Nokia

Nokia – The brand name immediately connects to every one of us who own/do not own mobile phones. Known for its robust design, quality and sturdiness, Nokia was the epitome of trust and reliability when it came to mobile phones. No other model could come even half way close to the immense brand power Nokia had. “Had” is the keyword. Things have changed quite bit in the mobile handset market in the last 3-4 years.

Ten years ago, having a cell phone itself was a luxury and call rates were exorbitant (by Indian standards). Only the white collared professionals had the privilege of owning one. In such a situation, where would one have the luxury of choosing between handsets? It was clearly a service providers’ market where Nokia enjoyed near monopoly among handset manufacturers. 70% was the market share of the mobile giant those days. Would you believe the share has now come down to just 39%!

What exactly happened in the interim period?

1: Call tariffs have fallen sharply over time. From a rate of Rs 16/min for an outgoing call and similar charges for incoming calls as well, we now have call rates as low as 50p per minute. This has resulted in mobile telephony spreading to every nook and corner of the country, thus opening up a huge opportunity for handset manufacturers.

2: There has been a surge in demand for high end phones with value added applications for business as well as personal use. This has brought in a huge competition for smartphones and has attracted the attention of the world’s leading smartphone manufacturers such as Apple and Research In Motion.

Nokia’s strength has always been its robust models, top notch quality, good servicing and a wide distribution network. Call it complacence or lack of foresight, Nokia was never known for its competency in Smartphones. And so when the smartphone market was bombarded with the Blackberries, Iphones and Google’s Android based models, Nokia was completely caught off guard. Launched in 2007, the Iphone became widely popular in India and that is when Nokia decided to get its act together and in response, launched the 5800 Xpress music touchscreen phone in 2008.

(Incidentally, although 5800 Xpress music is touted as the first touchscreen phone of Nokia, the fact is that Nokia was actually far ahead of its competitors in the touchscreen segment. There was a Nokia 7700 followed by 7710 launched as early as 2004 in the market. Misplaced timing it was, and the phones just faded away from memory.)

I have used the Iphone as well as the Nokia 5800 and the touchscreen experience between the two is as vastly different as chalk and cheese. Needless to say, the Apple Iphone is a class apart and generations ahead of Nokia in terms of user experience.

Okay, so smartphones is Nokia’s weak spot. But the smartphone market is still a very very small one compared to the mass market. Data tells that out of the 38.6mn handsets sold in Apr-June 2010, 89% of them were priced below Rs. 4,500. And this precise market is what has led to a flood of handset manufacturers vying for a share of the pie. 35 is the number and counting; 27 of them came into the market in Apr-June quarter alone! Let me try to name a few – Micromax, Maxx, Lemon, Karbonn, Zen, Spice, G’five, and even service provider Vodafone is getting into manufacturing handsets. Vodafone actually came out with the cheapest handset for Rs. 799 a few months back.

Given Nokia’s brand value and reliability, the company continues to seek premium pricing. However, the masses no longer are willing to pay that premium for quality and instead are ready to risk experimenting with newer models. After all, with handsets costing less than 1,000, even for the rural masses changing handsets frequently has become quite a fad.

Especially, since most of these low cost models come bundled with several value added features such as camera, memory slots, music and so on. The other major innovation brought on by the new vendors is the dual-sim technology which has become extremely popular among users. Once again, Nokia was a late entrant into this.

At one end, the handset market has become commoditized to such an extent that Nokia is unable to hold on to its premium brand image; At the other end, there are so many superior smartphone technologies that Nokia lacks significantly behind in terms of innovataion. A double whammy indeed. Nevertheless, Nokia still is the market leader with 39% market share, with the second biggest player Samsung far behind with just around 7% share.

The next big thing in the handset market would be 3G enabled phones; and Nokia really needs to get its act together and prepare itself well ahead of time for the next wave of handsets, to avoid losing market share any further.