Micromax Business Model and Strategy
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Transcript of 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
1000
2000
3000
4000
5000
6000
7000
8000
650
1650
2400
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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