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Tuesday, March 09, 2010

Now let’s get on to the branded war!

ZTE came out of nowhere to shake the global handset industry by offering ultra low cost handsets. It now plans to offer its own brand lineage in India, Surbhi Chawla finds out if it will be able to make the idea click amongst the Nokias and Samsungs of the world?

“One fine day our Chairman Hou Weigui woke up from the wrong side of the bed and announced that the company would now be entering the handset domain,” D. K. Ghosh, Chairman and MD of ZTE India amusingly informs 4Ps B&M. Well, that’s how ZTE Corp., which kicked off its operations in 1985 and was dealing in telecom equipments and infrastructure, decided (in 1990) that they would be entering the handset industry (though there were no real synergies). However, its biggest strength when it started off was the cost advantage (don’t forget it’s a Chinese company) that it could offer and ZTE made optimum use of the same to establish itself as the Ultra low Cost handsets company. For starters, it’s already the sixth largest handset player in the world and inching closer towards displacing Sony Ericsson.

Even in India ZTE is the fourth largest handset player with 5.6% market share. The company has been offering service operator branded handsets in the country for over 15 years now and has already sold more than 25 million handset through its clients Reliance Communications, Tata Teleservices, Vodafone, Virgin Mobile, Spice mobile, et al. Interestingly, this Chinese player had clocked in revenues to the tunes of $1 billion from its Indian operations in the last fiscal and claims that 50% of these revenues were from its handset business. Having learnt some tricks of the trade now this company is even planning to have its own brand of handsets in the Indian market. But the big question is – will ZTE able to make a mark of its own given that there are already many established players in the country. And not to forget that it’s one of the late entrants to get on the bandwagon, which is already cluttered? “The Indian telecom market is growing at burgeoning pace and there is great demand from both, the first time users as well as consumers seeking replacement. ZTE is primarily seen as the phone for the low rung of the consumer, which till now has been dominated by Nokia. Even Micromax and Samsung have started to take some share out of this market. So it would be difficult for ZTE to make its mark,” avers a handset expert.

ZTE too on its parts realises that the task to sell handset in its own name would surely not be a cake walk with distribution being one of the critical aspect. Therefore, it has tied up with Overseas Mobiles as its national distributor for mobile handsets. “This is a field that is completely new to us and the distribution channel for handsets is much like FMCG. Had we entered it directly it would have been a disaster so we got an expert to do it for us,” reasons Ghosh.

In fact, with the help of this partnership, the company has already started to offer the first few handsets models in the eastern parts of the country including Kolkata and it plans to make a national presence before Diwali. The company is also looking at making a large outlay in terms of marketing in the form of 360 degree advertising campaign that would be well supported by BTL activities like road shows to make ZTE a mass brand. The company is so confident with regards to its marketing initiatives that it claims that by March-April 2010, it would be one of the most recognised handset brand in the country and would have sold about 1.5 to 2 million ZTE branded phone by that time.

But then, the question that pops in the mind is that will it continue to offer operator branded handsets now that it is planning to launch its own lineage as well? To this Ghosh answers, “Both operator branded phones and our own brand of phones would be important to us going forward”. He also states that the features that one needs to add in operator branded handsets are directed separately by each operator, but through its own brand it would be packing in features that it feels are relevant for its target market.

Though ZTE is currently looked at by the service operators to offer low end phones, but under its own brand it would be offering an entire range of products to be relevant to all aspects of the market with a special focus on the low end phones in the rural market and mid-end market in the urban pockets. Looks like this company has done its homework well and given the price differentiation it seeks to offer, but then it shouldn’t forget that the Nokias and Samsungs of the world are there to give it good run for its money. Hope you wake up from the right side of the bed next time, Mr. Weigui!

Surbhi Chawla

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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