Weekend Reading: Made in China, Made for India

31 Jul

Last week someone asked me how many cellphone models are available in India. After putting some thought, I realised I’m not even sure of the number of cellphone brands present in India, leave aside the number of models. I discussed this with a couple of analyst friends, who pegged the number of brands in the range of 70-100, with at least one new phone brand getting launched every fortnight. Well, that’s just the brand launches we come to know about, I’m sure there would be more brands selling their wares out there in the market.



But how do these brands make money? And most importantly, how do they compete with global giants? Here’s my two cents on this ‘homegrown cellphone brand’ phenomenon.



I will take the latter question first, how do they compete with global giants? After all, the likes of the Nokias and Samsungs of the world have much deeper pockets that translates into marketing muscle, they have been around for many more years and have become household names. So how is it that someone like a Micromax or a Karbonn is able to eat into their market share?



The answer lies in making phones that address the local population’s requirements rather than making phones for a global audience – something that a Nokia might not be able to do. Analyse the features that a typical ‘Made for India’ phone has – dual-SIM, louder speakers, flashlight and higher capacity batteries. Some of them might even offer a front facing camera, when clearly you cannot make a video call on a phone that does not support 3G or a TV receiver that picks up most Doordarshan channels. Would a Nokia provide such features? Never. (In fact, Nokia’s idea of Mobile TV was DVB-H, which would have provided it with an alternative revenue stream.)



But consumers, especially in smaller towns and villages love such ‘gimmicky’ features. It gives them bragging rights over users of ‘global phones’ that provide only regular features, while a ‘Made for India’ phone provides much more features at a fraction of the price. Yes, the durability of these phones is a big question mark, but youngsters who buy these phones rarely keep them for more than a year.



So how do these brands make money? This can be answered in four words – by keeping costs down. These companies do not have a battery of engineers, designers or developers that conceptualise devices. Neither do they have any sort of R&D facilities or manufacturing plants. All that they have is an efficient supply and distribution management system that minimises warehouse storage expenses.



Phones are imported in minimum numbers and are distributed through a network of micro-distributors (usually at district level) rather than having one national distributor who then sends it to sub-distributors from whom it eventually reaches the dealer. This reduces at least one middleman, which translates into a higher margin for the handset brand.



As phones are imported according to demand, these brands usually revamp their entire product portfolio once every quarter, which is much quicker than the industry norm of about nine months. This enables these brands to react more quickly to price variations as well as new feature requirements.



I believe that these handset brands are not just a lash in the pan and are here to stay, simply because it would be close to impossible for global brands to compete with them on their terms. It is not surprising that most of these brands now want to replicate their success in India in other countries, especially those in Easter Europe, Middle East, Africa and Latin America. And there is a fairly high chance of them succeeding there as well.

No Responses to “Weekend Reading: Made in China, Made for India”

  1. John Smith August 1, 2010 at 11:11 am #

    very informative

  2. Prikshit August 1, 2010 at 4:06 pm #

    some wat rite

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