Micromax: Leveraging Scales

The last decade saw a significant growth in the mobile market. It was the medium budget segment
that attracted most with 1.5 times growth rate in the period. This growth was attributed to the entry
of domestic players in the market which was predominantly captured by global companies like
Microsoft, Samsung, Sony, Apple, etc.

The entry of players like Micromax and Karbonn made the industry more competitive, offering
a price range that was well suited for Indian market. In Q2 of 2014, Micromax overtook Samsung
in the overall sales of handsets, whereas, Karbonn outshined the Nokia market in India. With
the entry of Canvas, sales of Micromax in the Smartphone segment was sharply progressing
lagging just behind Samsung.
INTRODUCTION
Ten hours into the release of the phone, the companys website showed the SOLD OUT sign. On 14 February
2013, Micromax unveiled its crown jewel, the Micromax A116 Canvas HD. The timing of the release was very
carefully thought out. Although the company announced that the phone will be out by the first week of
February. However, Micromax seemed to have missed the deadline and had to postpone it by another week.
There were multiple theories behind this delay. The main reason was that in a market where delays such as
this usually hamper a company, benefited Micromax in more ways than one. 14 February, the valentines day
during which gifting was rampant, was an interesting choice by Micromax to launch the phone. With a price
tag under Rs 15000, Micromax took advantage of the fact that the A116 could be a gift (albeit a bit lavish).
Another relevance of the day of the release was that the Micromax A116 Canvas HD was launched a day before
the Samsung Galaxy Grand. This shifted all the limelight away from the Galaxy Grand.
According to a survey made by NDTV, when asked by the users to rate the two phones, Micromax A116 Canvas
HD and the Samsung Galaxy Grand, and pick one based only on the specifications alone, the Micromax handset
won comfortably. The Canvas HD raised the bar significantly from its predecessor the Canvas 2 A110. It boasted
of a higher definition screen and a more powerful quad-core CPU and in a price range which was not offered
by any other handset maker in the market. On comparing the Canvas HD with its closest rival the Samsung
Galaxy Grand customers saw that the A116 launched with the 4.1 Jelly Bean operating system right out of the
box. This not only put it ahead of the competition with other phones in its price range, but also ahead of some
other high-end handsets. The 5 inch HD display was fitted with a 720p IPS display, which gave the same pixel
count as the first Galaxy Note and much more than what the Grand had to offer. And the biggest factor where
Micromax gained the market was that the Canvas HD was priced at Rs 13990, high for a Micromax product.
The Galaxy Grand having almost similar specifications was priced at Rs 21500.
No matter how much anyone tried and nit-picked, it was a proven fact that the Canvas HD was the best Android
smartphone at the time. It was really tough to beat even by the market leader Samsung. Some of the strong
points that worked in its favor included the HD IPS display, quad-core CPU and Jelly Bean support. On top, a
carefully thought out marketing strategy and a perfect launch date provided it the push to be one of the most
successful products of Micromax till date.

DESIGN THINKING AT MICROMAX

Micromax pioneered the level playing field for the technology by their innovative and afford-able product

offerings in the past decade. The barrier for large-scale adoption of advanced technologies was further
removed. Micromax celebrated the vibrancies of life and empowerment and was a brand which was close to
the heart of the youth. The budget friendly price range was an instant connect with the youngsters as they also
had a very up end design and style. The products of Micromax had an impact and was positioned as an
extension of the Indian youths lifestyle and dynamism. Micromax was first in presenting many features to the
customers which comprised the 30-day battery backup, dual-sim standby handsets, QWERTY keypads,
universal remote control, first quad-core budget smart phone, etc.
The design thinking of the first product of Micromax came from as simple a thing as a truck. Rahul Sharma, CEO
of Micromax, saw an Airtel PCO being powered by a truck battery in a village named Behrampur in West Bengal.
The PCO owner inspired Sharma about Micromaxs first product. The company went ahead and designed a 30days lasting battery on a single charge. The X1i, priced at Rs 2249, was instantly popular in rural India. In 1999,
Nokia had signed Micromax as an all-India distributor for machine-to-machine mobile devices used by call
centres and PCOs. But in 2004, Nokia decided to exit the segment posing a threat to Micromax. Then came the
mobile revolution and Micromax jumped on the bandwagon. Micromax stressed on innovation for the priceconscious users.
Micromax sourced its handsets from 12 Chinese, South Korean and Taiwanese factories. This model was
beneficial as compared to the model of Nokia which was compelled to source and stay in-house or got to a
vendor-partner, even if another vendor had better capabilities.

Beyond Fashion
Wow what a phone This was the first reaction for almost all ladies who saw Micromax mobile Bling Q55.
The Micromax Bling Q55 was a unique, one of kind and trend setting phone. The phone came in white and was
in limited edition Black with studded elements of Swarovski. The build quality and the design of the phone was
all made to attract the target customers women!
The phone was fitted with a vanity mirror at the back side for ladies especially. It provided value for money
since the cost was less than Rs 5000 for the consumers.
Micromax kept coming up with beautifully designed phones. Initially criticized for copying the styles of leading
mobile brands such as Samsung, Micromax was then coming up with better and elegant designs for their new
products. They started manufacturing in India which gave them more freedom to exercise their creative
control. As they moved further into the future they raised the expectations from the customers to deliver
phones with both better specifications and design. And by the help of its looks, Micromax was certainly taking
up the challenge very well.

CULTURE OF INNOVATION
We have never sold our phones on price, jaise ki nau hazaar rupae mei yeh yeh milega never [for instance,
you wont get this that for Rs 9,000]. We have always sold our phones on imagery, we have highlighted the
design and the technology we are offering. We want to be seen as cool, in-your-face and edgy. That is why
we are associated with sports and music. Why should consumers pay Rs 30,000 or more for phones when
Micromax is offering them more value on a similar product?
Rahul Sharma, CEO Micromax Informatics Limited
Micromax worked passionately to achieve a customer centric position in market with the CEOs desire to lead
the growth curve by constant innovation and thus make Micromax the most loved mobile technology firm in
India. Supervised by Rahuls leadership, Micromax Informatics Limited achieved the target of a billion dollar
company in FY 201314.

Micromax had more than 70 models as their brands product portfolio, ranging from, data cards, dual SIM
phones, 3G Android smartphones, tablets and LED televisions. The company looked at adopting a diversified
product range with an aim of having customers using Micromax smart LEDs, connected to Micromax
smartphones over Micromax data-cards. It was thus the Midas touch of the CEO that brought unparalleled
increase in revenue inflows for the company. Rahul thus challenged the old schools thought that innovation
comes with a price, by introducing low-cost high technology products.
Within 5 years of existence, Micromax was the best seller of smartphone in India and at number 12 globally.
Even, it had 18.4% market share in the Indian tablet market and competed with big firms like Samsung and
Apple.
One of the main reasons of companys success in providing high quality features at cheaper rates and launching
new designs in the market at a higher speed was by leveraging China in managing the above crucial inputs.
China offered the labor cost advantage and product flexibility to Micromax. The companys success strategy
was to create high volumes of mobiles, ensure effective distribution, provide innovative products that were
cost-efficient and finally create a strong loved brand. Micromaxs growth strategy followed three stages.
Initially Micromax picked handsets from China, rebranded them and put them in the Indian market. In next
stage, Micromax did an extensive research for the demand in Indian market and developed products around
the same. Finally, Micromax followed a mix and match strategy having some products made in China and
other different countries, source its components from foreign countries and manufacture few newer products
in India.
Micromax was able to offer their products 40% lower than their global competitors by getting products
manufactured in China. Their basic and main strategy was affordable innovation. Micromax was always focused
on four critical components of a phone, i.e., screen, camera, chip-set and memory used in device. China offered
all the requirements at a very cheaper rate. The country had clearly built scale economies and knew how to
leverage it. Regarding designing process, Micromax started its R&D facility, created prototypes and instructed
its third-party manufacturers in China on what the company expected.
Micromax always put efforts to identify manufacturers in China who worked with global brands. The company
dealt with Tier I manufacturers only like Foxconn, BYD. It never put emphasis on Tier II and Tier III
manufacturers where quality was not emphasized. Around 500,000 handsets orders were put by Micromax at
the entry level from their contract manufacturers in China at one instance. Tier I manufacturers in China
typically charged $ 17 more per handset. Micromax worked hard at securing sound and formidable
partnerships.

Innovation and Product Development Strategy

Micromax innovation and product development cycle was the key to its success in the market. They formed a
team of 10 to 12 innovative design engineers who designed the phone. However the manufacturing was
contracted to countries like China, Taiwan and Indonesia where the same was cost effective and investment to
set up a plant was less. Also few models of mobiles were assembled in Uttar Pradesh and Bihar, which provided
a cheap labor for production.
Steps involved in successful innovation of Micromax

Find out customer pain (E.g. Long Battery Life Handset).

Budget, scope and payback period of the launch was decided.
Reverse thinking, random idea generation, critical thinking, parallel thinking and many more techniques
were adopted.
Focus on market research, which required focus groups discussions and research to see how customer

reacts on the idea.

Planning Innovative business model to execute the idea from idea to market.
Permanent product development strategy

Micromax provided several features in their handsets that were permanent and did not change. Examples of
this include dual sim feature. After the initial development, these features remained for extended periods of
time without undergoing significant changes.
Temporary product development strategy

In addition to its permanent features offerings, Micromax regularly developed temporary features. The
projector enabled handset, for example, was a product that was offered once. Also mobile phone with a
universal remote for television was quite a different idea. The purpose of these products development strategy
was to give customers something new to experience and to experiment with new features that may become
permanent.

MICROMAX IN THE MARKET

Our multinational competitors offered one or two smartphone models in every successive screen size of 3.5
inch, 4.3 inch, 4.7 inch, 5 inch, etc. It was as though they were checking each [screen size] box with a few
models, From Rs 6,000 Canvas Viva to Rs 19,000 Canvas 4, we have put a 5-inch Smartphone next to each of
their boxes. We bet the house on 5-inch Smartphones and that market just exploded!
Rahul Sharma, Co-founder of Micromax
The Micromax devise made sense in the Indian market especially at 25 percent of the Note 2s cost. Within
three weeks, Micromax sets were all sold out. This was Micromaxs biggest threat signal to the global giants.
Samsung India denied speaking with Forbes India for this story. One of their spokesperson blatantly ridiculed
the accuracy of the reports and said that they were more convinced by the GFK-Nielsens numbers. He said,
We do not consider Micromax a competitor. To this Sharma wittily replied, I think Mahatma Gandhi said it
best: First they ignore you, then they ridicule you, then they fight you, and then you win!
The Indian smartphone market was expected to grow to over 410 million handsets to the period ending
December 2014. The growth in the Indian market was driven by replacements rather than new user additions.
The three avenues were identified as the key growth granules in the Indian market as Replacement Cycle;
3G/4G business; Value added Services [Exhibit 8.1]. Micromax left no stone unturned as far as bold and
balanced marketing was concerned. Its new punch logo was unveiled on 18 March 2012 on the occasion of
India vs Pakistan cricket match.
Micromax Canvas 4 was directly positioned and compared to Samsung Galaxy S4. Customers were impressed
with commercials of Canvas 4 and the launch had a live web feed. In addition the company signed Hugh
Jackman, the Hollywood superstar over other Bollywood actors as the brand ambassador. With its brand
Mantras like Nothing like Anything and Can Juggle many Lives for Canvas Turbo, Micromax deserved full
credits for commitment.
Besides, they also roped Akshay Kumar, the Indian Bollywood flamboyant for covering advertisements for its
Bolt A67 and Bolt. As already stated, A55 Bling model had also another effective marketing strategy put forward
by Micromax studded with Swarovski crystals. Although this was not the first phone in market to focus on
women customers, but the phone became a huge hit instantly. Moreover, Micromax understood the Indian
market much better than their foreign competitors. The firm focused on rural Indian markets unlike other
competitors, by identifying the unmet demand of rural India. The company focused on their needs and built
their product strategy around the same.

The company was also eyeing the global market given their international standards. The innovation, planning,
effective marketing and low cost strategy made Micromax a household name in India which they wanted to
leverage across the globe.

COMPETITIVE ADVANTAGE
The Indian mobile phone market is very competitive with more than 150 device manufacturers selling
devices to consumers. Most of these manufacturers remain focused on the low-cost feature phone market
which still constitutes over 91 percent of overall mobile phone sales, offering a huge market to compete in.
Anshul Gupta, Principal Research Analyst at Gartner
Design, manufacturing and component sourcing were three pillars in handset industry for every firm operating
in it. Handset design along with four component categories integrated circuits, passives, modular component,
and plastic parts and three manufacturing steps namely PCB assembly, box build assembly and testing formed
the value chain of the industry. Micromax mastered these steps in India especially where consumers were
highly price sensitive. Micromax products were value for money. Micromax was dependent on China and
Taiwan to manufacture their handsets because of their stronger supply chain, better infrastructure and cost
effective work force. Over this, it had a service factory at Delhi which provided services such as chipset and PCB
replacement. It offered toll free telephone numbers for complaint registration. In 2014 Micromax had more
than 400 service centres which operated in 250 cities. The firm was looking at increasing its number to a huge
value.

Revenue Generator of Micromax

Micromax expected to hit $ 1 billion (over Rs 6100 crore) in revenues this fiscal. The companys revenues were
3168 crore for the financial year 201213. It held about 16% market share in Q$ 2013. Some of the top selling
models were the entry level smart phones like A35 Bolt and A67.

Products of Micromax
Computers and peripheral, routers and modems, data cards, computer accessories, TVS, audio and video,
televisions, home theatre systems, mobiles and tablets, mobile phones, tablets, mobile cases and covers,
mobile and tablet accessories batteries, clocks, Micromax sold around 2.3 million mobility devices every month
with a presence in more than 560 districts through 125000 outlets in India. Also, it launched funbook on 3 April
2012, an android 4.0 ice cream sandwich tablet with 7-inch capacitive display. It launched the Canvas Tab P650
android tablet, the first tablet in the canvas series. It controlled tablet market with a share of 18.4%, ahead of
veterans Samsung and Apple. Furthermore, it entered in the television market with the launch of LED TV 24inch to 55-inch range. It had a production capacity of 2000 LEDs per day.

FUTURE CHALLENGES
With already capturing the Indian market Micromax looked at the global markets to place its products. Hong
Kong, Bangladesh, Nepal, Sri Lanka, Maldives, UAE, Kingdom of Saudi Arabia, Kuwait, Qatar, Oman, Afghanistan
and Brazil started seeing Micromaxs presence which needed to be strengthened over time.
Once being labelled as a Chinese mobile, it started manufacturing in India, this would improve its brand image
and would also reduce the outsourcing delays from China. While answering in an interview the CEO of
Micromax, Rahul Sharma said that they have high hopes of the US and European markets. With the largest
market share in mobiles along with the technological innovations Micromax landed safe in the future of mobile
technology.
Though Micromax provided a wide range of products yet the after sales service was one area where Micromax

wanted to improve further. They needed to offer a great after-sales support. It was something that prohibited
customers from buying Micromax. They really needed to introspect into their after-sales service, which was
currently not up to the mark. Also they needed to retain their customers for repeated purchase. The market
for their premium products from Canvas series included customers entering for the first time into the
smartphone market. A very small share of these customers came again to buy a Micromax mobile. This posed
the challenge of losing their customer base.
Furthermore, the emergence of other Indian companies into the market posed a threat to Micromax as these
companies were slowly moving up the ladder, with Karbonn mobiles sales in India at the fourth place above
Nokia. Finally, Micromax still had a weak brand image in urban areas, which needed to be improved to have
monopoly over the mobile market.

Questions for Discussions

1. What are the competitive advantages for Micromax?
2. Analyze the dynamics of industry in which it is operating. Are these dynamics favorable or problematic?
3. As the CEO, solve the Micromaxs long standing problems with respect to the competition
4. Has Micromax found a new formula to create a sustainable competitive advantage?

Exhibit
Exhibit 8.1 Significant Milestones in Micromaxs History (20082014)
2000

Micromax was founded by Rahul Sharma, Vikas Jain, Sumeet Arora and Rajesh Agarwal. They started
their business with the sale of hardware parts.

2010

Micromax started manufacturing mobile phones in 2010 with a focus on low pricing, in order to
compete with international brands.

2011

Micromax entered the tablet segment with Canvas segment.

2013

Micromax attacking with a new marketing strategy signed Hugh Jackman for the commercial of their
Canvas Turbo smartphone.

January, 2014

On 24 January, Micromax became the first Indian company to start its business in Russia.

April, 2014

In April 2014, Micromax started manufacturing mobile phones and tablets at their facility in Rudraprayag,
Uttarakhand, earlier they sourced all their mobile phones from China.

July, 2014

Quarter 2, 2014 reports place Micromax ahead of Samsung to become the highest selling handset
brand in India.