Home > India, Technology, Telecom > Why is Nokia losing the handset war?

Why is Nokia losing the handset war?

September 29, 2010 Leave a comment Go to comments

Nokia has owned India’s mobile device market for many years now; it was not unusual for the term Nokia to be used as a generic term for handsets until two or three years ago.  But now, new vendors are eating into their unassailable market share at a fast pace.  IDC, the market research firm, just announced latest figures for devices shipped by various handset makers over the past year in India – the fastest growing telecom market during the period.

Market share of new entrants to handset market in India

(source IDC)

There are a few interesting things to note about this rapid erosion of Nokia’s fortune:

  • Failure in Product Management: Nokia has been complacent in not meeting the needs of the market; they announced their first dual-SIM phones only last week.    This is nothing short of hubris as it has long been known that growth in the market was in price sensitive segments where users will swap up to four SIMs a day to get the best deals on airtime or to share a device.
  • Losing sight of the channel: The complacency extended to their distribution system; I have spoken to several dealers who claim they just do not make money on selling Nokia so they have been actively steering buyers to LG or Samsung phones (both have been gaining share).
  • Absconding innovation: The smart phone segment is growing (RIM, Apple, and the higher end of the Sony Ericsson / Nokia / LG / Samsung  / HTC lineup) but is small.  It is however growing into a real battlefield as the margins are higher and the most innovative of the lot will take home the spoils.
  • The Chinese are here:  The interesting aspect of the past 12 to 18 months has been the emergence and hyper-growth of local device “makers” like Micromax and Spice and Chinese imports like GFive.   This set of handset vendors is essentially in the trading business; the handset marketers  source the same set of devices in China and sell them in India for a markup.   With no barriers to entry (distributors are fickle and promiscuous) we have seen 33 similar vendors emerge and they are now undercutting each other on price.  A downward spiral in prices is well underway

All indicators are that the market is maturing fast.  The large global vendors (Nokia, LG, Samsung, Sony Ericsson, etc.)  will likely lose even more share in the new device market.   A sizeable replacement market exists that is both brand and quality conscious and thankfully (for the vendors’ sake) Indians upgrade their devices frequently.   However, Nokia (and the others) cannot take their current customers for granted – they need to deliver iPhone/Blackberry  quality but in the INR 9000 (USD 200) price range.

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Categories: India, Technology, Telecom
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