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Started as a software company in 1999 by the name Micromax Software, the company focused on SAP and e-commerce applications (B2B and B2C) for the US market. Once the dotcom burst, the company changed its focus to embedded technologies by tying up with the University of California. In 2001, the company was renamed as Micromax Informatics and later the company shifted its business by becoming the value partner for Nokia's M2M business and focused on Fixed Wireless Terminals (FWT) based on GSM technology for the European market. Within a year, the company grew Nokia's M2M business from `10 crore to `100 crore. In 2005, Nokia sold its M2M business globally and the company started to focus on its own brand of FWT. The company sold terminals to airtel, Vodafone, and Idea and took the business to `200 crore. In 2008, there was some issue with fixed wireless supplies with airtel and while roaming in Berhampur and Bihar, one of the directors thought of entering mobile phone segment. But the big question which kept haunting them was who would buy their mobile phones when all multinationals were present in the country?
Phone for the Rural Market
After a lot of brainstorming, the company launched its first phone in 2008 called X1i for the rural market. The phone had a standby time of 30 days and it was ideal for rural market since these areas have no or negligible power. Being conservative in their approach, the company started with 10,000 phones but nobody was interested in selling these phones, so the company gave it to their FWT distributors pan India and within 4 months, the company sold 1.5 lakh phones.
Having tasted the initial success, the company identified gaps in the Indian market and launched phones with turnaround time of 3-4 months. In September 2008, Micromax launched dual SIM (2 GSM) phones in the price bands of `2,500. This made a big mark in the country since we have 16 operators and almost 90% of connections are prepaid thereby providing ideal conditions for dual SIM phones to grow in the Indian market. The company also had an advantage in this category since market leader, Nokia, was not focusing on the dual SIM market in India as well as worldwide.
Innovations
Dual SIM gave a big push to Micromax as the company got the real pulse of consumers and launched various variants of phones, be it qwerty phones, chat phones, bling phones, gaming phones, and bluetooth phones thereby creating sub verticals in each vertical. The company also tied-up with MTV and launched the MTV phone. All this helped the company to gain good market share in India. As per V&D 100, Micromax has 7% market share in FY11 and is ranked third after Nokia and Samsung. This is a remarkable achievement considering that Micromax is just a 3-year-old company in the mobile phone segment.
India was not a cakewalk for Micromax considering the fact that all major multinationals are present in the country and are aggressive but the company identified gap areas and introduced product at right price points, giving them an edge over other Indian manufacturers.
“The company attributes this new-found success to its continuous innovation supported by economies of scale,” says Rajesh Agarwal, managing director, Micromax Informatics. It will depend on how long the company can support these 2 parameters in the long run.
This new-found success can also be attributed to its efficient 3-tier distribution structure and good after sales service. The distribution structure includes 70 super distributors taking care of states, 2,000 micro distributors catering to districts, and 70,000 retailers in all major towns and cities. On after sales service, the company has opted for RT Outsourcing initially but later deployed its own service center (650 in number) sensing increasing numbers of handset sales.
With respect to after sales service, the company does 63% service on the same day, 80% within 7 days and 20% within 14 days, comments Sumit Kumar, CTO, Micromax Informatics. It seems that the company needs to improve on the after sales service as this will give them an advantage vis-a-vis other handset players.
The Transformation
So, all these strategies have helped Micromax transform from a rural player to a pan-India player. The company is now aiming high and is planning go for an Indian MNC tag. The company has now started to export its phones to Saarc, Middle East & Africa and Latin American markets by aggressively selling products in Sri Lanka, Bangladesh, Nepal, Dubai, Namibia, and Brazil. Presently, Micromax is selling a million handsets per month and has revenues of `2,357 crore in FY11 as per Voice&Data. The company has done well in Bangladesh and Sri Lanka market and is planning to do 25% sales from outside India in FY12. It is not an easy task and the company needs to perform well in 3-4 countries in 2011.
“The company has strategically chosen these regions since it helps the company and the brand as the intent is to make Micromax a global brand,” says Vikas Jain, business director, Micromax Informatics.
“The company feels that they can be a true multinational as they have done significant development in software. In the hardware space, the company sees a good potential and if they are able to play it right, they can capture a good market share in other countries,” says Rahul Sharma, executive director, Micromax Informatics.
In the coming 3 years, the company is planning to become a strong multinational player with 15% market share in all the markets. It would not be an easy task but one has to see how does the company perform in these regions.
Having done well in the feature phone market, the company is now looking at the smartphone market which is planned to contribute around 6% of the total market in 2011. Plans are to launch smartphones in the Indian market along with application store where the focus is on local flavor and consumers' taste. For marketing smartphones, the company is planning to focus on a new set of channel partners to provide differential selling experience to consumers.
“2011 is smartphone year for Micromax. If we are able to do good, it would be a fantastic year for us,” says Rahul Sharma, executive director, Micromax Informatics.
In order to cater to the rising demand and future expansion, the company plans to add around 500 people in the next 3 years of which majority would be hired for product development and sales.
Seeing the market condition, the company has postponed its proposed IPO for Q1 or Q2 of the next financial year. This will act as a major hindrance for future expansion and also delay their local manufacturing plans by a year.
Having known Indian preferences well, the company is planning to bring phones best suited for the Indian market and is aiming to achieve $1 bn revenue in 2 years' time.
Pravin Prashant
pravinp@cybermedia.co.in