Why Micromax needs to get smart or get going

In 2008 a small IT firm in Gurgaon decided to get in on the booming Indian mobile handsets game and Micromax started dabbling in handsets. Cut to two years later, and 2010 saw the dethroning of Nokia as the undisputed leader in the Indian mobile phone market, as Micromax and a host of other local and international vendors started competing for the largest share.

By early 2010, Micromax was the third largest GSM mobile phone vendor in India with a 6 percent market share, still a long way off from Nokia’s 62 percent and Samsung’s 8 percent market share. This was when the line between feature phones and smartphones was still blurry. But that’s no longer true.

In the third quarter of 2013 , Micromax has the second largest smartphone market share in India with 17.1 percent of the market, trailing Samsung’s 32.9 percent. The third in the list is Karbonn (11.2 percent), followed by Nokia (5 percent) and Lava (4.7 percent).

To put it in context, three years ago India did not have as many mobile phone vendors as it does today. But in the current densely packed marketplace companies like Lava and Karbonn that weren’t in the running a year ago as well as foreign players like Sony, LG, HTC, Huawei and Apple are all fighting for spoils, and Micromax’s 17.1 percent is still an impressive achievement.

However, the debate over its future is not nearly as steady. Market leader Samsung’s spokesperson speaking with Forbes India even went on to say - “We do not consider Micromax a competitor.” And although the Micromax management may respond with bravado, it doesn’t change the fact that the two companies exist in different leagues.

Samsung’s India revenues for 2012-13 in its mobile handset division were at Rs 11, 328 crore, a 43.5 percent hike over the previous year’s revenue of Rs 7,891 crore. That translates to revenue of Rs 31 crore on a daily basis.

Micromax’s revenue on the other hand was Rs 3,186 crore for 2012-13 - not even one-third of Samsung’s India revenues. So even though Micromax ranks second in market share it’s still a long gap between the first and second position.

Realising this vast chasm in front of them, Micromax is clearly trying to change customer mindsets - beginning with its customer service - the bane in its brand image which even the likes of Hugh Jackman can’t fix , unless customers genuinely perceive better service. Planning a 100 percent increase in its customer service centres for the coming year is perhaps a step in the right direction - Micromax is boosting service centre numbers from 745 now to 1250 by March 2014.

Another aspect of Micromax’s struggle is to get ahead of the technological curve rather than leading the “value for money” game. Although priced significantly lower, Micromax users quickly become aware of the limitations of their technology when faced with Samsung’s brand. The cosmetic appeal aside, hardware belongs to an earlier generation.

If Micromax believes it can change all this by improving customer service then it may be betting on the wrong horse. The commoditisation of technology makes consumer behaviour hard to predict. And to assume that consumers will always pick the cheaper of the given options is a folly that giants like the Tata group have also made with the Nano.

Consumer’s like cheap but not at the cost of service and personal brand image. The commoditisation of mobile phone technology started by Samsung via the Android interface has had far reaching consequences as exhibited by Apple’s lawsuit that explicitly attacks Samsung for diluting the brand value of Apple’s innovative design in the minds of the consumer.

But you can’t put the toothpaste back in the tube, and now companies like Samsung and Apple are thinking generations ahead with their mobile design with terms like Internet of Things and wearable technology. Micromax can’t expect to play to the bottom of the consumer pyramid if it hopes to make it in the global scenario. With reach in SAARC countries and early presence in Russia, Micromax is learning the hard lesson in painful increments - the world is moving too fast and playing for cheap isn’t going to cut it.

Micromax represents a success story in Indian business and if it hopes to continue doing the image of the Indian entrepreneur proud then it can’t afford to talk about setting up assembly plants in India to recreate the cheaper efficiencies of China. For too long India has regurgitated the outdated technologies of Chinese manufacturing to low end Indian markets.