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‘Diverse Market To Be Fed With Choices’

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In the last quarter of 2011, South Korean Chaebol Samsung electronics became the world's largest smartphone seller, according to technology research firm Gartner. It also narrowed the lead Nokia has in the overall handset sales. Some attribute these gains to rivals Motorola and Sony Ericsson frittering away the early mover advantage. Others say Samsung was lucky as Nokia's fall coincided with its rise. A few also claim that Samsung could not have done this without the help of Google's Android operating system, which has been key to the growing sales of its smartphones. But the fact is that Samsung had already laid the ground for its success. Long before it became the world's largest mobile phone maker, Samsung was the largest maker of mobile panels and chipsets — two critical components of a phone.

So, will the global story play out in India too? Nearly four years ago, Samsung was India's fourth largest mobile handset seller behind Nokia, Motorola and Sony Ericsson. It began 2011 with a value market share of 23 per cent, and closed the year with 34.9 per cent. In volumes, its share has risen from 17.8 per cent in December 2010 to 25.8 per cent in December 2011, according to market research firm GfK. In domestic smartphone sales, it leads the market with a 41 per cent share as of December 2011. Hyun Chul Ryu, vice-president of south-west sales team, mobile communications business, Samsung Electronics and Ranjit Yadav, country head, mobile business, Samsung Electronics India were quizzed by Businessworld's Rajeev Dubey on their India strategy.


What is the most difficult aspect of the Indian market? How have you tried to differentiate yourself to the consumer?
Ryu: I will not say it is difficult, but India is immensely diverse. Understanding the diverse needs of customers can be a challenge. Indian customers are rational and wise, and they have specific needs and are ready to spend money if the product fulfils their needs. As a result, we invest a lot of time and effort to understand their requirements and try to take a step towards them.

Ranjit: The challenge in India is that you need scale before you can reach out. If you are niche, then you cannot play effectively in India, given the nature of distribution and unbundled nature of the market. So, scale and innovation are important. Service is extremely important. What matters is whether you can reach out and service all customers? Samsung has set up more than 2,500 service points across the country. That is the largest footprint. Indians are extremely quality conscious. They are extremely discerning consumers at large. So, you need to be able to appeal to all this. Second, they want the latest and the best. Finally, there are some local requirements. For example, in rural markets you need a dual SIM. Our proposition is very straightforward. We are a mass player. We sell across price points from Rs 1,200 to Rs 36,000. At every price point we offer something to delight
the consumer.

Now you have a significant presence in smartphones. How much of that do you attribute to Apple's lack of interest and Nokia sticking to Symbian?
Ranjit: We prefer to focus on the market and opportunity, rather than what others are doing. India is an extremely competitive market. Many brands come and play here. Some are successful, some are not. Our view is that if you want to succeed with the Indian consumer, there are a few things you have to get right. First, you have to have the right intent and commitment. Second, you have to bring the right brand and promise to the consumer and back it with service capability. The Indian consumer, whether it is a Rs 2,000 product or Rs 30,000 product, always expects great service.

Once you put all this together, you must wrap it with speed and innovation. When you look at smartphones, speed and innovation is not enough because it is creation of a new category. So there is a lot of education, eco-system building and we are spending a lot of time and effort on that. We believe the Indian consumer deserves the same experience as any other consumer in the world. That is what we are working on.

How do you see BlackBerry's effort at reducing prices, making their products affordable and making a comeback with low-cost devices?
Ranjit: We do not comment on competitors, but if you do the right thing for the consumer, they will prefer you and will recommend you. That is our approach. The more people play in the marketplace, they help energise it. We actually welcome that because it brings focus, excitement around the category. And more consumers will explore it. 

How critical is India to Samsung Mobile's global plans?
Ryu: India is indeed very important to us as it contributes a substantial portion of our global sales. We see India as one of the key-growth markets going forward, especially in smartphone segment where we have observed overwhelming growth in the last couple of quarters. And we are confident that we can maintain the lead position in smartphone market in India. 

Ranjit: India is the third-largest market in volumes after the US and China. For Samsung, it is an extremely critical market. We take it as a lead market. Samsung always believed that we needed to have a full-range play. In India you cannot be just limited to one segment. We bring products into India at the same time as we bring globally. We believe that the Indian consumer deserves the same choice as every other international consumer. The needs and requirements are similar. There are many Indias, of course. There is the high-end India, the sophisticated India, the second or third phone India. There is also the first phone India. Depending on the category and the class, we do it differently.

Is your India sales, marketing and branding strategy any different from what it is globally?
Ryu: There are many Indias within India. There are diverse customers in India — regional, cultural, demographics and socio-economic diversities. We strive to fulfil the needs of all categories of customers with our made-for-India products. We try to give various options to the customers.

Ranjit: Our branding and communication philosophy is the same across the world. There are some nuances for localisation which is what we do. Different markets are at different stages of development. We have a three-tier model in India. We serve more than 70,000-80,000 stores in India. We have exclusive stores like 70-80 Samsung Smartphone Cafes where we show the experience, 300-400 digital plazas and channel partners.

The fact that most phones in India sell independent of network tie-ups, how would that reflect in marketing, branding and selling?
Ranjit: There are various kinds of markets worldwide. One set of markets are operator led. The other are open markets. India is one of the largest open markets caused by the nature of the market, the low ARPUs (average revenue per user) and the prepaid nature of the telco play. We have to work it like a classic distribution, sales management kind of process. Then there are various markets which are hybrid. In that sense, India is unique. My estimate is that 90-95 per cent of the phones are open-market. In that sense, we have to make all the efforts in explaining and making sure that the people understand what the phone can do for you.

How is distribution handled differently?
Ranjit: We have to be present in every retail store ourselves to be able to explain our product and make it available and usable. In that sense, it is a classical distribution approach which is a bit different from the operator-bundled approach. In that, the operator buys and takes on the responsibility of distribution.

How much of the pressure does this put on the marketing organisation to penetrate the market vis-a-vis the operator model?
Ranjit: We have the responsibility of developing the market on our own. We work very closely with operators to co-develop the market and make the experience better. The hardware device, by itself, is not enough. We need to make sure we have the right kind of telco eco-system and app and content eco-system around.

How many offerings do you have in the market right now?
Ranjit: About 45 products. They get refreshed every year. Smartphones have 13-14 variants. We have three-four tablets, too. Samsung Note is a category by itself.

Which products are manufactured locally?
Ranjit: Samsung has two plants across categories — Noida and Chennai. We have a very large mobile R&D footprint in Bangalore and Noida. This is largely for India with some commitments for exports also. Most of our requirement of phones for India is met by the Noida plant.


Do local mobile players act as a threat to samsung?
Ranjit: India is a large, attractive market, so there will be various players and brands. The key is: are you committed to the market? Are you wedded to innovation and bringing the right kind of consumer insight into the market? Then you will be successful. There is a perception that India is a low-end, low-priced market. I do not believe that. India has converted now to an upgrade market. Most people who want to have a phone already have one. It is a category where people are willing to pay a bit more for their next phone.

How far are India-specific content, apps?
Ranjit: It is a very strong activity. It is available across the board. We have sourced a whole lot of Java-based applications, even for our phones. We have a whole range of Bada-based applications and Android applications. We have a Samsung app store as well from where you can download local and customised applications. On the other side, we have access to the library of music, movies, video content which is available. We are running an app called ‘My Music', ‘My Movie'.

How profitable is the mobile business for Samsung in India?
Ranjit: India is a scale market. It is difficult to make money unless you are at scale. So there are those challenges here. Is it an attractive market? Yes, because the kind of scale you can build here cannot be built in many other markets. We are already in the black in the mobile business.

What is the future of your own mobile OS Bada?
Ryu: It is Samsung's essential part of multi-platform portfolio. Bada will continue to play an important role in democratising smartphone experience. Samsung's multi-platform strategy has proven in the market and will remain unchanged as we want to serve the various market needs.

Ranjit: In fact, we are in the process of launching two models of Bada phones. Wave Y has just been put in the market. We use Wave brand for Bada phones, Galaxy for Android and Omnia for Windows phones. We are in the middle of launching Wave 3. Windows phones have just been launched. Among smartphones, the stack is pretty even between Bada and Android for Samsung. India is a very strong Bada country.

Would Samsung have been as successful without Android, with just Bada?
Ranjit: It is a difficult answer. Would I be happier without getting married? I cannot say that in front of my wife.

What is Samsung's view of the way devices are headed? Will they converge?
Ranjit: My view is: many realities will coexist and we will cater to it all. Our competitive advantage is that we are able to produce innovation on various platforms and we are able to create various form factors which others are not. Our philosophy is choice. We will give choice. That being said, I certainly see convergence happening. How people will consume content or data or access may change. A tablet or a notebook was necessary for a road warrior. Today, you can argue you can do with two. May be in the future, you can do with one. May be it will add on a couple of things for other things. Very often people carry a media consumption device which is different from the laptop.

How critical is the tablet business for you?
Ryu: Samsung would like to be known as the best smart mobile device provider, which covers smartphone, note and tablet category. We are focusing on differentiating product experience as a whole.

Ranjit: Extremely critical, purely from the point of view of how content is consumed and used in India. If you look at the old paradigm, then you would say PCs (personal compueters) or laptops is the way to go. We have those in our portfolio but we know the way the new generation will use and consume data is changing. Tablets are extremely important for education, for youth and also for people in mobility.

(This story was published in Businessworld Issue Dated 13-02-2012)