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Can Nokia really pull itself up again?

 

Nokia is fighting really hard to stage a comeback to the Indian market. First a deal with Microsoft and then a slew of product launches, including the Windows based Lumia, Nokia is pulling every string to bring back those good ol’ days. But can it? By Anirudh Raheja
ANIRUDH RAHEJA | Issue Dated: May 26, 2013, New Delhi
Tags : NOkia | Smatphones | Samsung | Micromax | Symbian | Android | Google |
 

It was in the year 1995, when Finnish mobile handset maker Nokia had entered the Indian terrain and within no time, it found itself in a pioneering role to shape the growth of the Indian cellular industry when there was hardly any serious competition. In fact, over the years, it churned out a range of handsets across the price pyramid starting from low-cost ones like Nokia 1100 in 2003, and ensured that product features were in tune with Indian conditions. It also kept on unleashing smartphones like N95, based on Symbian and eventually bought the company in 2008.

Interestingly, that was approximately the time when tide started turning as Nokia lost its steam to the relative smartphone upstarts like Apple and Samsung. Even on the low end, players like Micromax, Karbonn, etc ensured that Nokia had to battle harder for every inch of space. And the trend continues till date. In fact, the handset manufacturer’s Q1 (2013) earnings report offers yet another reality check for its stakeholders.

To begin with, the single most glaring negative indicator is Nokia’s rather drastic decline in total mobile phone volume, both sequentially (-25% quarter-on-quarter) and yearly (-28% year-on-year). Although NSN (Nokia Siemens Networks), its joint venture with Siemens, records an operating profit of euro 3 million, it’s rather less than what one would hope for on sales of euro 2.8 billion. Overall, Nokia’s net sales are down globally 20% y-o-y indicating continued problems of selling its actual goods and services in every division, sector and geographical area.

In India too, as it is with other parts of the world, the company has made some serious strategic blunders that have led to serious corrections in its growth story. In fact, Nokia’s overdependence on the Symbian proved suicidal. Rather than developing a new operating software according to the dynamic market, Nokia bought over Symbian Ltd. in 2008 for $410 million to develop a better and update version of the OS. Interestingly, it was the time when Google’s free OS Android was introduced in the market. Symbian immediately came across as outdated, slow and considerably short on features compared to Android. Players like  Samsung, HTC and Huawei entered into strategic alliances with Google, after which they did not look back.

Today, it’s Samsung that rules the Indian smartphone market with 40.3% market share. Nokia, which once dominated it with about 80% market share, remains a distant second with just 25.5% market share (CyberMedia Research). What’s more? According to market tracker GfK-Nielsen’s data, Samsung has finally overtaken Nokia to become the largest seller of mobile phones in India’s major markets. The Korean giant’s volume market share in urban areas in March 2013 rose to 31.4%, surpassing Nokia’s 30.1%.

Hence, to ward off the blow the key for Nokia now, however, has to be its alliance with Microsoft as Windows based mobile phones made market-beating progress in 2012. The relationship is not only the key driver in Microsoft’s success, but has also benefited Nokia, which amassed 76.0% of all Windows Phone/Windows Mobile smartphone shipments in 2012. Confirms Vipul Mehrotra, Director, Smart Devices, IMEA, Nokia, “Windows 8 OS is now picking up steam in mobile devices and we will definitely be reaping the most of it.”


While Mehrotra sounds logical (given that IDC expects Windows OS to become one of the top platforms in the mobile space by 2015, at par with Android), the former giant now also needs to carve out new niches, as to unseat the Google-Apple duopoly is not an easy task, even with its partnership with Microsoft. No doubt, Nokia’s Lumia range finally seemed to be picking up some traction, with 5.6 million shipments in Q1 2013, but this was offset by Symbian shipments dropping to just 0.5 million. Moreover, Nokia’s feature phone business (which accounts for a majority of its total sales) seems to be collapsing, showing a 30% sequential decline and a 21% annual decline.

Certainly, Nokia faces a dramatically different situation today compared to 1995, when it had to battle with the disconnected marketing strategies of players like Siemens and Motorola. There has to be more of localisation in the app space. Nokia’s OVI store, which pales as compared to Android and Apple, should rope in more application developers with a focus on creating regional applications. Also, the company should first get its mass market strategy in order and push down its smartphone price points more aggressively to make them top performers in the lower end. Reason: Volume growth is clearly in favour of the smartphone segment. IDC projects mobile phone shipments to India to grow at a CAGR of 13.03% from 2011 to 2015 and reach 30 million by that calendar year. In contrast, smartphones are expected to clock a CAGR of 63.4% in the same period and reach 77.5 million by 2015.

Initial gains in this market will help Nokia build the momentum for sustainable market share. If you compare the lowest priced Nokia smartphone with its competitors currently, the company is still far from gaining that kind of edge. The Lumia 520 (launched on March 20, 2013) retails at Rs.10,499. In comparison, LG Optimus ME 350, Samsung Galaxy Y and Sony Xperia Mini are priced at Rs.6,400, Rs.7,000 and Rs.9,600 respectively. Not just this, Samsung has recently launched a new series of ‘smart’ feature phones with a price tag of Rs.4,000-6,500, taking rival Nokia’s Asha series of smartphones head on.

Thus, if Nokia wants to be back in action it needs to return to its mass marketing strategies connecting with this part of India first. The reason is simple. Its premium offerings may take time to create their space in a price sensitive market like India. If Nokia can cater to prices, it still stand a chance. After all, it is not just Android all the way!

anirudh.raheja@planmanmedia.com

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Issue Dated: Feb 5, 2017