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Why Nokia is No. 1 in India, China
Bruce Einhorn and Nandini Lakshman, BusinessWeek | March 23, 2006
It wasn't hard for Wang Ninie to decide on a mobile phone. In early March the twenty-something Beijing entrepreneur saw a golden Nokia handset with a flower pattern etched into the trim, one of the company's 'L'Amour' line of high-end designer phones.
"I fell in love with it," she says. At $470, the phone wasn't cheap, and she had to wait a few hours for delivery since the shop didn't have one in stock. No matter. Wang knew she had to have it. "I didn't even look at other phones," says Wang, who has recommended the handset to friends.
Jeevanlal Pitodia is equally smitten with Nokia. The 27-year-old Bombay (Mumbai) fruit vendor used to spend his days pounding the pavement in the city's alleys, hawking oranges, apples, and bananas.
Last September, Pitodia ponied up $56 for his first handset, a simple but sturdy Nokia 1100. Now he sits under a colorful beach umbrella, earning as much as $10 a day taking orders by phone for both himself and nearby vendors.
"I tried many phones, but Nokia is the most user-friendly," says Pitodia. "I am the only one in the footpath with a mobile," he says proudly.
More than any other handset maker, Nokia Corp. has connected with the likes of Wang and Pitodia and their billions of countrymen. In both China and India, the Finnish company is the top brand.
In China last year, it had nearly 31% of a crowded market, well ahead of the 10% controlled by No. 2 Motorola Inc. Nokia's sales in Greater China (the mainland, Hong Kong, and Taiwan) jumped by 28%, to $4.5 billion.
The region today is the company's biggest market, accounting for 11% of global revenues, compared with 8% in the U.S. In India, Nokia has a 60% share, with sales last year of about $1 billion. By 2010 the company expects India to be its No. 2 market.
Nokia isn't letting up: On Mar. 11 it opened its first Indian factory, a $150 million facility near the southern city of Madras (Chennai) that will turn out as many as 20 million inexpensive phones annually both for the local market and for export. And the company is doubling the size of its plant in the Chinese city of Dongguan, near Hong Kong.
The two Asian giants are of fundamental importance for Nokia. The Finnish company has played catch-up in the U.S., where Motorola has beaten it with hot-selling models such as the ultra-thin RAZR. But the U.S. market is nearly saturated.
The company that can control Asia's Big Two will have a lead in the global handset wars. Today, China is the world's No. 1 cellular market, with some 400 million users and growth last year of 20%. While India is far smaller, with just 81 million users in February, handset sales are expected to double this year and total users could hit 500 million by 2010.
"China and India are critical to Nokia's overall strategy and they can only get more important," says Neil Mawston, associate director of consultancy Strategy Analytics.
Caught off guard
Just a few years ago, Nokia faced big troubles in both countries. In India, growth was sluggish. Nokia was an early mover -- the country's first cell-phone call was made on one of its handsets -- but regulation hindered expansion.
In China, Nokia not only trailed Motorola but was threatened by ascendant domestic players such as TCL and Ningbo Bird, newcomers to the business that had quickly gobbled up almost half of the market with their inexpensive but well-designed handsets.
The Finns "were caught off guard by the rise of the domestic vendors," says Ted Dean, managing director at BDA China Ltd., a Beijing consulting firm. "Suddenly, Nokia was struggling."
The local upstarts flooded stores nationwide with armies of sales assistants flogging their brands. "Our people would put up posters, and within 30 minutes they would be torn down," recalls Colin Giles, manager of Nokia's China handset business. Visiting a shop in the western city of Chengdu, Giles says, "you could hardly move in the store because of the number of salespeople."
To fight back, Giles pushed through big changes. Nokia decentralized, going from three Chinese sales offices in 2003 to 70 today. Instead of eight national distributors, Nokia now has 50 provincial ones.
And since rivals were having great success with handsets designed for mainland users, Nokia introduced its own China-specific models. For instance, since many rural Chinese aren't familiar with the romanized transliteration system that most cell phones use to input Chinese for text messages, Nokia developed two phones with software that lets them write characters with a stylus.
And Nokia invested in new computer systems that provide detailed sales data. "Tomorrow, I will be able to tell you what happened today in the top 4,500 outlets," Giles boasts. "In a week's time, I will be able to tell you about 30,000 outlets." The result: Nokia sold 27.5 million handsets in China last year, triple what it sold in 2003. Now, the company is planning for the launch of 3G in China, expected this year.
Since 2002, when India's cellular market took off, Nokia has drawn on its China experience to consolidate its lead. In 2004 the company launched two India-specific models, which included a flashlight, dust cover, and slip-free grip (handy during India's scorching, sweaty summers).
Nokia introduced software in seven regional languages for non-Hindi speakers and added ringtones of patriotic songs such as the nationalist hymn India Is the Best. And the company's marketers pitched the phones through ads tailored to India, with one early campaign showing burly truck drivers calling home on Nokia handsets.
"We invested when the market was nothing," says Robert Andersson, who oversees manufacturing, sales, and marketing at Nokia. "We have been able to harvest the fruits of that commitment in the last four years."
Nokia has also reaped the fruits of rivals' missteps. Motorola was slower in reacting to the threat from the Chinese locals and has had a tougher time bouncing back. "Motorola didn't change its strategy for a long time," says Chris Han, an analyst in Beijing at Norson Telecom Consulting.
The Chinese upstarts, meanwhile, have suffered sharp reversals due to disappointing quality. In India, Motorola didn't focus on the market early enough, says Pankaj Mohindroo, president of the Indian Cellular Assn., a trade group. Today its share there is just 5% or so.
Rivals say the time is right to eat into Nokia's lead. Samsung in the past focused solely on the middle to high end of the market in India but began selling lower-cost phones last year. And on Mar. 7 the Korean company opened a new factory in Gurgaon, near Delhi.
Motorola has revamped its structure in China, expanding its sales force and strengthening its distribution network to cover 300 cities. By February, Motorola had boosted its market share by several percentage points.
"We've done a lot of the blocking and tackling," says Michael Tatelman, Motorola's China chief. And in India, Motorola is planning to market phones costing as little as $35. Motorola Vice-President Allen Burnes calls India "pivotal" and says the company will open its first factory there in 18 months. Of course, that's 18 months behind Nokia, giving the Finns another opportunity to solidify their lead in Asia's Big Two.
With Manjeet Kripalani in Mumbai and Jack Ewing in Frankfurt.
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