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Cover Story

Enter ‘Tactical’ Strategy
In a Superlative & most Insightful analysis, B&E Documents how Corporate Leaders have Transformed their Organisations & Implemented continental strategic shifts that have Rewritten Global Management case books
Issue Date - 17/02/2011
“I couldn’t have asked for anything more accurate”
Mahesh Bhalla shares with B&E the finer details of how Dell India exactly went on to create a win-win situation for all its stakeholders

B&E: Why did Dell opt for retail stores in India in 2007 when online selling had just picked up around that time? Mahesh Bhalla (MB): Online has its place, but a lot of consumers in India who go for their first purchase need a touch, feel and face-to-face interaction. That’s when we realised we need to have retail presence as well. But then, even today you can’t directly buy a Dell PC online in India. We have not had that capability. For us it was more of a tele-order kind of a business model, where you call and place your order.

B&E: So, how did Dell exactly go about executing the process?
MB: We took the same direct business model and placed it in our retail stores – Chroma and Staples. Then we have Dell Kiosks, which are managed by the sales persons who have been trained by us. Further, we have sales affiliates all across the country who are meant to advise customers in our stores on how to buy, and clear all their doubts.

B&E: But how did you tackle the hurdles at the distribution front?
MB: No doubt, the whole process boiled down to the distribution decision. And as you know that in any conventional distribution format you have three layers. First, you have the national distributors. Then there are regional distributors or the sub distributors. The third layer comprises of the mom & pop stores where you finally land up placing your order. These layers add cost to the product. Thus, what we did was that we went directly to the second layer. Eliminating one layer was clearly very effective from a business point of view. In fact, till date we work with about 35 of these people and each one of them works in a specific territory.

B&E: You have recently ventured into the smart phones business as well. What’s the reason behind this sudden strategic shift?
MB: We have already established our product as well as our credibility in the market. In fact, in H1 2010, we were the No. 1 PC maker in India. Now, we want to grow further and serve more customers, and smart phones market certainly seems to be an interesting proposition. Though majority of the phone market in India, which is estimated to be around $15-16 billion, comprises of lower-end handsets, smart phones is the fastest growing segment. And as we have the manufacturing as well as technological competencies, we can do really well even in this business.

B&E: In retrospect, how do you contemplate the effectiveness of the shift vis-à-vis shareholders’ reactions and market standing of Dell at present?
MB: Shareholders’ reactions have been positive ever since. You need to simply understand how to make a business case which is a win-win for everybody. I couldn’t have asked for anything more accurate. In fact, if I were to go back I would do the exact same thing, would change nothing at all.

Masters of the ‘network’ing code

Timely movement towards gsm has helped rcom win a whole new set of subscribers and avoid falling way behind. now it’s time to bring in the money
By : Akhilesh Shukla

When we talk about the business philosophy of Reliance, be it with Mukesh or Anil, the word ‘disruption’ comes to mind. They believe in being game changers and creating a new playing field wherever they enter. The brothers proved this in no uncertain terms when they pulled the right strings at the right time in the telecommunication business. It was Mukesh who made the first moves and forayed into the telecom business with CDMA technology through a disruption of the existing pricing strategies in the industry. Reliance made a world record by adding 1 million subscribers within 10 days after the launch of Monsoon Hungama offer in 2003. That was a great catalyst in taking mobile services to the masses.

In 2005, when the telecom business went to Anil, the shift was reflected in the business model as well. Ambani started GSM in 2008, leaving behind as many as 575 others in the line for the telecom licenses. The major chunk of the wireless business in India was with GSM commanding more than 80% of the market share then and it has only continued to grow, as it stands at 86% today. While GSM players add as many as 12-13 million subscribers every month, CDMA has to settle for 2-2.5 million only. The fact that RCOM made a brilliant move at an opportune time is proved by the fact that its own existing GSM subscribers number 62.05 million compared to 55.29 million for CDMA, within two years of launch of the former. Moreover, GSM players enjoy a higher ARPU. By the end of September 2010, while ARPU of GSM services stood at Rs.110, CDMA players were struggling with Rs.73.

“It was a smart move, as the bigger and potential market lies in the GSM space. Besides, Indian customers are inclined towards GSM services due to ease of switching with the same handset, which is not possible with CDMA,” highlights Neeraj Jain, Director KPMG. Besides, RCOM would have never become a 3G player, if it would have stuck to CDMA. Post Mobile Number Portability (MNP), CDMA players are losing their existing subscriber base to GSM operators. As many as 50,000 subscribers switched to GSM in the first 10 days post the introduction of MNP. More churn is expected in the near future.


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