Micromax: Riding the wave

Aided by a mobile telephony wave in India, here's how Micromax developed immunity against the downturn

After venturing into the mobile phone market in 2008, homegrown handset maker Micromax touched Rs 1,978 crore in revenue in 2011-12. The following year, that figure soared to Rs 3,168 crore. While at the beginning of this year, the company had set its target revenue in the region of Rs 6,000 crore, analysts say it might well surpass that figure. As the slowdown continued to haunt FMCG, consumer durables and automobile companies, Micromax managed to keep up the growth momentum to become a formidable force in India's 123.3 million-strong (source: eMarketer) smartphones market.

How did Micromax beat the slowdown blues? The company's newly-appointed chairman Sanjay Kapoor believes there are two reasons why leading smartphones players, especially Micromax, kept the momentum going. "Even today, smartphone penetration is only 11 per cent in the country. Second, the lifespan of a smartphone has shortened to two years. In the next six years we will see users changing their mobile phones every 12 months," he says. "Growth is inevitable."

In an earlier interview with The Strategist, Rahul Sharma, co-founder, Micromax, had said: "Our strategy is simple: create high volumes, reach the customer base through effective distribution, and give them products that are innovative and cost-effective. Finally, create a strong brand." Over the years, Micromax's strategy of associating with Bollywood and cricket has also helped.

In effect, Micromax's growth strategy has followed three clear stages. When it started out, the company picked handsets from China, rebadged them and sold them in the India market. In the second stage, it realised the need to do extensive research in terms of Indian consumers' demands and product development. Now, it has crossed over into a new phase, where the company has started following a mix-and-match strategy - overall handset designing and software integration with the operating system happens in India and hardware development with original design manufacturers for marquee handsets is done at its facility in Beijing.

The company has launched around 10 handsets so far this year including Micromax Unite II, Canvas Nitro, Canvas Win (first Microsoft Windows devices by Micromax), Canvas A1, Doodle and Canvas 4Plus, among others.

One of the defining moments came this year when the company's promoters decided to segregate ownership and management of the organisation. With the objective of transitioning from being a device business to a device and services company (and to drive global partnerships and strategic alliances), Micromax brought ex-Samsung India mobile chief Vineet Taneja as CEO in May followed by the appointment of Kapoor in June.

In the April-June quarter, Micromax gained the top spot as the country's biggest seller of handsets, dislodging Samsung. As per data from Hong Kong-based Counterpoint Technology Market Research, in the April-June period, Micromax's share of the overall handset market (smartphones, feature phones, and low-cost handsets) stood at 16.6 per cent, while Samsung settled for 14.4 per cent.

Gfk data for July, August and September showed South Korea's Samsung had achieved a 33 per cent market share at the end of the period after gaining over a percentage point from August. Micromax came in second with more than 18 per cent share, while Finnish handset maker Nokia, now owned by Microsoft, managed to keep itself going at No. 3 with 12 per cent share. In the wider market that includes feature phones, Samsung led with about a fourth of the market share while Nokia continued to be No 2 at about 21 per cent. Micromax, however, came in a distant third with 13.5 per cent share.