11 Oct 2016 20:04 IST

Can Micromax max it again in the Indian market?

The company must diversify product lines and regain lost share in a highly competitive space

In 2015, Micromax Informatics Ltd (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.

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.

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.

 

 

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.

New beginning

With the company in dire straits, the co-founders were forced to come back to helm the company, and started managing day-to-day operations. While Sharma managed the Yu11 brand, marketing and branding of mobile phones, Jain was in charge of partnership development, services, tablets, computing business, and finance. Agarwal handled sales and sales support, human resources, international and LED businesses, and manufacturing while the legal, R&D, and information technology departments were supervised by Arora.

To strengthen operations and boost sales, Micromax hired some former employees to fill the vacant senior management positions in 2016. Ajay Sharma, who was the head of Micromax’s smartphone business between 2012 and 2014, was appointed as the head of sales in the mobile phone and tablet divisions.

The company’s former chief marketing officer, Shubhodip Pal, was set to re-join the company. Pal was expected to oversee marketing operations of Yu. Following the exit of chief financial officer Badal Bagri in December 2015, Micromax roped in Vikas Thapar as its new senior vice-president for finance. He would also take on the role of chief finance officer.

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.

The Challenge

You are part of the top management team of Micromax. In the context of what has been outlined above, what will be your strategy to diversify product lines and launch new smartphones to gain market share in a highly competitive space. How will you hire and retain top talent, given that several top management hires left the company?

(To be eligible to participate in all the BLoC case study contests till March 2017, sign up for a six-month subscription to the website. When you send in your entry to the e-mail ID blcasestudies@thehindu.co.in, please remember to mention the full names, registered e-mail IDs and phone numbers of both the team members. The detailed contest rules are available in the Rules of the Challenge )

(Benudhar Sahu is a Research Associate and Syeda Maseeha Qumer is a Consultant at the IBS Case Research Centre, Hyderabad.)

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