Will Nokia get back on track in the Indian market?
Saturday, July 17, 2010
, Posted by Unknown at 2:48 AM
As one of the new entrants, Naveen Paul of Spice Mobile recalls “people were carrying one CDMA and one GSM handset, using the former for outgoing and the latter for incoming calls.”
The smaller companies worked with vendors to create dual SIM handsets that could switch between CDMA and GSM and later between two GSM cards. It was a bet that paid off for them. The demand for dual SIMs went through the roof, driven by a flood of new operators offering telephony at the lowest prices in living memory. Everyone from relative newcomer Micromax to Samsung leapt aboard the dual SIM bandwagon.
But it’s a reality that market leader Nokia is yet to react to. Its first dual SIM models C1 and C2 are still a few months away from launch. The brand that seemed to know India almost as well as its native Finland has not been able to cash in yet on the biggest handset trend of the last couple of years.
Dual SIM phones are growing at 40%, the fastest expanding segment in the category. It’s hard to ignore the increasing tide of opinion that suggests Nokia’s dream run in the country may be losing steam.
Apart from missing out on key innovations, it has been losing share. According to Voice & Data figures, Nokia’s marketshare in India has fallen from 64% in 2008-2009 to 52.2% in 2009-2010. Globally, its net sales fell in 2009 to Euro 40,984 million from Euro 50,710 million in 2008.
An observer close to the company believes, “There is a challenge at the product level. It’s not that people don’t love the brand. But they want more from it and have been spoilt by the value end of the market.”
D Shivakumar, managing director and vice president – sales, Nokia, admits that the marketer has not been as nimble as it could have: “This is a high innovation, high failure business. Even if you are the best you will always miss two or three.” He adds, “A year and a half is a significant time lag (on dual SIM). But I don’t think it is something that has weakened the brand. The consumer wants to see these features on Nokia.
He considers other brands only if there is no Nokia product that meets his needs, which means we have to move in quickly and be a fast follower.”
Nokia is of course still a formidable presence. Almost all the 40 to 50 odd phones on its annual release schedule make it to stores in India, its second largest market. According to Shivakumar, “We launched the 2690, aimed at the small town or rural consumer, six to seven weeks before we did anywhere else. In a month’s time, it has become a top 10 model.” But winners like 1100 and N72 are not coming as thick and fast as they used to off Nokia’s product line.
Many of the newcomers in the market have been able to crack the same distribution model Nokia relied on for rural markets: piggybacking on kirana stores or any other regular shopping destination to make themselves available. Micromax for instance fanned out to the urban areas from the hinterlands. Its first model launched two and a half years ago came with a 30-day battery backup.
The Micromax portfolio also features a phone that doubles up as a universal remote for television sets and air conditioners. The Korean electronics major Samsung launched Marine, a phone powered in part by solar energy. Spice Mobile threw in an ultra violet torch that would help detect counterfeit currency and has recently come up with a model with two memory cards that serve like double cassette decks of yore, allowing for easy transfer of data.
It was this unique consumer insight driven innovation that spun off winners like Nokia’s 1100 also known as the ‘Made for India’ phone, which came bundled with a flashlight. Many of these new products are definite proof of marketers with their ears to the ground, ready to exploit any opportunity, any niche, without wasting time. While Nokia has to adhere to a regimented global launch schedule decided well in advance, the decision making and go to market in many of these companies is a lot faster.
The newcomers seem to be fighting Nokia at a game it played very well, when it first fused cameras and FM radios to its phones. The mobile category has always led its consumers. Many features are articulated strongly only after they’ve been experienced.
And it’s a strategy that’s yielding rich dividends to the new innovators just as it did for Nokia. Vikas Jain, business director, Micromax, says it accounts for a million of the 10 million handsets sold every month in India, with 60% of its off-take coming from the rural markets. “There’s a whole ecosystem waiting to be addressed,” he observes.
Even the top and the middle of the market, Nokia’s mainstay, is under threat. The perceptual highground on touchphones was taken over by the iPhone even as Blackberry grew synonymous with business phones. While Nokia was slow to launch touchscreen phones, Samsung, which claims to have a 16% volume and 20% value share of the mobile market, went to town with these models.
According to Ranjit Yadav, director – mobile and IT, Samsung, “We began with Jet Star and expanded into Corby.” Spice too claims to be moving up the value chain with a camera phone that has a 12 megapixel lens powered by a separate processor. According to Vivek Bali, group president – global branding and marketing, Spice Mobile, “While not headquartered in Helsinki, we are getting on, given the changing preferences of Indian consumers.”
Part of the reason Nokia missed the bus on dual SIMs and a few other innovations could be because the company’s attention has been consumed by its drive into the apps and services space — a global strategy. Previously thought to be the domain of mobile service providers, a lot of senior management time at Nokia has been spent focussing on this area.
In an interview with The Economic Times, Nokia global CEO Olli Pekka Kallasvuo outlined his vision: “We will be adding the services layer on top of the handset, and with it, we’re adding the context, the social dimension and the location dimension. For Nokia, this is a major transformation.
We’ve been talking about the target of 300 million subscribers, or active users, by 2011. That’s a target we could not have imagined earlier when we were simply selling devices.”
India obviously plays a huge role in this sphere. Shivakumar says, “The urban market is penetrated completely. The next 200 or 300 million consumers will automatically have to come from rural markets.
The phones have moved from basic voice to much more. The business model will also have to move.” What he’s gunning for is the internet and application space, something he considers “the mother of all convergences.”
Nokia in 2006, commissioned a project with the Boston Consulting Group which studied India, China, South East Asia and Africa and asked consumers what they would like from a mobile phone in terms of service. The answers were commerce, health, education, information and entertainment.
In spite of a much publicised pilot, Nokia has finally kept payment aside, along with health. “There are regulatory issues,” Shivakumar says.
Nokia’s Life Tools aimed primarily at rural and semi urban populations offers entertainment, education and crop prices. Shivakumar says, “A lot of people tried this and nobody succeeded. We’ve been able to build an ecosystem which gets the right information and are able to do it via SMS.”
Another focus area has been music. Nokia currently offers four million songs for free download from its Ovi store. Of these, one million are Indian, a library it obtained after copious negotiations with content owners.
Shivakumar says, “The biggest innovation is taking music away from piracy. We have doubled the size of the music industry in this country. More people listen to music on the mobile phone than on the radio or television.” And with the full range of Ovi store features to be launched in the months to come, he expects Indian subscribers to add to 1.7 million strong users globally.
However, the app space is fraught with its own set of challenges. Besides service providers, other players like Micromax and Samsung are waiting in the wings. Micromax is gunning for a simultaneous launch of apps with the onset of 3G. Says Jain, “We would like to release something very Indianised in terms of solution and content. A couple of brands have come up with overseas content that’s not relevant.”
He sees this space having the potential to become a revenue generator. Samsung’s Yadav adds, “Apps ensure the consumer gets the full benefit from the product. We are working to make sure they have a choice. We do monetise a little of it; a very small percentage less than single digits at the moment. But for us it’s an investment. Most companies are moving beyond the hardware piece.”
The ultimate test for Nokia will be if it can replicate the tenacity, speed and consumer insight that won it leadership status in the handset space. And this time, it doesn’t have the luxury of an extensive first mover advantage.
Nokia raced to reach Rs 25,000 crore in 15 years flat. The next big leap will depend on whether the Indian consumer wants to go where the Finnish marketer is taking them.
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