Case Study of Uninor India

ENTREPRENEURSHIP ISSUE IN MARKETING MANAGEMENT A Case Study of Entrance of Telenor in India

RESEARCH PROPOSAL

Word Count 500 November 22, 2010

Contents Contents...........................................................................................................................................2 Introduction......................................................................................................................................3 Background of the Study.............................................................................................................3 Research Objectives.....................................................................................................................4 Scope of the Study.......................................................................................................................4 Research Strategy.........................................................................................................................4 Research Method.........................................................................................................................4 Data Collection Method...............................................................................................................4 Limitations of the Study...............................................................................................................5 Literature Review.............................................................................................................................5 Uninor in India ..............................................................................................................................11 Observation ..................................................................................................................................12 Analysis..........................................................................................................................................13 Recommendations..........................................................................................................................14 Conclusion.....................................................................................................................................15 References......................................................................................................................................15

Introduction Background of the Study

Entrepreneurship is the discovering practice of fresh conducts of merging resources. Joseph Schumpeter (1911) refined the character of entrepreneur like an innovator which equips economy transform through introducing fresh goods or fresh means of production. Dissimilar to Joseph Schumpeter’s point of view, Israel Kirzner (1997) stressed over entrepreneurship like a procedure of discovery. “In midst of 1980-1990, US government moved their hub to promote entrepreneurship. Existing conviction was that government’s latest programs were the paramount approach to encourage entrepreneurship thus the best policy is economic freedom. The latest scholarly entrepreneurship research revealed that government guidelines must highlight fundamental institution reformation to generate an atmosphere to flourish creative persons that involves low taxes, property rights, monetary system, sound legal, adequate contract enforcement and government-restricted intervention”. (Sobel R. S., 2008) “In developing countries, government isn’t providing enough incentives concerning management, finance, export and marketing to entrepreneurs that badly influence the economic capability. Furthermore, if incentives are provided then the process is much complicated and lengthy thus ultimately of no use. Moreover, entrepreneurs remain unaware regarding organization of entrepreneurial training programs. There is a need of training institutes for entrepreneurship issues regarding marketing management”. (Shehrawat P. S., 2006)

“Entrepreneurship possesses higher global significance under varying economic circumstances. Indian economy is floating for hasten entrepreneurship as super mall trend facilitates business entrepreneurship. The entrepreneurs offers magical stroke to business to attain flexibility, speed, innovativeness and freedom. Launch of NANO by Tata Motors and experience of ICICI, etc. sketches the current entrepreneurial situation in India”. (Dr. Chauhan V., 2010)

Aim of the Study The investigation of entrepreneurship issues specifically Telenor faced while entering Indian telecom market.

Research Objectives -

To identify the entrepreneurship issues in Indian telecom market.

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To identify emerging tendency in Indian telecom market.

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To identify positive and negative situations faced by Telenor while entering Indian telecom market.

Scope of the Study The study was focus on a single case of Telenor entrance issues in the Indian telecom market.

Research Strategy The research is base on case study analysis. The entrance of Telenor in Indian telecom market is the case. Since this strategy is considerably able to initiate responses towards “why” questions, thus is valuable method to investigate available assumptions.

Research Method To investigate the matter, related information was collected through internet sources and observations.

Data Collection Method Only secondary information was used which include earlier studies relative to the current research topic to necessitate the endorsement and comparison.

Limitations of the Study •

Complexities in availability of information.

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Only secondary approach was incorporated, making it difficult to access governmental records on industry.

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The scope of the study is very limited to only entrepreneurial business only

Literature Review Across the globe telecom sectors is considered the sign of socio-economic development on any country. For the moderation and growth of the economy it is very essential. The growing industry is now matured in America and Europe ,now these countries are looking atAsia ,Africa and South America the growing market of telecom and also has huge potential. (Kiruba Jeyaseeli BENJAMIN LEVI 2006)1 .The arrival of Foreign player in developing market was beneficial for both as the country gets FDI and technology and innovation and firms create it s profit. But entry into any country is not easy company has to face legal political and economical and social challenges .India is world third largest in telecom sector after USA and China, with 621 million connections with a growth rate of 45% annually .Mobile subscriber are estimated to grow at a speed that by 2012 it will reach 60 billion and investment by US $ 24 billion by 2010 .Now it has tough competition with 10 national level and two governmental owned firms regardless of tough competition on prices it is still very attractive for foreign players. 2 (Ratanchand R. Gaikwad ).World Investment Forum 20083 has mentioned that India is second 1

Kiruba Jeyaseeli BENJAMIN LEVI 2006 “Entry Strategies of Foreign Companies in Indian Telecommunications Market” University of Fribourg (Switzerland) 2

Ratanchand R. Gaikwad “Problems Faced by Western Firms in Indian Market” World Investment Report (2008) Transnational Corporations and the Infrastructure Challenge, India briefing homepage cited http://www.india-briefing.com/category/business/economy-politics3

23/10/08

best considered site for business international investment, due to its large population and language ( Ratanchand R. Gaikwad). 4. Indian telecom reforms began in 1980s and economic policy of 1991 strength it allowing private firm and foreign firms to invest in this sector. •

Large Market Huge population size India has 638,691 villages and 5161 towns with rural population of 741,660,293 and urban population of 285,354,954

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Growth Opportunities The teledenisty of India is very low as compare to respect of world and growing demand of all kind of telecom services such as cellular, fixed, v-sat, international long distance, national long distance, internet services, internet telephony, radio paging, cable network and other value added services infrastructure and manufacturing .

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Favorable Policies Encouraging Competition and favorable policies, liberalization and investor friendly environment promote foreign investment, regulatory framework which provide equal opportunities for public private and foreign companies.

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Skilled Labor The literacy rate is very high in India. A large pool of educated workforce makes India competitive.

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English Language as business Language

http://www.dot.gov.in/osp/Brochure/Brochure.htm#status

The schooling and higher education in India is in English so to access

elite and

expanding middleclass is easy Few policies made by government to smooth the inward flow of foreign direct investment were 5

,in radio paging service and internet service , basic cellular mobile, value added service

provider FDI up to 74 % (49 % under automatic routine) was allowed and 100% is allowed in Electric Mail , Voice mail ,infrastructure provider with dark fiber, no industrial license is required to set a industry for telecom equipment ,100 % FDI was allowed in for this, ,on automatic route the payments for royalties, transfer of technology or the use of trade name or brand name were made ,foreign player were allowed to bring their income and capital back to their home country. From April 2000 to December 2008 the inflow of foreign direct investment was estimated around US $ 3.62billion, it was 7.99% of total inflow of FDI in the country of that particular period. License fee is less then US $ 2 million and royalty is about 5% of domestic sales and 8% of exports in telecom manufacturing ,tax exemption on the finance through venture capital ,rebate on subscription of shares

/debentures ,less import duty for many telecom

equipment (Bajpai, N. and Sachs, J. D. 1997).A unified license for operating in all circles. A bird eye view of Indian industry is given below. Indian Telecommunication Report ( As on 31 March 2010) Position in the telecom World 3rd Tele density (Per cent Population) 52.74 Telephone Connection (In Millions) Fixed 36.95 Mobile 548.32 Total 621.28 Rural Telephone User 569385 Uncovered Villeges 593601 Foreign Direct Investment (April 2000-March 4070 5

http://www.dot.gov.in/osp/Brochure/Brochure.htm#status

2010) License Issued Basic CMTS UAS Telecom Regulatory Infrastructure Provider ISP Internet Long Distance Calls International Long Distance

2 38 241 219 371 29 24

Source: http://www.dot.gov.in/osp/Brochure/Brochure.htm#status Besides providing telecom services India is also a leading played in telecom manufacturing has crossed investment of US $ 6.5 billion in 2008, Nokia operating in Indian area Tamil Nadu has reached in production capacities of 125 million by 2008.Hand set production will reached 107 million hand set in 2010 and revenue to US $ 13.6 billion by 2011.As Indian rural population comprises of 2/3 of its population it the need for 350000 telecom tower by 2010 was estimated. Many foreign player came to india as a joint venture with local player and targeted the service market of telecom such as Hutchison ,First Pacific ,Avaya etc. Nokia Siemens Network has shifted its global service business office to India from Munich. In manufacturing sector of telecom a large manufacturing plant in Chennai and Sriperumbedur were established by Nokia and Motorola respectively. Another manufacturing plant was established by Sony Eicsson for GSM Radio Base Station and Research and Development center in Chennai. Samsung and LG Electronics has established GSM Mobile Phone manufacturing station in Manesar and Puna respectively. Many companies entered in the India some are making good position, some are struggling and some even could make in short run. These failure could be due to many reasons some firms ignore the socio-cultural aspect of the society considering it least important whereas population

is getting educated and their awareness increases their preference changes .Some enter with the modern and sophisticated technology but fail such as Swisscom the leading Switzerland firm failed in India this could be due to high capital expenditure, poor return or high license fee. This shows that entering in India are not easy firms had to make a strategy to face these challenges. Swisscom was unsuccessful in service segment in Indian market as it want to lead by technical strength it did not considered socio cultural aspect, it made a good research work before entering in India and invested in cellular service and avoided competition by catering other Delhi . (Aiyar, S. A. 2001)They entered with a joint venture ,with great control on operation and influence in decision making but it equity was less than partner. Swisscom failure was due to external factor (Miller, A. 1998) also as there was tough competition, rigid policies and cultural differences in managerial positions

,non supportive regulatory framework ,weak financial

position etc led to failure o f this venture. (Aiyar, S. A. 2001) Although English is business language but if the instructions are communicated in local languages it is preferred as India wants to cover all its villages. So language are different for different region ,Due to large area of India ,it is difficult to reach in some areas to establish towers are do wiring ,so power infrastructure is a problem is some region. First Pacific is a successful company in India by targeting rural areas which was ignored by the existing pkayers.It adopted differentiation strategy to meet the need of its target customers, such as promoting technologically good customer Service ,stressed on Research and development and technical assistant to firms that are on peak In India. (Bajpai, N. and Sachs, J. D. 2000) First Pacific entered India by Joint venture with local partner and handed full operation control to Indian people and itself provided mostly in finance and management issues .This enabled a good running of business.

First Pacific chooses agricultural and most tourist areas and places of small and medium businessmen which were not covered by existing player such as Rajasthan, Kerala, UP , Haryana. (Bajpai, N. and Sachs, J. D. 2000) These customers’ needs instructions in their local languages so company hired representative who do market survey and inform target customer. About tariff plan, payments, offers. In rural areas teledensity is low making a huge potential for investment .in these rural areas telephone demand was high as compare to cellular phone. Indian government also supports investment in rural areas.60% of Indian labor in engaged in agriculture which First Pacific was intelligent to target first. Alcatel is successful in manufacturing sector of Indian telecom is due to its patience and determination ,its planning was long term it started with strategic alliance then established wholly owned subsidiary company as it steadily increased its control on operation and possession. (Bajpai, N. and Sachs, J. D. 2000) Alcatel used global strategy to tap this market as it aimed to go in other segments also. It avoided direct competition and its decision to shift its head quarter from Paris to Delhi contributed to both Alcatel Indian and worldwide operational success. Alcatel focus on customer care research and development and market research help it to keep a close eye on its competitors activities, purchasing patterns, customer requirement, and provide best .Alcatel relations with renowned public and private operations, banks, IT houses made it a famous company throughout the country. As production was in India cost was low and Asia Pacific and Africa could be reached easily. Avaya entered in India with a joint venture with one of India’s leading Brand TATA. Avaya being successful at home faced financial problems in initial in India; its strategy grew steadily after looking at governmental policies banks and infrastructure, pricing of India. It focused on

employee productivity by providing high performance based environment .which made Avaya very popular in India.

Uninor in India Uninor is a new mobile operator in India started it s business on in December 2009 with a joint venture with local partner Unitech for 61.2 billion Wireless. It was best combination of Cheep rates from Unitech and best operational services from Telenor .Telenor spend $ 1.3 billion to buy the control of its India venture and 4.85 billion on capital expenditure. but leased towers from other firms and out sourced its call center functions. Uninor is covering 13 destination in India with aim to trace 900 million people across India Uninor has 67.25 % in Indian Venture with the finance of INR 6135.63 cores it is Norway based company and stand on 6 th position in world mobile group. Uninor is planning to cover all its 22 circles of India making 8% market Share. The unique thing about Uninor marketing is that it doesn’t used celebrity endorsement. it was estimated that venture will stand on strong foot within three years but after the Year of launch it is facing operating losses of more than $ 556 million. It was news that major shareholder in Telenor asked to quit the India Venture, but the management has not yet decided anything like this. And Norway government who is also a major shareholder of Telenor is interested in company‘s long term strategic positioning can carry the losses for many year. Uninor is targeting students and ambitious people as their slogan also depict “ab mera number hai”. It has not Launched post paid schemes,too much out sourcing may be harmful for the health of the company and it has entered in the market when it is saturated with local and foreign player it has decentralized management system and least number of employees as compare to competitors and also as many function are outsourced..Uninor has not provided any unique product except form

clear voice technology. It uses different segmentation strategy innovative promotional strategy it uses young people in adds rather then celebrities.

Observation Uninor entered in the Indian Market with aggressive marketing which result in 1.2 million customer in first month at that time it was in 8 circles but now it is in 13 circles with customer of 2.2 million The brand philosophy is “empower people” .This success was very impressive for new entrant in the presence of industry giant like Airtel ,Vodafone ,TATA etc. By august 2010 it has gained market share of 1.89 %Uninor has adopted strategy of micro segmentation, and differentiation which were served by other competitor but not that specifically as Uninor. From the start it s target market grew due to its inspiring advertisement in which young people were to promote the services rather then any celebrity. For brand recognition it launched a campaign with its slogan “Ab mera Number hai” which make people feel that with Telenor its your turn to take off and progress. Uninor strategy is not price led they want to acquire the market share by changing the people attitude by emphasizing on “Talk more ” and offering daily rental plan and dynamic changing discount “24X7 badlta discount” .This will allow people to talk as much as they want and rates goes down as time increases providing them value for money .All this created a connection with the brand, as it is innovative so different 6.Uninor offer services in few local languages also apart form only English. Now Uninor has launch a new campaign to be everywhere where people are is creating a curiosity in the public who donor know it to get info as what it is. For brand awareness Uninor is everywhere now from buses to airport, street to malls, TV to Radio etc. Uninor has 2 lakh retail points across India and 50 company owned stores, A unique offering by Uninor is empowered sale point even at a street level and rural areas, who can handle customer 6

http://teleguru.in/2010/09/uninors-marketing-strategy-broke-the-clutter-successfully/

query. The purpose of this empowerment is that Uninor offices are not everywhere and people find it difficult to call at call center make them understand their problem specially in rural areas and time is precious in this fast world people find it difficult to walk to office to solve any query so salesman at sale point registered the customer query then sent it to office for solution. Generally a retailer who sells connection are not so empowered.

Analysis Swisscom didn’t have any global experience nor of competition but have sound technological base. (Johnson, G. and Scholes, K.1999). It was also not a international brand and could not understood Indian market properly .Alcatel had managerial competency to deal with the market situation in India .Avaya didn’t had initial know how of Indian market and work culture so faced problems in start but it came it later and establish itself as popular brand in country due to employee productivity. First Pacific also faced problem of lack of experience in India and its deviation from core business could direct it in different directs. From this we can predict what factors make a foreign company successful in India .The best way to entered India is the foreign firm and wants to be effective and successful should have following characteristics: •

Should have strong competencies

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Select most suitable partner from Indian Telecom sector

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Should Adopt clear general strategy

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To operate efficiently at global level adopt best management practices.

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Best way to enter in the market is through strategic alliance or Joint Venture.

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For manufacturing and establishing infrastructure firm should wholly owned subsidiary company.

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For operational smoothness hire local people on key Position

Uninor has every above characteristics which shows that they had done market research and country analysis before entering in India. To increase their share now they the focused on increasing the usage of mobile services. The marketing strategies used by Uninor fulfilled its aim of brand recognition, now if people don’t know there name but know them by logo. Uninor would be successful in long run as it has competencies like finance as Norway government is its shareholder and who is ready to take Uninor earlier losses, sound technology ,empowered workforce ,experience in this field and specifically global experience most importantly patience and perseverance. As individual saving are increasing at 9 % and expected increase in size is by 500 million, almost 10-15 million mobile connections are added monthly, mobile density is 39 % percent high in urban areas and very low in rural area, if company target rural areas it would be both beneficial as Indian Government also interested in promoting rural area and help in investment in those areas. Decrease in handset rates and increasing number of young buyer, as only 64 % of 16-19 year age group have mobiles ,and Uninor target market is youngsters so it has great potential can could successes as break even is expected in 3 years. on average 56% male and 44 % females own a mobile set the remain ratio can be targeted by Uninor for introducing special packaged for house hold ladies. A far as brand philosophy is concerned which is “empower people”, and huge gap between rich and poor, educated and uneducated ,rural and urban resegmentation of the market can be done. Uninor should focused on rural has very few competitors are there as compare to urban market.

Recommendations

Entering into any foreign market should not be based only on technical or financial strength but company should have clear long term business strategy, so that short tern hurdle could stop its way to success. Company should enter in that market segment which have few competitors

(Bartholomew, M. F. 1997) but huge potential such as rural population in India. Starting in one region then expanding to other. To be successful in any country company should have services in local languages also which help illiterate and rural people to understand .Uninor should start its service in local languages of the circles in which it operates. (Miller, A. 1998) Every Strategy Uninor pursue should be based on Indian market research as more particularly of the circle it want to successes.

Conclusion In every market firm needs to opt either strategy cost reduction or differentiation. In India Uninor has executed differentiation in its product offering and marketing strategy to fulfill the dissimilar demand of the customers occurring due to difference in consumer tastes, distribution channels, competitive conditions and business practices. Hilly and mountainous region of India have very low density so Uninor can tap that market, Uninor should also try to cater Small and medium size businessman, this category is not very literate prefer local language instead of English.

References 1. http://economictimes.indiatimes.com/news/news-by-industry/telecom/Telenor-investorssay-Quit-India-as-ventures-losses-pile-up/articleshow/6507100.cms 2. http://www.telenor.com/en/news-and-media/press-releases/2010/uninor-launched-in-fivenew-circles-in-india 3. http://www.scribd.com/doc/32045859/uninor-gr5

4. http://economictimes.indiatimes.com/news/news-by-industry/telecom/Telenor-investorssay-Quit-India-as-ventures-losses-pile-up/articleshow/6507100.cms 5. http://www.scribd.com/doc/32045859/uninor-gr5 6. http://www.dot.gov.in/osp/Brochure/Brochure.htm#status 7. Kiruba Jeyaseeli BENJAMIN LEVI 2006 “Entry Strategies of Foreign Companies in Indian Telecommunications Market” University of Fribourg (Switzerland) a. Ratanchand R. Gaikwad “Problems Faced by Western Firms in Indian Market” 8. World Investment Report (2008) Transnational Corporations and the Infrastructure Challenge, India briefing homepage cited http://www.indiabriefing.com/category/business/economy-politics- 23/10/08 9. Aiyar, S. A. (2001); ‘What makes MNC quit India’. The Times of India, November 4, 2001. 10. Bajpai, N. and Sachs, J. D. (1997); ‘India’s Economic Reforms - Some Lessons from East Asia’. Journal of International Trade and Economic Development. 11. Bajpai, N. and Sachs, J. D. (2000); ‘Foreign Direct Investment in India: Issues and Problems’, Discussion Paper No. 759 of Harvard Institute for International Development of Harvard University. 12. Bartholomew, M. F. (1997); Successful Business Strategies using Telecommunications. Artech House Publishers. 13. Johanson J. and Vahlne J. E. (1977); ‘The Internationalization Process of the Firm - A Model of Knowledge Development and Increasing Foreign Commitments’. Journal of International Business Studies, Vol. 8, August, pp. 23-32. 14. Johnson, G. and Scholes, K. (5th edition)(1999); Exploring Corporate Strategy. Prentice Hall Europe. 15. Miller, A. (3rd Edition) (1998); Strategic Management. Irwin McGraw Hill.