quality and innovation, Micromax’s short-lived
flame of success had soon been extinguished.

Let this be a tale of caution.

The story of Micromax proves that no matter how smartly you market your products, quality
always wins in the long run.

By 2019, the annual revenue earned by Micromax was below Rs. 3000 crore.

Today, the company exists in name only.

Its founders have realised that the ship is sinking and have started looking into other industries
to break into.

These days, the mastermind Rahul Sharma is focussed on his startup in the two-wheeler electric
vehicle market and wishes to revolutionise it with his products.

As for Micromax, it is all but gone.

Can Micromax max it again in the Indian market?

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The Return of Micromax

After getting blitzed out of the market by Chinese smartphone makers, desi brand Micromax is
making a comeback. Aided by a rising anti-China sentiment, it wants to regain its old position.

Will it succeed?

Micromax Co-founder Rahul Sharma is not superstitious.

But when he re-focussed his attention on the struggling consumer electronics firm, one of the
decisions was to go back to the company's old office in Udyog Vihar Phase V in Gurgaon.

Earlier, when the going was good, Micromax had shifted base barely a kilometre away to a
bigger office in the adjacent Phase IV. Going back to the same building where it started its
journey in smartphones more than a decade ago and where it scaled dizzying heights, is symbolic
of what the company is aiming to do ahead - script the same success story all over again.

"We want our old position back. That is the target, else we would not be making this
comeback," says Sharma.

"We understand the sweet spot of this market and you will have a Micromax product disrupting
all of these sweet spots. We have the infrastructure and manufacturing set-up in place and are
investing big time in R&D. We are here to disrupt."

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The entry of deep-pocketed Chinese players such as Xiaomi, Oppo, Vivo, OnePlus and India's
rapid shift from 3G to 4G aided by cheap data plans launched by Reliance Jio queered the pitch
for the company.

It could not withstand the onslaught.

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Micromax's descent over the second half of the decade was as dramatic and rapid as its journey
to the top.

From 19 per cent in 2014, its market share had slid to just 0.5 per cent in 2019 in India's 158-
million-unit smartphone market - the second largest in the world.

In the process, the company's revenues, profits and valuation nosedived, while PE investors also
cashed out. In 2015, the unlisted firm was valued at Rs 21,000 crore, but today it is less than Rs
1,500 crore.

Revenues in 2014-15 were Rs 10,451 crore and it was generating a profit of Rs 364 crore.

By 2018-19, revenues had shrunk to less than a fourth at Rs 2,443 crore, with a profit of Rs 145
crore.

"It is not us alone. Everybody else lost business to the Chinese as well," says Sharma. "What
was happening was we were getting peppered with a volley of bouncers and could do nothing
but duck. They came in hordes and it was difficult to identify the real players. They were not
making money, but were buying market share. We did not have the bandwidth to compete so
decided to step back. To use a cricket analogy, I knew we will get a full toss at some point. We
needed to wait and hit that out of the park."

Micromax is padding up for its second innings and the full toss has come in the form of an
intense anti-China sentiment following the clash between the two countries at Galwan province
of Ladakh on June 15.

Most of the focus is on smartphones, a product that has come to symbolise China's growing
influence in India. Any real dent in demand, however small, for Chinese products here, will
throw up a sizable opportunity for Micromax.

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The timing seems just right for the company to script a grand comeback, but will it be able to
follow up on this premise?

The Nationalism Card

The impact of the anti-China sentiment is already

beginning to show in the market.

In the second quarter of 2020, the share of Chinese

smartphone makers fell to 73 per cent, from 82 per
cent in the first quarter.

Sharma says they started working on the comeback

plans more than a year ago when the US and China were embodied in a global trade war.

That relations with India would suffer a meltdown and sentiment against Chinese goods would
turn negative just as the company would be ready to embark on its second innings was, however,
unforeseen. "It is more of a coincidence.

You can't make things like phones and create an ecosystem so quickly. It takes a lot of time,"
says Sharma. "We have been working on this for a year now. The geo-political tension has been
going on for the last two years. Separately, we have been working very actively with the
government here to work towards building the whole ecosystem."

The ecosystem refers to hundreds of components that go into smartphones, which are either not
manufactured in the country at all, or where the scale is low.

India imported $28 billion worth of electrical components and machinery from mainland China
and Hong Kong last fiscal.

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Policymakers want India to reduce its dependence on China and become self-sufficient.

In April, the Ministry of Electronics and Information Technology launched a product-linked

incentive scheme for manufacturing smartphones, which provides a 4-6 per cent incentive on
incremental sales over FY20 levels. The scheme specifically favours local brands.

International firms have been excluded entirely in case of phones that cost less than Rs 15,000,
a category that constitutes 75 per cent of smartphone volumes. There is no such condition for
local firms. Also, domestic firms need to invest just Rs 50 crore initially and Rs 200 crore
incrementally over four years to avail the incentives, while for others, it is Rs 250 crore initially
and Rs 1,000 crore over four years. Sharma believes this will help create a level-playing field
for local brands against cash-rich Chinese companies.

"It is a great scheme and makes us competitive in the market," he says. "It is not that everything
is coming from outside. Even today at least 50-60 per cent of the supplier ecosystem is already
here. This scheme will help push MSMEs to invest more."

While that takes care of the manufacturing side of the business, Sharma believes the current
mood of the nation will save him a lot of dollars on marketing - a key area where the Chinese
have dwarfed everybody else, including Samsung.

"This whole anti-China thing is going to take care of a lot of dollars on the marketing side for
us," says Sharma. "This time it's not just business alone, but about the country and something
that I feel from the heart. Within a week after the lockdown was lifted all our smartphones were
sold out - whatever we had, including stocks 2-3 years old. That is when we started wondering

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what's happening. Then we realised people only wanted Indian products. We want somebody
from India to come and be successful."

"Consumers are buying Chinese phones because they do not have an option. But if I give you a
great product, which is as good as competition with our secret sauce of better features and it is
from Micromax, an Indian brand, it will be different now."

What the company is aspiring for is to reclaim its lost glory when it was one of world's top 10
handset companies.

It even had Hollywood star Hugh Jackman as its brand ambassador.

To regain that position, Micromax plans to launch at least 20 smartphones over the next two
years, and has prepared a war chest to fund its expansion plans.

Besides the Chinese onslaught, the company had suffered due to the transition from 3G to 4G.
Its dependence on supplies from China left it with a major overhang of 3G phones in its
inventory when the market graduated to 4G connectivity in 2016. And when it got ready with
its own devices by the end of the year, demonetisation exposed its weakness in the digital
domain.

"I dont want to focus too much right now on what went wrong, but we have had our learnings.
We are going to focus a lot more on R&D and invest there. We will have minimum dependence
on outside (imports). First we are going to focus on the software side of it and we will do it 100
per cent out here in India. Then slowly within 12-18 months we will start building up other
hardware capacities," he admits.
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An Uphill Task

The Indian smartphone market has changed in the last few years and going forward, due to the
onset of 5G, it will remain dynamic. So, the prospect of Micromax upstaging its bigger and more
technology-oriented rivals is suspect.

"It's a matter of scale now. The only non-Chinese brand to have any real scale is Samsung.

Do you expect Micromax to start making 100 million smartphones annually a year-and-a-half
from now when 5G would be around? I don't think that is possible, so the numbers don't stack
up," says Navkendar Singh, Research Director, IDC.

"Scale doesn’t come overnight. Just because the situation is suddenly in your favour doesn’t
mean you can make two million phones overnight. That needs investments and commitment. If
local brands start this journey and plant the seeds today and remain disciplined, they can see the
fruit of their efforts after two years."

How long will consumers continue to shun Chinese products is also not known. Geo-politics
has impacted consumer sentiment in the past as well, but it has never sustained beyond a point.

"It is something that we asked ourselves and I discussed this with multiple people. The
conclusion is that this time it is different," says Sharma. "This is not for the short term. People
have lost jobs and livelihood, or have seen earnings reduce. On top of that, the Ladakh issue
happened, which is linked to the safety and security of the country. That is another emotional
topic."

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Experts believe competition in the smartphone market will only get more intense in the coming
days.

"The Chinese are very competitive. They will not just go away at the first bump in the road.
Xiaomi has surprised by not only maintaining its leadership in the market, but at a high share -
almost a third of the market. Vivo has also consistently risen. They are no pushovers,"
says Tarun Pathak, Associate Director, Counterpoint Research.

"The opportunity is there right now, but the window will close soon. What lies after that is a
hard grind in the market where every rupee will have to be earned. If they have a reasonable
strategy, are willing to struggle and fight, they may crack it."

All Said and done, currently its time to see the way Micromax fights it back.

On August 15, India’s Independence Day, the manufacturer revealed it will be making a
comeback.

The announcement was made on Twitter and includes a 90-second long video about how
India has been dependent on other countries and how the dragon (China) has been bigger
than the elephant (India) for 73 years.

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Page | 42
References.

1. Bloomberg Businessweek – ‘Micromax closing in on Nokia in India’ by Mehul

Srivastava, Aug 2010
2. Innovation and Masculinity, a case study of Micromax and Thumbs Up by Akash Raha,
Oct 2010
3. Revenge of challenger Brands by Soumick Nag, Sep 2010.
4. Forbes India Magazine, Mar 2010
5. The Economic Times, Sep 2010
6. IDC report
7. Business Line on Campus – A Case Study by Benudhar Sahu, 11 Oct 2016
8. Blog Finnovationz – MI Failure Story
9. Today – The Return of Micromax 6th September 2020

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