1. 1ITM,VASHIProduct Policy & Brand ManagementLenovo Tablets & Smart PhonesArun Khedwal2nd August 2014Ref No: VAS2012XMBA25P001

2. 2Chapter NoTopic detailsPage No1Introduction - Product Policy & Brand Management3-30o Historical Backgroundo Product Management Processo Product Life Cycle Introduction, Growth, Maturity and Decline.o Case : : Lifebouy resurgence after declineo Product Life Cycle - Continueo Customer Life Cycleo The Discipline of Product Management2Industry Overview31-353Lenovo Tablets & Smart Phones36-58o Executive Summaryo Definitionso Global Market Summaryo Local Market Summaryo PC + Erao About Lenovoo Financial Analysiso Marketing Strategyo S.W.O.T Analysis- Lenovo Indiao Lenovo Smartphones in Indiao Lenovo Tablets in Indiao Conclusion 3. 31.1 Product Policy & Brand ManagementWhen talking about brands most people think of Coca Cola, Pepsi, Apple, Ikea, Starbucks, Nokia, Samsung, Sony and maybe Harley Davidson. These brands also happen to be among the most cited best-practice examples in the area of Business-to-Consumer (B2C) branding. For these companies their brand represents a strong and enduring asset, a value driver that has literally boosted the companys success. Hardly any company neglects the importance of brands in B2C.In Business-to-Business (B2B), things are different branding is not meant to be relevant. Many managers are convinced that it is a phenomenon confined only to consumer products and markets. Their justification often relies on the fact that they are in a commodity business or specialty market and that customers naturally know a great deal about their products as well as their competitors products. To them, brand loyalty is a non-rational behavior that applies to breakfast cereals and favourite jeans it doesnt apply in the more rational world of B2B products. Products such as electric motors, crystal components, industrial lubricants or high-tech components are chosen through an objective decision-making process that only accounts for the so-called hard facts like features/functionality; benefits, price, service and quality etc.1 Soft- facts like the reputation of the business, whether it is well known is not of interest. Is this true? Does anybody really believe that people can turn themselves into unemotional and utterly rational machines when at work? We dont think so.Is branding relevant to B2B companies? Microsoft, IBM, General Electric, Intel, HP, Cisco Systems, Dell, Oracle, SAP, Siemens, FedEx, Boeing they are all vivid examples of the fact that some of the worlds strongest brands are B2B brands. Although they also operate in B2C segments, their main business operations are concentrated on B2B. Then why are so many B2B companies spurning their fortune?Take for instance the Boeing Company. Only a few years ago a very interesting incident happened at the Boeing headquarters in Seattle. Shortly after Judith A. Muehlberg, a Ford veteran started as head of the Marketing and Public-Relations department, she dared to utter the B word in a meeting of top executives. Instantly, a senior manager stopped her and said: Judith, do you know what industry youre in and what company youve come to? We arent a consumer- goods company, and we dont have a brand. Since thenChapter 1: Introduction 4. 4US aerospace giant Boeing has come a long way. Nowadays, branding and brand management do matter in a big way to them. In 2000, the companys first-ever brand strategy was formalized and integrated in an overall strategy to extend its reach beyond the commercial airplane business. Today, the brand spans literally everything from its logo to corporate headquarters. Even the plan to relocate its corporate headquarter from Seattle to Chicago has been devised with the Boeing brand in mind. In 2005, Boeing introduced its new flagship aircraft. In a worldwide campaign with AOL, they searched for a suitable name and invented the Dreamliner, which was inaugurated by Rob Pollack, Vice President of Branding for Boeing Commercial Airplanes Marketing. What is branding all about anyway? First of all we can tell you what it is not: It is definitely not about stirring people into irrational buying decisions. Being such an intangible concept, branding is quite often misunderstood or even disregarded as creating the illusion that a product or service is better than it really is. There is an old saying among marketers: Nothing kills a bad product faster than good advertising. Without great products or services and an organization that can sustain them, there can be no successful brand.Brand management is a well-understood role in virtually every industry except technology. In the last ten years, the brand management role has expanded its influence in technology companies yet we continue to hear the question, Who needs brand management? The role of brand management spans many activities from strategic to tacticalsome very technical, others less so. The strategic role of brand management is to be messenger of the market, delivering information to the departments that need market facts to make decisions. This is why it is not surprising that 8% of brand managers report directly to the CEO, acting as his or her representative at the product level. Companies that do not see the value of brand management go through a series of expansions and layoffs. They hire and fire and hire and fire the brand management group. These same companies are the ones that seem to have a similar roller-coaster ride in revenue and profit. However, over the years we have seen extensive evidence that brand management is a role that can even out the ups-and-downs and can help push a company to the next level of performance. 5. 5Brand Management is a function within a company that deals with the planning or marketing or forecasting of a product or products through at all stages of the product lifecycle.Brand management and product marketing are different yet complementary efforts with the objective of maximizing sales revenues, market share, and profit margins. Brand Management has several roles which cover many activities from identification to development, to launch and even support during its life cycle. The issues handled by the product management team vary from being strategic and/or tactical in nature depending on the type of organisation and where in the organizations hierarchy the function lies. Brand management can be a separate function or a part of marketing or engineering functions.Since better and new products are a key differentiator in the market and are what drives companys profits brand Managements main focus is on new product development. However since they are the ones who know most of the product and the basis of its origin the brand management is responsible for the growth and development of the product in the market and sometimes they may even be responsible for the bottom line generated by the product. 6. 6Figure 1.1.1 Branding of ProductsProduct Policy is a strategic rule or rules covering how a good or service is promoted to potential consumers. A typical product policy created by a business for a manufactured product might attempt to manage how the item will be perceived by its target market and could also contain information about how durable the product is.1.2 Historical BackgroundBusiness executives throughout industry spend more and more time trying to answer one basic question: How can I assure continued profitable growth of my business? The answer to this question is quite simple: By providing the optimum solution to the market needs.Market needs are classified as Goods or Services. All these have a tangible value and can be commercially produced and marketed profitably. For our purpose, we shall classify both goods and services as products. Hence, if we were to answer the above question again, it could be: By providing a continual flow of new products to satisfy market needs or desires The question then arises: Now where will these products come from?In the early 1900s, new products were created by gifted inventors who worked with crude equipment and facilities but were creative geniuses with determination and vision to follow their discoveries in spite of tremendous difficulties. Men like Edison, Watt, and Marconi created products like the electric bulb, steam engine and the telegraph. All their products came from years of hard work and hit and trial experiments. Once these basic inventions were developed, new products evolved. For example, after the steam engine, 7. 7motorised transportation in the form of cars became a reality, and steam boats replaced horses and sailboats.By the end of World War I, new technologies had become so complex and the speed at which new developments were made became so rapid, that the individual inventor became less and less relevant. Instead, companies started organised development of products. World War II gave a further impetus to the development and refinement of products. However, most of these were based on Research and Development (R&D) in a given manufacturing company and were not driven by customer needs. The R&D product planning programs were expensive and slow, and they often were unproductive. Managements then concluded that a new approach was needed to make product development more productive. They realised that to be successful they needed to identify products that could satisfy the customers needs and desires, and which could, at the same time, match the company's manufacturing capabilities keeping in mind the constantly changing market conditions.Thus, it was no longer a case of merely reacting to market conditions. A company needed to stay ahead by creating new markets while continuing to dominate existing ones. Hence, what was needed was a formal approach to Product Planning and Brand Management.The formal process of Product Planning & Brand Management is led by a Brand Manager whose primary role is to serve as the Voice of the Customer. He is responsible for the 4Ps of Product Management: Price Place Product PromotionWe will go through the various aspects of Brand Management as is now undertaken in this complex business environment. 8. 81.3 Product Management ProcessIntroductionWe have seen that a company needs to stay ahead not only in its existing markets but also in new markets that it expands into. In order to stay ahead, it needs newer products on an ongoing basis that meet the needs of a continually changing market. We have also seen that the product development process has become a complicated and expensive process. Hence a structured approach to product development is needed. This is also called the Product Management Process.The Product Management Process is cyclical in nature this means that product development is a continual and ongoing process which goes through a cycle. As old products die new ones are born and so the cycle goes on. This process of managing the entire lifecycle of a product from its conception, through design and manufacture, to service and disposal integrates people, data, processes and business systems and provides a product information backbone for companies and their extended enterpriseProduct Management CycleThe Product Management Cycle has five stages:1. New Product Identification2. New Product Definition3. Product Development4. Product Launch and Growth5. Product Discontinuation1. New Product Identification PhaseThis is the phase in which the company conducts various activities in order to understand the customers needs and desires and define the functional requirements of the product.The product management group is entrusted with the task of creating a systematic process to understand the customer requirements and create a document that outlines what the product functions should be. During this phase the product development personnel and people from top management undertake some of the following activities: 9. 9a. Customer surveys and responses to existing products so that improvements to existing products can be undertaken. They also try to understand what the customer feels are his pain areas (areas where the customer has problems). Many times it is the solution of the pain area of the customer that gives rise to new innovations. When a company is selling a product in its target segment then this product will fulfil all the needs of a part of this segment, most of the needs of a large part of this segment and some of the needs of the balance. In order to know whether the companys products are meeting the customers expectations the companys sales force or an agency appointed by the product management team. These people generate a feedback from the customers some of which is extremely useful in generating new ideas.b. They read journals, magazines, books, and also go to international exhibitions, conferences and see what innovations are being displayed and discussed by eminent scientists, business associates and competitors. This helps them keep abreast with the latest developments around the world so that they can use some of these in their own products. It also helps understand what the competition could possibly develop in terms of new products.c. Companies create think tanks that take in all the data that comes in from various sources and come up with various ideas. This consists of cross functional teams teams consisting of people from various departments many of whom may eventually be involved in the development of the product. These cross functional teams get all the inputs that is available for product development and they also bring into the team their knowledge and experience. Using this they debate and come up with ideas for new product development.d. All interesting information is collated and circulated organisation-wide usually strategic planners or technology policy makers. Organisations generally circulate information about products, technologies, business processes, competition, etc within the organisation. This not only helps people keep abreast with the latest trends but also allows the germination of new ideas.During this phase several product ideas are generated and there is a fuzzy view of each of these products. 10. 102. Product Definition PhaseDuring this phase various ideas for products generated in the first phase are discussed and evaluated so that the final product is finalised. During this phase the following activities are undertaken:a. The high level functions of the product are defined. High level specifications mean that these specifications are an overview of all the functions desired in the product. These are stated simply and are meant so that everyone in the organisation can understand the functions are and how it solves the customers problems. For example when the Nano was planned by the Tatas a high level specification would have given that they need to develop a car that will cost only Rs one lakh to the customer, would look modern, have the basic comforts, and that it would be positioned for a two wheeler owner who would aspire for a four wheeler or an existing small car buyer who would like to buy a more economical more modern design.b. A business case is made for the new product. This business case defines the size of the market, the segment for which the product has been defined, what are the investments needed to make and sell the product and what will be the profit that the product make during its life cycle. It also outlines what are the competitive products currently and also likely to be launched by the competitor. Once the basic product has been defined like the Nano the product management team will have to make a detailed report in which they will have to evaluate whether this product will make business sense. At the end of the day the business needs to make a profit and if a product cannot make profit it will not be considered for the next stage of development. The study done in this phase is relatively preliminary and is done to understand the basics of the economic feasibility.c. In this stage the product management team has to sell the idea of the product to various people in the organisation sales, production, R&D, HR, etc. Once the Product Development team has determined that the product is viable it has to convince the management that the product not only meets the strategic objectives but also the profit objectives of the organisation. Until the management is convinced the financial commitment needed to commence product development cannot be made. The presentation to the management will also have details of the financial support needed for development, the time by which the product will be developed, the business prospects and the techno-commercial feasibility. 11. 11During this phase, the Technology group with industrial engineering group conduct a feasibility study; In addition, an economic study is done. Let us say in the case of the Nano once the basic product idea had been agreed to in principle the product development team would have conducted a study as to understand how they can meet the given objectives of the product specification and yet make the product feasible. This is done in consultation with the technical teams of the organisation like R&D, operations, procurement etc in order to understand broadly if the product can be made economically, At this stage many assumptions are made based on which the decision is taken. For example the product management team will assume that a certain technology needed to manufacture the product will be available at a certain cost and base their calculations on that. This assumption is based on the experience of the people in the organisation and no formal quotation is taken since it has not been decided for sure that this is the technology that will be used or some other option will be taken. Later once the decision is taken then the organisation tries to get the technology for a price below the figure taken in the assumptions.3. Product Development PhaseOnce the products high level specifications have been finalised and the top management has approved this product and committed resources for its development, the Product Management Group involves the Product Development Team. This team consists of people from R&D, Manufacturing, Industrial Engineering and Sales. They are given the high level specifications of the product and given the tasks of creating the actual physical product. During this phase:a. The various functions involved in the Product Development Team make a detailed specification of the product. They also define the look and feel of the product. The task of converting a high level specification as given in 2.3.2.i into a detailed product specification is not a small task. It involves a detailed process in which several functional areas are involved. Each functional area provides inputs in the best way of meeting the products objectives and the Product Development team considers all the inputs and decides on what options to take. During this period the product specifications may undergo minor changes keeping in view the strengths of an organisation however the overall functional requirements will remain the same.b. They evaluate the various options in manufacturing processes and the need for any new technology to make the product. They also evaluate the impact of various options in making the product in terms of investment needed, profits generated, etc. While making the detailed product specifications the management also evaluates the 12. 12manufacturing options it has for the new products. They need to evaluate whether the existing manufacturing processes are adequate for making the new product, or they need to expand the manufacturing set up or they need to create an altogether new facility. Many times it happens that new technology needed to manufacture the new product has a significant impact on the existing processes and so the management needs to evaluate whether such a technology should be used or not, whether this is going to be beneficial to the organisation in the long term, since it may involve a lot of retraining of its manpower for using the new technology.c. The first prototype of the product is developed and evaluated to see if the product meets all the functional requirements set out in the initial document. This is an important stage in the product development cycle. This product is put through functional trials to see if the specifications laid out at the beginning are met not only form the engineering point of view but also from the customers requirements point of view. At this stage sometimes a few chosen customers are also shown the product for their feedback. The feedback from testing and the customer is considered by the product management team and they decide on the changes to be incorporated in the product.d. At this stage the product is more or less finalised and the product functionality frozen. However some fine tuning may continue till the product launch and even during the life of the product. These modifications are done to suit the conveniences of manufacturing or additional features needed by Sales.e. Once the final product comes out of the factory it is once again shown to some key partners (much larger numbers than before) in the market and sometimes test marketed in a small area to get the more feedback. Test marketing is usually done so that the actual user experience is received. It is normally done in a small representative market away from the main market of the company. The reason for doing the test away from the main market is that in case the test fails or has a negative impact the main market (which is significantly larger) must not be affected. This feedback also is discussed internally and the relevant parts are incorporated in the product.f. The product is then ready for launch. 13. 134. Product Launch and Growth PhaseThe product launch needs a lot of preparation so as to ensure that the product succeeds in the market. Just making a good product is not enough to ensure its success. Thus by the time the final product is ready, the Product Management group has to develop the support needed to launch the product in the market. They have to:a. The product management team knows how they have positioned the product and what their target segment is. Along with the advertising department they have to develop the campaign needed to launch the product. Now keeping with the companys overall business objective they know how much they can spend on this campaign and so they plan the media according to this need.b. The entire sales force, the channel partners must know what product they are selling and how it compares to competition. The customers must be able to understand the product they are buying. Hence the Product Management team must also develop the tools needed by the sales team and channel partners to sell the product effectively and for customers to understand them. They create tools like sales catalogs, leaflets, comparison charts with competition, explaining application areas and target segments for the product, they provide the pricing strategy, etc.c. The Product Management group continues to provide support to the product throughout the life of the product by determining ways to improve sales, profitability of the product. Many times they have built in features in the product that have not been released with the initial launch of the product. These features are added into the product in a phased manner so as to stay ahead of competition and keep the customer interested in the product.d. They also keep taking a feedback from the customer so that small incremental improvements can be made to the product thus increasing its life and profitability of the company while keeping it ahead of competition.e. We know that capital is scarce and new product development is expensive. Thus if we can prolong the life of the product it can help the company make profits while staying ahead of its competition. 14. 14The products life and success will depend to a large extent on the ground work under taken by the Product Management Group from the time of its development to its launch and stay in the market.5. Product Discontinuation PhaseThis is a critical phase in the management of products. This is the phase when the product is to be discontinued and a new product has to be introduced. This seems to be quite simple but in reality it is a difficult decision. The reason is that on one hand we have a product that is established in the market and has customer acceptance, and, on the other hand, the new product has still to be accepted by the customer. If the current product is discontinued and the new product is not accepted by the customer, it can cause a major setback for the company. If we take the example of the Maruti 800 car it is a car that has been selling in large numbers, even though competition has introduced many products. Now if Maruti introduces a new product in its place they are not sure how the customers will feel about. We know that the Maruti 800 is a car that has excellent availability of spares and maintenance. Even the roadside mechanic can repair it and so there is no problem in using it anywhere in the country city, town or village. Any new car will take some time to penetrate the market so much. It will also take some time for Maruti to train its engineers in their service establishments across the country. Thus there is always some danger of losing a part of the market share to competitors. Hence some of the considerations in this phase are:a. Availability of a new product The foremost consideration in introducing a new product is its availability.b. Awareness of the Competitors Products - At the same time we need to see what the competitor is doing. If the competitor has already launched a new product, it will force the companys hand in launching its own product. For example when Apple launched its iPhone with a large touch screen technology, other phone manufacturers were forced to launch similar products within a very short time.c. Customer Maturity - Even though a new product may be ready, it may not be possible to launch it because the customers are not ready for it. E.g.: consumer durable manufacturers had washing machines ready in their product portfolio but could not launch it since the Indian customer was not ready for it. The Indian customer at that time felt that washing by hand was the done thing and that a washing machine never washed the clothes properly and that they never came out clean. 15. 15d. Adequate Training - In addition before discontinuing an existing product and launching a new product the organisation needs to be trained in it E.g.: the manufacturing team must know how to make it, the sales team and its distributors must understand how to sell the product. If it is a product that needs installation and maintenance then this team must also be trained.e. Adequate stock must lie in the distribution channel so that once the product is launched and the campaign breaks out, sales must not be lost due to non -availability at the retail end.Nowadays, because of the speed at which the market is changing and competition is responding, existing products are discarded even when they have not completed their economic life. This puts more pressure on the Product Management Group to develop newer products that will give returns in shorter and shorter periods of time. We therefore see that many CEOs make the product management team report directly to them since it has one of the most profound effects on the bottom line of the company.1.3 Product Life Cycle (PLC)Product Life Cycle as the name suggests every product has a life cycle. This life cycle commences from the time the product is launched in the market till the time it is ultimately withdrawn from it. During this period it passes through several phases each of which is important and needs different strategies if the product has to remain in the market and grow into the next phase. This is very similar to a human being who also passes through several phases from birth to death and the strategies or activities needed for each phase of life are different from each other and need a successful management of each phase.We can generalise various phases of life as childhood, youth, adult hood, old age and based on the total population make a generalised period for each stage and life expectancy of the individual. However for an individual each phase may not be of the same duration or intensity as the standard one. An individual may have a very short youth because of certain conditions in his life or family, or a person may die a premature death due to illness or accident. Similarly a for products we can make a standardised life cycle based on the industry in which it is but an individual product may not follow the standard life cycle pattern an may live much longer or may perish much earlier.Product Life Cycle (PLC)The Product Life Cycle consists of four stages Introduction, Growth, Maturity and Decline. 16. 16IntroductionIn this phase the product is introduced in the market. Once the product has been developed the Product Manager has to decide when he wants to introduce the product to the market. The timing of introduction is a critical decision since it may involve the phasing out of another product from the market or the product being introduced is designed to counter a competitors product and the right timing is an important consideration for success. If the product is introduced too late because our product has not been phased out the company may lose profits that it could have made with the new product or if it was meant to counter a competitors then it is possible that our customers have shifted to some competitors product and getting them back will be difficult. When Nirma initially launched its washing powder in the Rural Markets Hindustan Lever never paid attention to it because it did not think that the Rural market had that much potential and underestimated the rural populations desire for a quality product. They continued to concentrate on urban markets. This allowed Nirma to consolidate its position by way of improved product, manufacturing facilities and distribution system. By the time Hindustan Lever responded to the threat by launching a lower priced washing powder it was too late to dislodge a well-entrenched Nirma. In fact now Nirma was able to enter the urban markets also since it was an established product and financially it was much stronger to resist Hindustan Lever in the market.Some of the key features of this stage are: Product category has recently been introduced into the market - consumers are unaware of the product. Proper capitalization is important. Industry sales are low, but growing. Industry profits are negative. Advertising usually tries to develop the primary demand. Creating awareness and trial are common marketing objectives. Sales promotion is used to trigger product trial.GrowthIn this stage the product is advertised vigorously by the company and grows rapidly in sales with more and more customers coming to know about it and beginning to try it. This is an important stage where the product is either accepted or rejected by the customer. An acceptance will continue to see a growth in its sales otherwise the product will continue to try and sell but will soon fail and be withdrawn from the market.Usually the customers in this phase are the early adopters or those who like to experiment and are comfortable with innovation. They are also those people who are fashion conscious and trend leaders. 17. 17In this phase the company who is an innovator or a market leader should expect to recover its costs of development by keeping margins high. However a word of caution here is that sometimes companies have spent so much on development that they do not have sufficient resources to sustain the investment needed to push the growth over its critical mass and fail because the product revenues needed for sustenance take time to build.This phase also witnesses the introduction of competitors (followers) products who have either developed a similar product or find it simple to copy the market leaders product make some changes and introduce it as their own product. For those companies who have only copied the market leaders product there is virtually no development cost and they can use all their resources to promote their product. In addition since they do not have to recover any development costs they have much less at stake in a higher pricing of the product. Thus their product can be much cheaper.Thus the Growth phase is a critical phase and companies must ensure that before they introduce a product they have enough resources to see the products launch to success.Some of the key features of this stage are: Sales are rising rapidly. Profits appear, peak, and begin to decline just before the end of the period. Profit possibilities attract competitors, but many competitors will be shaken out during this phase as well. Promotion shifts from primary to selective demand. Building market share is a common marketing objective.MaturityThe introduction of the product sees a period of rapid growth when the sales increase. But as time passes more and more competitors enter the market with similar products. The sale is then divided amongst many products and the rate of growth of sales begins to slow down. During this phase those customers from the total target segment who are the early majority begin to use the product. Though the rate of growth of sales begins to slow down the total market share of the product continues to rise. In this phase the company needs to put in a lot of effort in order to maintain growth in sales. Several strategies may need to be adopted. These may take several forms like:a. Reducing prices: This may seem to be the simplest form of enhancing sales but in effect it is quite complicated. A reduced price means that the companys margins come down and so its ability to undertake other activities in the market needed to promote the product gets limited. This can be done if the production volumes allow a reduced production cost and so a part of this 18. 18can be passed on to the customer without in any way seriously jeopardising the margins.From the customers point of view however reduced prices are always welcome but it always puts a quantifiable value to the benefit. In place of reducing the price if the company is able to give the customer an enhanced benefit the customer may put a value to this benefit at a much higher value than the reduction in price.b. Enhancing the value proposition of their product: thus the other way of benefiting a customer is to provide him some features that he may value and be willing to pay the additional premium over the competitors product. We have seen earlier that during the product development many more features are planned than are launched during the initial launch. The reason for this is that these enhanced features can be released in a gradual manner to the customer. This allows the company to keep the customer engaged by offering him innovations while at the same time being able to maintain their bottom line in the face of competition.c. Launching consumer schemes : In order to stay ahead of competition the company may launch consumer schemes which gives a consumer the feeling of getting a benefit without actually reducing price for example in a shampoo a company brings in a product that says additional 20% free. This way the company is putting in additional 20% shampoo in the packaging but it saves in all other costs like distribution channel cost, transportation cost, manufacturing cost and the only cost is the cost of the extra material. Thus for a small incremental cost the customer feels he is getting a much higher value. Schemes could be in form of a gift or a scratch card with every product purchased. A Scratch card is a card put with the product which the customer gets an option to scratch and win the prize mentioned on the card.d. Enhancing Advertising: With the increased sales volumes the company begins to get enhanced revenues. Increased advertising is used to increase reach within the target segment and support the dropping rate of growth in sales.e. Increasing channel benefits: Several times the distribution channel is in a position to push sales. The distributor has limited resources and he would like to maximise his returns. Thus he will tend to push those products that will fetch him the maximum returns. In order to motivate the distributor the company tend to give volume based benefits to them. This means that the distributor will get a defined percentage as an additional value over and above the normal percentage if he achieves a certain volume of sales. This percentage increases his Return on Investment and he is motivated. The caution here is that if the company has multiple products with the same distributor they must 19. 19ensure that he does not cannibalise their other products at the expense of this product.Some of the key features of this stage are: Sales rise to their peak, then level off. Industry profits are in a slow decline. Competition increases. Promotional costs increase (selective demand), and sales promotion to trigger switching is more common (companies motivate customers to come and change their old products with new ones) Products become more homogenous, triggering price competition. Need to differentiate brand. Diversify brand and models. Can be difficult to enter the market in this phase (capturing vs. retaining share). It is easier to retain share than to capture share because for capturing a competitors share the company has to spend some money, but in this phase profits margins are very tight. Efficiency is a key factor for staying alive in this phase.DeclineDespite the companys best efforts the growth in sales of the product begins to slow down and plateau. This may happen due to the product becoming out dated and newer products becoming available. It may also happen because of a new technology becoming available. As we know when mobile phones were introduced they were large bulky and did not have much back up. As soon as smaller and more efficient phones became available consumers switched to the newer phones and the larger ones went into decline.In this phase the late majority and the stragglers of the total target segment are the likely consumers of the product. These people are not likely to experiment with a new technology and so they will wait for the technology to stabilise and prices to come down. They will also not change their products or brands easily and so in a way are a loyal part of the companys products and efforts should be made to retain them.Depending on product to product from here on the product may go into a gradual or a rapid decline till it is withdrawn from the market. By this phase the company has recovered its development costs and has made profit on the product. The company has to take a decision on how long it would like to sustain this product. Companies have to see whether they can continue to support their products profitably or not. Many times products that have become strong consumer brands can be retained for a sustained period of time profitably. This does not mean that the company does not have to innovate. Sometimes companies make some adjustments in its products positioning to 20. 20remain in the market. Let us take the example of Lifebuoy soap this product has remained between the maturity and decline phase for a very long time1.4 Lifebouy resurgence after declineLifebuoy was sold in India as early as 1895 when the country was in the grip of a plague epidemic, but was officially launched and marketed from 1935.With its positioning as a powerful germicidal and disinfectant, and with a strong carbolic smell, it was what the nation was looking for at that time.Lifebuoy rapidly grew as a reliable brand of India, reaching millions of rural customers with a promise of health and hygiene as a platform of its business. Its famous advertising jingle, tandurusti ki raksha karta hai Lifebuoy was so famous that it enabled the brand Lifebuoy to be perceived as a red carbolic soap for several decades.Lifebuoy had a 21% market share in the overall soap market and was a category leader in the carbolic soap segment with a 95% market share. For over hundred years since the brand first came to India, Lifebuoy has been associated with health and well-being. Its ads reiterated the message that Lifebuoy washed away germs and kept one protected and healthy. The brand went through a major re-launch for the first time in 1964, with a change in product formulation, shape, and packaging.But the health advantage was lost over time as competitors came out with soaps that promised both health and beauty.The brand passed through prolonged stages of growth and maturity during most of the second half of 20th century. It was faced with a decline stage during the last stages of the 20th century and early 21st century with sales falling at a very rapid rate of 15%20% per year. The downward trend of Lifebuoy carbolic soap sales made Hindustan Lever Ltd. reposition the product during 2002 and rejuvenate the brand with prudent marketing strategies by optimally utilising the brand image.In 2002 the product moved from being a hard soap to a mild soap that delivered a significantly superior bathing experience. The new soap had a refreshing fragrance and its overall positioning changed, painting its promise of health in softer, more versatile and responsible hues for the entire family.The packaging was also changed: The rugged looking packs were soon replaced with a softer pinkish cover. This was followed by a series of ads highlighting the soaps germ fighting benefits.Lifebuoy had become a family soap with hygiene as its core promise. A soap that had been relegated to toilets, Lifebuoy has added new values in an age where more consumers are getting more and more concerned about germs and cleanliness. 21. 21Lifebuoy has 112 years of existence in India and has constantly reinvigorated itself.Some of the key features of this stage are: Sales decrease. Profits decrease and eventually disappear. Declining numbers of competitors. Spend enough on promotion to retain hard core brand loyal customers. Eliminate unprofitable outlets. Marketing objective: reduce costs and milk the brand, or drop it.1.5 Types of customers at different stagesThe Product Life Cycle is closely linked to the type of buyer. We will see that depending on the stage in the products life cycle a certain type of buyer within the total target segment of a company will be predominant and will have a certain type of mindset. This influences the purchasing behaviour and also the product life cycle of the product.Innovators: - Innovators are a very small part of the total target audience but they are a very important part. They the first individuals to adopt an innovation or product and in a way prompt the others to begin to use the product. Innovators are willing to take risks in trying out new products. These types of buyers are predominant during the introduction of the product. They are usually the youngest in ageBelong to the highest social classa. Financially they are sound and have significant surplus.b. Are very social and keep abreast with the latest products and innovations.Early Adopters: - This category of individuals is second fastest to adopt an innovation and follow the Innovators. They have a greatest influence on the opinion amongst the others in the target segment. Others look at them for their opinion of the product for adopting or not it. Like the innovators the early adopters area. Typically younger in age,b. Have a high social status,c. Advanced education,d. Are also financially sound and have surpluse. They are more socially forward than late adoptersBoth the Early Adopters and Early Majority are a significant part of the growth phase of the product.Early Majority: - Individuals in this category adopt an innovation after a varying degree of time. This time of adoption is significantly longer than the 22. 22innovators and early adopters. Early Majority tend to be slower in the adoption process. The Early Majority havea. Above average social status,b. They are influenced by the early adopters and are usually in contact with them.c. This category also influences the opinion of other categories of adopters though to a lesser extent.Late Majority: - The Late Majority customers will enter the market during the maturity phase of the product life cycle. Individuals in this category will adopt an innovation after a large part of the adopters have already adopted the product. These individuals look at an innovation or a new product with a high degree of suspicion about its effectiveness and begin to use the product only after the majority of society has adopted the innovation or product. The Late Majority area. Generally suspicious of an innovation or new productb. Belong to a below average social status,c. They do not have very much financial surplusd. They are in contact with others in late majority and early majority,e. They have very little opinion leadership.Laggards:-The Laggards enter the market near the end of the maturity phase of during the decline phase of the PLC. They will wait for the product to be absolutely tried and tested and for the prices to have come down to the minimum. Individuals in this category are the last to adopt an innovation. Individuals in this category show little to no opinion leadership. These individuals typicallya. Have an dislike for change of any type and tend to resist change.b. They tend to be older in age.c. These individuals in general tend to be focused on traditionsd. And they are at the lowest social status and lowest financial surpluse. They are usually in contact with only family and close friends and exert very little to no opinion leadership. 23. 23Figure 1.5.1 Types of customers at different stages of PLC1.6 Product Life CycleIn its simplest form, the product life cycle consists of three phases:1. Develop the product2. Operate the product3. Decommission the productObviously this simplistic model leaves a number of questions about changes, procedures, etc. Figure1.6.1 below gives a more complete view of the product life cycle 24. 24Figure1.6.1 Product Life CycleProduct Initiation Phase: - In the Initiation Phase, Product Management, Engineering, or Operations submits a request for a new service or modification to an existing service.These requests are received and prioritized by the Program Management Office (PMO). Once prioritized, the requests are reviewed by various management teams to assess the impact and viability of the request in the context of business needs and the organizations strategy. If approved, the request is given necessary funding and resources in order to proceed to the Feasibility Phase.Feasibility Phase: - The Feasibility Phase is where an idea is explored in more depth in order to determine the feasibility of engineering the requested service within the scope of the business needs. The request that has been approved during the initiation phase by the Governing Committee is evaluated at the engineering and product management level. From an engineering perspective, the service is evaluated for technical feasibility. The preliminary Technical Service Description outlines the general architecture of the proposed service. The Feasibility Analysis and stable Business Case are also developed during this phase. These documents summarize time and cost estimates and other investment information necessary for deciding whether to continue the product development process or not.Design and Plan Phase: - In the Design & Plan Phase, the cross-functional team documents all detail pertaining to the development of the service. While core documents, such as the Marketing Service Description, Technical Service Description, and Design Specifications, are stabilized, other groups, including 25. 25Operations, QA, and Customer Care begin to specify their requirements for supporting the service. All of these documents are approved and signed off by the project team and the Design & Plan Checklist is presented to the Governing Committee for final approval before moving into the Development Phase.Development Phase: - In the Development Phase, the actual engineering of the service is completed. As the service is being developed, other functional groups continue preparatory work for the Testing and Introduction Phases. Much of the documentation to support Customer Care, Training, Vendors, and Clients is created during this phase. Also, the Quality Assurance Group prepares for the testing handoff by documenting Test Plans and Test Specifications, and configuring the test environment.In this phase, a decision gate ensures that all pieces required for testing have been completed. The following are requirements to pass through the decision gate: Ready for Testing Phase from a System Integration Test perspective Documentation Complete Test Environment Complete Code Complete Vendor Requirements met Integration Testing & Results CompleteOnce the Project Team has approved the readiness of the service, the Development Checklist is compiled and presented to the Governing Committee for approval to move the service into the Testing Phase.Testing Phase: - The majority of the Testing Phase is spent certifying the hardware and software changes involved in the service. The service will undergo a number of readiness tests in a Lab Environment. Operations also performs necessary system and network tests to ensure operational readiness prior to deployment. Once QA Test Results and Operations Readiness Test Results are completed, the service may undergo field trials as directed by product management. The Testing Phase Decision Gate is based on the QA Test Results, Operations Test Results, Field Verification, Change Requests, and Business Needs. A 'go' decision at the gate authorizes the launch of the service.Product Launch Phase: - The Product Launch Phase coordinates the deployment of the new or modified service. As the service is enabled by Operations, the supporting organizations initiate support processes to maintain the service. Once deployed a service check is made by the Project Team and Program Management Organization to ensure that the Service is available. If the service is found to be unsuccessful, a predetermined un-launch process 26. 26will be executed. If the service is launched without incident, the Project Team then evaluates the stability of the release and the service is transitioned to the Life Cycle Management Process.Operation Phase: - The Operation Phase is typically the longest of the phases since once a product is developed, it may be operated for quite some time before it is updated or decommissioned. The operation phase requires an organization that can manage the product, track problems and bugs, and respond to customer issues regarding the product in a timely and cost effective manner. A multi-tiered product support model is used to ensure that products are operated in a way that leads to RASM (reliability, availability, security, and manageability).Decommissioning Phase: - The Decommissioning Phase occurs at the end of the product life cycle. While it may seem like the decommissioning phase is something that can be safely ignored since there will likely be larger problems if the product is decommissioned, the truth is that many products are taken out of service. Even when a company is in bankruptcy, the rational, orderly closing down of a product or service is important to managing the companys assets.1.7 Customer Life CycleJust as products have life cycle, customers also have a life cycle. In its most simple forms the customer life cycle consists of two phases: -1. Customer buys the product2. Customer uses productIn many cases, however, particularly when a product is a service or a good that needs to be periodically replenished, the life cycle is slightly more complicated. Figure 1.7.1 gives a more complete view of the customer life cycleFigure 1.7.1 Customer Life Cycle 27. 27Even this model is overly simplified compared to what one might see in a sales textbook, but it is sufficient for our purposes.Initial Customer Contact: - The initial customer contact phase collapses all of the marketing, advertising, and initial sales calls into one tidy box.Customer Acquisition: - The customer acquisition phase is the first point where a person or organization becomes a customer. Abstractly, the process consists of an agreement between the customer and the organization to exchange money for the product. From the product managers perspective, however, the process is much more complicated: How will the customer request service? The customer may request service by phone, email, web page, or in person. How will payment be received? How will the product be delivered? In the case of a service, the process of delivering the product is called provisioning and may consist of touching a number of unrelated systems and configuring myriad devices and systems.Product Use: - Every product is designed to ultimately be used by a customer. The customer may use a product and have to repurchase before another use or the product may be such that the customer uses it over and over after purchase. The payment may be made once or on a recurring basis.Periodic Contact: - Throughout the product use phase, the customer may have periodic contact with the company. These interactions take the form of Customer service Technical support Billing Sales callsIn each of these events, the company has an opportunity to make a positive or negative impression on the customer. These periodic contacts are usually managed using some sort of Customer Relationship Management (CRM) system that tracks all interactions with a customer from all channels. The CRM system thus allows the product manager (and others) to capture vital information about missed sales opportunities, customer complaints, common problems, etc. Using this data the product manager can mold a product so that it better meets customer needs and reduces customer support costs.Product Upgrade: - When a customer is finished using a product, the things can happen: the customer can be upgraded to a follow on product that meets their needs or deprovisioned. The product upgrade path is desirable because it keeps the customer and reduces customer reacquisition costs. Customer frequently outgrow products or their needs change. If a company has a well 28. 28managed product portfolio, a product more suited for the customers current situation will be waiting for them.Deprovisioning: - Deprovisioning a customer may seem like an issue that need not be dealt with: the customer stops using the product and nothing more need be done. However, in many cases, particularly where service with a recurring billing has been provided, if the customer is not properly deprovisioned, there will be future costs resulting from either providing service that is not being paid for or from billing a customer who is not receiving service. In either case there are likely to be costly customer support calls and an unhappy customer. Customer deprovisioning, where appropriate, should be planned for and built into the product from the beginning.1.8 The Discipline of Product ManagementAs a members of a discipline, product managers work at all levels of a company in the product development process. For our purposes, we will discuss only three levels: product manager, lead product manager, and product strategy director. Of course, these might have different names and be shared among multiple people in any real installation.Table1.8.1 Brand Manager RoleTable 1.8.1 shows the three roles of brand management, gives the driver for the role and the work product that the role produces.Product Manager: - The product manager is driven by the customer life cycle and produces a product. Any large product may have multiple product managers assigned to it, especially during Design and Plan, Development, and Testing, portions of the product life cycle. A product manager must be concerned with every aspect of the customer life cycle and every way that the customer might touch the product or the company about the product. They are primarily concerned with the customer experience in every dimension that it might take. The end result of all of this is the product itself.Lead Product Manager: - The lead product manager is responsible for a product throughout its entire life cycle. Every product will have a product manager assigned to it from inception to decommissioning, guiding the product from birth through death. This guidance is called a product roadmap and is the detailed plan for the product lifecycle. The lead product manager manages 29. 29a cross functional team of people who are responsible for the development and operation of the product. This team may grow and diminish during different phases of the product life cycle, but generally includes: Software developers Project managers Product operations engineers Software quality assurance engineers User interface design engineers Marketers Financial personnel Graphic artists Customer supportThe lead product manager does not necessarily function as the operational manager for these people, but leads, coordinates, and supervises their work toward the end goal of making the product a reality, launching it, operating it, and managing it throughout its life cycle.The product managers who manage the customer life cycle report to the lead product manager during times that they are assigned to the team. In many cases, the product manager will have P&L responsibility for the product and thus manage everything about the product including sales, marketing, and advertising.Product Strategy Director: - The product strategy director is a member of the executive management team and is responsible for creating a portfolio of products that are aligned with the business strategy of the company. A small company might have a small product portfolio. A large company might have multiple portfolios organized along lines of business.A product strategy director has the following responsibilities: Define and plan product lines and product enhancements Management of product contracts and sales Strategic direction based on customer needs and business goals Interpret strategic goals into operational tasks Make proposals to senior management regarding implications of proposed plans Serves as representative to internal and external clients. Manages external vendors and deliverables Takes lead in establishing tactical plans and objectives Develops and implements administrative and operational matters ensuring achievement of objectives Establishes business plan and operational goals Evaluates risks and trade-offs; proposes contingency plans 30. 30The product strategy director is accountable in the following areas: Accountable for overall product direction. Make key decisions based on risk management and trade-off assessments. Act as product evangelist Manage product budget Anticipate and develop strategies and tactics to meet client business needs Participate in strategic decisions that will have long term impact on product success Provide business leadership to members of team including developers, contractors, and othersThe product strategy director is gives leadership in the following ways: Provide tactical leadership and general direction to managers and team members. Regularly interact with executive management Handle controversial and sensitive situations with diplomacy Negotiate with clients and customers as well as executives and other directors Provide supervisory guidance and mentoring to more junior product managersFigure 1.8.1 The Roles & Responsibilities of Brand Manager 31. 31Growth of the Indian EconomyOver the last few years, India has shown strong economic growth. In Fiscal 2010 the growth rate for India's gross domestic product ("GDP") is estimated to have been 7.44%, and in Fiscal 2009 and 2008, GDP growth is estimated to have been 6.72% and 9.22%, respectively, according to the Central Statistical Organisation (CSO). Economic growth is expected to continue into the immediate future with the International Monetary Fund (IMF) estimating Indias real GDP growth at 9.4% in 2010 and 8.4% in 2011 (Source: IMF World Economic Outlook, July 2010). The McKinsey Global Institute estimates that Indias real GDP will grow at a combined annual growth rate (CAGR) of 7.3% from 2005 to 2025.Indian Consumer MarketAs India's economy has grown, so too has the spending power of its citizens. Real average household disposable income has roughly doubled since 1985 and a new Indian middle class has emerged, according to The 'Bird of Gold': The Rise of India's Consumer Market, a May 2007 report of the McKinsey Global Institute (the "McKinsey Report").The McKinsey Report posits that if India continues on its current high growth path, the Indian consumer market will undergo a major transformation during the period from 2005 to 2025: Income levels will almost triple, with annual real income growth per household accelerating from 3.6% over the last two decades to 5.3% over the next two; The shape of India's income pyramid will change with India's middle class growing by over ten times from its 2007 size of 50 million to 583 million people; India will climb from its 2007 position as the 12th largest consumer market to become the world's 5th largest consumer market by 2025; and Spending patterns will evolve, with basic necessities declining in relative importance, and categories such as communications growing rapidly.Some of the key reasons relating to the growth of Indias customer markets are summarised below: Population Growth Favourable Demographics Rising Income Levels Dramatic Shift to Income Pyramid Increasing Consumption Increased Discretionary Spending Communications Spending to Grow FastChapter 2: Industry Overview 32. 32Indian Telecommunications Services MarketIndia is the second largest and the fastest growing telecom market in the world in terms of number of wireless connections, according to the Telecom Regulatory Authority of India (the "TRAI"). The Indian telecom industry can be divided into basic, mobile and internet services.With the implementation of the GoI's Broadband Policy in 2004, the number of broadband connections has increased to 8.77 million subscribers as of March 31, 2010, and according to TRAI, the President of India has set a target of 100 million connections by 2014.The size of the mobile wireless services market has increase by 103.70% from 286.86 million subscribers as of June 30, 2008 to 584.32 million subscribers as of March 31, 2010. TRAI estimates that the number of wireless subscribers will be over 1.00 billion subscribers by March 2014. While wireless penetration is urban areas has increased significantly over the last few years, rural and semi-urban areas continue to be under-penetrated. The overall wireless teledensity in India has increased from 24.95% for the quarter ended June 30, 2008 to 49.60% for the quarter ended March 31, 2010 (source TRAI). TRAI estimates that urban mobile teledensity will reach 125% by March 2014, with urban mobile subscribers reaching 572 million, and that the rural mobile teledensity will reach 60% by March 2014, with rural mobile subscribers reaching 468 million.Indian Mobile Handset MarketThe Indian mobile handset market has grown by 30.17% from 116 million handsets for the twelve month period ended December 31, 2008 to 151 million handsets for the twelve month period ended December 31, 2009. The growth has been driven by the growth in medium ASP devices (devices with a price in the range of ` 2,000 to ` 5,000). The contribution of medium ASP devices has increased from 34.48% for the twelve month period ended December 31, 2008 to 45.03% for the twelve month period ended December 31, 2009.According to Analysys Mason, the Indian mobile handset market is expected to grow from a total of 151 million handsets for the twelve month period ended December 31, 2009 to 402 million handsets for the twelve month period ended December 31, 2014. The medium ASP segment is likely to be the fastest growing with volumes increasing from 68 million handsets for the twelve month period ended December 31, 2009 to 240 million handsets for the twelve month period ended December 31, 2014 and overall contribution increasing from 45.03% to 59.85% of total mobile handset market in India.The growth in the Indian mobile handset market is likely to be driven by the replacement handset market rather than new user additions. Within the replacement 33. 33handset market, the medium ASP device market is likely to grow the fastest. (Source: Analysys Mason)Indian Data Card and USB MarketThe Indian mobile data card and USB modem market stood at 2.02 million units in volume terms and ` 5,179.72 million in value terms for the twelve month period ended March 31, 2010. (Source: IDC India, 2010)Key Growth Drivers for the Indian Telecom and Handset MarketWe believe a number of factors have contributed to and will continue to drive growth in the Indian telecom and handset market, including the following: Indias economic growth has helped increase household incomes and consequently consumption, especially among young Indians who are increasingly investing in various entertainment and communication services. Indias favourable demographics in the coming years will continue to add impetus to the growth of the telecom and handset markets. The growing need of high mobility and connectivity at affordable prices. In order to curtail their network deployment costs, many service providers are considering sharing both passive and active infrastructure with each other. Common infrastructure will improve coverage, reduce costs and enable operators to expand telecom services at affordable prices to customers. Low overall mobile penetration indicates a latent potential for growth in India. This is especially true for expansion opportunities in the rural and semi-rural markets, which currently have low teledensity. GoI telecom policies have emphasized the need for expanding telecom coverage to include rural areas and empowering rural Indians through access to mobile telephony. Besides the presence of major telecom handset manufacturers, including Nokia, Samsung, LG and Motorola, and leading global telecom service companies and infrastructure majors, such as Vodafone, Singapore Telecom, AT&T, Ericsson, Alcatel and Siemens, there is strong competition from growing domestic handset companies and Indian mobile operators. Furthermore, increased competition among service providers created as a result of India allowing an unlimited number of service providers in each service area has contributed to and will continue to drive the growth of the telecom sector in India. The growth in the Indian mobile handset market is likely to be driven by the replacement handset market rather than new user additions. The replacement market is expected to grow from 118 million handsets for the twelve month period ended December 31, 2010, constituting 62.77% of overall Indian mobile handset market, to 359 million handsets for the twelve month period ended December 31, 2014, constituting 89.30% of overall Indian mobile handset market. Furthermore, within the replacement handset market, the 34. 34medium ASP device market is likely to grow the fastest. (Source: Analysys Mason) The demand for more sophisticated and innovative e-mail and multimedia based services, as well as gaming and music related offerings is likely to fuel growth in the delivery of value added services (VAS). We believe the advent of 3G will also add impetus to the growth of the VAS market due to 3G's faster network capabilities. Consequently, we believe mobile devices will also need to become more sophisticated. We believe that as wireless teledensity increases, particularly among lower income Indians, the ARPU will continue to decline. As ARPUs decline and voice gets commoditized, both handset manufacturers and operators will need to develop VAS so as to create high yielding revenue streams, and attract as well as retain customers by creating a basis for differentiation. The growth in VAS is likely to impact the growth of the telecom and handset markets. The advent of 3G has stimulated the introduction of 3G compatible mobile devices, and expanded offerings of applications, which can take advantage of the superior speed and data transfer capabilities of 3G, from the providers of hosting, billing and network management services and content providersMarket Overview:-We believe a number of factors have contributed to and will continue to drive growth in the Indian telecom and handset market, including the following: Macroeconomic growth, rising incomes and increasing consumer spending. Indias real GDP is expected to grow at a CAGR of 7.3% from 2005 to 2025. During the same period, income levels will almost triple and Indias middle class is expected to increase over ten times to 583 million people in 2025. This is expected to lead to changing consumer preferences in both urban and rural markets with consumer spending on communications expected to be one of the fastest expanding categories of spending with growth of over 13.4% per year taking the market size to Rs. 4,2888 billion by 2025 (Source: The McKinsey Report). Favourable demographics. While Indias economic growth unfolds, the population of India is expected to continue to consist mostly of working age people between the ages of 15-59 with urbanization levels reaching approximately 31% by 2015 and 38% by 2026 (Source: Report of the National Commission on Population (May 2006)). Wireless penetration. Low overall mobile penetration indicates a latent potential for growth in India. TRAI estimates that urban mobile teledensity will reach 125% by March 2014, with urban mobile subscribers reaching 572 million, and that rural mobile teledensity will reach 60% by March 2014, with rural mobile subscribers reaching 468 million. Replacement cycle. The growth in the Indian mobile handset market is likely to be driven by the replacement handset market rather than new user 35. 35additions. The replacement market is expected to grow from 118 million handsets for the twelve month period ended December 31, 2010, constituting 62.77% of overall Indian mobile handset market, to 359 million handsets for the twelve month period ended December 31, 2014, constituting 89.30% of overall Indian mobile handset market. Furthermore, within the replacement handset market, the medium ASP device market is likely to grow the fastest (Source: Analysys Mason). 36. 36Executive Summary- Worldwide combined shipments of devices (PCs, tablets and mobile phones) are projected to reach 2.32 billion units in 2013, a 4.5% increase from 2012, according to Gartner, Inc.- By the end of this year, 6% of the global population will own a tablet, 20% will own PCs, and 22% will own smartphones.- On average, there will be two smartphones for every nine people on earth, or 1.4 billion smartphones, by the end of 2013.- Tablets are showing faster adoption rates than smartphones. It took smartphones nearly four years to reach 6% penetration from when the devices first started to register on a global level. Tablets accomplished this in just two years.- Indian tablet market size rose 107.4 % year-on-year and 27.2 % quarter-on-quarter.- Tablet PC market in India is set to cross $2 bn by 2013.- The market is being driven by a shift to lower-priced devices in nearly all device categories.Drivers- Low entry barriers- Increasing popularity of initiative social networking sites- Growing use of smartphones and tablets for playing games, growing in-app purchases for free games- Low cost data Plan and growing potential in emerging markets.- This growth is largely fueled by the need of security on smartphones due to increase in constant connectivity and demand for high bandwidth applications- Decreasing device and data costs.DriverMarketChapter 3: Lenovo Tablets & Smart Phones 37. 37Challenges- Convincing consumers they need to upgrade their smartphones or tablets in every two year.- Price-sensitive consumer. Exchange rate fluctuations.- High excise & Import duty- Competing to build superior products based on the same information- The premium class of tablets & smartphones is generating the majority of revenue in the global tablet & smartphone market.- IDC also predicts Android will continue to be the dominant smartphone & tablet market.- IDC: 87% Of Connected Devices Sales By 2017 Will Be Tablets And Smartphones- The trend of customers upgrading existing mobile handsets to smartphones and acquiring tablets, along with other mobile internet services, such as dongles and data cards, has provided new growth opportunities for the mobile communications sector.- Samsung and Apple dominated the worldwide smartphone & tablet market- In operating system Android hold a 61 per cent market share followed by Apples iOS, which have 25 per cent other platforms, such as Windows and RIMs Blackberry OS, are in single figures.TrendsCompetitionChallenges 38. 38Smartphone PenetrationFigure: 3.1.1 Smartphone PenetrationTablet ownership, 2013 compared to 2012Figure: 3.1.2 Tablet ownership, 2013 compared to 2012 39. 39Figure: 3.1.3 Mobile Ownership in the BRIC Markets by type of DeviceDefinitionsCloud storage: - Internet-based data storage capacity which can be purchased or is available free of charge; usually available on an as-needed basis and generally expandable as more storage capacity is required.Data usage: - Data usage includes all data transferred via uploads and downloads from a smartphone or tablet. This data may be transferred through one of a number of connections that the smartphone or tablet can utilise, including a WiFi connection or a mobile network connection supplied by a mobile network provider such as Vodafone, Airtel, Loop, BSNL, MTNL etc.Mobile networks: - Mobile networks are wireless networks which are used for communications and are capable of transmitting data over significant distances. In India, mobile networks are owned and operated by Vodafone, Airtel and Loop. Data 40. 40speeds over mobile networks can vary and may be defined as 2G, 3G or 4G (To be launched). 2G: - Second generation mobile network (analog being the first) and first generation digital mobile network which allows download speeds roughly comparable with dial-up internet access. Users outside the range of 3G and 4G networks, but still with mobile coverage, will generally be able to transfer data at 2G speeds. 3G: - Third generation mobile network which facilitates data transfer speeds faster than speeds over a 2G network. Data transfer speed over 3G networks in good coverage areas is roughly equivalent to speed over a fixed ADSL connection. 4G: - Fourth generation mobile network which facilitates data transfer speeds faster than 3G and 2G networks. Data transfer speed over 4G networks in good coverage areas is faster than speeds over a fixed ADSL connection and may be as fast as some cable internet connections. 4G coverage in India is to be launched, but it is expected providers will greatly expand coverage in the coming years.Mobile apps: - Mobile apps (short for applications) are software-based tools which can be downloaded and installed on a smartphone or tablet to enhance the devices functionality. A piece of software that allows a user to view their banking information on a smartphone or tablet is an example of a mobile app.Operating system: - The software that supports a computers basic functions such as scheduling tasks, executing applications, receiving input from the user and controlling the display. In India, the two most common operating systems for smartphones and tablets are:iOS: - proprietary software used by Apple devices such as the iPhone and iPad. iOS content is limited to content directly supported by Apple.Android: an open-source platform that is used by a variety of smartphone devices, including some of those manufactured by HTC, Motorola and Samsung.Other operating systems available include: 41. 41Windows, including the newly released Windows 8: Microsofts latest operating system, Windows 8, is now the primary operating system of Nokia smartphones and Microsofts Surface tablet.Blackberry OS: - operating system of the Blackberry smartphone.Symbian: - Until 2011, Symbian was the operating system of Nokia smartphones, which have since migrated to Windows 8 as their primary operating system. It is still used as the operating system for some older model Nokia smartphones.Smartphone: - A smartphone is a mobile phone built on a mobile operating system, with more advanced computing capability and connectivity. In particular, smartphones are often characterised by the ease with which they can access information online and their ability to have their functionality expanded through custom-designed apps. Examples of smartphones include Apple iPhones, Android phones, such as HTC Desire and Samsung Galaxy, Windows mobile phones, such as the Nokia Lumia series and HTC Mozart, and Blackberries.Tablet: - A handheld, internet-enabled, wireless personal computer usually having a touchscreen or a digital pen-enabled interface, and no hardware keyboard. Tablets may have WiFi-only or WiFi connection plus mobile internet connectivity. Most non- iOS tablets can also connect to the internet through a USB port.Global Market Summary of Smartphone and TabletThe smartphone and tablet technology marketplace is now global, with devices typically launched simultaneously across multiple countries, accompanied by worldwide marketing and, for high profile brands, multimedia events. As still makes up a relatively small portion of the smartphone and tablet market, it does not have a significant impact on global trends. Rather, global developments and trends may have a strong bearing on developments and trends seen here, with pre-purchase reviews easily accessible online, apps transcending international borders keep pace with the latest global trends. With the power of super charged processor, open platforms, consumer can now multitask & experience the wonder of mobile applications like never before. This section examines the latest global trends and developments to provide context for patterns observed in the marketplace for the supply of smartphones and tablets. 42. 42 There are 6.8 billion mobile subscriptions worldwide.(Year 2013) Over half of the worlds mobile subscribers are in Asia Pacific The top 12 countries account for more than 56%of the worlds total mobile subscriptions. 29 % of the worlds mobile users live in India and China. Gartner (February 2013): 1.746 billion handsets were sold in 2012, down 1.7 % from 2011. (These figures include feature phones & Smartphone sales). Gartner (February 2013): predicts mobile device sales will grow to reach 1.9 billion units in 2013. Smartphone sales are expected to hit 1 billion units in 2013, which means that for the first time smartphones will outsell feature phones. The star performer is Samsung, which accounted for more than 20- 24 % of all handsets sold in 2012 and more than 30 % of smartphones. By the end of 2013, global smartphone penetration will have exploded from 5% of the global population in 2009, to 22%. That's an increase of nearly 1.3 billion smartphones in four years. On average, there will be two smartphones for every nine people on earth, or 1.4 billion smartphones, by the end of 2013. According to IDC, Android holds 79.3% share in global smartphone market. Apple's iOS is second with 13.2% while Windows Phone is third with 3.7% share. Globally today smart phones contribution stands at 27% of handsets sales, going as high as 63 % & 51 % in the developed telecom markets of North America & European Union respectively. It has led consumers to use their handsets in ways reaching far beyond the rudiments of basic mobiles phones. Its no surprise that the adoption of smartphones & tablets worldwide has grown vertically in the short spans of last 2 years. 43. 43Figure: 3.1.4 Multiple Mobile Phones OwnershipLocal Market Summary of Smartphone and TabletSmartphone category in India is still very nascent at 8-10 %.Smartphone use is booming in India and is quickly becoming the dominant way many of the countrys 900 million mobile phone users stay connected. Looking at recent trends, the country may have as many as 40 million of these devices in use by early this year. The dramatic growth is being driven by a desire among users to stay connected and have instant access to social networking sites a global trend that represents an exponential growth opportunity in developing countries like India.Indian Tablet PC market will cross $2 billion of revenue by the end of 2013. The growth is lead by increased use of tablets in education and enterprise sectors. 62% of recent smartphone buyers chose Android More than one in 10 smartphone owners intended to purchase a tablet Among users who paid for apps, 58% purchased games making it the most popular category 44. 44According to MAIT, the apex body representing India's training and R&D services sectors, IT hardware industry, tablet sales in 2012-13 were at 1.9 million units as against 0.36 million units in 2011-12 witnessing a massive growth of 427 per cent.CyberMedia Research (CMR) stated that the Indian tablet market increased 107.4 per cent year-on-year to 1,150,000 tablets in the second quarter of 2013. Global research firm IDC stated that the overall tablet market in India has crossed 2.66 million units and will reach 6 million units in 2013. A recent IDC report stated that tablet sales will surpass PCs in Q4 of 2013 and will surpass total PC shipments on an annual basis by 2015 year end.According to IDC, Google's mobile operating system has a 91% market share in the country, giving it an overwhelming lead over its competitors. The second most used mobile OS in the country is Windows Phone, which has a market share of 5.4%. The figures from IDC, which tracks units of phones shipped in a market, are for the second quarter of this year. Apples iOS, which powers iPhones, has a market share of just 2.3%.Figure: 3.1.5 Indian Smartphones & Tablets Market share 45. 45Figure: 3.1.6 Turnover & Market share of Indian Brands 46. 46About LenovoLenovo Group Limited is a US $ 34 billion company into personal technology, company serving customers in more than 160 countries. It is largest personal computer vendor in the world, having recently surpassed Dell & HP. Formed by Lenovo Groups acquisition of IBMs personal computer business in 2005. Lenovo's acquisition of IBM's personal computer division accelerated access to foreign markets while improving both its branding and technology. Lenovo paid US$1.25 billion for IBM's computer business and assumed an additional US$500 million of IBM's debt. A global Fortune 500 company.Lenovos business is built on product innovation, highly efficient global supply chain & strong strategic executions.Its product line includes Legendary Think-branded commercials PCs era & Idea - branded consumer PCs, as well as servers, workstations, and a family of mobile internet devices, including tablets & smartphones.Lenovo has major research centres in Yamato, Japan; Beijing, China; & Raleigh, North Carolina.Approximately 35,000 employees worldwide.Lenovo continued to drive its unique hybrid manufacturing strategy & invest in vertical integration. Currently the manufacturing facility at Beijing, Shanghai, Chengdu, Hefei, Huiyang & Shenzhen, China; Pondicherry, India; Monterrey, Mexico; Itu, Brazil; as well as Whitsitt, North Carolina in the USA., with contract manufacturing & Original Design Manufacturing Locations worldwide.In 2012, Lenovo made a major effort to expand its market share in developing economies such as Brazil and India through acquisitions and increased budgets for marketing and advertising. While Lenovo has not revealed its total spending on marketing, it did increase marketing and advertising expenditures by $248 million in the fiscal year ending in 2012. 47. 47Lenovo ChinaIn China, Lenovo has a vast distribution network designed to make sure that there is at least one shop selling Lenovo computers within 50 kilometres of nearly all consumers. Lenovo has also developed close relationships with its Chinese distributors, who are granted exclusive territories and only carry Lenovo productsLenovo previously benefited from the Chinese governments rural subsidy, part of a wider economic stimulus initiative, designed to increase purchases of appliances and electronics. That program of subsidies, which Lenovo joined in 2004, ended in 2011. Lenovo enjoys consistent price premiums over its traditional competitors in rural markets and a stronger local sales and service presence. Lenovo IndiaLenovo has gained significant market share in India through bulk orders to large companies and government agencies. For example, the government of Tamil Nadu ordered a million laptops from Lenovo in 2012 and single-handedly made the firm a market leader. Lenovo distributes most of the personal computers it sells in India through five national distributors such as Ingram Micro and Redington.Given that most smartphones and tablets are sold to individuals Lenovo is pursuing a different strategy making use of many small state-centric distributors. Amar Babu, Lenovo's managing director for India, said, "To reach out to small towns and the hinterland, we have tied up with 40 regional distributors. We want our regional distributors to be exclusive to us. We will, in turn, ensure they have exclusive rights to distribute Lenovo products in their catchment area." As of 2013, Lenovo had about 6,000 retailers selling smartphones and tablets in India. In February 2013, Lenovo established a relationship with Reliance Communications to sell smartphones. The smartphones carried by Reliance have dual-SIM capability and support both GSM and CDMA. Babu claims that the relative under-penetration of smartphones in India represents an opportunity for Lenovo.In India, where Lenovo is relatively unknown, Lenovo grants distributors exclusive territories, but allows them to sell computers from other companies. Lenovo uses its close relationships with distributors to gain market intelligence and speed up product development. 48. 48India is witnessing a technology revolution. There is an explosion of smart connected devices in the market and the growth has been phenomenal over the last 1 year. The last year witnessed a huge spike in sales of Smartphones, Tablets and Laptops. This has also resulted in more and more hardware brands entering the space to address the needs of the consumers across all stages.Lenovo, global leader in PCs & India's #2 PC brand plans to foray into Indian tablet & smartphone market. Lenovo met with huge success in smartphones in China, where it jumped to #2 position in less than a year's time. Tablets are a new addition to Lenovo's stable. Launched in 2011 with 2 high-end models, Lenovo now is gearing up to launch a complete range of tablets catering to a larger audience.Lenovo is confident that, with its success in PCs and a strong brand, it can win the Indian tablet & smartphone market.Lenovo is entering the Indian tablet & smartphone market which has seen hyper- competition between the global brands like Apple, Samsung & Sony and some Indian brands like Micromax, Karbon etc. Leading PC makers like Dell & Acer had earlier attempted entering this space but had met with very little success. While Lenovo is a top brand among PC considerers, it is an unknown brand among tablet & smartphone consumers. Today, only 5% of the consumers are aware of Lenovo tablet & smartphones and only 2% consider buying one.Lenovo is targeting the consumers of smart connected devices in the age group of 15-35 in SEC AB. In phones, It has a range starting from Rs.7, 000 going up to Rs.35, 000 with different combinations of hardware & software catering to various needs of the Indian consumer. In tablets, the range starts from Rs.9000/- and is expected to introduce models across price range going up to Rs.50,000/-Lenovo has 1,200 exclusive stores (retailing PCs) across 300+ towns and is sold out of another 3,000+ multi-brand retail counters in the country. 49. 49PC + ERAWe are entering a new era in technology - we call it the PC Plus era. While PCs are central to the digital lives of millions of people and businesses, there are many new devices emerging on the scene. They offer different experiences and applications, but all share the 'heart' of a PC. Lenovo is fully committed to the PC space for the long term. Lenovo will continue to drive growth and innovation in PCs while expanding our business across the four screens (PC, tablet, smartphone, smart TV) of devices and into the ecosystem of cloud, services and other applications that make up the PC Plus market.Lenovo has been preparing for this industry change for several years. Our Mobile Internet Digital Home (MIDH) business is driving our expansion into these new devices, and has made significant progress. In the past fiscal year (FY2012/13 full year),