Nokia: Losing Ground in India
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Case Code: BSTR447 Case Length: 19 Pages Period: 1994 - 2013 Pub Date: 2014 Teaching Note: Not Available |
Price: Rs.500 Organization: Nokia Industry: Telecommunications Countries: India Themes: Globalization, Strategic Alliance, Growth Strategies |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Nokia in India
In 1994, Nokia entered the Indian market. Nokia India operated as a subsidiary of Nokia Corporation. In 1995, the first mobile phone call in India was made through the Nokia network and on a Nokia handset. The first Indian ringtone – ‘Saare Jahan Se Achcha’ (meaning India is best in the world) – was introduced on a Nokia 5110 handset in 1998. In 2000, the Nokia 3210, a phone with the user menu in the local language – Hindi, was launched in India. In order to have a better understanding of the Indian market, the R&D Center was established in 2001. In 2002, the first camera phone, the Nokia 7650, was brought to India, followed by the first made-for-India phone, the Nokia 1100, in 2003. The Hindi text messaging service was launched in 2004 and Nokia introduced its first Wi-Fi enabled phone, the Nokia Communicator N9500 the same year.
In 2005, user interfaces in different Indian languages were introduced. For further expansion, the company established its manufacturing unit in South India, in 2005. In August 2007, when India was adding 6 to 7 million subscribers every month to a base of 170 million subscribers, Nokia held a major share in the Indian mobile phones market, with a market share of 58%. ...
Indian Telecom Market
In 1994, the Indian government initiated the telecom reforms which made the Indian market attractive to global mobile handset manufacturers. The Department of Telecom (DoT) was responsible for policy making, licensing, and promotion of private investments in telecom equipment manufacturing and provision of services. A series of reforms was initiated in the Telecom sector in order to open the Indian market up to foreign players. (Refer to Table II for reforms in the Indian telecom sector) The telecom policy announced by the government in 1999 allowed unrestricted private entry into all mobile service sectors. This policy coupled with other policies like sharing infrastructure with other operators, etc. helped in the growth of the mobile phone industry in the country. By 2001, there were 5 million mobile subscribers in the country. This increased to 10 million by 2002......
Losing the Grip
Nokia was the undisputed leader in India's mobile market till 2007. It was the leader in the feature phone market and entry level mobile phone market. It had a presence in the smartphone market through the N Series launched in 2005. The N series phones allowed the users to listen to music, take pictures, play games, and also access the internet. Nokia also had other smartphones, the C Series and the E Series that ran on its proprietary software Symbian, apart from XpressMusic phones. In 2007, Apple launched the iPhone, a smartphone....
The Reasons
In India, Nokia failed to assess the changing trends, and continued to launch low cost mobile phones for the lower end of the market. In 2007, it launched seven new low cost mobile phones that included the Nokia 2630, Nokia 2760, Nokia 2505, Nokia 1200, and Nokia 1208. The phones were equipped with functions and features designed specifically for emerging markets like India. Till 2007, Nokia launched an average of 40 new models every year suitable for emerging markets. In 2009, it recognized India as its second largest market. It targeted the lower income group and aimed to remove the affordability barrier of the Indian market so as to ensure easy accessibility to mobile telephony.....
The Acquisition
In September 2013, Nokia, announced that it would sell a part of its business to the US-based Microsoft. Microsoft acquired Nokia’s handset business for € 3.79 billion and licensed its patents for ten years for € 1.65 billion. Microsoft acquired not only Nokia’s Devices and Services Business with the mobile phone and smart devices segments but also the industry leading design team, its operations along with Devices and Services – related sales and marketing activities and related support functions. Microsoft also provided € 1.5 billion of ‘immediate financing’ to Nokia, when the latter’s debt was downgraded to ‘junk’ status. While Nokia would retain its patent portfolio, Microsoft could be gifting Nokia reciprocal rights to use Microsoft’s patents in its HERE services and in turn became a strategic licensee of the HERE platform.....
The Impact
The Indian market that included the highly price sensitive semi-urban and rural population showed an increasing number of internet subscribers on the mobile platform. As per TRAI, on a pan-India basis in 2013, there were some 898 million wireless mobile phone subscribers, out of whom 61% were urban and the remaining rural. The urban teledensity was 146.96 and rural teledensity was as low as 41.02 in March 2013. With a local manufacturing unit in Chennai, Nokia-Microsoft could competitively position its low-cost smartphones in such a low teledensity market. Analysts were of the view that through cost synergies on licensing, patents, and intellectual property and support of Microsoft’s R&D, the new Nokia could bring out better equipped phones at a lower price....
Exhibits
Exhibit I: Market Share and Revenue of Mobile companies in India (2013)
Exhibit II: Top 10 Mobile Phones in Indian Market - 2013
Exhibit III: Net Sales (in € Million) of Nokia in India
Exhibit IV: Post Acquisition Details of Email by Ballmer
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