cstr group project - a3 - micromax_final

8/6/2019 CSTR Group Project - A3 - Micromax_Final

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Competitive

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Company:

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Executive Summary

Micromax is one of the biggest Indian domestic mobile handsets company and hasbeen growing explosively in the fast growing telecom market since they startedoperations in January 2008. Their market share stood at 6.24% for the March 2010

quarter, in less than 3 years of starting their operations.

Micromax has been able to capture the said market share by following someextremely effective pricing strategies. With Micromax, its been more aboutaffordable handsets which shows in their average selling price of Rs. 2,275.98 forthe March 2010 quarter.

Micromax, once a Printer & IT hardware dealer has given tough competition for 2ndposition in mobile market after Nokia & Samsung and is ready to list on stockexchange very soon. All credit to its sheer innovation and creativity.

Micromax has been able to achieve a unique and diverse product mix. They haveover 30 handset models selling in the Indian market, and that helps in not relying on just one product to drive revenues, as no single handset accounted for more than20% of their revenues.

Not only that, Micromax has also been able to spread itself Pan-India. They are welldiversified across states, and no single state accounted for more than 10% of theirsales.

They have understood the Indian Telecom market really well and as a result, havekept themselves focused on not only new but also the replacement handset market

which constitutes nearly 65% of the total handset market (until 2010).

It sells anywhere from 700,000 to one million mobile phones every month. And by itsown estimates it is now selling nearly Rs.1,500 crore worth of phones annually.

The dual-SIM feature is today present in 20 to 30 percent of all mobile handsetssold in India, estimate experts. Yet market leader Nokia does not have a single dual-SIM handset in its vast repertoire of phone models for India. Micromax offers thisfeature on nearly 22 out of the approximate 26 phone models it sells in India.

Through this report, we plan to bring on paper the following aspects:

a. What is the industry like?b. What is the competitive positioning?c. What value chain attributes support such a position?d. How sustainable is it?


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(Sources from where inputs are taken for this report Microsofts Draft Red HerringProspectus filed with SEBI, IMF World Economic Outlook Reports, McKinsey Report,TRAI Database and Report, Analyses Mason Reports, Wikipedia, Google)

Brief History of Micromax

Micromax is one of the leading Indian Telecom Handset Companies with 23 domesticoffices across the country and international offices in Hong Kong, USA, Dubai and nowin Nepal. It was one of the largest mobile handsets company in India as at March 31,2010 in terms of units shipped during Q4, 2010 and the third largest mobile handsetseller in India for the financial year ending 2010.

It has been the fastest growing among India's top five mobile brands during the twelvemonth period ended March 31, 2010 compared to the twelve month period ended March31, 2009 in terms of the number of shipments

Basis its revolutionary outlook and a comprehensive R&D at its helm, Micromax hassuccessfully generated innovative technologies that have revolutionized the mobilehandset space in India. Micromax is on a task to successfully overcome thetechnological barriers and constantly engender life enhancing solutions. Thecompanys mission is to develop path-breaking technologies and efficient processesthat incubate newer markets, enliven customer aspirations and continue to makeMicromax a trusted market leader amongst people. The Micromax ideology stems fromits rooted belief in Innovation and delivering nothing short of the best. (Source: IDC'sIndia Quarterly Mobile Handsets Tracker, 1Q 2010, June 2010 release).

Founded in 1991 by Rajesh Agarwal, Micromax in its original avatar was a distributor of

computer hardware equipments. In 1998, three more people - Sumit Arora, RahulSharma and Vikas Jain joined Micromax as co-founders. The company branched outfrom a mere distributor to a marketer of telecommunication equipments. With youngenthusiasts as its anchors, Micromax created a niche for itself in the telecommunicationindustry. Micromax ventured into the telecommunication industry with an end-to-endsolution of Fixed Wireless Devices and Wireless Data Cards. In the year 2008, afterdelivering upon the technology of fixed wireless-powering desired products, thecompany forayed into one of the most predominant genres of telecommunication Mobile handsets.

The entrepreneurial idea stuck the team somewhere around 2007. On a hot summer

afternoon, executives at this small Indian pay phone company noticed a curious sight. Ina village in the eastern part of the country, they watched people line up next to a manwith a car battery strapped to the back of his bicycle and hand him a few rupees to plugtheir cell phones in for a half hour's worth of charge. The villagers' homes didn't haveelectricity.


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The Micromax TeamFounders (from left) - Rahul Sharma, Rajesh Agarwal, Vikas Jain & Sumeet Kumar

The brand wanted to create a base before taking on the large players. Hence as a go-to- market strategy, Micromax concentrated on the rural market first. It was a differentmove altogether since most of the marketers tend to concentrate on the urban marketsfirst and then move to rural markets.

Less than a year later, Micromax launched its first phone, X1i (refer picture below) in therural market with a very unique USP - 30 days battery standby time. Priced at merely Rs

2,150, X1i was lapped up by the rural market. It came with an oversized battery, a smallscreen, and tweaked electronics that made the phone run for as long as five days, andon standby for as many as 30 days.

Micromax X1iUndoubtedly, 80% of its sales come from the rural areas substantial factor behindMciromaxs explosive growth. After building a strong presence in the rural market,where the prominence of both subscribers and operators is rapidly increasing,Micromax is now progressively moving towards establishing its foothold in thecompetitive urban market as well.


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Headquartered out of Gurgaon, National Capital Region, Micromax has introduced 37phones in just a couple of years since launch of its operations. It has been designing itscell phones in India and manufacturing with partners across China and Taiwan

Its been since then that Micromax has received commendable response for its unique

and interesting handsets. Innovation, Cost-Effectiveness, Credibility and an InsightfulR&D, have now become synonymous to Micromax in the telecom vertical. Today,Micromax has become a brand which people relate and look up to for realizing theirindividual device preferences and other out-of-the-box solutions.

a. WHAT IS THE MOBILE HANDSET/TELECOMMUNICATION INDUSTRY LIKE?

Mobile Handset Industry

Growth of the Indian Economy

Over the last few years, India has shown strong economic growth. In Fiscal 2010 thegrowth rate for India's gross domestic product ("GDP") is estimated to have been7.44%, and in Fiscal 2009 and 2008, GDP growth is estimated to have been 6.72% and9.22%, respectively, according to the Central Statistical Organization (CSO).Economic growth is expected to continue into the immediate future with the InternationalMonetary Fund (IMF) estimating Indias real GDP growth at 9.4% in 2010 and 8.4% in2011 (Source: IMF World Economic Outlook, July 2010). The McKinsey Global Instituteestimates that Indias real GDP will grow at a combined annual growth rate (CAGR) of7.3% from 2005 to 2025.

Indian Telecommunications Services Market

India is the second largest and the fastest growing telecom market in the world in termsof number of wireless connections, according to the Telecom Regulatory Authority ofIndia (the "TRAI").

With the implementation of the GOI's Broadband Policy in 2004, the number ofbroadband connections has increased to 8.77 million subscribers as of March 31, 2010,and according to TRAI, the President of India has set a target of 100 million connectionsby 2014.

The size of the mobile wireless services market has increased by 103.70% from 286.86

million subscribers as of June 30, 2008 to 584.32 million subscribers as of March 31,2010. While wireless penetration in urban areas has increased significantly over the lastfew years, rural and semi-urban areas continue to be under-penetrated. The overallwireless tele-density in India has increased from 24.95% for the quarter ended June 30,2008 to 49.60% for the quarter ended March 31, 2010 (source TRAI).

Indian Mobile Handset Market


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The Indian mobile handset market has grown by 30.17% from 116 million handsets forthe twelve month period ended December 31, 2008 to 151 million handsets for thetwelve month period ended December 31, 2009. The growth has been driven by thegrowth in medium ASP devices (devices with a price in the range of Rs 2,000 to Rs5,000). The contribution of medium ASP devices has increased from 34.48% for the

twelve month period ended December 31, 2008 to 45.03% for the twelve month periodended December 31, 2009.

Key Growth Drivers for the Indian Telecom and Handset Market

A number of factors have contributed to and will continue to drive growth in the Indiantelecom and handset market, including the following:

Indias economic growth has helped increase household incomes and consequentlyconsumption, especially among young Indians who are increasingly investing invarious entertainment and communication services. Indias favorable demographics

in the coming years will continue to add impetus to the growth of the telecom andhandset markets.

The growing need of high mobility and connectivity at affordable prices.

In order to curtail their network deployment costs, many service providers areconsidering sharing both passive and active infrastructure with each other. Commoninfrastructure will improve coverage, reduce costs and enable operators to expandtelecom services at affordable prices to customers.

Low overall mobile penetration indicates tat a huge market is left untapped and that

there exist huge expansion opportunities in the rural and semi-rural markets, whichcurrently have low tele-density. GOI telecom policies have emphasized the need forexpanding telecom coverage to include rural areas and empowering rural Indiansthrough access to mobile telephony.

Besides the presence of major telecom handset manufacturers, including Nokia,Samsung, LG and Motorola, and leading global telecom service companies andinfrastructure majors, such as Vodafone, Singapore Telecom, AT&T, Ericsson,Alcatel and Siemens, there is strong competition from growing domestic handsetcompanies and Indian mobile operators.

Furthermore, increased competition among service providers created as a result ofIndia allowing an unlimited number of service providers in each service area hascontributed to and will continue to drive the growth of the telecom sector in India.

The demand for more sophisticated and innovative e-mail and multimedia basedservices, as well as gaming and music related offerings is likely to fuel growth in Thedelivery of value added services (VAS). The advent of 3G will also add impetus to


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the growth of the VAS mamobile devices will also n

As wireless teledensity iARPU (average revenue

decline and voice gets coneed to develop VAS sowell as retain customers blikely to impact the growth

The advent of 3G has stiand expanded offerings ospeed and data transfer cnetwork management ser

b. WHAT IS MICROMAXS

Its core strategy statement -

Micromaxs vision

a. To develop path-breakb. To incubate newer ma

Micromax a trusted m

Source www.micromaxiDiverse Product Mix at Un-be

Micromaxs competitive strat

from its website. It clearly unit phones with long lastinginstruments, universal remotit all and in the best price. In fmobile handset model in itsfiscal 2010. Moreover, no sivolume in fiscal 2010, indicatiadd, total revenue share thro

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rket due to 3G's faster network capabilities.ed to become more sophisticated.

creases, particularly among lower incoper user for telcos) will continue to decli

moditized, both handset manufacturers ans to create high yielding revenue streamsy creating a basis for differentiation. The gof the telecom and handset markets.

ulated the introduction of 3G compatiblef applications, which can take advantageapabilities of 3G, from the providers of hosices and content providers.

OMPETITIVE POSITIONING?

ing technologies and efficient processes.rkets, enliven customer aspirations and crket leader amongst people.

fo.com

atable prices:

gy is very much in its vision statement bro

erstands the pulse of consumers in the Inbattery life, dual GSM capability, low-controls and/or gaming phones, Microma

act, such has been its product diversificatiostable accounted for more than 20% of rgle Indian state accounted for more tha

ng the diversification of the brand across gugh its 10 largest distributors in fiscal 201

. Consequently,

e Indians, thene. As ARPUs

d operators will, and attract asrowth in VAS is

obile devices,of the superiorting, billing and

ntinue to make

ught out above

ian market. Becost QWERTYx has deliveredn that no singlevenues during10% of sales

eographies. Toaccounted for


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less than 56%, with only one distributor accounting for more than 10%of its sales byvolume.

Categories of Micromaxs handsets (Source www.micromaxinfo.com)

As it can be seen above, Micromax offers an un-comparable product mix, a mix whichno other player in the market can boast to come out with. At continuous intervals,Micromax molded the market situation into a business opportunity for itself. As the tariffwars amongst telcos gathered heat, Micromax launched dual-SIM handsets to allowcustomers fulfill their need of carrying two numbers. In fact, at a time when marketleader Nokia didnt have even one dual-SIM phone in its stable, Micromax had alreadylaunched 23 dual-SIM phones out of its total product portfolio of 27 phones! It launchedphone-cum-stereo with 3D surround sound fed by Yamaha and Wolfson at less than Rs5,000 to capture the youth market. In Feb 2010, it launched Bling, phone withSwarovski embellishments targeted to women customers. It became an instant hit.

Priced at Rs 5,500, it gave competitors a run for their money. Few months later in May2010, it came out with a phone that could switch TV channels and even ACtemperature, basically act as a remote. Targeted at tech-savvy customers and priced atRs 2,999, it was tough for customers not to fall for it.

Moreover, its ability to contain costs and launch these products in the market at un-believably low prices strengthens its competitive positioning in the market.


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Below we have brought out mthe cost containment efforts tIt has managed to maintain i2,500, a feat not possible focountry.

Reverse Go-to-Market strategAs an exception to the regulaestablished markets, Microm

operations by launching a mPriced at Rs 2,249 upon itsMicromax X1i has a battery ton 30 days stand-by on aMicromaxs deliberate attempthe presence of tough compewas THE segment for Micrreturns, provided it offered psupply was a big roadblocktechnological innovation tocompetitor in India could

Micromax clear edge over its

Effective Promotion Strategy:

Micromax was one of the bighas focused a lot of its prconnects the nation. Off spor

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arket pricing for Micromaxs handsets whice company has been investing it right fro

its average cost per handset to consumerr even the leading handset model manu

y:

r market entry strategy where a company lx chose to tread upon the path less travell

obile handset designed especially for thelaunch in April 2008 and currently priceat gives its customers 17 hours of talk tim

single charge. Launching itself in the rut to make its presence felt in the industry,titors like Nokia, Samsung, Motorola and Lomaxprobably the best market for it troducts at reasonable prices. Lack of confor rural sectors growth and all that wasbridge the gap between present and fuanage to deliver that kind of product,

competitors.

gest spenders at the recently concluded vomotional activities surrounding Cricket,ts, it signed Akshay Kumar, one of the lea

h clearly showsthe beginning.way below Rsacturers in the

unches itself inled. It began its

rural markets.d at Rs 1,999,e and could goal market wasespecially with. Rural market

o maximize itstinuous electricneeded was ature. No otherthus rendering

rsion of IPL. Itthe game thatding Bollywood


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actors as its brand ambassador that enabled it to connect a close chord with themasses at large.

As part of its promotion strategy, it targeted school/college students. It perceived thesecustomers to treat mobile phone more of a need than just luxury owing to the

parental involvement. Parents/Guardians need to be aware of the whereabouts of theirwards in todays time. Be it coaching classes, college, even out with friends or anythingelse, parents wanted to be in touch with their kids without having them possess a high-end expensive phone. Micromax launched a special offer whereby students could go toany of its outlets near their school/college, produce their ID cards and avail a certainpercentage of discount. This offer was further extended to the institutes faculty, thuscreating a separate loyal customer segment.

Product Placement Strategy:

As an effort to place itself effectively, Micromax offered higher margins to its channel

partners. It extended even higher commission to channel partners who were willing tostock-up its products.

Strong product development capabilities resulting in efficient and speedy executioncapability:

Micromax has been investing heavily towards product development and designing. It setup a R&D facility in Gurgaon and had an in-house team of 24 engineers in ProductDevelopment as of August 2010. Also, Micromax operates a multi-sourcing strategy forits chipsets in order to increase efficiency of product development efforts. As part of itsbusiness environment, its product development team works in sync with the chipset

manufacturers to assess the technical feasibility of its new ideas, thus ensuring that itstime to market is at the minimum. Currently, its time to market stands around three tosix months on an average. Its because of this low time to market that Micromax, sinceits launch in 2008 has introduced over 40 distinct mobile handset models in the market.

Extensive nationwide distribution network:

Micromax follows a three-tier distribution network comprising more than 60 state andregional distributors across 23 states in India. These state and regional distributors sellproducts to more than 800 local distributors nationwide and they further distributeproducts to retail outlets who in turn sell to customers. Micromax has also partnered

with a national distributor that targets organized retail outlets and assists Micromax inbrand building and sales through sales channels. In less than 3 years of having begunits operations, Micromax has been able to create a robust distribution network for itself,all because of its team of 33 in-house skilled service coordinators who continuouslymanage its distribution network.


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Nationwide after sales supporAll of its After Sales Servicewith whom Micromax contrac370 strategically located A

continuously monitored by in-

Robust Financial Results:

Its earnings before interest,3,377.07 million in fiscal 2010in fiscal 2009, which in turn r199.96 million in fiscal 2008. I358.44% increase comparedwhich in turn represented1,301.50 million in fiscal 2008

All the above factors and manit enjoys currently in the India

c. WHAT VALUE CHAIN AT

The Porter Value Chain framthrough which firms can cranalyzed different aspects ofcompetitive advantage as anRED, the various attributes of

position.

Attributes that support

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t:

Centers (ASCs) are owned and operatedts. Over the last 3 years, Micromax has creSCs and 5 modular service centers.

house technical regional service coordinato

taxation, depreciation and amortization (represented growth of 539.37% against Rpresented growth of 164.15% compared tn fiscal 2010, it had total income of Rs 16,0to total revenues of Rs 3,493.95 million168.46% increase compared to total r

. To sum up, very strong financials!

y others help Micromax create the competimarket.

TRIBUTES SUPPORT SUCH A POSITIO

work by Michael Porter helps to analyze sate value and competitive advantage.Porters Value Chain that allow Micromalyzed by us in the part above. Also, we haPorters Value Chain that support Microm

Micromaxs competitive positioning in the IHandset market

y third parties,ated more thanAll ASCs are

rs.

BITDA) of Rs528.19 millionEBITDA of Rs

17.58 million, ain fiscal 2009,venues of Rs

tive advantage

?

ecific activitieselow we havecommand the

e highlighted inxs competitive

ndia Mobile


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Firm Infrastructure:

Micromax owns its corporate office and warehouse located in Gurgaon, NationalCapital Region aggregating to a total land are of 574 square meters. Its R&D facilityis housed at its corporate office mentioned above. It also owns land admeasuring

1,996 square meters in Solan, Himachal Pradesh and have recently acquired landadmeasuring nearly 57,000 meters in Faridabad, Haryana. They have also receivedallotment letter from Haryana State Industrial Development Corporation Limited(HSIDC) towards allotment of industrial plot measuring 2,763 square meters inGurgaon. It has also identified potential site where it intends to build its proposedhandset manufacturing facility from the proceeds it generates through Initial PublicOffer (IPO). It has also entered into warehousing agreements with OM LogisticsLimited and UTL Warehouse Management Private Limited for numerous warehouselocations over India. This level of infrastructure, we believe, is more than sufficientfor Micromax to carry out its business activities smoothly and also scale up, whenrequired.

Human Resource Management:

As at July 2010, company had 377 employees. Out of 355, 37 were post-graduates,197 graduates and the remaining 68, undergraduates. 264 of its employees werebelow 35 years of age, thus signifying the presence of fresh blood and new ideaswithin the company. Since the company is not listed on the stock exchange, notmuch information is currently available on its Human Resource Managementaspects. However, it does state in its recently filed DRHP with SEBI that, We arededicated to the development of the expertise and know-how of our employees. Ourpersonnel policies are aimed towards recruiting talented employees, facilitating their

integration and encouraging the development of their skills.

Technology Development:

Its in-house R&D team of 24 skilled personnel at its Corporate HQ helps it operate amulti-sourcing strategy for its chipsets that is designed to increase efficiency of itsR&D efforts by working with the best partner in a specific chipset development area.Its dedicated R&D team focuses on all different aspects ranging from Hardware,Software, Testing and Quality Assurance. Its their sheer expertise, dedication andadvanced technical know-how that this team has maintained a record time to marketof three to six months vis--vis time to market of 18 months taken by the larger

manufacturers. We have also come across its splendid technical advancements inthe different mobile handsets launched by it in the market, as brought out above inthe report.

Procurement:

In its current business model, since it doesnt have a manufacturing facility of itsown, Micromax contracts with suppliers in China and Taiwan to manufacture and


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supply them handsets per their ordered specifications. Since they have succeededin maintaining costs over years, in fact reduce it, this model has been very favorablefor them for more than just one reason. Besides the cost advantage and its controlover pricing, the outsourcing helped Micromax management and team lay the initialfocus on innovation, research and development. For any new venture, first 3 years

are treated as a make or break period. Having outsourced the manufacturing inentirety, Micromax gained much more than they would otherwise have. However,considering they have attained that level of technological sophistication, it now plansto foray into manufacturing its phone models itself. This should give additionalopportunities of cost-cutting and further price reduction to the company, thuscreating value for customers and the market, overall. More than that, this would alsoallow Micromax to diversify its manufacturing base (in case it continues with theoutsourcing model), decrease dependence over outsourced partners, control costs,manage quality and most importantly, minimize risks of operations being adverselyaffected by change in Chinas/Taiwans trade policies, including any anti-dumpingduty or similar measures introduced by the Government of India with respect to

import of mobile handsets.

Operations:

Micromaxs operations largely comprise of the following

a. Product Development its strong technical team is entrusted with the task ofdiscovering break-through technology and has consistently delivered results inthe pasts within record time frame.

b. Manufacturing this aspect is handled with Procurement wherein outsourcedpartners are approached to manufacture its handsets

c. Marketing & Branding, Selling & Distribution and After Sales Service this shallbe covered in the coming up attributes

Outbound Logistics:

Micromax extends some handsome dealer margins to the market. Where on onehand Nokia pays a meager 2% to its partners (out of which 1% goes away indiscounts), Micromax extends somewhere 5%, leading to greater channel partnersatisfaction. It also extends extra margin to distributors willing to hold its product intheir inventory.

Also, under its distribution model, it offers marginal short-term credit or no credit toits distributors, with most of its distributors paying for its products at the time theyaccept delivery. In order to effectively manage its inventory, it obtains daily inventoryand sales reports from its state and regional distributors detailing the location andmodels sold, and endeavors to maintain an optimal level of inventory. On the otherhand, it avails handsome credit period from its outsourced manufacturing partners,extending from 30 to nearly 60 days, thus allowing itself sufficient cash flow to


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manage its operations inmoney.

Marketing and Sales:

Promotion of the producmarketing is a very impAdvertising is the bigcommunication (IMC). IMtools in order to send a co

Micromax has very effeadvertising to communicat

IIFA, one of the biggest nwas the official sponsor othe aim to capture the gain the Sri Lankan & thewhere 6 lucky Micromaxawards and would be treaIIFA edition of Micromax

Aspirational campaign

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a cost effective manner and realize th

t through sales, advertising, public relatiortant aspect of the marketing mix. Asest tool for development of integra

is the practice of unifying all marketingncise and persuasive message promoting c

tively used television, print, events ande with the customers.

The Micromax Fly to Brazil Teahuge success of Fear Factor

Khiladi Season 1 and 2, MicrAssociate Sponsor for the 3rd seleading bollywood actress, PriApart from that, Micromax hasheavily on cricket tournaments.sponsoring IPL matches duringWhats most important is tunderstands its target customersknows that every penny that it spthe game that connects every Imore than a dollar.

ames across the Indian Entertainment indf the prestigious IIFA Awards, 2010. Thise of potential consumers and to enrich thglobal market. The company came up wicustomers would get to fly to Sri Lank

ted as celebrity. Later, Micromax unveiled55 Bling.

IIFA teaser All exclusive IIFA pho

time value of

ons and directwe all know,

ted marketingcommunicationompany goals.

web media of

ser after thes Khatron Ke

omax becameson hosted byanka Chopra.

been spendingIt took part in2010 season.

hat Micromaxvery well and itnds on cricket,dian, is worth

stry. Micromaxwas done withbrand visibility

ith a campaignfor Micromax

an all exclusive

e Bling


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Micromaxs brand positioning is driven by the following factors Innovative,Youthful, Real and Aspirational.

Service:

As mentioned earlier above, all of Micromaxs After Sales Service Centers (ASCs)are owned and operated by third parties, with whom Micromax contracts. Over thelast 3 years, Micromax has created more than 370 strategically located ASCs and 5modular service centers. All ASCs are continuously monitored by in-house technicalregional service coordinators. Besides that, they also have a service factory in NewDelhi that provides comprehensive range of services, including chipset and PCBreplacement services. It also has technical regional service coordinators whoregularly audit ASCs country-wide and seek feedback from customers anddistributors on after sales services being provided.

d. HOW SUSTAINABLE IS IT?

We are not the poor cousins of Nokia, says Vikas Jain founder of Micromax Mobile.This is the attitude that has brought them this far and will take them further.

Micromaxs strength to appropriately identify and cater to the needs of customers(battery life, qwerty keypad, Dual SIM etc.) in the most effective way is what has madethem succeed this far and will continue doing that. It is on top position in Indian telecomspace with 80% growth in rural areas while Nokias market share has been dipping.Micromax, according to IDC, has a 8.1 percent market share in India and is now valuedat over $1 billion.

Micromaxs growth is very much sustainable, owing to the followingreasons/factors/predictions:

Per The McKinsey Report (The Bird of Gold The Rise of Indias Consumer Market May 2007 report), it is predicted that if India continued on its current growth path,income levels would nearly triple from 2005 to 2025, over 291 million people wouldmove from poverty to a more sustainable life over these two decades, countrysmiddle class would swell by nearly 10 times, India would climb from being 12thlargest consumer market in 2005 to worlds 5th largest consumer market in 2025.This is because of huge population growth which is expected to reach 1.40 billion by

2026. It is also expected that India would have an excellent populationdemographics wherein most of its population would fall with 15-59 years of age.

Urbanization levels are expected to reach approximately 31% by 2015 and 38% by2026.

Increasing Consumption- The combination of rapidly rising household incomes anda robustly growing population will lead to a significant increase in overall consumer


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spending. The McKinsey Report forecasts that aggregate consumption in India willgrow in real terms from ` 17 trillion in 2007 to ` 34 trillion by 2015 and ` 70 trillion by2025, a fourfold increase.

Increased Discretionary Spending Communications Spending to Grow Fast - The

largest categories of Indian spending were food, beverages and tobacco (FB&T),transportation and housing. By 2025, FB&T will still be the largest category, althoughits share of average household consumption is expected to drop from 42% to 25%.Communications, which accounted for only 2% of average household consumptionin 2005 with a market size of Rs 344 billion, will be one of the fastest expandingcategories with growth of over 13% per year taking the market size to Rs 4,288billion by 2025. (Source: The McKinsey Report)

The overall wireless teledensity in India has increased from 24.95% for the quarterended June 30, 2008 to 49.60% for the quarter ended March 31, 2010 (sourceTRAI). TRAI estimates that urban mobile teledensity will reach 125% by March

2014, with urban mobile subscribers reaching 572 million, and that the rural mobileteledensity will reach 60% by March 2014, with rural mobile subscribers reaching468 million.

According to Analysys Mason, the Indian mobile handset market is expected to growfrom a total of 151 million handsets for the twelve month period ended December 31,2009 to 402 million handsets for the twelve month period ended December 31, 2014.The medium ASP segment is likely to be the fastest growing with volumesincreasing from 68 million handsets for the twelve month period ended December31, 2009 to 240 million handsets for the twelve month period ended December 31,2014 and overall contribution increasing from 45.03% to 59.85% of total mobile

handset market in India. The medium ASP segment is expected to grow at a CAGRof 26.07% between the twelve month period ended December 31, 2010 and thetwelve month period ended December 31, 2014 with the overall Indian MobileHandset market registering a CAGR of 20.93%.

All these factors/predictions indicate that there is still a huge market un-tapped andthere is a lot more coming up. Surely, demand influx is going to be much more thansupply unless companies like Micromax are able to reasonably forecast the marketpotential continuously going forward and are able to stick around and deliver highquality products one after the other. Theres a lot that such companies can make outof the future predicted growth, not only for themselves, but for the society, for the

government, for the economy and also, for generations to come!

cstr group project - a3 - micromax_final

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