NOKIA DISTRIBUTION Network

Submitted to : Submitted by :

Mr.Asif Zameer Ashutosh Kumar Jha (91011)

Assisstant Professor, Marketing Faraz Khan (91033)
FORE School of Management, New Nishant Singh (91039)
Delhi
Roshan Sonthalia (91045)

Smriti Gupta (91054)

Stuti Gupta (91056)

 Table of Contents

Introduction................................................................................................................................. 4

Mobile phone industry in India............................................................................................. 4

Nokia in India.............................................................................................................................. 5

Nokia distribution structure in India.................................................................................. 6

Role of Channel Partners......................................................................................................... 8

Margins at each level.............................................................................................................. 10

Distributors Coverage Plan.................................................................................................. 11

Infrastructure required by distributor............................................................................11

Support provided by the company to the distributor.................................................13

Credit/ Payment terms.......................................................................................................... 14

Major Problems Faced by the distributors.....................................................................14

Major Points of conflict.......................................................................................................... 15

Major Problems/ Issues identified.................................................................................... 16

Recommendations.................................................................................................................. 17

Refrences.................................................................................................................................... 18

People Contacted..................................................................................................................... 19

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 Terms and Abbreviations used

 Nokia - Nokia India Pvt. Ltd.

 RDSS – Redistribution Stockist Supplier

 HCLI – HCL Infosystems

 Dealers – Mobile phone retailers

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Introduction
Integral part of 4P’s f marketing mix is ‘place’. Having a great product is useless till its made
available to potential customers at right places and at right time. Considering a country like India
with not only a large but also economically, climatically and socially diverse landscape to be
covered amplifies the problem manifolds. A distribution network for products rises above
importance levels to become bare necessity for the existence of any company. The success of the
channel design depends upon the reach and efficiency of the network any organization develops
and maintains and ease with which any potential customer is able to find the product. Efficiency
of the distribution cost and type of channel partners form and integral part of this.

Mobile phone industry in India

The mobile phones industry made a slow start in India in 1995. Several private players who had
entered the industry in 1995 exited in the next few years due to the unfriendly telecom policies of
the Indian government, high licensing fees and absence of a proper telecom regulatory body. The
growth in the subscriber base of mobile phones remained sluggish initially, reaching the 1
million milestone in 1998. In 1999, the Government of India announced a new telecom policy.
This policy planned to provide telephones on demand by 2002.

Among other things, the policy allowed unrestricted private entry into almost all mobile service
sectors. The government allowed cellular mobile service providers to share infrastructure with
other operators. It also allowed existing operators to migrate from fixed license fee to one-time
entry fee with revenue sharing. This policy helped many private operators to break even faster.
By 2001, the demand for mobile services was growing well. The private companies concentrated
on providing basic telephone services to consumers. The number of mobile phones crossed five
million by 2001 and doubled to 10 million in 2002. Since then, India has reached almost 35%
teledensity with metros having 100% teledensity and over 450mn mobile connections across
India.

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Nokia in India
Nokia entered the Indian market in 1994. The first ever GSM call in India was made on a Nokia
2110 mobile phone on its own network in 1995. When Nokia entered India, the telecom policies
were not conducive to the growth of the mobile phone industry. Nokia also had to face tough
competition from other powerful global players like Motorola, Sony, Siemens and Ericsson.

Nokia as a company has expanded at a very fast pace in India. Over the past decade, Nokia has
captured nearly 60% of India’s $5.6 billion handset market, of which about 25% are rural
consumers. In 2006, Nokia set up a manufacturing facility in India, 2006, which allows it to
manufacture and sell low-cost phones. It also adapted its phones to suit the local conditions. To
further increase its popularity, the company has increased its number of customer care centers
and caters to rural India with vans staffed with sales reps. It has also introduced social
innovations such as access to crop prices, weather forecasts, and English lessons.

However due to staunch competition the market share has decreased slightly in 2006. However it
is expected to grow as it has plans to expand in the rural market. India has around 95,000 outlets
that sell mobile phones. In around 50,000 of them only one brand is available that is Nokia.

Achievements of Nokia:

 Nokia Company released first

mobile with Hindi menu in 2000
10.9 5.6 2 Nokia
5.9 Lg  They have come up with Wi-Fi
Motorola
53.6 samsung mobile which is called Nokia
10.8
sony Ericsson
11.2 HTC
communicator in 2004
Others
 In 2006 this company has started
huge mobile manufacturing plant in
Sriperambathur nearby Chennai.

 Nokia Company has joined with

Malayalam Manorama to launch first India’s vernacular News.

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Nokia distribution structure in India
When it comes to distribution, Nokia's lead is clear. Today, India has some 1,10,000 outlets that
sell mobile phones. Out of these, according to companies own conservative estimates, 50,000
stores have only one brand available – Nokia.

Nokia started distributing its phones through a partnership with HCLI (formerly Hindustan
Computers Ltd.), which had already built an extensive network for its own products. Recently,
Nokia has decided to supplement that with its own distribution efforts. Nokia believed that there
was a tremendous growth opportunity and it was best exploited when the resources utilization of
both companies was optimized. Nokia and HCLI have decided to develop a go-to-market
strategy to jointly address the coverage needs of the urban and widely dispersed rural areas,
while rest are handled individually. Nokia has always been secretive about its operation and
strategies and have not spelt out clearly how the two partners have divided the markets, but some
do clues exist in the way demand is shaping up. In the cities where the market is maturing,
buyers are looking at more sophisticated mobile phones, such as Nokia's E-series phones (which
serve business users) and the N-series (which have multimedia features). In rural India -- which
constitutes 70% of the population -- affordability is an issue. So there is a different range for this
constituency. Different types of retail fronts selling Nokia mobiles are :

Nokia concept stores

A one-stop shop for mobile users has been brought into existence to provide an opportunity for
consumers to “experience the product “before purchasing it. Trained Nokia personnel would
brief customers about various handsets and features. The store would have the entire range of
Nokia devices in all categories including latest range of mobile enhancements and exclusive
Nokia merchandise apart from handsets.

The new Nokia Concept Stores represent a rebranding of the previous Nokia Professional
Centers. Nokia has so far been rolled out 9 Concept Stores in India with only Mumbai and
Bangaluru having 2 concept stores. Other Concept stores in India are located in Gurgaon, Indore,
Jaipur, Hyderabad and Chennai.

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These stores would help Nokia strengthen it brand and at the same time save costs that it incurs
in distributing to the dealers. Although it would have to bear the costs of training the employees
but the transportation cost would be greatly reduced. It would also give the company the
advantage of exclusivity. Since it has been opened in only metro and important cities, therefore,
it would not be subject to state sales tax, if the CFA is located in the same city.

Nokia Priority Dealers

Nokia Exclusive Stores namely PRORITY DEALERS are all franchised outlets .The franchisee
must fulfil certain criteria, for example, in the case of an existing store that would be converted
to a priority dealer, there must be a certain number of footfalls, the location of the store should be
prime real estate in that region, and certain other standards.

Nokia provides support to these outlets in the form of help in visual merchandising, furniture etc.
against a certain deposit by the owner which is refundable at the end of the contract if need be.

Multi Brand Dealers

Apart from its Nokia Priority dealers and concept stores, the company distributes its product to
many organized multi-brand mobile stores with nation-wide presence in India and recognized for
their service and price discounts. Few of the major players are

 Hotspot

 Univercell

 The Mobile store

 RPG Cellucom

Besides these there are individual mobile retailing stores as well as wide variety of retail stores
like electronics goods dealers, Stationary shops, etc who have started selling mobile phones over
past few years. HCLI has also established over 150 Nokia Care Centers managed by HCLI and
franchisee operations.

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Role of Channel Partners
Nokia

Nokia manufactures its mobile in Chennai manufacturing plant

and then it transfers to nokia’s mother depot which is located in
Gurgaon. They also provide assistance in selection of channel
partners like redistributors, Dealers, Franchisees, etc. Besides
this they provide monetary assistance in Store development for
Nokia Priority dealers, help in promotion of products on mass
scale as well as in store and training of the sales force of
partners at every level.

HCLI

HCLI Info has been handling distribution of Nokia phones for

10 years. The agreement was due for renewal in August, 2006
and was renegotiated beforehand. Again on January28th’ 2009 a

accounts for 52% EBIT of HCLI.

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Nokia
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Chennai
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ers
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Gurgaon
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new agreement for territory division was signed between Nokia and HCLI. Nokia business

HCLI currently has 30,000 channel partners (dealers), some of which it will transfer to Nokia.
The pilot phase was launched in Mumbai and Bangalore to test the new distribution model. The
absence of any other distribution partner ensures that there will be no price-cutting. In both the
territories, Nokia phones were made available for a uniform price.

HCLI starts distributing Nokia’s product from Gurgaon depot. HCLI takes order from 4
redistributers appointed in Delhi to cover North, South, East and West zones and then it supplies
the product to the dealers with the help of RDSS (Re-Distribution stockiest supplier).

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HCLI also takes care of appointing partners and operation of Nokia Care centres. Currently there
are care centres in more than 180 cities across India.

Re-Distribution stockiest supplier (RDSS)

There are 6 RDSS in Delhi NCR region with territories divided as North, South, East and West
Delhi, Noida and Gurgaon. RDSS are supposed to operate only in their designated territorial
zone. In case of conflict HCLI acts as the arbitrator.

RDSS, assisted by Nokia, also take responsibilities like recruiting sales force, training and
developing. Stocking norms of Nokia- HCLI agreement says that HCLI depot should have 7
days supply, RDSS in city should have 5 days of supply.

Dealers

Nokia Priority dealers, Multi brand and individual dealers in Delhi NCR are all served by RDSS.
Dealers are explained the features of every new launch mobiles, different schemes and offers by
Nokia’s representatives. Re-supplies are always just a phone call away and the delivery is made
within a few hours. Besides, Nokia assists most dealers in the region in the store set-up and
design. The price points sometimes dictate the type of outlet.

Stock norms define that for how many days worth of stock does any level in the supply chain
should have. These norms are defined by Nokia only. Given below are the stock norms:
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a
c
r
o
S
F
The expected target to be fulfilled by the particular level is determined by the following formula:

Expected target = (30 / No. of working days) * Stock Norm for that level

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Margins at each level
The margins for the Nokia distribution segment have not been disclosed separately but are
clubbed with the overall contribution of the office automation and telecom segment. Tentative
margins found on the basis of discussions with dealers were :

Margin not declared

18% Margin

2% Margin
8% Margin 10% Margin

Nokia and HCLI have never publicly declared their margins. Nokia business is the largest
contributor to HCLI’s revenues and profits. Nokia product distribution was the largest
contributor to HCLI’s sales (about 72% in FY2009). As a percentage of PBIT however, the share

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of Nokia distribution was at 61%. Since 2006, when Nokia took over 50% distribution channel
from HCLI, revenue growth has almost been flat.

When comparing with its competitors, Nokia offers almost half to one-eighth margins on its
phones. Compared to 2% offered to dealers by Nokia, LG and Motorola offer around 8-10% and
Samsung 18%. But still dealers prefer to go with Nokia as it has much more surer sales and have
excellent support from RDSS and the company.

Distributors Coverage Plan

HCLI being the first level intermediary between Nokia and dealers, HCLI collects the goods
from mother depot in Gurgaon and supplies to 5 RDSS across Delhi and Noida. Gurgain depot
itself functions as RDSS for the Gurgaon. HCLI agents deliver the ordered mobile sets to RDSS
within 4hrs of receiving orders. Mother depot maintains stock capable of catering to atleast 7
days of demand in its covered territory.

In turn, RDSS ensures the delivery of goods within 4 hrs of the order made, sometimes even
quicker. Night time orders are delivered net day morning. As each RDSS is given a small
geographic territory, making quick deliveries does not prove to be hard. Although territories are
geographically small, the number of retail stores in each zone make them commercially attractive
to operate in. The small delivery time and close-knit relations with RDSS allows dealers to even
order the mobile pieces as and when customer walks in demanding the handset.

Again compared to this, Nokia’s rivals have appointed much more number of distributors in each
region. Samsung has 15 or more distributors to cover Delhi NCR region. But Still Nokia
manages to give services better than its competitors.

Infrastructure required by distributor

Nokia’s sole distributor currently in India is HCLI. Their deal was first inked over a decade ago
just when Nokia was entering into Indian telecom market which was perceived to be ready to
take a big leap forward. Nokia wanted an established partner with proven record in handling
distribution across India. HCLI had an excellent wide-reaching distribution channel and support

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centers. This partnership helped Nokia in having a focused approach towards increasing
penetration to Rural & Semi-urban areas and improvement in market share across the country.

Nokia-HCLI have not declared any of their agreement details on public domain and hence its not
known what infrastructure HCL is supposed to maintain as per the agreement or what
infrastructure they have dedicated or use for servicing Nokia. Few details available in public
domain are:

 Service provider for the repair of Nokia Mobile Phones in   India

 Pan India service network in 21 L3 locations equipped with state of art equipments
 Mobile care vans across the country to increase remote coverage
 Nokia repair facility
 100+ repair benches with 75K handsets/ month repair capacity
 L4 repair capability

HCLI maintains the mother warehouse located Gurgaon.

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Support provided by the company to the distributor
Nokia has an extensive support program dedicated to providing key benefits to HCLI and RDSS
agents and qualified mobile phone dealers throughout Delhi. Nokia offers qualified dealers
unprecedented access to Nokia's products and support services to better satisfy customer needs
for Nokia products. It offers the tools and point-of-purchase support dealers need to deliver the
best possible customer solutions to Nokia end users. Nokia also offers dealers extensive
merchandising support such as counter top displays, product brochures, demonstration phones
and a Nokia premier dealer plaque

Point of Sales(POS) system : Nokia provides point of sale systems and software to dealers to
help them manage their selling activity better. It encourages dealers to move away from their
cash registers to IT managed account system. Almost all the Priority dealers have moved from
cash registers to POS systems.

In-shop Branding

Schemes : The concept of mobile recycling was first introduced by Nokia, a campaign was
launched to encourage people to give their damaged Phones to Nokia care, & avail the discount
on buying a new one. Besides, Nokia offers multiple schemes to push sales of lagging mobile
models. These schemes come in form such as added cash bonus of Rs.300-1500/ set for selling a
5 specific lagging set in 4 days.

Retail element: Nokia assists priority dealers by assisting in the payments for the retail element
part of their stores while the dealer is supposed to take care of the expenditure incurred on the
services other than the retail element. The service charge payments for the retail element could
be split into 'core' and 'additional' elements, with dealers paying pro-rata with for only those
services they all have use of, and an additional element for any extras it specifically requires.

Sales Collaterals : Nokia provides promotional collaterals and brochures to the dealers directly
to help in promoting sales. They regularly send in posters and pamphlets of latest releases,
updated brochures and handset fact-sheets to assist dealers in closing the sales.

Training the dealers : Nokia sends in its executives to dealers to train them on the features and
selling points of new launches and handset models not performing to their potential. Mostly

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these tasks are taken up by the delivery executives who also inform the dealers about their latest
launches and the feature sets of these phones.

Dealer encouragement schemes : Nokia has cash rewards to promote and motivate the dealers.
They offer cash rewards for making predetermined level of sales fortnight which may ranges
from Rs.500 to Rs.5000. For their high performing dealers they offer all expenses paid
local/foreign holiday trips.

Credit/ Payment terms

Nokia operates of quick delivery and quick payment terms with RDSS and mobile dealers.
Deliveries are made super-quick, 4-5 hrs, and payments are supposed to be made quickly
too.

Nokia and HCLI have been under long term contract which has been in place for over a decade
now, with terms and conditions having been revised twice in this period. Margin and credit
period agreement between Nokia and HCLI have never been declared publicly. But its
speculated that its revenue sharing model based on total sales in a particular period.

Nokia having a very strong brand and market presence, exhorts tremendous power in market. It
allows a very small credit period to the RDSS which in turn squeeze dealers, giving them equally
small credit period. RDSS are allowed a credit period of 7 days, which in turn give dealers also
7 days credit period only. Although dealers moan about the short credit period, the power Nokia
has in market and demand for Nokia phones makes it imperative that dealers carry Nokia mobile
phones in their stores.

Again on this front, Nokia has tighter norms compared to its rivals. Samsung and LG offer
double the credit period offered by Nokia. Samsung and LG offer 15 days credit period,
compared to Nokia’s 7 days.

Major Problems Faced by the distributors

Terms and condition of the deal between Nokia and HCLI has never been revealed in the public
domain. Hence, the problems faced by HCLI are not known publicly. Since, the deal to divide

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distribution territories was signed in 2006, there has been some issues for HCLI. HCLI shares
have suffered on share market. Nokia has also refused to confirm or deny plans on appointing
distributors for the territories under its control after the revised agreement.

On its part RDSS are quite happy with their functioning. They are satisfied with the products,
quantum of sales and promotional support provided by the company.

Even dealers spoke very highly of Nokia. Multiple dealers were contacted and not a single one
had any problem with Nokia’s distribution or service. Some dealers in other states were also
contacted and they also had nothing to report on the problem front.

A few minor issues that possibly could become concern in future were :

 Credit period given by Nokia is very low compared to its competitors – just 7 days
compared to 15 days offered by Samsung and LG
 Margins offered are very low compared to competitors who could become larger player
over new few years. Nokia offers just 2% margin to dealers compared to around 10%
offered by LG and 18% offered by Samsung
 The damage piece policy has been cause of concern for some dealers/ RDSS. Although
minimal damaged pieces have been reported over years, if any physically damaged handset
is found, it sometimes leads to dealer/RDSS having to bear with it.

Major Points of conflict

 There has been no point of conflict reported by RDSS or the dealers over the years.
Nokia-HCLI have marked the territories very effectively and have been strict in ensuring
that territories are not encroached upon by dealers or RDSS. There has also been no
conflict amongst channel partners at different levels or channel partners at same level.
Payments, delivery of goods ordered and services have also been impeccable.
 Relations between Nokia and HCLI are deeply ingrained in their system and if there has
ever been any conflict or disagreement, it has never been reported in any open forum.

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Major Problems/ Issues identified
 With market scenario changing, smart phones are increasing their share of total mobile
phones market. Although Nokia too has presence in this segment, but with multiple recent
offerings launched by Blackberry, Apple and Samsung market is set to become more
competitive for Nokia. Compared to Nokia all these companies are offering better credit
terms and margins and this may lead to dealers and RDSS moving over to these
competitors.
 Dealers reported Nokia’s executives never try to pressurize them in keeping their phones
on prominent displays or push sales when customer walks into the store. On the contrary,
LG, Samsung and other rival brand’s sales executives repeatedly exhort dealers to keep
their products in prominent displays. They even ask the dealers to push their handsets when
customer asks for Nokia. Till now Nokia has done strong promotion and relied on the pull
of its products and brand to make the sales. But in future, as the market gets competitive,
Nokia will find this tougher and should start forming strategy to counter such moves of its
competitors.
 Service centers of Nokia are managed by HCLI in assistance with Nokia personnel.
Although, defects and problems in handsets have been very low compared to competitors,
the handling of service has not been impeccable. Service centers usually take time and at
some centres have long waiting list. This makes customers to move to cheaper and
convenient local mobile repair shops. As parts used are not genuine and sometimes results
in handset damage, customers end up blaming Nokia as much as they blame Local shop.

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Recommendations
 Review the margins offered to dealers and RDSS periodically taking in consideration the
competitive structure of the market
 Review the credit period allowed to dealers and RDSS periodically taking in consideration
the competitive structure of the market
 Have a multiple complaint channels as channels tend to get choked due to the bulk of
complaints coming in everyday. Nokia Priority dealers can be used as centres where
complaints can be registered and can be dealt in an organised way
 Nokia has to be make its sales executives more pushy keeping in mind the tougher
competition from previously smaller players like LG and Samsung
 Nokia needs to provide better purchase centric schemes to the dealers. These schemes can be
given on a sales basis so that they solve dual purpose increasing the sales and acting as an
incentive for the dealers.
 The distribution network of Nokia is very wide but there are certain areas where no brands
has reached like sector -3,4, Harola market in Noida , Govind puram in Ghaziabad , Certain
areas on GT road, but in these areas distribution is not very effective and thus Nokia should
work on its distribution in these areas.
 Some dealers said that missing piece in Nokia’s product line is absence of stylish mobiles in
range of Rs.3000-5000. This highlights reliance of Nokia on HCLI for market information
gathering. Nokia in itself is disconnected from its dealers and has no mechanism to gather
this insight from them.

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Refrences
 www.Nokia.co.in

 www.hclinfosystems.in

 http://toostep.com/debate/nokia-to-have-its-own-retail-distribution-model-will-this-he

 http://davidhowse.wordpress.com/2010/08/10/converting-a-wholesale-or-distribution-
business-model-to-a-retail-model-an-alberta-marketing-perspective/

 http://press.nokia.com/PR/199601/775828_5.html

 http://www.hclinfosystems.com/news45.htm

 http://dqchannels.ciol.com/content/reselleralert/106022101.asp

 http://www.businessweek.com/globalbiz/content/aug2007/gb20070831_914354.htm

 http://www.businessweek.com/magazine/content/09_32/b4142056700653.htm

 http://www.thehindubusinessline.com/2008/06/27/stories/2008062751790400.htm

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People Contacted
Person Met Mr. Rahul Chattri

Company Name Naveen Mobiles

Role in Channel Dealer

Address J12/1, Khirki Extn, Malviya Nagar, New Delhi

Person Met Mr.Pankaj Mishra

Company Name MobileStore

Role in Channel Dealer

Address Shop No.2, Upper Ground Floor, Main Market,

Malviya Nagar, New Delhi

Person Met Vineet

Company Name Nokia Concept Store

Role in Channel Dealer/ Distributor

Address Select CityWalk Mall, Saket, New Delhi

Person Met Mr.Dinesh Chand Srivastava

Company Name Chowdhury Agencies

Role in Channel RDSS – South Delhi

Address Jamrudpur, Lajpat Nagar

NOKIA Distribution Network, Delhi NCR Page 19

 Person Met Mr.Vaibhav Sharma

Company Name

Role in Channel RDSS

Address A-28 Gurunanak Pura Laxmi Nagar Delhi

Person Met Mr.M.R.Balaji

Company Name

Role in Channel RDSS

Address L,F-2, Mansarovar complex, arera colony Bhopal

M.P.

Person Met Mr.Sayed Zamir Ali

Company Name Vision Mobile zone

Role in Channel Dealer

Address Shop No.-7, Allied complex, Sultania Road,

Bhopal, M.P

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