Emerging Markets Strategy: Nokia Life Tools for Rural Markets

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ICMR Center for Management Research

Emerging Markets Strategy: Nokia Life Tools for Rural Markets
This case was written by Hadiya Faheem, under the direction of Debapratim Purkayastha. ICMR Center for Management
Research (ICMR). It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

2009, ICMR. All rights reserved.
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BSTR/349

Emerging Markets Strategy:
Nokia Life Tools for Rural Markets
“Filling in the information gaps in agriculture and education with Nokia Life Tools, we strive to contribute towards empowering people with the right tools to help them make informed decisions in their daily lives. Nokia Life Tools was developed to help bridge the Digital Divide in the emerging markets.”1
Jawahar Kanjilal, global head of Emerging Market Services at Nokia Corporation
(Nokia), in November 2008.
“There were many in the rural and emerging areas whose needs and pain points were being unmet?”2 Dinesh Subramaniam, senior manager of communications for Nokia, Finland, commenting on the launch of Nokia Life Tools in India, in June 2009.
“It’s important to remember that this is about money: Nokia wants to sell handsets to this growing market, and providing services to farmers in India may prove as lucrative as selling us applications and content through Ovi. But better informed farmers grow better crops so, for once, it seems everyone can be a winner.”3
Bill Ray, The Register4, in April 2009.

INTRODUCTION
On June 12, 2009, Finland-based telecom giant, Nokia Corporation (Nokia) launched its Nokia
Life Tools (NLT) service in the state of Maharashtra in India. This was a bid to expand its rural base in the country. The service was commercially rolled out after the successful implementation of the pilot program in Maharashtra, in November 2008. The launch of the NLT service marked the increasing accessibility of value-added services (VAS) to rural consumers in India. Targeted at the rural consumers, the NLT service offered a range of services in the areas of agriculture, education, and entertainment to address the information gaps in the rural community.
Nokia began focusing on the Indian rural market in 2003 when it launched a mobile handset with features such as longer battery life, one-touch flashlight, etc., that catered to the needs of the rural consumers. Over the years, it extended its support to the rural markets by launching several lowend phones that rural consumers found affordable. However, the company felt the need to serve the rural market by offering a value proposition along with its handsets. It noted that the rural consumers, especially farmers and students, had little or no access to the information they needed due to lack of resources and erratic Internet connections. This prompted Nokia to launch a service that would be embedded in its handsets and would serve the needs of the rural community. In
1

2

3
4

Michael Schwartz, ―Nokia Brings out Life Tools for Rural Emerging Markets,‖ www.developingtelcoms.com, November 19, 2008.
Dan Butcher, ―Nokia Life Tools Targets Emerging Markets such as India,‖ www.mobilemarketer.com,
June 17, 2009.
Bill Ray, ―Nokia Life Tools Help Indian Farmers Get One,‖ http://theregister.co.uk, April 8, 2009.
The Register is a British technology news and opinion website that provides independent news, views, opinions, and reviews on the latest in the IT industry.
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Emerging Markets Strategy: Nokia Life Tools for Rural Markets

November 2008, the company launched a pilot program for testing its NLT service in Maharashtra.
The test phase was carried out for a period of four months and the results, revealed in April 2009, showed that farmers and students, in particular, had benefited through this service. The farmers could access the latest information on crops, weather, market prices of seeds, fertilizers, and pesticides, etc. through this service. The students benefited by learning the English language and gaining local, national, and international general knowledge.
Having received the feedback, Nokia commercially rolled out the NLT service in 10 districts in
Maharashtra, in June 2009. Commenting on the commercial launch of the service, D Shivakumar
(Shivakumar), MD, Nokia India, said, ―We believe this is the beginning of a historical journey that will take mobility to grassroots and make a positive difference to the lives of people in the areas that are crucial to them.‖5
Nokia collaborated with several private ecosystem partners to offer the NLT service. According to
Dinesh Subramaniam (Subramaniam), senior manager of communications for Nokia, Finland ,
―Together with ecosystem partners, Nokia will get the word out about Life Tools.‖6
The NLT service was to be extended initially to the Southern states of India such as Andhra
Pradesh and Tamil Nadu in the first week of July 2009, and then to other states in Indi a. The service was also expected to be launched in other parts of Asia and Africa by the end of 2009 and beyond. Experts commended Nokia for its NLT service since it catered to the needs of the rural consumers.
They said that in addition to giving information related to agriculture, it also helped farmers to save on time and money, be better informed, and take correct decisions. Some experts also appreciated the education services since it enabled students who aspired to learn English to learn the language. Moreover, they felt that the education service would help students build their confidence and have a better social standing in the community. Some experts said that the NL T services were just another aspect of Nokia‘s emerging market strategy to increase its penetration in rural markets since the urban markets were approaching saturation. Moreover, there was a slump in handset sales due to the global economic slowdown. Some industry analysts said that it was logical for Nokia to tap the rural market since it had tremendous market potential. The rural subscriber base was expected to reach 320 million by 2010, according to a research report from
RNCOS7.8 The increase in subscriber base was attributed mainly to low -cost handsets and affordable services, according to the report. Some analysts opined that by launching NLT service,
Nokia aimed to improve the existing Value Added Services (VAS) it offered to the rural consumers. BACKGROUND NOTE
ABOUT NOKIA CORPORATION
The history of Nokia dates back to 1865 when Fredrik Idestam, a mining engineer, set up Nokia
Ab, a paper manufacturing company, in Finland.9 In 1920, Finnish Rubber Works10 (FRW) became a part of the company, and later on in 1922, Finnish Cable Works11 (FCW) joined them. In
1967, Nokia Ab, FRW, and FCW were merged to form the Nokia Corporation.
―Nokia Launches ‗Historical‘ Life Tools in India, Providing Agriculture-related News,‖ www.ibtimes.com, June 17, 2009.
6
―Nokia Life Tools Rolls out across India,‖ www.mobilemarketer.com By Dan Butcher June 17, 2009.
7
RNCOS is a market research consulting firm.
8
―Mobile Market Riding High on Untapped Indian Rural Market,‖ www.cellular-news.com, June 12, 2009.
9
―Story of Nokia,‖ www.nokia.com.
10
Finnish Rubber Works was founded by Arvid Wickstorm and manufactured tires, footwear, and rubber bands under the brand name ‗Nokia‘.
11
Finnish Cable Works was founded by Eduard Polon.
5

2

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

The mobile phone businesses had its roots in the electronics section founded in the FCW by the then president, Bjorn Westerlund. In 1963, the electronics section manufactured radio telephones for emergency services and the armed forces. After the merger of three companies in 1967, the electronics section was spun off as a separate division responsible for manufacturing telecommunications equipment on a full scale.
In the late 1970s, Nokia started taking an active interest in the power and electronics businesses. In
1981, it created the Nordic Mobile Telephone12 (NMT) standard and launched the first NMT phone, the Mobira Cityman, in 1987. By 1987, consumer electronics had become Nokia‘s major business. In the same year, it adopted the Global System for Mobile Communication13 (GSM) as the standard for digital mobile technology in Europe. In 1989, the company delivered the first
GSM network to Radiolinja14, a Finnish company.15
On July 1, 1991, the first GSM call in the world was made using Nokia equipment. In 1992, it launched the Nokia 1011 – a precursor for all Nokia‘s current GSM phones. In 1992, Jorma Ollila
(Ollila) became the President and CEO of the company. He took the strategic decision of focusing on the telecommunications business and of divesting the company of all its non telecommunications businesses. Between 1992 and 1996, Nokia exited from businesses like rubber, cable, and consumer electronics after which its prime businesses were mobile phones and telecommunications equipment.
In 1998, Nokia established a subsidiary company to manufacture luxury mobile phones under the brand name ‗Vertu‘16. By the late 1990s, Nokia‘s GSM equipment was being used by more than 90 operators across the world.17 Nokia at that time had a presence in more than 130 countries across the world.18
In 2001, Nokia‘s revenue reached € 31 billion.19 In 2002, the company launched its first 3G20 phone – the Nokia 6650. In the same year, the Nokia 7650, a phone with a built-in camera and the
Nokia 3650, a video capture phone, were also introduced.21
In 2002, Nokia‘s revenue fell by 4 percent to € 30 billion due to weaker sales in the Americas 22.23
The year 2004 was characterized by lackluster performance by the company with its market share decreasing to 29 percent during the first quarter of 2004 from 35 percent in the first quarter of

12

13
14

15
16

17
18

19
20

21
22
23

Nordic Mobile Telephony is the first fully automatic cellular phone system and is based on the analog technology. The network opened in Sweden and Norway in 1981 and in Denmark and Finland in 1982.
GSM is a leading mobile telecommunications standard. It is a variant technology of TDMA.
Radiolinja was a Finland-based GSM operator. The company was founded in 1988. In the mid-1990s it was acquired by Helsinki Telephone Company.
―Story of Nokia,‖ www.nokia.com.
Vertu, headquartered in London, UK, is a wholly-owned subsidiary of Nokia. It is a consumer electronics company which manufactures luxury phones.
―Nokia and the Rise of Mobile Telecommunications,‖ www.nokiasiemensnetworks.com.
―Nokia Installs 2000 Base Stations in 10 Months for E2 Network in Germany,‖ www.press.nokia.com,
October 5, 1998.
―Quarterly and Annual Information,‖ www.nokia.com.
3G is an advanced mobile standard which uses technologies such as WCDMA and CDMA-EVDO to facilitate faster data access on the mobile phones.
―Story of Nokia,‖ www.nokia.com.
Americas comprises North America and South America with their associated regions and islands.
―Nokia Reports Good Results, Gives Guarded Forecast,‖ www.mobilemonday.net, January 23, 2003.
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Emerging Markets Strategy: Nokia Life Tools for Rural Markets

2003.24 Experts attributed the decline in market share to the company offering outdated products while its competitors were coming out with clamshell and camera phones. They felt that innovation had taken a beating at the company since Nokia was late in reading the market signals and the latest trends wherein consumers were focusing on design and style, in addition to the features. The company continued to produce phones in the candybar model. Nokia also did not customize its phones for operators across the world.
In 2004, Nokia increased its focus on emerging markets like China and India. It launched several low cost handsets to cater to consumers in these markets. This h ad a counter-effect on its global sales since consumers in the US and Europe wanted phones that would enable them to surf the web and played videos. Some analysts felt that Nokia‘s increasing focus on emerging markets like
China and India coupled with the launch of several low cost handsets had led to the brand losing its sheen. They said that the brand suffered declining sales in developed markets since innovation had taken a back seat at the company.
In 2005, Nokia found that it was continuing to lose market share and it decided that it would have to change its models by revamping the designs. Subsequently, the company came up with phones in slider and clamshell designs. In April 2005, the Nokia Nseries — high-end multimedia devices with stylish designs — were launched.25 The features that the Nseries offered included a camera, video capture, high-resolution display, and a hard drive. Industry watchers opined that these hybrid multimedia devices were an instant hit with the target audience – people who liked to carry latest modern multimedia services in a single device. In 2005, the total mobile phone subscriptions across the world surpassed the 2 billion mark and Nokia sold its 1 billionth phone.26
In 2006, Olli-Pekka Kallasvuo (Kallasvuo), CFO, Nokia was appointed President and CEO of
Nokia, with Ollila assuming the responsibilities as Chairman of the Board of Directors at Nokia.
By the end of 2007, Nokia was the leading manufacturer of mobile phones in the world, with a global market share of 40 percent.27
In 2008, Nokia ranked 5th in BusinessWeek28/Interbrand Corporation‘s29 (Interbrand) list of 100
Best Global Brands. Its brand value increased by 7 percent to US$ 35,942 million in 2008 from
US$ 33,696 million in 2007.30 (Refer to Exhibit I for Nokia‘s ranking in Business
Week/Interbrand‘s list of 100 best global brands).
For the first quarter of 2008, Nokia‘s market share stood at 39.1 percent, keeping it ahead of its competitors. However, it dropped to 36.2 percent in the first quarter of 2009, according to estimates by Gartner Inc. 31, in May 2009.32 (Refer to Table I for first quarter markets shares of leading mobile phone companies).

―Nokia Loses its Grip on the Handset Market Share,‖ http://news.cnet.com, April 29, 2004.
Rich Brome, ―Nokia Nseries Launch,‖ www.phonescoop.com, April 27, 2005.
26
―Story of Nokia,‖ www.nokia.com.
27
―Nokia Officially Hits 40% Global Market Share,‖ www.mobilecomment.com, January 24, 2008.
28
BusinessWeek is one of the world‘s leading financial magazines.
29
Interbrand Corporation is a leading brand consultancy, serving clients worldwide. Founded in London,
Interbrand is headquartered in New York.
30
―Best Global Brands,‖ http://bwnt.businessweek.com, 2009.
31
Gartner Inc., based in Connecticut, USA, is an information technology and advisory firm.
32
―Gartner Says Worldwide Mobile Phone Sales Declined 8.6 Per Cent and Smartphones Grew 12.7 Per
Cent in First Quarter of 2009,‖ www.gartner.com, May 20, 2009.
24
25

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Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Table I
Market Share of Leading Mobile Phone Companies
Q1 09

Q1 09

Q1 08

Sales (in
Thousands
of Units)

Market
Share
(in%)

Sales (in
Thousands
of Units)

Q1 08
Market
Share
(in%)

Nokia

97,398.2

36.2

115,191.8

39.1

Samsung

51,385.4

19.1

42,396.5

14.4

LG

26,546.9

9.9%

23,645.8

8

Motorola

16,587.3

6.2%

29,884.7

10.2

Sony Ericsson

14,470.3

5.4%

22,061.0

7.5

Others

62,732.0

23.4%

61,103.20

20.8

Total

269,120.1

100

294,283.0

100

Company

Note: Totals may not add to 100.0 percent due to rounding.
Source: “Gartner Says Worldwide Mobile Phone Sales Declined 8.6 Per Cent and
Smartphones Grew 12.7 Per Cent in First Quarter of 2009,” www.gartner.com, May
20, 2009.
Some analysts opined that, despite the decline in growth in the global market, Nokia continued to be the market leader due to its focus on emerging markets like India and China. Analysts felt that in addition to launching low cost handsets and other products catered to those markets, Nokia‘s business strategy in the emerging markets helped it retain its market leadership position (Refer to
Box I for Nokia‘s business strategy in emerging markets).
Box I
Nokia‟s Business Strategy in Emerging Markets
Nokia‘s business strategy in emerging markets was to:
Increase the usage of mobile phones in rural areas
Decrease the initial costs associated with owning a mobile phone, in addition to reducing the operating costs
Convey to people in emerging markets, the benefits associated with mobile telephony
Bring the Internet power to the emerging markets
Adapted from “Nokia’s Strategy in Emerging Markets,” www.casestudyinc.com, June 9, 2009.
As of 2008, the company reported net sales of € 50,710 million with an operating profit of € 4,966 million (Refer to Exhibit II for Nokia‘s financials).33
NOKIA IN INDIA
Nokia entered the Indian mobile phone market through its subsidiary Nokia India, in 1994. The company aimed to leverage the opportunities offered by this emerging market in India. Initially it planned to set up a manufacturing unit in India. Later, however, it decided against it since the volume of sales was too low then. Moreover, the telecom policies were characterized by high
33

―Nokia in 2008,‖ Annual Report, www.nokia.com, 2008.
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Emerging Markets Strategy: Nokia Life Tools for Rural Markets

tariffs and usage charges were not conducive to the growth of the mobile phone industry. Hence ,
Nokia imported all the handsets from its international manufacturing units.
In the 1990s, Nokia started supplying GSM equipment and handsets to SkyCell Communications34 and Usher Martin Telecom35. By 2000, it had entered into joint ventures with several cellular service providers across India for the supply of mobile communications infrastructure and handsets. Within five years of its setting up its operations in India, it was earning revenues of US$
100 million.36
To fortify its position in the Indian market, Nokia followed its global strategy of customizing its products at the local level while maintaining its international standards of quality. It also set up software development facilities in Bangalore and Hyderabad. The research centers and R&D hubs played a crucial role in the development of software platforms, new applications, and hardware for high-end handsets. The centers also localized their innovations to cater to the Indian consumers such as having text display in local languages and torches in mobile phones. These innovations appealed more to the rural consumers and were an instant hit with that segment.
In 2003, Nokia launched two models designed specifically for the Indian market. They were the
1100 and the 1108 and had features like an anti-slip grip and a built-in torchlight. Later, the torchlight was also incorporated in the 3112 CDMA model. In 2004, Nokia came up with Saral
Mobile Sandesh (SMS37 in Hindi) to enable consumers to communicate in Hindi. By 2005, 24 of
Nokia‘s models supported the Hindi user interface and 21 models supported Hindi text. The strategy paid off and Nokia‘s market share increased from 58.2 percent in July 2003 to 59.6 percent in July 2004.38
Nokia also had to face tough competition from other powerful global handset players like
Motorola Inc.39 (Motorola), Sony Ericsson Mobile Communications AB40 (Sony Ericsson), LG
Electronics41 (LG), and Samsung Electronics Co. Ltd.42 (Samsung). These companies were well aware of conditions in the Indian market due to their presence in the consumer durables, electronics, and engineering sectors. However, Nokia‘s aggressive marketing strategy coupled with its powerful design and features helped it withstand all odds and emerge as the leader in the
Indian mobile phones industry with a 56 percent market share in the fiscal 2003 -04.43 The market share increased further in the subsequent years.

34

SkyCell Communications is one of the leading cellular service operators in the southern state of Tamil
Nadu in India.
35
Usher Martin Telecom is a telecom operator in the state of West Bengal, India.
36
―Escalating Growth Curve of Nokia India,‖ http:indiquest.wordpress.com, May 13, 2009.
37
Short Messaging Service or SMS pertains to the service meant for sending short text messages to mobile phones. 38
Nikunj Daga, ―Nokia‘s Marketing Strategies in India,‖ http://edissertations.nottingham.ac.uk, 2006-2007.
39
Motorola Inc., headquartered in Schaumburg, Illinois, USA, was the world‘s second-largest mobile phone company as of July 2007.
40
Sony Ericsson Mobile Communications AB, headquartered in Acton, London, UK, is a mobile phone company formed in 2001 as a joint venture between one of the leading consumer electronics companies
Sony Corporation (Sony) of Japan and Swedish mobile phone company Ericcson.
41
LG was established in 1958 as Goldstar in Korea. In 1995, it changed its name to LG Electronics. It manufactures televisions, telecommunication devices, and home appliances.
42
Founded in 1969, Samsung Electronics Co. Ltd. is a South Korea-based electronics company with interests in consumer electronics, telecommunication, and semiconductors.
43
Vipul Chauhan, ―India Study Tekes Nets and Fenix Programs,‖ http://akseli.tekes.fi, July 10, 2004.
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Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Nokia had a dominant position in the Indian market, but experts felt that competition in the mobile phone market had intensified post-2005 with its rivals, particularly Samsung, Motorola, Sony
Ericsson, and LG, adopting aggressive strategies to improve their market position in India. 44
Experts felt that Nokia‘s stranglehold on the Indian market had loosened since its market share that had stood at 78 percent in 2005 dropped to 48 percent in 2007, according to The Economic
Times45.46 Despite the fall in Nokia‘s market share, experts felt that the company was way ahead of its competitors because of its strategy of making early investments in brand building and manufacturing, establishing crucial distribution partnerships, and developing innovative product features. According to Ravi Bapna, professor of information systems at the Indian School of
Business, a leading business school, in Hyderabad, ―As far as Nokia‘s India strategy is concerned, the numbers speak for themselves. The company is a key cog in India‘s wireless value chain, and it has used India as its emerging market lab.‖47
According to analysts, in addition to Nokia‘s India specific strategy, pricing was of prime importance for the success of the company in India. Research showed that the phones in the lower price range (below Rs.48 8000) accounted for 65 percent of the total sales in India. Since Nokia placed a major thrust on the rural markets for its growth in future, pricing was an important success factor for the company. Nokia focused on reducing the initial costs of owning a mobile phone by launching low cost handsets coupled with low operating costs. According to Nokia, it priced its mobile phones lower in India than the prices at which the same models were being sold in most other countries.
In a bid to revive its market share, Nokia continued to make investments in R&D to launch products catering to the needs of customers in India. This strategy paid off and India became a major revenue earning country for Nokia after China. According to its 2008 annual report, Nokia generated net sales of € 3,719 million from India (Refer to Table II for Nokia‘s 10 major markets in terms of net sales).49
Table II
Nokia‟s 10 Major Markets in Terms of Net Sales (in € million)
Country
China
India
UK
Germany
Russia
Indonesia
USA
Brazil
Italy
Spain

2008
5,916
3,719
2,382
2,294
2,083
2,046
1,907
1,902
1,774
1,497

2007
5,898
3,684
2,574
2,641
2,012
1,754
2,124
1,257
1,792
1,830

Source: “Nokia in 2008,” Annual Report, www.nokia.com, 2008.
―Nokia All Set to Increase its Market Share,‖ www.hinduonnet.com, June 28, 2009.
The Economic Times is one of the leading business newspapers in India.
46
―Nokia Losing Market Share in India. SE and MOTO on a High,‖www.esato.com.
47
―How Did Nokia Succeed in the Indian Mobile Market, While Its Rivals Got Hung up?‖ http://knowledge.what\rton.upenn.edu, August 23, 2007.
48
As of July 2009, 1 US$ = Rs. 40.75 and 1 € = Rs. 68.6.
49
―Nokia in 2008,‖ Annual Report, www.nokia.com, 2008.
44
45

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Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Nokia‘s success story in India continued in 2008 after it reported a market share of 59.5 percent. It was way ahead of its competitors in terms of market share (Refer to Table III for market shares of leading mobile phone companies in India). Experts attributed Nokia‘s success mainly to the distribution deals it had with the mobile retail outlets in India. Nokia had deals with 72,000 of the
79,000 retail outlets in the country.50 Some experts pointed out that though there was a significant increase in market share from 48 percent in 2007 to 59.5 percent in 2008, Nokia‘s market share had actually gone down compared to the previous months of 2008. Analysts pointed that the competitors‘ increasing retail presence in the country had led to the decline in Nokia‘s market share. Table III
Market Shares of Leading Mobile Phone Companies in India (2008)
Company

Market Share (in%)

Nokia

59.5

Sony Ericcson

8.1

Samsung

7

Motorola

5.9

Data Courtesy: ORG.
Source: “Mobile Handset Market Share – Nokia Leads, Samsung overtakes
Motorola,” www.pluggd.in, June 10, 2008.
While Nokia was making efforts to increase its market share in India by increasing its presence in the rural markets, its competitors were also making aggressive efforts to capture a larger portion of the pie in the Indian handset market. Samsung, which claimed to have a market share of between
10 and 15 percent, had plans to increase its market share to 20 percent by the end of 2009, by launching several new handsets.51 LG also was planning to double its market share to 15 percent from 5.25 percent in the lucrative GSM segment. The company, which had a 50 percent market share in the Indian CDMA segment, announced plans to launch 50 new handsets for the Indian market by the end of 2009.52 According to BoH Choi (Choi), Head (Asia Pacific Region), Mobile
Communication Company of LG, the company was increasing its presence in India since the developed markets were approaching saturation. Moreover, the demand for mobile phones was increasing in India. Choi added, ―We would be doing India-specific product planning and the design, color, and finishing would also depend on the choice of Indian customers.‖ 53 Sony
Ericsson was also making efforts to fortify its position in the Indian handset market. In June 2009, the company started offering its ‗one-click content service‘ called PlayNow in India. PlayNow, mainly targeted at the Indian youth, offered users unlimited access to wallpapers, music tracks, themes, games, and animation. On launching the service, Sudhin Mathur, General Manager, Sony
Ericsson Mobile Communications India, said, ―At Sony Ericsson, we have always tried to keep ourselves abreast with evolving consumer needs. The youth in India are constantly on the move today. In fact, they comprise the new download generation. Mobile downloading is fast gaining momentum as the youth want their mobile phones to cater to a range of needs in tune with their dynamic lifestyle. PlayNow is the apt answer to this emerging need.‖54
―Mobile Handset Market Share – Nokia Leads, Samsung overtakes Motorola,‖ www.pluggd.in, June 10,
2008.
51
Stuti Roy, ―Samsung Mobile Eyes 20% Market Share in India,‖ www.livemint.com, June 16, 2009.
52
―LG to Launch 50 Phones in India,‖ http://infotech.indiatimes.com, June 17, 2009.
53
―LG to Launch 50 Phones in India,‖ http://infotech.indiatimes.com, June 17, 2009.
54
―Sony PlayNow Service Available in India,‖ http://tech2.in.com, June 5, 2009.
50

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Emerging Markets Strategy: Nokia Life Tools for Rural Markets

While Samsung, LG, and Sony Ericsson were increasing their presence in the Indian handset market, Motorola was struggling to keep up its position in the country. The company witnessed a drop in market share to 5.9 percent in 2008 and Samsung overtook its third position in the Indian handset market. Experts attributed the company‘s beleaguered position to its weak sales due to the global economic slowdown and its uninspiring products. The company had laid off nearly 3,000 employees worldwide in October 2008 and was reported to have laid off more 400 employees in
India, in January 2009. The new job cuts were part of Motorola‘s strategy to cut nearly 4,000 jobs worldwide in order to cope with the weak global economy.
With its various innovative handsets for the urban consumers and handsets with special features for the rural consumers, Nokia had established itself as the brand and market leader in the Indian mobile handset market. The company offered a diverse product portfolio to cater to the needs of different segments of consumers. The various segments included Entry, Live, Connect, Explore, and Achieve. These comprised devices ranging from entry level mobile phones for first time subscribers to advanced devices for business purposes with multimedia devices for music, gaming, and imaging. In addition to specific products for various segments, Nokia also focused on its services business by launching Ovi55. According to Nokia, with the launch of Ovi, the company renewed its image of being at the forefront of mobile and Internet convergence.

TARGETING THE INDIAN RURAL MARKET
Nokia had always been at the forefront in coming out with products that would cater to the needs of the Indian consumers. While it focused on launching products for the urban market, it also focused on serving the rural population. In 2002, Nokia announced its emerging market strategy under which it planned to lower the initial costs of owning a mobile phone in addition to lowering the operating costs. This was a bid to enable the rural customers to reap the benefits of mobile telephony. In 2003, Nokia launched The Nokia 1100 mobile phone targeting mainly the rura l consumers. The phone had features such as longer battery life, torch, a radio, and an alarm clock.
The torch feature was included keeping in mind the fact that a large number of villages in India do not have electricity. This model was also targeted at urban consumers since power cuts were common in the cities. The company also launched an advertising campaign highlighting the features of this product such as its anti-slip grip, dust resistance, and torchlight. This model proved to be popular with the consumers. Commenting on its success in the Indian mobile phone market,
Shivakumar said, ―Innovation is something which consumers reward in this market.‖ 56
Since Nokia placed a major thrust on the rural markets for its growth in future, pricing was an important success factor for the company. Over the years, the company launched several low-end phones that were affordable for the rural consumers.
In 2005, Nokia collaborated with Bharti Airtel Ltd.57 (Airtel) to reach rural consumers. Under the agreement, Nokia had to provide the equipment and manage services for Airtel. Commenting on the deal, Manoj Kohli, president of mobility at Airtel, said, ―To sustain India‘s economic growth, it is imperative to take the benefits of mobile communications to the rural consume rs. Nokia will help us deliver economically viable services to the low revenue consumers.‖58
55

56

57

58

On August 29, 2007, Nokia entered the Internet services space with the ‗Ovi‘ brand. ‗Ovi‘ is an umbrella brand for a range of Internet services offered by Nokia — such as an online music store, an online navigation service, and an online games store.
―How Did Nokia Succeed in the Indian Mobile Market, While Its Rivals Got Hung up?‖ http://knowledge.wharton.upenn.edu, August 23, 2007.
Bharti Airtel Ltd. is the leading integrated telecom service provider in Asia. It has operations in India and
Sri Lanka. It offers services in the telecom, manufacturing, retail, financial, and agri-business services. It holds a dominant position in the Indian telecom sector.
―Nokia Collaborating with Bharti Airtel in India,‖ http://sifybroadband.techwhack.com, August 24, 2005.
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Emerging Markets Strategy: Nokia Life Tools for Rural Markets

The company tasted success in the rural markets once it started catering to the needs of the rural consumers. The company decided to increase its penetration into the rural market since it was expected to provide a huge market potential. According to a survey by McKinsey & Company59, in
2006, the rural market was expected to be worth US$ 500-600 billion by 202060 (Refer to Exhibit
III for a note on the Indian rural mobile phone market).
In 2006, Nokia‘s rural market penetration reached 3 percent and in 2007 , it more than doubled to 7 percent.61 Despite strong growth and results, the company felt that a larger portion of the rural market still remained untapped. Subsequently, Nokia launched seven low-end phones, including two shared phones, in 2007. The shared phones were intended to be used by families of consumers in the rural areas or even entire villages. The shared phones were launched in the wake of attempts by the mobile service operators and the Indian government to launch low-cost mobile telephony for the rural consumers. The two models catering to this service were the Nokia 1200 and the
Nokia 1208. These phones offered features like call-time tracking and multiple phonebooks. The call-time tracking feature allowed users to preset a cost limit or time limit on individual calls. The company said that this feature automatically ended the call after the limit was reached. Moreover, it made talking on a mobile phone affordable for rural consumers.
In 2007, Nokia again tied up with Airtel to offer entry-level handsets to its customers. Airtel was to offer Nokia handsets bundled with its connections at subsidized prices. This tie -up was aimed at countering the self-branded handsets offered by operators such as Vodafone Essar Ltd.62 and Tata
Teleservices Ltd.63 and also to facilitate Nokia‘s expansion into the rural areas. As part of the tieup, the two companies also combined their advertising and marketing initiatives to ta p the lower segments of the market.
According to Jagdish Rebello, director and principal analyst at iSuppli Corporation 64, ―The cities are becoming saturated with mobile subscribers, and it is natural for handset makers to penetrate the rural markets.‖65 According to estimates by Gartner in 2007, the revenues from cellular services would grow at a compound annual growth rate of 18.4 percent to US$ 25.6 billion by
2011. It also estimated that the major chunk of this growth would come from the rural markets which were still underserved.66
In view of these estimates, Nokia announced its plans to increase its focus on the rural markets, in
June 2008. Kallasvuo said that the company would launch several initiatives in the areas of distribution, microfinance, agricultural services, and after sales and support services for the rural
59

60
61

62

63

64

65
66

McKinsey & Company is a management consulting firm that offers advisory services to leading businesses, institutions, and governments globally (Source: www.mckinsey.com).
―Rural India a Potential $500-bn Market: Survey,‖ http://ia.rediff.com, April 20, 2006.
―Nokia Plans Internet Services for ‗emerged‘ India‘s Rural Market,‖ www.financialexpress.com, June 27,
2008.
Vodafone Essar Ltd. (Vodafone Essar) is a subsidiary of the UK-based Vodafone Group Plc, (Vodafone) in India. It was formed in May 2007, after Vodafone Plc. entered into a joint venture with the then fourth largest communication service provider in India, Hutchison Essar Ltd. In September 2007, the ‗Hutch‘ brand was rebranded as ‗Vodafone‘, in India.
Tata Teleservices Ltd is CDMA-based mobile service provider and is headquartered in Mumbai,
Maharashtra, India. iSuppli Corporation offers services that helps clients to improve their performance in the electronics value chain. The services include electronic component research, teardown analysis, consumer electronics, forecasts on device-specific application market, and display device and systems research (Source: www.isuppli.com). ―Cellphones Push Mobile Growth in Rural India,‖ www.eetasia.com, October 1, 2008.
John Ribeiro, ―Nokia to Target India‘s Rural Markets,‖ http://abcnews.go.com, June 27, 2008.
10

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

markets. According to Kallasvuo, ―India‘s consumption of mobility is growing at a phenomenal pace and it has the potential to make a major contribution to the country‘s socio -economic development. Nokia recognizes its responsibility and our aim will be to try and bring more consumers into the folds of mobility by maximizing value creation.‖67
Nokia primarily aimed to focus on microfinance in order to increase its penetration into rural markets, which was at 26 percent as of June 30, 2008.68 Analysts felt that the Indian market including the rural segment had immense untapped potential that was constrained due to the high initial costs associated with owning a mobile phone. The company planned to conduct several pilot programs in select markets to gauge consumers‘ response. After gauging the response to these programs, the company aimed to come out with specific product offerings that offered content to users while overcoming language barriers, with special emphasis on making the mobile phone affordable to consumers. Shivakumar added, ―Language, content, and affordability will play a critical role in connecting the next billion consumers. At Nokia, our endeavor is to drive down the accessibility barriers and make universal access a reality.‖69
In 2008, Gartner forecast that the growth of the global handset market would drop to 10 percent for the year 2008 from 16 percent in 2007 due to the global economic slowdown. However, some experts said that the Indian market would not be affected by the global economic slowdown since the mobile subscribers had reached 260 million by October 2008.70 Moreover, they said that the rural market penetration was a major contributor to the increase in the mobile phone s ubscribers
(Refer to Table IV for urban-rural teledensity in India from 2001 to 2007).
Table IV
Urban-Rural Teledensity: 2001-2007
(Mobile subscribers as % of population*)
March
2001

March
2002

March
2003

March
2004

March
2005

March
2006

March
2007

Urban

10.4

12.2

14.3

21.3

26.3

38

48.5

Rural

0.9

1.2

1.5

1.7

1.8

2

4

Overall

3.6

4.3

5.1

7

9.1

12.9

18.3

* Population taken as 1.088 billion

Source: “Cellphones Push Mobile Growth in Rural India,” www.eetasia.com, October 1, 2008.
In November 2008, Nokia took its emerging markets strategy forward by launching low cost handsets in India. According to the company, the new handset, priced at € 25, was the lowest cost handset it had launched till date. The company also announced its plans to launch the NLT service that would offer a range of agricultural and educational information to the rural community, through these handsets. The prices of the handsets ranged from € 25 to € 90 and the phones were expected to be shipped by the end of 2008. The company‘s suite of Internet services was to be made available from 2009. Commenting on the launch of low cost handsets and its NLT service,
Robert Andersson, Executive Vice-President, Devices, Nokia, said, ―In 2002, Nokia unveiled a
67

68

69

70

―News Wire: India: Mobile Provider Nokia Targets Rural Markets for Growth,‖ www.microcapital.org,
June 30, 2008.
―Nokia to Focus on Microfinance to Grow Indian Market Share,‖ www.microfinanceinsights.com, August
20, 2008.
―News Wire: India: Mobile Provider Nokia Targets Rural Markets for Growth,‖ www.microcapital.org,
June 30, 2008.
―Cellphones Push Mobile Growth in Rural India,‖ www.eetasia.com, October 1, 2008.
11

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

strategy to lower the cost of owning and operating a mobile phone and to bring the benefits of mobile telephony to people in emerging markets. Today, we are expanding that vision by introducing a number of devices and services that aim to bring the power of the Internet to these markets as well.‖71

NOKIA LIFE TOOLS
THE PILOT PROGRAM
Taking its rural thrust forward, Nokia planned to offer VAS through its mobile handsets to the rural consumers. The company felt that adding content that would benefit the rural consumers while offering the mobile handset at an affordable price would help it further tap the rural market.
In 2008, the company adopted a ground-up approach and the Emerging Markets Services research team at Nokia did extensive research on the lives of rural consumers, the services accessed by them, and the areas that needed improvement. The research team found that the rural markets faced several constraints related to infrastructure, distances, cost, and the vast number of local languages. The team then concluded that the rural consumers had little or no access to information on agriculture and education. The farmers had to go to the markets several times to get to know about the crops and the market prices of seeds, fertilizers, pesticides, etc. Moreover, they had to deal with unscrupulous agents who often cheated them due to their lack of knowledge and education. Students also suffered since they could not gain the required educational material for their exams due to lack of resources and the erratic Internet connections in villages. The company felt access to the Internet would improve the lives of people living in such areas since they could get the information they needed. However, the cost associated with buying a PC posed a big challenge. The team said that most of the rural consumers they interviewed expressed their desire to get such information on their mobile phones. Subsequently, in November 2008, Nokia launched the pilot program of the NLT service in ten districts of Maharashtra in a bid to bridge the information gap for rural consumers. With the increasing mobile coverage in the country, there was renewed hope for rural consumers to gain access to the needed information. The research conducted by Nokia revealed that information services in areas where access to the Internet was constrained due to infrastructure could help improve the learning, earning potential, and quality of life in the rural community.
The NLT service offered rural consumers access to a range of information in the areas of agriculture, education, and entertainment. Commenting on why the company chose these areas,
Shivakumar said, ―Agriculture employs more than 60 percent of all workforce in India. This sector of the economy needs fresh inputs via technology…. Education and English language, on the other hand, are springboards for a number of small town and rural youth to move into the employment market. Nokia, through services in Agriculture and Education, will fulfill these opportunities for the Indian population.‖72
The pilot program was enabled on the Nokia 2600 and the Nokia 1680 models priced at Rs. 3000 and Rs. 2560 respectively and was offered in three languages – Hindi, Marathi, and English. The program ran for four months and the results were revealed in April 2009. The users using the
‗agriculture‘ module said that they could get to know about the market rates that were being offered for their produce. In addition to market prices, people also benefited from information on the weather, crop advisory services like tips on successful harvests, probable disease s affecting yields, and disruptions due to weather. With NLT, farmers could plan labor, sow, harvest, and sell their produce more effectively. They could also save on time and money as they did not have to visit the marketplace multiple times to get information about the latest rates. Moreover, it reduced
71

72

―Nokia Launches Low-cost handsets, Targets Rural Users,‖ www.thehindubusinessline.com, November
5, 2008.
―Nokia Life Tools Opens Side Door to the Internet in Rural INDIA and beyond… via SMS!‖ http://coversations.nokia.com, November 5, 2008.
12

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

their dependence on agents for fundamental information. The users of the ‗education‘ module were mainly students. They said they were immensely satisfied with the service. The students said that the module made learning English easy for people who aspired to learn the language. Some students revealed that this module helped them better their performance in job interviews and career prospects. Moreover, they expected to enhance their image and social standing by using the
NLT service. According to Nokia, ―For many, learning English was an aspiration which was finally achievable. Better performance in job interviews and career prospects, enhanced image and social standing also featured highly and frequently in the feedback.‖73
The farmers and the students were happy to use the NLT service. Appreciating the service, a farmer from Tuljapur village in Amravati said, ―I believe in working rigorously to enhance my livelihood and lifestyle and I expect that Nokia Life Tools services will help me in validating the desired information.‖74 Voicing a similar opinion, a second-year, Master of Arts student in Hindi said, ―Nokia Life Tools has given me many directions that I can take related to my education, agriculture business, and my overall individual status. It has the potential to change my future.‖ 75
The company was also satisfied with the results of the pilot program. According to Shivakumar,
―The results from the pilot in Maharashtra are testimony that Nokia still play s a very relevant role in people‘s lives — connecting them in new and better ways through devices that they continue to love, and services that help them improve their lives.‖76
Industry insiders felt that the pilot program was a success since it catered to the needs of the rural customers. According to Jawahar Kanjilal (Kanjilal), global head, emerging market services,
Nokia, ―The sole reason for [the] brilliant success of the pilot program of the Nokia Life Tools is that the services address the specific needs of the poor and farming community and rural people of
India.‖77
In addition to gaining the feedback and results of the pilot program, Nokia also received some information on enhancing the service. According to B V Natesh, head-emerging market services,
Nokia India, ―The pilot phase not only provided us with feedback, but also information about how people were using the service as well as what they wanted to see in terms of improvements.‖ 78
LAUNCHING NOKIA LIFE TOOLS
Buoyed by the success of the NLT pilot program, Nokia launched the service commercially in
Maharashtra, on June 12, 2009. The company signed a Memorandum of Understanding (MOU) with the Maharashtra State Agriculture Marketing Board79 (MSAMB). Under this agreement, the
MSAMB sought to offer knowledge on commodity prices from their 291 local mandis (market yards). According to a Nokia press statement, ―MSAMB will also have the opportunity to deliver relevant news, alerts on schemes, and other information directly to grassroots consumers.‖80

73

74
75

76

77
78
79

80

Mike, ―Nokia Life Tools Pilot Scheme Ends in Preparation for Launch,‖ http://conversations.nokia.com,
April 8, 2009.
Bill Ray, ―Nokia Life Tools Help Indian Farmers Get One,‖ http://theregister.co.uk, April 8, 2009.
Mike, ―Nokia Life Tools Pilot Scheme Ends in Preparation for Launch,‖ http://conversations.nokia.com,
April 8, 2009.
―Nokia Life Tools Pilot Shows High Appeal for Livelihood and Life Improvement Services in India,‖ www.alphatrade.com, April 8, 2009.
―Nokia Sounds Positive about the Success of Nokia Life Tools,‖ http://silverscorpio.com, April 18, 2009.
Nanda Kasabe, ―Nokia to Woo Rural Customers through New Offerings,‖ June 25, 2009.
Established on March 23, 1984, MSAMB is entrusted with the responsibility of developing and collaborating with the agricultural marketing system in Maharashtra (Source: www.msamb.com).
―Nokia Launches ‗Historical‘ Life Tools in India, Providing Agriculture-related News,‖ www.ibtimes.com, June 17, 2009.
13

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Nokia also collaborated with the Indian Government in conjunction with multiple partners and
Non-Governmental Organizations (NGOs) to deliver information through its NLT service.
According to Kanjilal, ―As mobile coverage increases to cover the millions of unconn ected, Nokia
— in India and in other emerging markets around the world — will work together with mobile operators, multiple government and private enterprises, and non-government organizations to empower millions by connecting them to better opportunities that have a positive impact on their daily lives.‖81
The private collaborators extending their support to Nokia comprised Idea Cellular Ltd.82 (Idea
Cellular), Reuters Market Light83 (RML), Syngenta India Limited84 (Syngenta), Pearson Education
India85 (Pearson), and OnMobile Global Ltd.86 (OnMobile). Idea Cellular was the first GSM operator in India to collaborate with Nokia for the NLT service. Pradeep Shrivastava, Chief
Marketing Officer, Idea Cellular added, ―We at Idea, Aditya Birla Group, have made significant strides in rural markets and have taken initiatives around rural telephony. We are delighted to collaborate with Nokia in this new service and enrich the life of the Indian rural consumer through these service-enabled handsets.‖87
The NLT services utilized an icon-based, graphically rich user interface that consisted of tables and displayed information concurrently in two languages. SMSs were used to deliver the information easily. According to Kanjilal, ―SMS is used to deliver the critical information t o ensure that this service works wherever a mobile phone does, without the hassles of additional settings or the need for GPRS coverage.‖88,89
The NLT service was offered through two Nokia models – the Nokia 2323 classic and the Nokia
2330 classic priced at Rs. 2,500 and Rs. 3,076 respectively90, in three areas such as agriculture, education, and entertainment. The user had to subscribe to each of the service s in order to access the information. After subscribing to the service, the user could use it seamlessl y. The NLT supported only three languages – Hindi, English, and Marathi during the pilot program, but after its commercial roll-out, the handsets supported other languages such as Punjabi, Gujarati, Bengali,
Kannada, Malayalam, Tamil, and Telugu as well.
In addition to services in the areas of agriculture, education, and entertainment, the NLT also displayed promotional information from its business partners. Ticker and Splash were two kinds of promotional messages that appeared as scrolling texts on the di splay. When a ticker started playing, the user could access the information by clicking on ‗show‘. In case the user clicked on
―Nokia Life Tools Launched across India,‖ http://moneywatch.bnet.com, June 12, 2009.
Incorporated in 1995, Idea Cellular is one of the foremost GSM mobile service operators in India.
83
Reuters Market Light is an SMS service offered by information and news company, Reuters Group Plc.
The RML service offers data related to crop prices and weather information to farmers through the mobile phone (Source: www.reuters.com).
84
Syngenta India Limited is an agri-business company that offers products and solutions contributing to the
Indian agriculture. Its products include crop protection, crop nutrients, seeds, seed care, and yield protection (Source: www.syngenta.co.in).
85
Pearson Education India is a leading integrated education publisher in India. It offers assessment tools, quality content, and educational services (Source: www.pearsoned.co.in).
86
Headquartered in Bangalore, India, OnMobile Global Ltd. is one of the largest value-added services and white labeled data companies in India (Source: www.onmobile.com).
87
―Inform, Involve, Empower – Nokia‘s Service Mantra for Emerging Markets with Nokia Mumbai-based
Life Tools,‖ www.earthtimes.org, November 4, 2008.
88
GPRS refers to General Packet Radio Service which allows mobile phones to send and receive data over the Internet.
89
―Nokia Launches Low-cost Handsets, Targets Rural Users,‖ www.thehindubusinessline.com, November
5, 2008.
90
www.fonearena.com
81
82

14

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

show, the ticker asks for confirmation that he/she was requesting for additional details. The advertiser would send a message in response to the request to the user‘s Alerts mailbox. On the other hand, the Splash messages came occasionally on the display during menu navigation. These messages disappeared after a few seconds and the user could continue with the navigation.
Agriculture
Users could subscribe to the ‗agriculture‘ module through their Nokia handsets. The service offered two plans. The first plan was a basic one that was available at a rate of Rs. 30 per month.
Under this plan, subscribers could get daily updates on the weather, market prices, information related to seeds, fertilizers, pesticides, etc. In addition to the basic plan, a premium plan was provided at a subscription rate of Rs. 60 per month. In this plan, the subscriber could choose to get the closest market prices of three crops selected by the subscriber, in addition to news, updates, and tips on agriculture.91 The basic plan was to be made available throughout the country while the premium plan was to be made available only in 10 states including Maharashtra. R ML was the exclusive provider for the content in the pilot program and also continued to provide the content in the ‗agriculture‘ module. Amit Mehra, MD, RML, added, ―Reuters Market Light (RML) has already proven the value of personalized information services by selling RML to over 100,000 farmers across 10,000 villages. Most farmers have made thousands of rupees in additional profit and reduced losses using the most accurate, comprehensive, timely, and personalized information service. We were the exclusive provider of agriculture services to Nokia in the successful NTL pilot in Maharashtra. It gives us great pleasure to continue our collaboration by scaling up our association with Nokia Life Tools to cover many more states in India.‖92
Nokia also collaborated with Syngenta for its expertise in crop protection and seeds. According to
Kuldeep Kaul, Vice-President Marketing, Syngenta, ―Agriculture is a local business where timely and relevant information dissemination to farmers can help them make better decisi ons, helping to boost their productivity and raise farm incomes. Nokia Life Tools is designed to offer location specific personalized information to individual farmers.‖93
Education
The ‗education‘ module comprised three service components – learning English with basic, intermediary, and advanced levels; tips on exam preparation for state-boards, ICSE, and CBSE boards94; and general knowledge, through which the subscribers could get to know about the world around them. The education services were offered at a subscription of Rs. 30 per month. In addition to the language learning lessons and general knowledge, the students also received career guidance, tips on exam preparation, and exam results. The content was offered through Pearson.
On its collaboration with Nokia, Vivek Govil, CEO of Pearson, said, ―Pearson is delighted to collaborate with Nokia in exploring how to deliver its wide range of educational content through mobile phones, which are the most popular information devices in emerging markets.‖ 95 In addition to Pearson, the content was gathered from local and international companies and delivered through EnableM96.

―Nokia Life Tools Launched across India,‖ www.gadgets-network.com, 2009.
―Nokia Life Tools Launched across India,‖ www.portfolio.com, June 12, 2009.
93
―Nokia Life Tools Launched across India,‖ www.nokia.com, June 12, 2009.
94
State-boards, ICSE, and CBSE boards are the education boards that prepare the syllabus for schools affiliated to them.
95
―Nokia Life Tools Launched across India,‖ http://moneywatch.bnet.com, June 12, 2009.
96
Founded in June 2006, EnableM is a company that offers wireless solutions in the field of multi-user mobile interactions and mobile learning.
91
92

15

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Entertainment
Through its ‗entertainment‘ module, Nokia enabled its subscribers to personalize their phones by tuning in to the latest ring back and ring tones. People could also enjoy jokes, news, and cricket scores, in addition to availing of the astrology service. The entertainment services were offered at existing prices charged by Nokia throughout the country that ranged from Rs. 6 per mi nute for every download to Rs. 30 for every download of a ring tone. The content was aggregated and brought on the mobile through OnMobile. On its collaboration with Nokia, Pratapa Bernard, Head of Marketing & Products, OnMobile said, ―We are happy to collaborate with Nokia and share our experience in Value Added Services (VAS) in India to deliver regional and local content to the consumer. Our expertise in Managed Services for mobile data services enables us to meet the stringent operational requirements for Nokia Life Tools.‖97

THE BENEFITS
Experts lauded Nokia for launching VAS (which, till then, had been mostly offered to the young urban customers) through its mobile phone for the rural people. According to Naresh Priyadarshi
(Priyadarshi), head of Synovate Business Consulting India98, ―VAS will definitely be the driving factor, but what is important is the end-offering customized to appeal to the target segment. It is very important to understand the needs of the rural population to ensure that the service s are aligned on those lines. Vernacular content is already a differentiating factor, considering the wide language diversity in the rural population which a lot of handset manufacturers are already exploiting.‖99 Analysts appreciated Nokia for its efforts to serve the rural consumers. They said that the NLT service gave farmers an opportunity to gather information relevant to the cropping cycles. They could access information related to the weather that helped them to plan work that depended on the weather conditions. They also said that the farmers could spend their money wisely by getting to know information related to fertilizers, pesticides, and seed, and that this would help them to improve their productivity and increase their earnings.
Some industry experts pointed that with the information on hand, the farmers could deal more effectively with the agents besides saving on time and money as they did not have to go to the market to get access to the latest rates. Subramaniam added, ―Many of these folks w ere involved in agriculture, but depended heavily on middlemen for information, and also spent a lot of time and money seeking out information that would enable them to grow better crops or sell their produce at better prices. Unfortunately, the kind of information that they were used to getting were not completely in their favor, or was obtained with some difficulty.‖100
Some experts also commended Nokia for its ‗education‘ module that sought to help students who aspired to learn English and gain general knowledge. According to Subramaniam, ―In the area of
Education and learning, many sought to improve themselves by knowing more about the world around them, or having a better command of English. Again, these resources were not readily available to people in emerging markets.‖101
97
98

99

100

101

―Nokia Life Tools Launched across India,‖ www.prsnewswire.com, June 12, 2009.
Synovate Business Consulting India, is the Indian arm of the Singapore-based management consulting firm, Synovate Business Consulting. It offers services related business intelligence, management consulting, and market analysis.
Gagandeep Kaur, ―Handset Strategy : Ride to Rural India,‖ http://voicendata.ciol.com, November 7,
2008.
Dan Butcher, ―Nokia Life Tools Targets Emerging Markets such as India,‖ www.mobilemarketer.com,
June 17, 2009.
Dan Butcher, ―Nokia Life Tools Targets Emerging Markets such as India,‖ www.mobilemarketer.com,
June 17, 2009.
16

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Some critics said that the actual benefits of NLT were still largely unknown to the farmers but
Nokia‘s attempts to sell its phones through NLT were justified. They said that Nokia was using
NLT as a strategy to sell its phones since the mobile market had reached a dwindling phase in the urban markets where brand differentiation had lost its significance and the market was flooded with several players who launched devices like commodities. Moreover, the company‘s sales had fallen by 27 percent YoY at 9.3 billion euros for the first quarter of 2009. In April 2009, the company said that its 93.2 million unit volume of mobile devices had also decreased by 19 percent
YoY.102 According to Rakesh Raman, managing editor of My Techbox Online,103 ―With this worrisome record, obviously, the company will run from pillar to post to sell its phones. Now, it‘s focusing on India with the belief that highly populated countries like India hold good potential for its phones. And it‘s trying to sell them under the garb of gimmicks like Life Tools, etc.‖104
Nokia, however, maintained that by launching NLT, it aimed to overcome constraints related to information and to contribute toward employee empowerment by enabling them to make informed decisions. It also said that it planned to bridge the digital divide prevalent in emerging markets through this service. Experts felt that Nokia‘s strategy of using VAS to sell its handset sales would succeed in emerging markets, as these handsets could serve as the main way to acce ss the Internet in countries where most people did not have access to PCs. However, they also felt that this strategy was bound to fail in more developed countries where Internet usage was well defined.105

THE CHALLENGES
One of the biggest challenges that Nokia faced with its NLT service was in offering timely and accurate information to the subscribers, according to experts. Some experts also felt that the growth of this service would be limited since it was offered only in some areas such as agriculture, education, and entertainment.
Some industry experts opined that though the NLT services sought to offer an array of benefits to the rural consumers, the affordability of the handset still posed a significant challenge. Nokia, however, maintained that it had launched low-cost handsets targeted at the rural consumers. It added that it was considering entering into deals with microfinance institutions to offer easy financing options to make the mobile handsets affordable to the rural consumers.
Some critics opined that the NLT service did not cater to people who were illiterate since the information was in text. According to WATBlog.com106, ―What Life tools lack is they are not voice driven and thus will need customer to be able to read and write apart from the learning cycle it‘d need to use the tools per se.‖107
Some critics also questioned how Nokia would market its NLT service to the rural consumers when it was available only in two models. They said that it remained to be seen how Nokia would convince the rural community to buy these handsets for the VAS provided through the NL T rather than focusing on tangible features such as longer battery life, ruggedness, and the torch feature.108
102
103

104
105
106

107

108

―Nokia Provides Life Tools in India,‖ www.mytechboxonline.com, 2008.
My Techbox Online was started in June 2008. The site offers personal and enterprise technology trends.
The site also focuses on areas such as digital entertainment, technology events, web market trends, online games, mobile devices, reports based on market research, etc. (Source: www.mytechboxonline.com). ―Nokia Provides Life Tools in India,‖ www.mytechboxonline.com, 2008.
Jack Ewing, ―Analyst Doubts Nokia Services Strategy,‖ www.businessweek.com, May 14, 2009.
WATBlog.com is owned by a digital media company, WATMedia Pvt Ltd. It is a blog that gives reviews, news, and interviews on advertising, technology, and web.
Mike, ―Nokia Life Tools - Initial Reactions to Launch in India,‖ http://conversations.nokia.com, June
25, 2009.
―Nokia Poised to Help Farmers to Expand its Rural Base,‖ www.thinkchangeindia.org, March 6, 2009.
17

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

THE ROAD AHEAD
As of 2009, Nokia was the dominant player in the Indian mobile pho ne market. Experts felt that its product innovations coupled with its ability to appeal to various segments of consumers were the reasons for its success. In 2009, an independent nationwide survey conducted for Brand Equity by
The Nielsen Company109 found that Nokia was the most trusted brand in India (Refer to Exhibit IV for India‘s most trusted brands). 110 According to Shivakumar, in these challenging times, continued trust could be earned only through consistent performance and delivering more than the promise. ―Delivering ‗more‘ than the promise requires brands and firms to be transparent in this era of the Internet, media scrutiny, and word of mouth. Putting more information helps trust; opacity will hurt trust in a brand. Is the brand shaped by its business or shaped by the values it upholds? In volatile conditions, consumers would expect a brand to be more than just a profit earning entity. Consumers increasingly want to know what the company and the people behind the brand look like and do they care beyond an economic motive?‖111 he said.
The company had high ambitions for the Indian market and it expected the rural markets to play a big role in achieving this. The company was banking on the various rural specific initiatives it had undertaken, including NLT, to make that possible.
Industry observers opined that the NLT service would be as successful as its pilot program. They felt that as NLT benefited the farmers and other sections of society, the pilot project had met with success in Maharashtra. According to them, this success could be replicated in other parts of India as well.112 While there were several benefits offered by the NLT service, some industry observers opined that the company also had to overcome the challenges associated with it. The company collaborated with SKS Microfinance113 to come out with a financial package that would result in lowering the initial costs associated with buying a mobile phone.114 Moreover, it sought to offer consumers loans to buy the handsets. The company also planned to launch the cheapest handset for the emerging market – The Nokia 27300 classic, in 2009, according to Mary McDowell
(McDowell), executive vice president and chief development officer at Nokia.115
In order to increase awareness about the NLT service among rural consumers, the company planned to expand its service and sales channels and to market its products through small shops and vans. It planned to launch servicing and marketing vehicles like ‗Rural care on the go‘ and
‗Showroom on wheels‘. Nokia planned to leverage on its distribution network in order to enter rural geographies. It also planned to increase the number of Care Service Centers to tap the rural markets. Besides, the company planned to roll out several education programs that would teach rural consumers the benefits of mobility.116

109

110

111

112

113

114
115

116

The Nielsen Company is headquartered in New York and is the leading media information and marketing company in the world.
―India‘s Most Trusted Brands 2009,‖ http://economictimes.indiatimes.com/quickiearticleshow/4663609.cms. ―Share
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Hurts:
D
Shivakumar,‖
http://economictimes.indiatimes.com/articleshow/4662742.cms, June 17, 2009.
Mike, ―Nokia Life Tools - Initial Reactions to Launch in India,‖ http://conversations.nokia.com, June
25, 2009.
Founded in 1988, SKS Microfinance is a Hyderabad-based NGO that offered microfinance services to poor women living in rural areas.
John Ribeiro, ―Nokia to Target India‘s Rural Markets,‖ http://abcnews.go.com, June 27, 2008.
Sumner Lemon, ―Nokia to Offer Life Tools for Rural Mobile Users,‖ www.pcworld.com, June 14,
2009.
―News Wire: India: Mobile Provider Nokia Targets Rural Markets for Growth,‖ www.microcapital.org,
June 30, 2008.
18

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Analysts opined that while NLT enhanced the lives of farmers and students, it also provided an opportunity for Nokia to tap the growing potential in the rural market. As of June 2009, the Indian mobile phone market had 249 million urban subscribers with 93 million rural consumers.117
Moreover, the mobile penetration in India was estimated to reach 500 million mobile phone users by 2010.118 The company planned to increase its customer base by 150 million by 2011 . Of these, the maximum number was estimated to be rural consumers. 119 Considering the potential of the rural market, some analysts opined that tapping rural consumers was as lucrative as selling applications and content through Ovi to urban users.120
The NLT service that had benefited the lives of several students and nearly 300,000 farmers in
Maharashtra was to be extended to another 11 states starting with the Southern states such as
Andhra Pradesh and Tamil Nadu in the first week of July 2009, followed by other states such as
Gujarat, Haryana, Uttar Pradesh, Karnataka, and Madhya Pradesh. The service was also expected to be launched in other parts of Asia and Africa by the end of 2009 and beyond.121
The success of the NLT pilot program in Maharashtra prompted the company to launch this service in other emerging markets.122 McDowell added, ―Nokia is now formulating plans to roll out Life Tools, which includes agricultural and educational services for rural mobile users, in other emerging markets following the "great success" of a trial conducted in India.‖123 In early 2009,
Nokia announced that it was launching a very similar initiative as part of NLT in Kenya.124
According to the company, going forward, it would bring about further improvements in NL T to bring the service closer to the target audience. Kanjilal said, ―By continuously sharpening our offerings and providing the most relevant services, we intend to make Nokia Life Tools extremely relevant and indispensible to the target users.‖125

117
118

119

120
121
122

123
124

125

―Nokia Seeks to Tap Rural Market to Spur Growth,‖ www.thehindusbusinessline.com, April 9, 2009.
Amit Sharma, ―Nokia Launches Life Tools Service across India News,‖ www.prdomain.com, June 12,
2009.
Amit Sharma, ―Nokia Launches Life Tools Service across India News,‖ www.prdomain.com, June 12,
2009.
Bill Ray, ―Nokia Life Tools Help Indian Farmers Get One,‖ http://theregister.co.uk, April 8, 2009.
―Nokia All Set to Increase its Market Share,‖ www.hinduonnet.com, June 28, 2009.
―Nokia Life Tools Services for Rural Mobile Users on India,‖ www.india-server.com/news/nokia-lifetools-services-for-rural-7659.html, June 15, 2009.
Sumner Lemon, ―Nokia to Offer Life Tools for Rural Mobile Users,‖ www.cio.com, June 14, 2009.
Brian Adero, ―Nokia Launches Service for Kenyan Farmers,‖ www.itnewafrica.com, February 10,
2009.
―Nokia Life Tools Pilot Shows High Appeal for Livelihood and Life Improvement Services in India,‖ www.nokia.com, April 8, 2009.
19

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Exhibit I
Business Week/Interbrand List of 100 Best Global Brands
2008 2007
Rank Rank

Brand

2007
Brand
Value

2008 Brand
Value
(US$
Millions)

(US$
Millions)

Percent
Change
from 2007 to
2008 (in%)

Country of
Ownership

1

1

Coca-Cola

66,667

65,324

2

U.S.

2

3

IBM

59,031

57,091

3

U.S.

3

2

Microsoft

59,007

58,709

1

U.S.

4

4

GE

53,086

51,569

3

U.S.

5

5

Nokia

35,942

33,696

7

Finland

6

6

Toyota

34,050

32,070

6

Japan

7

7

Intel

31,261

30,954

1

U.S.

8

8

McDonald‘s

31,049

29,398

6

U.S.

9

9

Disney

29,251

29,210

0

U.S.

10

20

Google

25,590

17,837

43

U.S.

Sources: “Best Global Brands 2008,” http://bwnt.businessweek.com/interactive_reports/global_brand_2008/, 2009.

20

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Exhibit II
Nokia‟s Worldwide Financials
(In € million)

Change
2007 (in%)

2008

Net Sales

20710

51058

-1

Operating profit

4966

7985

-38

Profit before tax

4970

8268

-40

Profit attributable to equity holders of the parent 3988

7205

-45

Research and development expenses

5968

5636

6

Return on capital employed

27.2

54.8

%

2008

2007

-14

-62

1.07

1.85

-42

0.53

-25

35099

37705

-7

5816

7584

-23

15309

13393

14

-301

-1308

61130

53523

14

60295

58423

3

355

316

12

125829

112262

12

Net debt to equity (gearing)
EUR
Earnings per share, basic
Dividend per share

0.40**

** Board‘s proposal
Reportable segments, (in € million)
Devices & Services
Net Sales
Operating profit
NAVTEQ
Net sales

361

Operating profit

-153

Nokia Siemens Networks
Net Sales
Operating profit
Personnel, (As of December 31)
Devices & Services
NAVTEQ

4049

Nokia Siemens Networks
Corporate Common Functions
Nokia Group

Source: “Nokia in 2008,” Annual Report, www.nokia.com, 2008.

21

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Exhibit III
A Note on the Indian Rural Mobile Phone Market
The early 2000s witnessed the entry of mobile phone companies into the Indian rural market. In
2004, the companies made their rural foray since the growth in the urban markets had almost reached a saturation phase with several global players launching products to target the Indian urban market. This prompted the mobile phone companies to venture into the rural markets.
Experts opined that with the rise in income levels of the rural consumers due to agricultural output and with the rural economy becoming mainstreamed, more and more rural consumers were interested in buying mobile handsets. Some experts said that with 70 percent of the population of India living in rural areas, it was logical for mo bile phone companies to tap the opportunity presented by the rural market. According to T V Ramachandran, director general of the Cellular Operators Association of India126 (COAI), ―Nearly 70 percent of India‘s population lives in rural areas and yet most mobile phone service providers are not there.‖127
Experts also felt that the since the disposable incomes of rural consumers were totally disposable, they offered a greater potential for tapping. They said that unlike an urban consumer, a rural consumer did not have to pay any tax. This resulted in increasing the purchasing power of the rural consumers.
Nokia was one of the first companies to realize the potential of the rural market and enter the rural market. In 2003, it launched the Nokia 1100 targeted at rural consumers. The phone was an instant hit with the consumers as it had features such as a torch, alarm clock, radio, anti slip grip, dust resistance, etc. Since the rural markets were still untapped, Nokia launched low-cost handsets that were affordable for the rural consumers. In addition to offering low-cost handsets,
Nokia offered financing options and reduced the mobile tariffs to make the handsets more affordable to the rural consumers. This resulted in a rapid increase in the subscription base of rural mobile users. In 2004, India had 36 million mobile subscribers out of which 15 percent were rural consumers.128
In order to increase awareness among rural consumers about the benefits of mobility, Nokia launched the Rural Van project in 2006. The company planned to increase this initiative to further tap the villages, in 2008.
Experts said that the major portion of the growth would now come from the rural markets where two-thirds of India‘s 1.7 billion population lives, as of 2008. They also reported that the rural subscription base accounted for 25 percent as of 2008.129 According to Voice&Data130 estimates in 2008, of the next 250 million users, 100 million would be from rural markets. In addition to the estimated rural subscription base, another driver that prompted the players to tap the Indian rural market was the increasing rural teledensity. The rural teledensity that stood at 4 percent in
2007 increased to 9.2 percent in March 2008, according to the Association of Unified Telecom
Service Providers of India131 (AUSPI). The AUSPI also pointed that the wireless subscriber base of rural consumers stood at 622 million while the wireless subscriber base for urban consumers stood at 1980 million, as of March 31, 2008.

126
127
128
129

130

131

Cellular Operators Association of India (COAI) was the industry body for GSM operators in India.
―Mobile Phones to Ring Louder in Rural India,‖ www.siliconindia.com, June 21, 2004.
―Mobile Phones to Ring Louder in Rural India,‖ www.siliconindia.com, June 21, 2004.
Pramila, ―Mobile Phone Manufactures Increasing their Reach in Rural India,‖ www.itvidya.com,
August 1, 2008.
Voice&Data is a magazine that provides analysis technology, business, and regulatory aspects of Indian networking and telecom (Source: http://voicendata.ciol.com).
Association of Unified Telecom Service Providers of India is representative body of Unified Access
Service Licensees. It offers telecom services with CDMA technology in India (Source: www.auspi.in).
22

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Another major driver for the rural market was the Department of Telecommunication‘s132 plan to initiate the second phase of mobile phone expansion with a coverage of 2,00,000 villages.
Under the plan, the department planned to install 11,000 additional towers to cover a population of 500 people.133
While several plans to tap the rural markets were underway, a report by Ernst & Young134FICCI135 concluded that geographical variance and low income of rural consumers posed a challenge for network layout and setting up of distribution channels. In addition to tha t, the low
ARPU generated by the rural community did not counterbalance the return on investment and revenue spends for rural penetration by the operators. In addition to these constraints, a major challenge in tapping the rural market remained with pricing since the consumers were extremely price conscious, according to experts. Several players were focusing on pricing their handsets to make it affordable by the rural consumers. According Sunil Dutt (Dutt), country head, Samsung
Mobile Business, ―Affordability is one of the key factors, and our effort will be in the direction of making our products more accessible to rural consumers, be it easier finance or pricing itself.‖136 Some experts opined that, in addition to pricing, another significant challenge was the features offered by a mobile handset. Anshul Gupta, principal analyst with Gartner, added, ―One of the major challenges for handset companies is that they have to have an understanding of a model that responds to user needs. It is not just pricing. Rural India is also looking for features that are specific to their needs. For instance, Nokia 1100, one of the best selling Nokia model s, was specifically targeted at the rural segment with long battery life and came with a torch. Hence, it is imperative that manufacturers have to understand the needs of the rural segment.‖ 137 The mobile phone companies also viewed this as a major challenge since rural consumers sought a value for money proposition. The rural consumers preferred sturdy handsets with stronger battery life, with easy text and voice messaging features, according to Devinder Kishore
(Kishore), director marketing, Nokia India.
The mobile phone companies began launching low cost handsets coupled with features catering to the needs of the rural consumers. For instance, On June 11, 2008, Spice launched a Handset
Combo offer called Sabka Spice in which a handset came bundled with a Spice connection. The
Spice S 300 handset, available at Rs 599, was specially designed to make mobile telephony accessible to the rural population in India. In 2009, Spice launched a mobile phone priced at Rs.
800. LG launched the Bullet series of phones specifically for the rural segment. It also launched the KP106B phone for this segment. Motorola already had a presence in the rural market with its

132

133

134

135

136

137

DoT was the primary telecom service provider and the regulatory body for telecom operations in India until 1997. In 1997, the Telecom Regulatory Authority of India (TRAI) was made the primary regulatory authority for telecom operations in India, following which DoT 's functions were limited to provision of telecom services, policy framing, and licensing for fixed line players.
Gagandeep Kaur, ―Handset Strategy : Ride to Rural India,‖ http://voicendata.ciol.com, November 7,
2008.
Ernst & Young is one of the world 's largest professional services firm with global headquarters in
London, UK.
The Federation of Indian Chambers of Commerce and Industry (FICCI) was established in 1927 to garner support for the independence movement and safeguard the interests of the Indian business community Gagandeep Kaur, ―Handset Strategy: Ride to Rural India,‖ http://voicendata.ciol.com, November 7,
2008.
Gagandeep Kaur, ―Handset Strategy: Ride to Rural India,‖ http://voicendata.ciol.com, November 7,
2008.
23

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Motoyuva series, Motoflip W220, Motoflip W375, and Motorola W218. The company had also launched features specific to rural consumers such as the Hindu calendar, Hinglish138 predictive text input, Indian wallpapers, Hindi texting and phonebook storage, in addition to vernacular languages, and this had more appeal to the rural community. Nokia was also not behind and had launched handsets prices at US$ 30 to US$ 40.139 Reliance Communications Ltd.140 had also announced that it would launch low-end China-made phones retailing at US$ 19. Tata was also sourcing phones from XL Telecom and Energy Ltd141 and CDMA phones from Kyocera
Wireless Corp.142 Bharat Sanchar Nigam Ltd.143 was also planning to team up with Beetel144 to launch low cost handsets for the rural consumers. Experts felt that it remained to be seen whether rural consumers would buy those low cost handsets. According to Rahul Gupta, an analyst with Strategy Analytics Inc.145, ―But success will entirely depend on customer response to the handset vendors‘ service offerings, and the ability of vendors and operators to serve those communities both adequately and cost-effectively.‖146
While Nokia maintained that though it was a market leader it was always on its toes and did not believe in resting on its laurels, the company did not see any threat to its market position due to the low cost handsets being offered by some competitors to the rural customers. Reacting to the launch of low cost phones by a competitor, Shivakumar said, ―Rural India is no less brand conscious. In fact, rich people buy for vanity and poor people for security. When a poor person purchases a phone he would want low maintenance and services costs. Poor people also want a better return on investment and know that a known and reliable brand will fetch better returns on second-hand sale.‖147 Kishore added, ―Every handset maker has realized that a built-in flashlight and FM radio are a big hit in the rural handset market. You would think that a monochrome display would satisfy an illiterate villager. But it is not so. We have studied the market and realized that they all want a color display and a camera. I think our TV campaigns have paved the way for them to aspire to feature-rich handsets they would never have dreamt of two years ago.‖148 Some experts opined that handset manufacturers have to offer features that make the mobile phone affordable, accessible, and available to the rural consumers. In May 2009, Vodafone launched Vodafone GappaGoshti, a rural initiative which allowed rural consumers to form a community and stay connected at 30 paise per minute, in Maharashtra and Goa. According to B
P Singh, CEO, Vodafone Maharashtra and Goa, ―Vodafone‘s new product, ‗GappaGoshti‘ is a unique offering to the rural population keeping in mind affo rdability, accessibility, and

138
139
140

141
142
143
144

145

146
147

148

Hinglish is a mixture of India‘s national language, Hindi, and English.
―Cellphones Push Mobile Growth in Rural India,‖ www.eetasia.com, October 1, 2008.
Reliance Communications Ltd is one of the major telecom companies in India and is headquartered in
Navi Mumbai, India.
XL Telecom & Energy Limited is a Hyderabad, India-based telecom equipment manufacturer.
Kyocera Wireless Corp. is a California-based CDMA mobile phone manufacturer.
Bharat Sanchar Nigam Ltd. is the largest telecom company in India and is state owned.
Bharti Teletech, a subsidiary of India-based business conglomerate Bharti Enterprises, manufactures high quality landline phones under the Beetel brand for Airtel, MTNL, BSNL, and as well as for retail and exports to more than 30 countries.
Founded in 1968 as Mackinstosh Consultants, Strategy Analytics Inc. is an international research and consulting company.
―Cellphones Push Mobile Growth in Rural India,‖ www.eetasia.com, October 1, 2008.
―Nokia Plans Internet Services for ‗Emerged‘ India‘s Rural Market,‖ www.financialexpress.com, June
27, 2008.
―Cellphones Push Mobile Growth in Rural India,‖ www.eetasia.com, October 1, 2008.
24

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

customization to their requirements. It is an innovative product designed to suit the needs of the market and create a long-term association with the rural markets of India.‖149 Similarly, in June
2009, Airtel launched a Kisan Green Card, a prepaid service coupled with VAS for farmers. The service sought to offer information related to agriculture and animal husbandry to farmers.
Experts opined that the companies tapping the rural markets could enhance their distribution models to increase their rural penetration. They felt that entering into deals with key opinion leaders and players like DSCL Haryali Kisaan Bazaar150 and ITC e-Choupal151 would help the companies in educating the rural consumers about the advantages of the handsets.
Some handset manufactures had already considered alternate distribution channels to tap the prospective customers. ―We are targeting alternate distribution networks to reach the rural market, which is the next growth area for the mobile industry. We are al so looking at tying up with local co-operatives to push handset sales in the rural segment. Samsung recently tied up with the Indian Farmers Fertilizer Co-operative (IFFCO) for rural telephony, which will take our handsets to the countryside. We will use IFFCO 's co-operative network for marketing our handsets. The handsets will be especially beneficial for accessing commodity prices to agricultural inputs, among other benefits,‖ said Dutt. Motorola and Nokia had partnered with
ITC e-Choupal to gain a wider reach in the rural markets. However, this was thought to be expensive since FMCG and pharma industries were high margin businesses and could afford to have their own distribution networks while the margins were low for handset companies. Nokia tied up with HCL152 for the distribution of the phones.
Some industry observers also suggested the handset companies bundle their handsets with other features to target the rural community. According to experts, bundling was important since it would offer the rural consumers a mobile handset with the connection. Priyadarshi added,
―Handset manufacturers would have to work in tandem with operators to reach out to new subscribers in the rural market. This is mainly because the consumer is looking at total cost of owning a mobile, and bundled schemes become very important in this scenario.‖153
While bundling offered a value for money proposition to the rural consumers, it offered other advantages as well such as increasing rural penetration by handset companies and telecom companies by taking advantage of each other‘s distribution network. Handset companies which were not well known could also bank on the telecom companies‘ brand image and garner higher sales. Some experts said that LG and Samsung would have a higher brand recall than other companies since they already had a presence in the rural market. ―LG has been very aggressive in the rural market with products like Sampoorna TV being a complete hit in this segment. Also, these companies have a distribution network in place to leverage on as a competitive advantage,‖154
149

150

151

152

153

154

―Vodafone Launches GappaGoshti in Rural Markets of Maharashtra and Goa,‖ www.vodafone.in, May
11, 2009.
Founded in 1889, DCM Shriram Consolidated Limited (DSCL) is a company with interests in valueadded businesses, energy intensive businesses, and agri-business. Its Haryali Kisaan Bazaar is a rural initiative that created a hub that offers agri products and agri services to farmers in a convenient and fair manner. ITC is one of India 's leading Fast Moving Consumer Goods companies. e-Choupal is ITC 's unique webbased initiative which offers farmers of India the information, products, and services they need to improve farm productivity, enhance farm-gate price realization, and reduce transaction costs.
HCL Infosystems Ltd, headquartered in Noida India, is a hardware and systems integrator. It is a subsidiary of India 's leading electronics, computing, and information technology (IT) company, HCL
Enterprises.
Gagandeep Kaur, ―Handset Strategy: Ride to Rural India,‖ http://voicendata.ciol.com, November 7,
2008.
Gagandeep Kaur, ―Handset Strategy: Ride to Rural India,‖ http://voicendata.ciol.com, November 7,
2008.
25

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

said Priyadarshi. However, companies like Nokia which had a substantial network in the rural segment were also reaping advantages. Samsung was making efforts to strengthen its distribution network by appointing SSK and Link as its distributors for mobile sales in the
Western and Eastern part of the country. Experts were of the view that brand loyalty and word of mouth provided an excellent potential in the Indian rural market.
Experts opined that the increasing purchasing power of rural consumers had had led to a demand for mobile phones in rural communities. Citing the reasons for increase in rural purchasing power, Pankaj Gupta, practice head, consumer & retail, Tata Strategic Management Group155
(TSMG), said, ―The increase in procurement prices [the government sets the minimum support price -- MSP -- for many farm products] has contributed to a rise in rural demand. A series of good harvests on the back of several good monsoons boosted rural employment in agricul tural and allied activities. Government schemes like NREGS [National Rural Employment Guarantee
Scheme, which guarantees 100 days of employment to one member of every rural household] reduced rural underemployment and raised wages. Also, farmers benefited from loan waivers
[introduced in the last Union Budget]. The increase in rural purchasing power is reflected in rural growth across a number of categories. For example, in the financial year 2009 [April March], FMCG [fast moving consumer goods] rural volume growth is estimated to be 5% to
12% higher than urban growth across a number of categories.‖156
Some experts were of the view that the rural segment was the driver of growth in future in any industry. According to Gupta of ruralnaukri.com, ―The purchasing power of rural India is more than half for fast moving consumer goods [US$17 billion]. The durables and automobile sectors contribute US$2.5 billion each, and agri-inputs (including tractors) about US$1 billion. Some 42 million rural households [use] banking services against 27 million urban households. There are
41 million Kisan credit cardholders [credit cards issued to farmers for purchase of agricultural goods] against some 22 million card users in urban markets. Be it automobile, telecom, insurance, retail, real estate or banking, the future drivers of growth are rural. No marketer can afford to ignore the possibilities of rural India.‖157
Some experts pointed out that the increasing number of rural households, estimated at 720 million as of June 2009, also added to the advantages of the companies tapping the rural market.
Moreover, the rural income was expected to increase at CAGR of 12 percent from US$ 220 billion in 2004-2005 to US$425 billion by 2010-2011, according to TSMG.158 Some experts felt that another major driver in the rural market would be content offered in vernacular languages since it would help companies to tap the inner rural areas. They also felt that the key to success in these markets was to offer after-sales services to the rural consumers. Amit Aggarwal, an analyst at Zinnov Management Consulting Pvt. Ltd.159 added, ―The challenges are numerous.
After-sales service is key to the success of handset makers, and companies are coming out with innovative ways to handle this.‖160

155
156

157

158

159
160

Tata Strategic Management Group is a management consulting firm based in the Mumbai, India.
―Why Companies See Bright Prospects in Rural India,‖ www.knowledge.wharton.upenn.edu, June 18,
2009.
―Why Companies See Bright Prospects in Rural India,‖ www.knowledge.wharton.upenn.edu, June 18,
2009.
―Why Companies See Bright Prospects in Rural India,‖ www.knowledge.wharton.upenn.edu, June 18,
2009.
Zinnov Management Consulting Pvt. Ltd. is a Bangalore-based portal that offers premium jobs in India.
―Cellphones Push Mobile Growth in Rural India,‖ www.eetasia.com, October 1, 2008.
26

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

Despite several challenges and benefits in tapping the rural markets, it was expected to be the major driver for the growth of the Indian mobile phone companies in the coming years.
According to a ‗Emerging Rural Mobile Market in India‘ report by MarketResearch.com 161, in
2008, the Indian rural market was likely to grow at a compounded annual growth rate (CAGR) of 32 percent from 2009 to 2012.162 It also said that the handset sales in rural areas in India would grow at CAGR of nearly 17 percent from 2009 to 2012.163
Compiled from various sources.

Exhibit IV
Top Ten Most Trusted Brands in India
Rank

Brand

Company

Industry/Category

1

Nokia

Nokia Corporation

Mobile Phones

2

Colgate

Colgate-Palmolive (India) Ltd.

Consumer Packaged Goods
(CPG)/ Oral Hygiene

3

Lux

Hindustan Unilever Ltd.

CPG / Personal Hygiene

4

Lifebuoy

Hindustan Unilever Ltd.

CPG / Personal Hygiene

5

Dettol

Reckitt Benckiser

CPG / Antiseptic liquid and soap 6

Horlicks

GlaxoSmithKline

CPG / Health Drinks

7

Tata Salt

Tata Group

CPG

8

Pepsodent

Procter & Gamble

CPG/ Oral Hygiene

9

Britannia

Britannia

CPG/ Food

10

Reliance
Mobile

Reliance
Anil
Ambani Group

Dhirubhai Telecom

Adapted from “India’s Most Trusted Brands 2009,” http://economictimes.indiatimes.com/quickiearticleshow/4663609.cms. 161

162
163

MarketResearch.com is the largest collection of market research reports in the world. As of 2009, it offered over 200,000 market research reports from 650 leading publishers (Source: www.marketresearh.com). ―Emerging Rural Mobile Market in India,‖ www.marketresearch.com, June 1, 2009.
―Emerging Rural Mobile Market in India,‖ www.marketresearch.com, June 1, 2009.
27

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

References and Suggested Readings:
1. “Nokia Installs 2000 Base Stations in 10 Months for E2 Network in Germany,” www.press.nokia.com, October 5, 1998.
2. “Nokia Reports Good Results, Gives Guarded Forecast,” www.mobilemonday.net,
January 23, 2003.
3. “Nokia Loses its Grip on the Handset Market Share,” http://news.cnet.com, April 29,
2004.
4. “Mobile Phones to Ring Louder in Rural India,” www.siliconindia.com, June 21, 2004.
5. Vipul Chauhan, “India Study Tekes Nets and Fenix Programs,” http://akseli.tekes.fi,
July 10, 2004.
6. Rich Brome, “Nokia Nseries Launch,‖ www.phonescoop.com, April 27, 2005.
7. “Nokia Collaborating with Bharti Airtel in India,” http://sifybroadband.techwhack.com, August 24, 2005.
8. “Rural India a Potential $500-bn Market: Survey,” http://ia.rediff.com, April 20, 2006.
9. Nikunj
Daga,
“Nokia‟s
Marketing
http://edissertations.nottingham.ac.uk, 2006-2007.

Strategies

in

India,”

10. “How Did Nokia Succeed in the Indian Mobile Market, while Its Rivals Got Hung up?” http://knowledge.what\rton.upenn.edu, August 23, 2007.
11. “Nokia Officially Hits 40% Global Market Share,” www.mobilecomment.com, January
24, 2008.
12. “Mobile Handset Market Share – Nokia Leads, Samsung overtakes Motorola,” www.pluggd.in, June 10, 2008.
13. “Nokia Plans Internet Services for www.financialexpress.com, June 27, 2008.

„emerged‟

India‟s

Rural

Market,”

14. John Ribeiro, “Nokia to Target India‟s Rural Markets,” http://abcnews.go.com, June
27, 2008.
15. “News Wire: India: Mobile Provider Nokia Targets Rural Markets for Growth,” www.microcapital.org, June 30, 2008.
16. Pramila, “Mobile Phone Manufactures Increasing their Reach in Rural India,” www.itvidya.com, August 1, 2008.
17. “Nokia to Focus on Microfinance to Grow www.microfinanceinsights.com, August 20, 2008.

Indian

Market

Share,”

18. “Cellphones Push Mobile Growth in Rural India,” www.eetasia.com, October 1, 2008.
19. “Inform, Involve, Empower – Nokia‟s Service Mantra for Emerging Markets with
Nokia Mumbai-based Life Tools,” www.earthtimes.org, November 4, 2008.
20. “Nokia
Launches
Low-cost
Handsets,
www.thehindubusinessline.com, November 5, 2008.

Targets

Rural

Users,”

21. “Nokia Life Tools Opens Side Door to the Internet in Rural INDIA and beyond… via
SMS!” http://coversations.nokia.com, November 5, 2008.
22. Gagandeep Kaur, “Handset Strategy: Ride to Rural India,” http://voicendata.ciol.com,
November 7, 2008.

28

Emerging Markets Strategy: Nokia Life Tools for Rural Markets

23. Michael Schwartz, “Nokia Brings out Life Tools for Rural Emerging Markets,” www.developingtelcoms.com, November 19, 2008.
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29

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30

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