April 18, 2014

Has Samsung lost its plot in Indian Smart Phone Industry?

Hi Guys,

When I saw the ratings for Samsung Galaxy S5 in Flipkart, I was quite shocked. I expected a poor show, but I didn’t expect 1.6 out of 5 for the new phone. It made me think as to whether Samsung has lost its plot in India somewhere down the line?

To understand this sudden dip, it is essential for us to understand the evolution of Touch Screen Phones or the Smart Phones (both terms might be mutually exclusive, but most Touch Screen Phones are smart phones and vice versa) in India.

Nokia 7710 was first touch screen phone in India (year 2004). But, it was in the late 2000s that Touch Screen phones got a bit popular in India. When Nokia introduced a stream of Touch Screen phones in late 2000s and early 2010s, there were few takers. But, they were not much impressed with the interface. Sony had a few good phones and then there were niche players like iPhones for which Apple didn’t have any proper retail strategy in India. It was around this point of time, Google’s Android phones were becoming popular.

It is at this stage that we need to understand how the commonly used jargon in Strategy class ‘Diversification vs Focus’ worked here. Diversification is a strategy where a firm is present across different sectors instead of focusing on a single business (eg: Tata Group). Focus is a strategy where a firm concentrates on a single business and focuses all its efforts on the single business unit (eg: Ferrari in Sports cars).

In the early 2010s, the touch screen market entered the growth phase. Diversification strategy works in Growth phase. Samsung introduced a few Android mobiles in India and they were becoming a huge success. Buoyed by the success, Samsung started introducing a wide range of phones available across all price categories from Rs. 7000 to Rs. 40000. At this point of time, other players were very focused like Apple or HTC. Samsung had phones to offer to all type of customers. The Diversification worked for Samsung. Customers thought Samsung Phones had value for the price they paid for. These phones became an aspirational product for many of the youngsters. Samsung rode on the absence of competitors.

The next phase is an interesting one. Around 2012-2013, Samsung introduced Samsung S3, which was a total revamp of S2 and provided a wide range of features. They also had large screen phones at the middle segment like Grand which was also a success. On the other side, they were losing the market at the lower end of the market. Micromax had slowly started to dominate. They offered phones with same features at around 50% of the price Samsung provided. Samsung’s ‘Cost Leadership’ strategy started to vanish. At the other end of the spectrum, Apple started to focus in India and iPhone4 and 4S were major successes in India. Nokia’s Lumia Series with Windows 8 OS had quite a few takers who wanted alternatives.

Enter the next phase in late 2013 and early 2014. I feel this phase is the beginning of Maturity phase in the Smart phone market with less and less innovations coming and cost becoming an important factor. Micromax rode on the ‘Cost Leadership’ strategy and made Hugh Jackman their brand ambassador. They introduced 5 inch screen phones for Rs. 10000 odd and their Canvas series was a huge hit. The same features in a pure branded phone would cost double.

Nokia’s Lumia had its set of loyal customers. Apple had started to increase its value share. Google’s Nexus 4 and 5 were real alternatives to people who were looking for premium segment phones.  Moto G opened to a stunning response with all phones sold out in Flipkart in no point of time. Samsung had no significant launches in the mean time. I have a feeling that Samsung started to think that they belong to the ‘Premium segment’. Launching Galaxy S5 at Rs. 51000 (around the price of an iPhone) just proves what Samsung thought about the phone. If you compare S5 with Galaxy S4 at around Rs. 35000 or Nexus 5 at around Rs. 30000, you will know how overpriced S5 is.

At this point of time, Samsung still is the leader in Indian Smart phone industry by a huge distance. But, if you think as to how Nokia lost its plot a few years back, you would wonder if Samsung could lose it the same way.

Other point to ponder is how Samsung is going to respond to the competitor’s strategy. At one point of time, Samsung were the ‘Cost Leaders’. Now Micromax has taken the tag away from them. It would be difficult for Samsung to occupy the same rung as Micromax. Competitors like Nokia, Apple have entered into ‘Differentiation’ strategy with unique products.

The question that comes to one mind is whether the time has come for Samsung to shed its Diversification strategy and start focusing on a particular segment? Also, do they have the time to do the same?

It would be interesting to observe how the smart phone industry would pan out in the next months (Years is too long for the industry).


Happy Reading!

2 comments:

  1. I still like my Nokia over my Galaxy.I mean it was the phone with battery which wouldn't go,even if I throw nothing mch would happen.Yes,Samsung is still the leader,but..there's something missing in the new model which are coming up.

    ReplyDelete
  2. nice analysis and report on smart phones in india

    ReplyDelete

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