Akshay Sharma |Ankit Gupta| Ishan Shah| Tushar Sharma| Vivekanandan

Introduction
Usage Trends
Overview of Demand

India is the second largest market for Smartphones in World after China with
220 Million Smartphones in use.

In 2016 for the first time since the entry of Smartphones, global market
growth stalled

But at the same time Indian Market grew at staggering 23%.

India is the next China

Future growth aspects

More than a billion smartphones will be sold in India over the next five years

This will drive the number of smartphone users from quarter of a billion to
more than half a billion in the same time period.

Which will still be just 55% of the total population

Supply

The only constraint to affordable supply is technology.

The raw materials are getting cheaper day by day due to advent of new
technologies

4G LTE network infrastructure will be a key catalyst in the countrys

Smartphone adoption in coming years
Market Structure : Case for oligopoly
There are 100 + firms competing in the market, yet the market is heavily dominated by four top
players.
This suggests that the market structure is oligopoly (Differentiated oligopoly)
Further high barriers of entry exists in the market.
For a new firm to enter the market a highly developed production line and up to date
technology will be needed to compete with the existing firms
The new firm will also have to spend vast amounts of capital on areas such as marketing so they
have a chance of competing with the established firms within the oligopoly.
There is evidence of supernormal profits in the market which are present in an oligopoly
Barriers to Entry
As can be seen the
market share of the
platforms are
continuously expanding
obliterating everything
else.
Such kind of OS duo-
polization gives
entrenched players a
very huge benefit.
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Supernormal Profits

Apples iphone 6S costs $236 to make and sells for $749

Thus huge abnormal profit is being generated

Apple is not a specialist player globally but has around 20% market share,
hence it is a generic player who makes supernormal profits
Price Leadership

The price leader of the high end market is Apple. iPhone sets the price for
other high end phones

Samsung is the price leaders of the low end market, they set the price for low
end phones
Differentiated Oligopoly

The industry is differentiated oligopoly because no dominant design has yet

emerged in the industry

Reasons are

High appropriability (As evident by huge number of patent wars between Samsung
and Apple)

High technological radicality of the product

High network effects leading to excess inertia

 Apple IPhone

Smartphone market approaching saturation point in the U.S.

and Western Europe

Indian market key features: growing economy and an

increasing middle class

Apple depends on a select number of models in its portfolio

and lays higher emphasis on them unlike other competitors
with more price variety

Premium market (30K and above) in India expected to grow to

35 million units per year by 2018, up from 2015's shipments of
under 15 million
Price Changes in IPhone Models
Strategic Decisions

Apple is planning to import and sell refurbished iPhones

Contracting with multiple national-level distributors

Partnering with banks to back financing

Offering deep discounts on older models and providing buyback plans

Tie-ups with Vodafone to offer zero-down payment plans increasing

affordability
Samsung price strategy
Two major pricing strategy followed by Samsung

Price skimming
Products are priced high during introductory phase

Demand is usually inelastic during that phase

Gaining high profit in first few months of launch and recover its
investment

However higher unit sales has to be sacrificed due to high price

Samsung drops around 30-40% of its model price

After a year average cost of Samsung galaxy S is

Rs.28,000-32,000
Competitive pricing
Charging a price that is comparable to other vendors selling the same
item

Gain wider market share with competitive prices

Market leader sets the price

Samsung galaxy S series comes at around Rs.2000 less

than latest apple model

In lower and mid segment Samsung being the market

leader sets the price

MICROMAX:
In 2008, Micromax joined the mobile handset market.

By 2010, the company had grown to become one of the largest Indian
mobile handset companies.

It stands 2nd in terms of market share in smartphones category in 2016

But now the mobile company manufacturer is struggling with drastic

fall in the market share.

This is due to the entry of low cost Chinese mobile manufacturer

Trademark Strategic decisions:
Micromax was one of the first phones in the market to concentrate on
penetrating the smartphone market.

Introduced Low Cost Smartphones which would suit the rural pocket and
satisfy the price sensitive rural customers.

In the initial stages Micromax sourced its components from China, which gave
them more flexibility and less production costs.

It made use of the reduced barrier of entry by adopting the opensource

operating system ANDROID.

Micromax incorporated applications like Aisha(like apples Siri),Hookup to

avoid developing a inferior good image due to low cost.
Pricing Strategy of Micromax:

Micromax is using penetration pricing which is a pricing technique of setting

Low initial price which is lower than the actual market price.

Penetration Pricing:
Micromax employs the penetration pricing strategy to increase its market
share by producing low cost smartphones.

So they are able to get more demand from the price sensitive consumers.

They are able to produce the smartphones at a lower cost by outsourcing the
products to OEMs.

Micromax introduces around 40+ Models every year in the low cost segment.
Challenges for MICROMAX:

Micromax facing the heat from the Chinese manufacturers low cost mobile
phones which have the same features but less cost.

It has started to produce its components. so because of the increased cost it

is not able to indulge in the price war with Chinese players.

As a result there is decrease in demand for its products.

It will take time to achieve the economies of scale in its new plants till then
the operating profit will be less.

New innovations are very less in the smartphone when compared to previous
decade.So will not be able sustain just by changing the design.