Micromax changes everything about itself to survive

Chinese handset manufacturers, with high-performance products, have caused the company to rework its strategy

India's largest homegrown mobile handset company, Micromax, made a mark for itself between 2009 and 2013 with handsets that were trendy yet affordable. With a strong distribution network in place and a high-decibel advertising campaign that featured Hugh Jackman, the Gurgaon-headquartered company was able to strike a chord with India's price-sensitive buyers. There came a time when it became a serious challenger to Samsung, the market leader in smartphones.

Things, however, started changing in 2014 when a horde of Chinese handset makers entered the Indian market: Xiaomi, Gionee, One Plus, Oppo, Huawei and others. They offered superior hardware at competitive prices, which were eagerly lapped up by buyers. Many of their online sales got over in a matter of seconds.

Micromax's strategy that had worked well for four years became redundant. In the year to December 2015, its share plunged 4 per cent in the fast-growing smartphone market. To complicate matters further, two of its key management professionals left the company. Disagreement over valuation of the unlisted entity was the bone of contention between its four co-founders and the professionals. And a stake sale worth a billion dollars to Alibaba of Japan, rumoured to be in the making for almost a year now, has still not happened.

Rahul Sharma, Co-founder, Micromax

As it lagged others in terms of innovation, its sales began to get affected, analysts say. A mid-course correction in its strategy and portfolio was required if it had to survive the tsunami started by its Chinese rivals.

With this objective in mind, the company now wants to transform into a full-range player in the mobile ecosystem. It also wants to venture into the home appliances and electronics categories. It has already launched LED televisions and personal computers. Purists may argue that it is unwisely losing focus, but Rahul Sharma, one of the four co-founders of the company, envisions Micromax as a global brand that offers devices and related services to tap the wider 'Internet of Things' market.

For the uninitiated, Internet of Things refers to a digitally connected ecosystem where devices communicate with each other. Thus, the mobile handset could become a device in the hands of the householder to operate the refrigerator and air conditioner at home. This is the space that Sharma wants Micromax to tap into.

His aim is to become one of the top five handset players globally and to have 100 million connected devices among consumers by 2018, and then back them with various services such as "utility payments and entertainment on an operating system that offers seamless connection," says Sharma.

After the makeover

Thus, Micromax launched 20 smart devices at one go recently: 15 smartphones, two LED TVs, two tablets and a smart watch. The company also announced its brand new corporate strategy, which it called Micromax 3.0, and released its newly designed logo.

That apart, the company has acquired a new tagline: 'Nuts, guts and Glory.' It signifies Micromax's changed attitude, Sharma says, which is about "defying odds and fear". The changes will pave the way for the next phase of growth, he believes.

Analysts are optimistic too. "Revamping its positioning is a good idea. Micromax needs to go beyond the mass market image now," Tarun Pathak, senior analyst, Counterpoint Research, says.

Pathak feels that Micromax needs to go through a complete makeover if it wants to survive in the cutthroat rivalry. "It should now shift its focus on the Rs 10,000 to Rs 20,000 category", he says.

Sharma's vision is to transform Micromax into a services provider from a mere handset maker. Clearly, a handset is more than just a communication device: people use it to transact and also to access information and store data. Sharma has for some time now talked of an ecosystem of apps that sit on a smartphone and improve the user experience.

"The changing landscape in the ecommerce space, with more people making online purchase and the decline in the discounts, is the reality of the day," he says. Micromax has thus launched its own online sales portal and will offer more products through it starting Diwali this year. Currently, it generates a little more than 25 per cent of sales through the online channel.

"We are focused on digitising people's lifestyle. Offering all utility services like payments, app-based services such as health care and entertainment, will be the thing of the future. We have invested in companies like Ixigo (a travel portal) and Healthifyme (a health app). And we will keep making such strategic investments," Vikas Jain, another co-founder of Micromax, says.

The company has tied up with at least 10 such online service providers and is ramping up the supply chain.

The four co-founders - Rajesh Agarwal, Sumeet Kumar, Jain and Sharma - are currently leading the company from the front, in the absence of a chairman and chief executive officer. The four have now set a target of growing Micomax sales 25 per cent every year and to ratchet up the contribution of the overseas markets to its sales from 10 per cent at present to 30 per cent in the next five years.

To achieve this goal, Micromax wants to gain a foothold in overseas markets such as Russia, Armenia and Ukraine among others. One of the top five brands in India, Micromax wants to become the number one brand in the country and one of the top five globally.

Trying to change everything at the same time is not easy. "This is a very bold target," Sharma accepts. In next two year, when two other manufacturing units in Madhya Pradesh and Rajasthan become operational, Micromax will be manufacturing 60 million devices a year, up from 24 million now.