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Nokia India - Market leader eyes new opportunities

June 15, 2009
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The year 2009 has not started well for the 150-year-old Finland-based handset maker Nokia. The company has announced a 90 per cent slump in profits for the January-March quarter to Euro 122 million from Euro 1.22 billion in January-March 2008, marking its biggest drop since 2001. The earnings per share dropped to Euro 0.03 from Euro 0.32, while handsets sale revenue fell by almost 33 per cent to Euro 6.2 billion.

Steps are being taken to stem the loss and retain investor confidence. Nokia has undertaken severe cost cutting measures and slashed jobs across operations, with 1,700 lay-offs being recently announced worldwide. It has also stopped the use of subcontractors in phone manufacturing.

While the parent company is weathering the storm, Nokia India, which leads the handset segment in the country, is viewing the current situation as a learning opportunity. According to D. Shivakumar, vicepresident and managing director, markets, Nokia India, the recession is a good time for Nokia to build brand equity as consumers tend to opt for phones that offer value and durability.

Nokia has been operating in India since 1995. The company has a manufacturing plant in Chennai, a design studio in Bangalore and research and development facilities in Bangalore, Hyderabad and Mumbai.

The handset major has introduced several top-selling mobiles in India. The rugged Nokia 1100 monochrome handheld, with a built-in flashlight, sold over 200 million units after being introduced in 2003. The Nokia 3310 also sold over 126 million units.

Nokia India has made strong inroads through its extensive distribution network, especially in the hinterland. It has set up multiple stores across the country and has recently opened its flagship concept store in Mumbai. The store offers Nokia's entire range of devices in all categories and exclusive Nokia merchandise.

For Nokia, getting it right in India is crucial considering the size of the market. In fact, according to Shivakumar, India is the second largest market for the company, next only to China. As of April 2009, according to GetJar.com, Nokia has the lion's share of the market at 64.46 per cent, way ahead of rivals Motorola, Sony Ericsson, Samsung and LG.

Nevertheless, the competition is serious. Motorola's iconic RAZR series took the market by storm after being introduced in late 2004. As a result, Nokia's market share fell from 34 per cent to 33.6 per cent in early 2005. But Nokia subsequently regained ground, helped by its USP of offering multiple features at competitive prices.

Recent initiatives
Over the past year, Nokia India has launched a number of handsets and valueadded services, and has worked to increase brand visibility. It has also started to segment its handsets into specific categories, for example, entertainment centric and business centric.

In partnership with HCL Infocomm, Nokia is set to launch a chain of retail stores offering high-end handsets such as Vertu, virtual Nokia Music services as well as consumer services under the Ovi brand. The handset maker will hold a 51 per cent stake in the venture.

In order to tap the 3G market, Nokia India has tied up with Bharat Sanchar Nigam Limited to offer 3G-enabled phones like the 3120 Classic, 5320, N97, N81, E71 and 5800 XpressMusic.

The company is also working to be a good corporate citizen. It has started the Green Initiative, under which 1,300 bins have been put up across the country where consumers can drop their old phones and accessories, irrespective of brand, for recycling. Nokia plants a tree for every phone dropped.

Going forward
While Nokia is likely to retain its lead in the Indian market, industry analysts feel that the pricing of its high-end handsets might be a point for concern. Nokia's luxury handsets are often priced higher than similar products by competing manufacturers. This, experts feel, might lead to lower handset sales.

For the company, the aim is to move away from its "just devices" image and become a devices, services and solutions provider. Following this strategy, it has initiated talks with music companies and content providers to introduce virtual music stores in India. In 2009, the company plans to launch nearly 40 new handsets, with a focus on building its touch-screen portfolio.

Nokia is also working on several innovative business models for the rural market. For example, it has joined hands with Bharti Airtel to help villagers in remote areas of Maharashtra experience mobility. Under this initiative, Airtel Nokia vans are sent to villages where people can make free calls, send SMSs, click photos or listen to the radio using the mobile. These vans provide a number of bundled offers involving a free lifetime connection and low-end handsets.

All in all, Nokia India has clearly chalked out its go-to-market plans. This will go a long way in maintaining the company's lead in the Indian handset market.

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