Professional Documents
Culture Documents
Report on
Indian Mobile Handset Industry
Table of Contents
Introduction and Historical background of industry 2
World Market
Future Estimates 4
Analysis of Mobile industry using Porters Five Forces Model
Supplier power
Buyer Power
New Entrants
Substitute 10
Rivalry
12
14
Conclusion 16
References 17
Page 1 of 17
India has come in a close second in the sale of mobile phones in the year 2006. China
has led the race of mobile sales being the highest in the world. In India however the GSM
phones rule over the CDMA handsets. Leading the categories are Nokia, Samsung, Sony
Erickson while Reliance takes a large size share in the corporate segment. The Indian mobile
phones market had total revenue of $6.1 billion in 2009, representing a compound annual
growth rate (CAGR) of 23.1% for the period spanning 2005-2009. In comparison, the
Chinese market increased with a CAGR of 16.4%, and the Japanese market declined with a
CARC of -2.1%, over the same period, to reach respective values of $23.1 billion and $13.2
billion in 2009. Market consumption volumes increased with a CAGR of 29.8% between
2005 and 2009, to reach a total of 117 million units in 2009. (Source Data monitor)
Cellular phone penetration in India stood at 45 percent in 2009, and the market is
entering into a second phase of growth, with replacement sales increasing from 45 percent in
2009 to 50 percent of total sales in 2010. Moves to high-speed 3G networks is bringing in
more challenges in terms of innovation and keeping up with fast changing consumer demand.
Shortening product life cycle times and declining sales of voice-centric devices will bring
changes to the market during the next five years.2
Market Players
Recently till 2009, Indian mobile market was dominated by large global players like
Nokia, Samsung, LG and Sony Ericsson. According to latest data available, in the financial
year 2009 10, the market share of Nokia in India stood at 52.2% versus 64% in the last
financial year. Samsung share stood at 17.4% versus 10% last year while LG stood third with
5.9% market share. Fall in share of Nokia was mainly due to the entry of many Indian
handset makers whose combined market share was just lurking between 3 to 4% in the
previous financial year has grown up to 14%.Micromax mobiles topped the chart (of Indian
makers) with 4.1% share followed by Spice (3.9%) and Karbonn mobiles (3%). Recent
entrants such as Lava mobile, Lemon mobiles and Max mobile too are hovering around that
1% market share. Success of the new players is mainly attributing to the low price and
introduction of dual sim phones whose demand increases as a result of the fall in call rates.3
However, the Dual sim craze might not last longer as consolidation is expected in the
Indian market when maintaining 2-3 Sim cards would prove to be heavy. And not to forget
the 3G entrance to India last year so people would certainly look for 3G handsets.
Page 3 of 17
Future Estimates
The market's volume is expected to rise to 206.7 million units by the end of 2014,
representing a CAGR of 12.1% for the 2009-2014 periods. The performance of the market is
forecast to decelerate, with an anticipated CAGR of 16.3% for the five year period 20092014, which is expected to drive the market to a value of $12.9 billion by the end of 2014.
Comparatively, the Chinese and Japanese markets will grow with CAGRs of 17.2% and 7.3%
respectively, over the same period, to reach respective values of $50.9 billion and $18.8
billion in 2014. (Source Data monitor)
Page 4 of 17
Page 5 of 17
High
5
1. Differentiated Input Since basic type of input (keypad, screen) required for handset
manufacturing is more or less same so they dont create much of the differentiated input.
Page 6 of 17
2.
3.
4.
5.
6.
However for high end premium mobile phones, material and technology required is of very
different type for different manufacturer. Companies could switch suppliers for non critical
components but are closely tied to them for critical components and sub-systems. Thus
strength of this parameter is medium and attractiveness of industry is given 4 points.
Forward Integration Suppliers do not pose any credible threat of forward integration even
though they are outsourced. Thus strength is low and rating is 4 points.
Importance of quality/cost Due to increased competition in the industry, quality is
becoming a necessity for any player to survive. Indian people are becoming more quality
conscious day by day and they want good quality phone at low cost. Thus strength of this
factor is high and it can decrease the attractiveness of the industry hence rating given is 2
points.
No Substitute inputs Due to availability of large number of substitute supplier for non
critical components, the strength of this factor is low and attractiveness rating is 5.
Supplier Size - Manufacturers are much larger companies than suppliers and therefore they
have the ability to influence supply contracts. For example, Nokia carry out assessments on
their suppliers to make sure they meet standards. . However this is partly because market
players are so heavily reliant on the quality and efficiency of the software and products
provided. Moreover, some of the software, such as integrated circuits, can be specific to the
company, which again increases dependence upon suppliers. Thus the strength of this medium
and rating given is 3.
Switching Costs Since requirement of high quality supplies and huge volume requirement,
it is very tough for any manufacturer to switch its suppliers easily. Also due to requirement of
specific technology for particular handset, switching costs are very high. Thus the strength is
medium and attractiveness rating given is 2.
supplier size
player independence
Series 1
Importance of quality/cost
No substitute input
player dispesability
oligoply threat
2. BUYER POWER:
Buyers in the market fall into two categories. Firstly, independent retail outlets and big store
retailers, purchase handsets to sell on to end-users. Mobile network operators constitute the other
section of buyers in the market, although some of these operators are vertically integrated and have
their own retail outlets. There are a small number of large mobile network operators, giving them
some negotiation muscle when bidding for contracts with market players. However it is necessary for
all buyers to stock the latest innovative products if they want to meet end-user demand and this
diminishes their strength in the supply chain. Both: network operators and retailers are occasionally
able to win exclusive deals with manufacturers. Overall buyer power is moderate.
Page 7 of 17
Low
1
High
5
Low
Medium
High
High
High
Less
Medium
Medium
High
Medium
1. Buyer Size Since there are so many small and different buyers, they are source of
attractiveness for new players. Thus the strength is high and rating given is 5.
2. Low cost switching Switching cost is very low for buyers as there are so many different
handsets available at different prices. Thus the buyers have power to switch easily. Hence the
strength of this factor is high and it decreases the attractiveness to some extent. However due
to brand loyalty they might not switch easily which result in rating of 2.
3. Price sensitivity Since India is growing at an average rate of 8% since last decade, income
level has gone significantly. Lifestyle of people has changed to a great extent. Status is one of
the desirable factors in the handset. But still much of Indian population lives in rural and
semi-urban population, people are somewhat price sensitive. Thus the strength of this factor is
medium and rating given is 3.
4. Tendency to switch Since the switching cost is not so high, people tend to switch mobile
phone if they are unsatisfied with the current phone or if some other phone with better feature
is launched. Thus the strength of this factor is high and rating given is 2 as buyer has some
power.
5. Undifferentiated product Majority of mobile phone provide all the basic facilities like
calling, texting, alarm, calendar, camera, radio etc. Thus point of differentiation lies mainly in
price and other special feature like GPS, Music player quality, WiFi etc. Thus if we look
across different segments, we can see many differentiated product and also some phone are
highly differentiated. Thus the strength of this factor is medium and rating given it 3.
6. Financial Muscle Since the wholesale buyers and distributors are in good financial
position, mobile manufacturer need not worry much about the business with them. Hence the
strength of this factor is medium and rating given is 5.
7. Background Integration Since it requires very high investments and high expertise, small
retailers and distributor cannot background integrate easily. Also as of now we have not seen
any backward integration. Thus the strength is low and rating given is 4.
Page 8 of 17
Buyer independence
Series 1
Oligopsony threat
Buyer size
Financial muscle
3. NEW ENTRANTS:
The overall threat to mobile handset industry due to new entrants is moderate. The
reason for moderate risk is due to the fact that companies in electronic equipment
manufacturing can easily venture into mobile industry owing to similar technology. Examples
are success of Blackberry, HTC and other smart phones. All of the established mobile phone
manufacturers are now following suit by launching their own smart phones, which suggests
that this section of the market is likely to see significant growth over the next few years,
luring newcomers with revenue perspective.
Problems:
1. For entirely new entrants, the scenario is difficult because they have to compete in
technology with already established big players like Nokia, Samsung, and Motorola etc.
They will require huge capital outlay not only in production facilities but also in research
and development.
2. There are stringent laws relating to science-based regulation and the adoption of emission
guidance by the International Commission on Non-Ionizing Radiation. Furthermore
mobile manufacture is closely monitored with studies being conducted on the possible
side effects of electromagnetic fields produced by mobile phones.
3. Though buyers may have good disposable income and youngsters may have fad to change
their handsets very frequently but they rely on established players who in recent times are
coming up with new, fancy and cost effective models catering to the needs of the
consumers. So new entrant will find it difficult to establish itself and compete at the same
level of innovation by creating not only a share of market but also share of mind.
Statistics:
In Indian handset industry, the number of new entrants has almost doubled to 68 and
market share which they now hold is around 45 percent. New entrants include Indian
manufacturers like micromax, spice,Karbonn, Chinese player Bird, Taiwan-based DBTel and
Taiwan-based BenQ etc.
Page 9 of 17
Brand
Nokia
Sony Ericsson
Samsung
Other(legal)
Gray
Percent share
52
8
6
7
27
Factors:
Strength
Market Growth
cost switching
Fixed Cost
Regulation
Access
to
channel
Distributions
Other Brands
Product
Access to material
Scaling
Attractiveness
Low
1
2
High
5
High
Low
Low
Low
of
Moderate
Strong
Undifferentiated
Easy
Unimportant
1. Market growth: The mobile handset market is growing at a very fast pace. Indias mobile
handset market touched 100.9 million units in the year ended June 2009, recording a growth
of 6.7% from 94.6 million units in the previous year ended June 2008, according to IDC
India.
Switching Cost
Supplier
Fixed Cost
Series 1
UndifferentiatedProduct
Regulation
Brands
Distribution channel
4. SUBSTITUTE:
Threat from substitutes is very low because potential substitutes are landlines, e-mail,
networking sites, messengers (skype, gtalk, yahoo messenger) etc. But it can be said that
threat from such substitutes is quite low. Landline, once dominant player is in declining
stage. E-mails and networking sites can never be perfect substitutes for mobile phones.
Many mobiles now provide their users with the internet, TV, GPS and mp3 functions. With
these features in offering and complete mobility at affordable prices, any significant threat
from the substitutes is ruled out.
Statistics:
Page 11 of 17
It can be clearly seen that number of cell phone users is far above than that of land line
users. Also looking at the number of monthly cell phone addition, it is quite close to the
number of land line users. It can be conveniently concluded that there is no serious threat
from landline which is close substitute of mobile users.
Factors:
Strength
Availability
of
substitutes
Switching Cost
Beneficial alternative
Attractiveness
Low
1
2
High
5
close
low
low
not enough
1. Availability of close substitutes: This poses a very low threat because advantages offered by
mobile phones include voice services at affordable rates, complete mobility and value added
services. This list not being exhaustive clearly surpasses any other substitute.
2. Switching Cost: As far as switching costs are concerned, they are low but lack of potential
substitute dismisses the threat that could have cropped because of low switching cost.
3. Beneficial alternative: There may be services offered on internet which cannot be availed on
mobile phones but it can never replace mobile phones. Recently i-pad and palm computers
have come up but they are very costly and at the same time not convenient to carry. Landlines
on other hand do not offer any other service apart from voice calling which is not what
generation look out for.
Page 12 of 17
Series 1
0
Beneficial alternative
Switching cost
5. RIVALRY:
This market is mostly dominated by a few large well known companies such as LG,
Samsung, Nokia and Motorola, which intensifies competition. Also present in the market,
however, is a second tier of small manufacturers with phones that are targeted towards niche
markets or produced for specific regions. Market penetration is high and in such conditions
well established mobile phone firms, such as Motorola, have responded by creating growth
opportunities through a high generation of replacement handset sales.
Statistics:
Based on IDC India, Nokia's market share dropped significantly to 36 percent in the second
quarter, from 56.8 percent in the same quarter last year and further drop to 31.5 percent in the
third quarter, reflecting the growing share of Chinese and Indian vendors of low-end mobile
phones.
Sour
ce
IDC
Date
Q4/20
10
Gartn Q3/20
er
10
Nok
ia
30.8
%
28.2
%
SAMSU
NG
20.1%
17.2%
LG ZT
E
7.6 4.2
%
%
6.6
%
App
le
4.0
%
3.2
%
RI
M
2.9
%
Othe
rs
33.2
%
33.0
%
Factors:
Strength
No
of
Competitors
Industry Growth
Fixed Cost
Differentiation
Attractiveness
Low
1
2
High
High
Low
Low
Page 13 of 17
High
5
Low
Important
low
High
Easy
1. Number of Competitors: penetrated by large number of brands, still it poses little threat
because each has their own production facilities, distribution centers and clientele base which
it needs to retain by investing regularly in R&D which till now companies have been able to
do so. With growing market if competitors are close competitors, they still have lot of
untapped potential in terms of rural market.
2. Industry growth: Mobile handset industry is growing very fast with giving lot of
opportunities to not only existing players but also new entrants and thus this is an area of high
opportunity and threat at the same time.
Page 14 of 17
storage cost
fixed cost
differentiation
competitor
switching
size cost
Page 15 of 17
Now some of the strategies adopted by firms to sustain rapid market growth are:
1.
2.
3.
4.
5.
6.
It improves product quality and adds new product features and improved styling.
It adds new models and flanker products.
It enters new market segments.
It increases its distribution coverage and enters new distribution channels.
It shifts from product-awareness advertising to product-preference advertising.
It lowers prices to attract the next layer of price-sensitive buyers.
The mobile handset industry in India is in growth stage which can be attributed to the reasons
below mentioned:
1. Growth story of Mobile industry in India can be summarized in following manner,
a. Market volume: The Indian mobile phones market grew by 27.7% in 2009 to
reach a volume of 117 million units.
a. Market volume forecast: In 2014, the Indian mobile phones market is forecast to
have a volume of 206.7 million units, an increase of 76.7% since 2009.
India mobile
phones market value forecast: $ million, 20091
The Indian mobile phone market has experienced rapid, double-digit growth in recent
years and although deceleration is expected towards 2014, further double-digit growth
is forecast.
2. Another characteristic of mature industry is entering of new competitors attracted by
opportunities. As have been shown in previous point market forecast for mobile
industry is very bright and in recent past many new players have emerged. Some of
the emerging Indian player are Maxmobile, Karbonn, spice etc.
India mobile phones market segmentation by value is,
Category
% share
China
43.7
Japan
25
India
11.5
South Korea
9.0
Rest of Asia-Pacific
10.7
(Source: Datamonitor)
3. Some of the emerging opportunities which will be leveraged and bring huge revenues
to the firm are,
a. An area of potential growth is mobile banking (m-banking). There are more than
600 million users of mobile phones in India but only 40 percent of them have
bank accounts and less than 10 percent of those use even net banking. But this is
an area of huge potential and will bring revolution not only in banking but also
mobile industry.
b. Smartphone sales in the country accounted for 5.2% of total handset sales in the
first quarter of 2010. Gartner projects a growth of 18% in Smartphone sales by
2014. Also these smart phones or business phones have huge potential where
executives and working professionals want to keep themselves online and best
way to do so is through mobile. Blackberry, Nokia, and HTC are important players
in this sector.
c. 3G is another big revolution bound to happen in India with its emergence 3G
enabled devices will be in huge demand. This will improve video quality and
internet speed. As per reports by Gartner 3G subscribers will grow manifolds
within next 3 years.
d. Lower tariff plans and value added services also contribute a lot in replacing not
only landline but also forcing each member in a family to own a mobile phone for
self. 24 hours connectivity is thing of the present and with mobiles penetrating in
middle class households like anything, this market will grow as rural sector ia still
largely untouched which has huge untapped potential.
e. Mobile applications form yet another important promising sector. More than 1,000
developers in India create mobile apps such as games, social networking apps, and
utility apps. However, these apps are not India-specific and cater to a global
audience. With 3G and improved connectivity, Indias consumers will be able to
take advantage of the home grown mobile apps.
4. The strategies adopted by firms in growth phase have been mentioned above and on
close observation it can be seen that similar strategies are being adopted by players in
the mobile industry,
Page 17 of 17
Conclusion:
With a large percentage of its population being young, India is expected to top the world's
youth mobile market by 2011. For the techno savvy youth, a phone should combine cool
looks with utility. Considering the various factors driving the growth of the mobile market in
India, the young, dynamic, and developing mobile market will offer great opportunities and
challenges for local as well as international players. The recent enormous growth of the
industry has attracted many players. Currently, there are 88 companies in India which are
manufacturing mobile handsets. Some of the main companies are Airfone, Beetel, Maxx,
Lava, Olive, Acer, CAPLIGHT, Airnet, etc. This is supporting the increased teledensity in
India. International studies have proven that with every 1 percent increase of teledensity,
there is an increase of 3 percent in the GDP of that country. Thus, this booming mobile
industry is now playing an active part to make India a strong economy of the world.
Page 18 of 17
Page 19 of 17