Harvard Case - Bhagwati Products Limited - Making in India for Micromax
"Bhagwati Products Limited - Making in India for Micromax" Harvard business case study is written by Sunita Mehta, Surya Kant Sharma, Arun Pereira. It deals with the challenges in the field of Strategy. The case study is 22 page(s) long and it was first published on : Dec 26, 2016
At Fern Fort University, we recommend Bhagwati Products Limited (BPL) adopt a strategic alliance with Micromax, leveraging its manufacturing expertise and capacity to cater to the growing Indian smartphone market. This alliance will enable BPL to tap into the rapidly expanding smartphone market, diversify its product portfolio, and strengthen its position as a leading electronics manufacturer in India.
2. Background
The case study focuses on Bhagwati Products Limited (BPL), a leading manufacturer of consumer electronics in India, and its opportunity to partner with Micromax, a prominent Indian smartphone brand. BPL possesses a strong manufacturing base and a proven track record in producing high-quality electronics. However, they are facing increasing competition from Chinese manufacturers and are seeking new growth avenues. Micromax, on the other hand, is looking to expand its manufacturing capabilities in India to reduce dependence on Chinese suppliers and enhance its competitive edge.
The main protagonists are:
- BPL: A leading electronics manufacturer in India with a strong manufacturing base and a desire to expand into the smartphone market.
- Micromax: A prominent Indian smartphone brand seeking to expand its manufacturing capabilities in India.
3. Analysis of the Case Study
This case study can be analyzed using the following frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: High, due to the low barriers to entry in the smartphone market, particularly from Chinese manufacturers.
- Bargaining Power of Buyers: Moderate, as consumers have a wide range of choices in the smartphone market.
- Bargaining Power of Suppliers: Moderate, as suppliers have some leverage due to the increasing demand for components.
- Threat of Substitute Products: High, as consumers can choose from various alternative devices, such as feature phones and tablets.
- Competitive Rivalry: Intense, with numerous players vying for market share.
b) SWOT Analysis:
BPL:
- Strengths: Strong manufacturing base, experienced workforce, established brand in India.
- Weaknesses: Limited experience in smartphone manufacturing, lack of brand recognition in the smartphone market.
- Opportunities: Growing Indian smartphone market, potential for strategic alliances with brands like Micromax.
- Threats: Competition from Chinese manufacturers, fluctuating component prices.
Micromax:
- Strengths: Strong brand recognition in India, established distribution network.
- Weaknesses: Dependence on Chinese suppliers, limited manufacturing capabilities.
- Opportunities: Expanding Indian smartphone market, potential for increased market share with local manufacturing.
- Threats: Competition from established international brands, fluctuating component prices.
c) Value Chain Analysis:
BPL possesses a strong value chain in the electronics manufacturing sector, covering design, procurement, production, and distribution. However, they need to strengthen their capabilities in product development and marketing to effectively compete in the smartphone market.
d) Business Model Innovation:
BPL can leverage its existing manufacturing capabilities to develop a new business model focused on contract manufacturing for smartphone brands like Micromax. This model would allow BPL to leverage its expertise and capacity while mitigating the risks associated with entering the competitive smartphone market independently.
4. Recommendations
BPL should pursue a strategic alliance with Micromax, focusing on the following key aspects:
- Contract Manufacturing: BPL can act as a contract manufacturer for Micromax, leveraging its existing infrastructure and expertise to produce smartphones for the Indian market. This would allow Micromax to expand its manufacturing footprint in India, reduce dependence on Chinese suppliers, and potentially lower production costs.
- Joint Product Development: BPL and Micromax can collaborate on developing new smartphone models tailored to the Indian market. This would allow BPL to gain valuable experience in smartphone design and development, while Micromax can benefit from BPL's expertise in manufacturing and cost optimization.
- Technology Transfer: BPL can leverage its existing technology and expertise in electronics manufacturing to assist Micromax in developing its own manufacturing capabilities. This could involve sharing knowledge, training personnel, and providing technical support.
- Joint Marketing and Sales: BPL and Micromax can collaborate on marketing and sales initiatives to reach a wider audience in India. This could involve joint promotional campaigns, leveraging each other's distribution networks, and targeting specific market segments.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: BPL's core competency lies in its manufacturing capabilities, which aligns with the proposed alliance with Micromax. This partnership allows BPL to leverage its existing strengths and expand into a new market segment.
- External Customers and Internal Clients: The alliance benefits both BPL and Micromax by providing Micromax with access to a reliable and cost-effective manufacturing base in India, while BPL gains access to a growing market and valuable experience in the smartphone sector.
- Competitors: The alliance strengthens BPL's position against Chinese competitors by providing access to a strong brand like Micromax and enabling BPL to offer competitive pricing.
- Attractiveness: The alliance is attractive as it offers significant growth potential for BPL, with the Indian smartphone market expected to continue expanding. The partnership also allows BPL to diversify its product portfolio and mitigate risks associated with relying solely on the traditional electronics market.
6. Conclusion
BPL's strategic alliance with Micromax presents a significant opportunity for both companies to capitalize on the growing Indian smartphone market. By leveraging its manufacturing expertise and capacity, BPL can play a crucial role in Micromax's growth strategy while expanding its own business into a new and lucrative sector. This partnership will foster innovation, enhance competitiveness, and contribute to the development of the Indian electronics industry.
7. Discussion
Alternatives:
- Independent Entry into the Smartphone Market: BPL could attempt to enter the smartphone market independently by developing its own brand and products. However, this would require significant investment and would expose BPL to intense competition from established players.
- Mergers and Acquisitions: BPL could consider acquiring an existing smartphone manufacturer or merging with another company to gain access to the necessary expertise and market share. However, these options would require significant financial resources and could pose integration challenges.
Risks and Key Assumptions:
- Competition: The smartphone market is highly competitive, and BPL needs to carefully assess the competitive landscape and potential threats from both domestic and international players.
- Technology: The smartphone industry is characterized by rapid technological advancements, and BPL needs to ensure it can keep up with these changes to remain competitive.
- Market Demand: The success of the alliance depends on the continued growth of the Indian smartphone market, which is subject to economic and technological factors.
8. Next Steps
- Negotiate the Alliance Agreement: BPL and Micromax should negotiate a comprehensive agreement outlining the terms of the partnership, including manufacturing responsibilities, product development, technology transfer, and financial arrangements.
- Establish a Joint Task Force: A joint task force should be established to oversee the implementation of the alliance, including representatives from both companies.
- Develop a Joint Marketing Strategy: BPL and Micromax should develop a joint marketing strategy to promote their products and services to the Indian market.
- Monitor Performance and Make Adjustments: BPL and Micromax should regularly monitor the performance of the alliance and make necessary adjustments to ensure its success.
By taking these steps, BPL can successfully implement its strategic alliance with Micromax and capitalize on the immense growth potential of the Indian smartphone market. This partnership will not only benefit both companies but also contribute to the development of the Indian electronics industry and the overall economic growth of the country.
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Case Description
Emerging markets have become an attractive destination for multinationals as they provide these companies with high growth potential due to low product penetration and also help them in reducing costs of production due to reduced labor costs. The case brings out the trajectory of growth of Micromax Informatics Limited which started as a company depending on China and Taiwan for manufacturing of their handsets because of better technological infrastructure, stronger supply chain and cost effective workforce. As the government enhanced import duty on CBU (Completely Built Unit) electronic products and reduced excise duty and import duty on SKD (Semi Knocked Down) units required for manufacturing of electronic products, Micromax started its production facility, Bhagwati Products Limited in India and reduced import of finished electronic products to a large extent. To keep the cost low all across the value chain, it focused on development of indigenous design and manufacturing capabilities to achieve higher localization. This helped Micromax in keeping the cost of the products low and thus being a cost leader in the market. The case also brings out how costs can be kept low by utilizing central and state government initiatives in providing subsidies that helped the company build competitive advantage and how these specific actions resulted in creation of a vibrant electronics industry in the country. This case focuses on the specific issues faced by Bhagwati Products Limited, the production arm of Micromax in production of mobile phones locally, with regard to sourcing of raw material, manpower, research and development, competition and reduction in cost of production.
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