Post Q4 2014, Micromax has seen a severe decline in market share, falling way behind market leader Samsung.
All said and done, things are not that bad for Micromax. Such reality checks are instrumental in making good companies great. So, the company’s future strategies should be based on the following cornerstones.
With most of the top most management resigning in less than two years, the company’s priority is to get its act together. The Micromax promoters are known for their “control issues” and, moving forward, this needs to change. With new management already roped in, the focus should be on giving them a free hand to carry out actions and implement policies such as:
Stock options : New management must be given a stake in the organisation and the exercise price for the call should be set to at least thrice the current share value. This, in addition to giving incentives to the top management (thereby deterring early exits), will demonstrate the confidence the founders have in them and the brand.
Business unit approach : With Micromax diversifying into electronic segments, such as the home electronics division and the service segment, the focus should be on developing domain capabilities that are different for the various categories that will require dedicated and experienced leadership.
With Alibaba rolling back its investment offer and chances of other international investors following suit, Micromax cannot delay its plans of going public. With new management and new policies in place, one can expect a positive valuation. Currently, Micromax has an approximate valuation of ₹21,000 crore, with 80 per cent equity in the hands of the founders, so it should aim to dilute this by an additional 15-20 per cent. An early IPO will serve two benefits:
Provide capital to put future plans in motion
Provide publicity and awareness
Research and development
The next step after stabilising top management and raising the necessary capital is to build differentiation capabilities; this will require a robust and dynamic research and development wing. Key areas of focus for this department should be:
Architecture : Micromax should adopt “centralised architecture”, which would facilitate better communication and integration across functional groups.
Processes : A tightly coordinated unit along with flexible processes will facilitate a faster product roll-out rate, which is crucial in the smartphone industry, where the average product life-cycle is 15 months.
Portfolio : It reflects the priorities of the R&D department which, in Micromax’s case, are:
- Low-cost innovation
- Product differentiation
- Current offerings improvement/optimisation
Micromax launching YU Televentures as a gateway for its mobile service segment and its rebranding of Micromax 3.0 are all indications of strong diversification intent.
— The current online-only arm of Micromax should become offline as well and should be the source of its new smartphone offerings — cost-effective, differentiated and of quality.
— YU’s target should be sub-15k category and it should carry a flavour of its mobile as a service initiative (Around and Udio) in all its offerings, although the level and extent of service can be varied based on the segment of the purchase.
The democratisation of mobile phones should be the main aim here. Moreover, with over 50 per cent sales coming from feature phone segment and with the current price war happening in the telecom sector, this segment needs to be nurtured as it may soon change track.
Diversification should be the main agenda. Moreover, Micromax should consider exploring an M&A option for smartphone, LED and white goods segments to fend off the Chinese onslaught.
With ₹300 crore already invested, Micromax is leveraging the benefits of “Make in India” and should continue to do so.
Udio and Around
~ Develop Around as a service different from the smartphone line of business (like Blackberry).
~ Tie up with different brands like Karbonn, Lava and Intex for rolling out “Around” on a large scale.
~ Advertise using different partner platforms, such as movie booking portals, cab services, e-commerce portals, and so on.
~ Leverage the “Digital India” campaign and offer Udio and Around as a “service ecosystem” that combines both light and heavyweight electronics.
(The third runners-up are from Great Lakes Institute of Management, Chennai, doing their PGPM.)