Micromax Business Model and Strategy

Introduction• Founded in 1991 by Rajesh Agarwal

• 2008 Micromax joined the mobile handset market.

• Micromax is currently the 2nd largest smartphone

company in India.

• Micromax sells around 2.3 million Mobility Devices

every month.

• It had revenue of around Rs 10,000 crore in the year

2014-15.

MISSION

• To successfully overcome the technological barriers and constantly engender “life enhancing solutions”.

VISION

• To develop path breaking technologies and efficient processes that incubate newer markets, enliven customer aspirations and continue to make Micromax a trusted market leader amongst people.

• Ideology stems from its rooted belief in “ Innovation” and delivering “nothing short of the best”

BUSINESS MODEL

• Value Proposition– The USP of Micromax is offering feature rich smart

phones at very affordable prices.– Having higher commission for retailers and distributors

(5%)• Strategic resources– Market Knowledge– Sustainable partnership with Chinese manufacturers;

distributors/retailers.• Dynamic Process– Quick Launch of Mobile models

QUALITATIVE COMPONENTS

Organizational Capability Profile• Financial Capability– Maintaining without any debt and their credit

policy• Marketing Capability– Marketing and sales workforce/Market research

• Operations Capability– Supply chain & Distribution Channel

• Human Resources Capability– Strong top management

CORE COMPETENCY

• Cost Control• Outsourcing

REVENUE STREAMS

Selling electronic goods like mobile phone, tablet , LED TV (8% of the top line) etc.

Micromax is set to venture into the services business eg. areas of education, health and security, through partnerships

Quantitative components

COST CONTROL

Asset light business model

Low working capital

Partnership with MediaTek

Reducing Research and Development

Cost

Profitability• Rs 190-crore net profit, 6.1

per cent of its Rs 3,106 crore revenue in 2012-2013.

• Its profit before tax was Rs 280 crore, about 9 per cent of revenue.

• 2014-15 , revenue increased 39%

Micromax Profit Margin-6.1%

Samsung Profit Margin-13.22%

Apple Profit Margin- 21.42%

• Who it serves?

- Serves both the rural market by providing products

with long battery life and urban market by

providing them with various choices at affordable

prices.

• What it provides?– Smartphones, – Tablet computers– 3G datacards – LED televisions

• How it makes money?– Most of its revenue comes from selling mobile phones. – Micromax has started manufacturing LED Television sets

and tablet computers from April 2014.

2008-09 2009-10 2010-11 2011-12 2012-13 2013-140

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3106

7200Revenue(₹ crore)

Revenue(₹ crore)

How it provides its products/Services?

• Three-tier distribution network

• Through Amazon (Yu brand)

State-level distributors (60+)

local distributors (800+)

retail outlets (1, 25,000 )

Environmental Scanning

SWOT Analysis

STRENGTH -Promise to provide an economical handset

-Capitalised on the local market knowledge

-Extensive distribution -No debts

WEAKNESSHas limited global presence

-Not preferred by Tech-Savvy people

-Customers perceive it as Low price means low quality

OPPORTUNITIES-Market Expansion

-E commerce-Introduction of 4G

-Wearable technology and Virtual reality

THREATS-Competition from national &

global players.-Dynamic tech environment

Porter’s 5 Force Model

Bargaining power of Buyers-Low to medium

• Diverse customers• Switching cost-Low• The increasing number of choices and very

little differentiation of products• Availability of information aids buyer’s

bargaining ability

Threat of new entrants-Medium • Patents- 250,000 Active Patents.• Capital requirement- Medium • Time needed to set-up- Medium to High• Brand loyalty-Low (But Brand name is

important)• Already existing competition to gain market

share among the big players.

Bargaining Power of Suppliers-Medium to High

• Number of suppliers Chipset – Low(Qualcomm-66% and Mediatek-17% ) Operating System- Android(Open source),iOS,

Windows• Cost of switching- High• Comparative share in the business-Medium to High

Degree Of Rivalry- Medium• The Concentration Ratio Top 4 companies have - 60% share Samsung-23% Micromax-17.9%• Smartphone Market growth-19%• Competitors constantly at short intervals launch new

variants , Models , Versions and better features.• Response time of Competitors towards customers

demands and expectation lowering day by day

Threat of Substitutes - LOW

– Communication tech has reached to stagnation– Wire to Wireless Saturation – Only disruptive substitutes : Touch Pads, BookPads

with VoIP facilities– Nascent emergence of Wearable Technology– No Significant Tech existing to wipe out Mobile

and Smartphone industry any time soon

Corporate Level Strategy

• Directional: – Expansion in market: from rural to urban and now

international level– Diversification: Entered into TV segment– Capital budgeting: they thought of an IPO for $500

million but later on pulled back No debt in balance sheet

Business level strategy

• Unique Fusion of cost reduction and product differentiation – 30days battery – Dual sim– Slimmest phone

• Segmentation according to rural needs.

Functional Strategy

• Marketing: • Distribution channel and Celebrity endorsements• Following a Frontal and Flanking attack strategy.

• Human Resources: Recruited high potential top management.

• R&D : technology follower, setting up new plants. Outsourcing reduces the cost.

Recommendations

• Corporate level: Expansion into countries like Indonesia. Can have own retail outlets (Forward integration)

• No need for IPO until there is huge need for cash.

• Business Level: Focus on Differentiation• Functional Level: More Service centers &

software updates to increase the customer responsiveness.

THANK YOU