ECONOMICS PROJECT

MOBILE HANDSET MARKET IN INDIA

Guide: Prof. Haripriya Gudimenda

Group Members:
Saurabh Yuvraj Tembhurne Pallav Vasa Arneh Jain Tanmay Raj Goswami Aditya Bhadoriya Mayank Gupta (08d07024) (08d07016) (08d07023) (08d07017) (08d07019) (08d07020)

Introduction:
15 years ago, having a mobile phone was considered a luxury, but now it is a very common commodity. Just look around and you will see someone talking on a mobile phone. This device has become an integral part of our life. It is very interesting to see how the mobile handset market has evolved from ten years before to what it is now. What is even more interesting is how competition plays a very important role in determining the market condition today and tomorrow. Initially when Motorola introduced the mobile handset it was said that this device had a huge potential and that prediction has come true. In this report we will be observing the present market share of companies producing mobile handsets, their marketing strategies, the market structure, and other such details.

History of Mobiles in India:

Mobiles were introduced by Motorola in India. They were extremely costly and hence, majority of the Indians could not afford them. It was completely a luxury good. But just like in the case of any other electrical appliance, the prices of mobiles fell as technology improved and competition emerged. In a few years other companies like Nokia, Sony Ericson, LG, and Samsung launched their products in India. What followed was a huge war for market share, each company bringing in new models, newer technology, and reducing the prices of older models. This resulted in making mobiles affordable to a normal person in India.

The Mobile Scenario Today:

First it was the t-phase (time phase), in which both the time and location used to be fixed. This phase was in early 19s. Then came the e-phase (electronic phase) and everything was e-tised. But still the locations where you can use e-sources were fixed. Then came the m-phase (mobile phase) with the world of mobiles. And even the restriction on the location domain was put off. Now you can communicate and interact with the world anywhere anytime. This m-phase led to the development of the mobile handsets. With 115.3 million forecasted mobile owners, INDIA ranks 3rd in the world behind only china and USA.

Indian mobile owners are increasing as a result of cheaper call rates, cheaper handsets and widespread availability of prepay lowering the barriers to ownership.(Even a rikshaw wala owns a mobile today ) Relatively low GDP combined with the popularity of prepay still exerts downward pressure on ARPU (average revenue per user) in India. 25-29 year olds spend the most, with ARPU at over $8 per calendar month. The rising use of data services, particularly SMS, has stemmed ARPU decline in this age group. This is not the case among older users where ARPU is fast in decline, particularly among 35-39 year olds where we expect the greatest churn to post-paid contracts. We are still sticking to the old concept of chatting. In early 19 century people used to sit in veranda and talk or there used to be live contact between people. Even today, we are still following the same concept. Only the level of technology used has changed and is changing.

Today in INDIA we have many companies in the mobile handset market. Some of them are listed below: 1. Nokia 2. Sony Ericsson 3. Samsung 4. Motorola 5. LG 6. HTC 7. O2 etc.

Behavior of the Mobile Manufacturing Industries during the Last Year:

Analysis of the Above Graph:

As can be observed from the graph of the market shares of different companies, the dominant company in the market today is NOKIA. Starting from the October 2008, Nokia is leading the mobile industry, but somewhere around April July 2009 the market shares of Nokia suddenly fell down. During the same time there was a peak in the market shares of Sony Ericsson. But soon after Nokia recovered its market shares and stood again as the leading mobile manufacturing company in INDIA. Nokia says the terrible figures are the result of a collapse in demand for its new handsets as consumers tighten their belts and retain their old mobiles for far longer than was the norm during the years of economic boom. The company has also been losing top-end consumers to the iPhone and RIM's re-invigorated Blackberry.

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Market Shares of different mobile companies is listed below:

Position 1 2 Group Company Nokia Sony Ericsson Market Share 58.49% 16.47% 7.19% 2.29% 1.18% 0.41% 0.28% 0.04% 0.03% 0.01% 0.01% <0.01% <0.01% <0.01% <0.01% <0.01% <0.01% <0.01% <0.01% <0.01% <0.01% <0.01% <0.01% <0.01% <0.01% <0.01% 13.30% 100% Concentration Ratios 58.49% ( 1st conc. Ratio) 74.96% ( 2nd conc. Ratio) 82.15% (3rd conc. Ratio) 84.44% (4th conc. Ratio) 85.62% (5th conc. Ratio) 86.03% (6th conc. Ratio) 86.31% (7th conc. Ratio) 86.35% (8th conc. Ratio) 86.38% (9th conc. Ratio) 86.39% (10th conc. Ratio) 86.40% (11th conc. Ratio) <86.41% <86.42% <86.43% <86.44% <86.45% <86.46% <86.47% <86.48% <86.49% <86.50%

3 Samsung 4 Motorola 5 LG 6 HTC 7 O2 8 FLY 9 Apple 10 Sagem 11 NEC 12 Siemens 13 Sharp 14 Alcatel 15 BlackBerry 16 Sanyo 17 Huawei 18 Philips 19 Panasonic 20 ZTE 21 VK mobile 22 UT Starcom 23 Toshiba 24 Tianyu 25 Spice 26 BenQ 27 Unknown Manufactures TOTAL MARKET SHARE Classification As Oligopoly

100%

An oligopoly is a market dominated by a few large suppliers. The degree of market concentration is very high (i.e. a large % of the market is taken up by the leading firms). The concentration ratios of an industry is used as an indicator of the relative s ize of firms in relation to the industry as a whole.It is calulated as the sum of the percent market share of the top n firms.This may also assist in determining the market structure of the industry.

Observing the market shares of different companies we can rank them and calculate the concentration ratios. Looking at the market shares of different mobile manufactures in india ,and the fourth concentration ratio ,we can conclude the mobile handset manufacturing industry comes under the OLIGOPOLY.

Calculation Of Herfindahl Index

The Herfindahl index, also known as Herfindahl-Hirschman Index or HHI, is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them. Named after economists Orris C. Herfindahl and Albert O. Hirschman, it is an economic concept widely applied. It is defined as the sum of the squares of the market shares of the 50 largest firms (or summed over all the firms if there are fewer than 50) within the industry, where the market shares are expressed as fractions. The result is proportional to the average market share, weighted by market share. As such, it can range from 0 to 1.0, moving from a huge number of very small firms to a single monopolistic producer. Increases in the Herfindahl index generally indicate a decrease in competition and an increase of market power, whereas decreases indicate the opposite. The calculated HHI for the mobile industry as calculated from the above data is around 0.375

Results Of The Survey Undertaken In The Hostel

To analyse the behaviour of mobile market, we took out a survey in our hostel, regarding, which mobile phones they use and are they satisfied with their mobile phones. The outcome was that, indeed the NOKIA stood out as the most favoured one. The good feature was its cost effectiveness and reliability. Most people said that its made for rough and tough use. The second best mobile came out to be MOTOROLA. Its positive features were its cost effectiveness and sleek features. Mostly being young, most of the people were attracted to its eye catching designs. These days the market of the so called china mobiles is growing, particularly in the lower economic section. A glimpse of this was being seen during the survey. The housekeepers mostly carry china mobile, mainly because it provides them with more features including

some high tech features plus it falls in their budget. On the other hand, the students are not fond of these mobiles considering their reliability. It was observed that mobiles produced by big brands like NOKIA, HTC, SAMSUNG etc fall under the category of normal goods whereas the china mobiles and other cheap mobiles fall under the category of inferior goods as their demand decrease with increasing income.

REFERENCES:
*Talk by the Senior Vice President Of Bharti Airtel. *Wikipedia *Google *stats.getjar.com *http://telecomtv.com/comspace_newsDetail.aspx?n=44...