Sales and Distribution Management[A report on Nokia s distribution system] 14/10/2009 Submitted to Ms. Manisha Nayar Submitted by: BLR 0903031021 Nirupan M BLR 0903031007 Chetan J BLR 0903031023 Sainath V BLR 0903031032 Aravinthan V P 1 MBA 12 SADM Major assignment Contents Introduction ................................ ................................ ................................ .......................... 3 Distribution channel structure ................................ ................................ ............................... 4 New concept stores: ................................ ................................ ................................ .............. 4 Franchisees: ................................ ................................ ................................ .......................... 5 Rural market distribution: ................................ ................................ ................................ ..... 5 Other distributions in India: ................................ ................................ ................................ .. 5 Channel distribution for GSM handsets: ................................ ................................ ................ 6 Channel distribution for CDMA handsets:................................ ................................ ............. 6 Activities of channel member:................................ ................................ ............................... 7 Interview with HOTSPOT mobile distribution member: ................................ ....................... 9 Conclusion: ................................ ................................ ................................ ......................... 10 References ................................ ................................ ................................ .......................... 10 2|Page MBA 12 SADM Major assignment Introduction Distribution (or place) is one of marketing element in marketing mix and hence designing a distribution Network for a product is very important aspect for any company¶s product. The success of the channel design will be declared as the product is readily available at ease for the consumers. Here we as a group have chosen the Nokia mobile company for doing this assignment. The company established in 1865 having its foundation in Finland. Nokia is one of the leading mobile communications in the world, it has 14 manufacturing plants throughout the world and they have 58,876 employees. The company owns R&D centers in Japan and China. Nokia mobile industrialized company plays a major role in India and have huge market share than other players. They have started its process in India in 1995 and have their offices in major cities like New Delhi, Mumbai, Chennai, Kolkata, Hyderabad, and Bangalore. They have increased their man power from 850 people to 15000 from the year of 2004 to 2008. And also they have targeting all class of people by releasing different kind of mobiles with different features. China started mobile services in 1988 whereas, India started mobile services in 1995. By 2001 India exceeded China¶s growth rate in mobile services. This shows how the distribution channels of the mobile companies working in India. Here in this report we are trying to bring out the efficient network of distribution addressed by Nokia in India. Achievements of Nokia: Nokia Company released first mobile with Hindi menu in 2000 They have come up with Wi-Fi mobile which is called Nokia communicator in 2004 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. y y y y 3|Page MBA 12 SADM Major assignment Distribution channel structure Nokia manufactures its mobile in Chennai manufacturing plant and then it transfers to nokia¶s mother depot which is located in Gurgaon, HCL will start distributing Nokia¶s product from here on. HCL takes order from all the distributers in the region and then it supply the product to the retailers with the help of RDSS (Re-Distribution stockiest supplier). RDSS are further divided in to two types based on quantity distributed and geographic nature as RDSS city and RDSS MD (Micro Distributers), RDSS city caters to large cities and supply directly to the retailers whereas RDSS MD will supply to its micro distributers to carter small towns and through them it will be supplied to retailers. The above mentioned distribution channel structure of Nokia ± HCL is restricted to north and east part of India. For west and south India Nokia has developed its own distribution channel which takes responsibility of transferring handsets to end users apart from that Nokia also takes responsibilities like recruiting sales force, training and developing. Stock norms of Nokia- HCL says that how many days stock should be maintained in each level of distribution in the supply chain which are as, HCL ± 7, RDSS city ± 5, RDSS MD ± 4 and MD ± 3. Anything below this number of days would be replenished immediately to avoid stock out. The expected target to fulfill the stock level can be determined by the formula (30/number of working days)* stock norm for that level. (Handset distribution business ² HCL Info, Nokia in new 5-year deal , 2006) New concept stores: Nokia rolled out its new channel distribution as Nokia concept store. The shop provides one stop solution for mobile users to give away the opportunity to experience the desired mobile in the outlet before purchasing the same. These stores would have wide range of Nokia mobiles along with mobile enhancements also. The new concepts had launched new branding which was extended to other Nokia retailer and other multi-brand shops. These concept outlets will help in reducing the distribution cost and transportation cost. These concept 4|Page MBA 12 SADM Major assignment outlets are opened only in metros and large cities which bring out exclusivity towards the brand. (Handset distribution business ² HCL Info, Nokia in new 5-year deal , 2006) Franchisees: Nokia franchised its brand exclusivity in the name of Nokia Priority Dealers. All the outlets which are under the franchiser should follow certain footfalls of the franchiser¶s company. This would include converting a normal outlet into Nokia Priority Dealer outlet. But the franchiser will help in visual merchandising and loan for deposits which are refundable. Rural market distribution: Nokia did not concentrate more on rural market as the products are widely used in urban cities but due to competition in the market Nokia planning to venture in rural marketing along with the concept of micro financing for its product which would help in covering high market share. Nokia planning to leverage the distribution network in order to expand to rural sectors and to serve untapped market. The company planned to educate the benefits of its mobile towards the villagers. Other distributions in India: Apart from its Nokia concept stores, the company distributes its product to many multi-brand mobile stores which are well known in India for their service and price discounts. They are Hotspot: it is ranked as the number one outlet for its wide collection of mobile of all range and also for good after sales service. Apart from handsets, it also sells mobile accessories, mobile network connections, recharge vouchers and gaming device. Univercell: it is considered as the highest selling outlets among the other mobile retailers in India. This is because of their service flexibilities like online shopping, door delivery, and after sales service. The mobile store: it is a recently emerged mobile outlet which is also well known for the wide range of mobiles and its enhancement product along with the well known repair center 5|Page MBA 12 SADM Major assignment insides it¶s each outlet. Recently the store had won award as ³most wanted mobile retailer´ in India. Channel distribution for GSM handsets: The handsets are transferred from Nokia Chennai manufacturing center to Gurgaon mother warehouse near Delhi and from there it is supplied through HCL distribution network to north and east part of India. HCL distributes to its regional distributors and from them to RDSS city and they will supply directly to the retailers but in the second channel called RDSS MD first, they will receive and send it to micro distributors and through them the handsets will reach retailers and then to its customers. GSM handset distribution structure: Nokia mother warehouse HCL Distributor RDSS MD MD Retailer MD Retailer RDSS City Retailer (Handset distribution business ² HCL Info, Nokia in new 5-year deal , 2006) Channel distribution for CDMA handsets: 6|Page MBA 12 SADM Major assignment The distribution system for CDMA will be little different from GSM as there is a need for SIM from the mobile network operators. The CDMA handsets are manufactured and send to Nokia¶s mother warehouse located in Gurgaon. And then from there it is delivered directly to the mobile network operators of India. There they will assemble their respective mobile network¶s SIM card and then send it to its own operators¶ outlets and large distributors. The large distributors will further transferred to agents, chain of stores, etc. and finally it will reach the end customers. Nokia has a tie-up with TATA Indicom and Reliance network for its CDMA handsets. CDMA distribution structure: Nokia's mother warehouse Network operator Large distributors Mobile store, Agents and Dealors Network owned oulet s Activities of channel member: Nokia owns the distribution centers in west and south of India but, in northern and eastern part of the country Nokia distributes its products through HCL. HCL has served the customers as a partner of Nokia for more than 10 years. HCL consist a large part of Nokia services, it has its centers in more than 180 cities, and these care centers are owned and are operated efficiently by HCL, the operations of HCL is limited only to north and east India only. (Distribution Structure of Nokia, 2007) 7|Page MBA 12 SADM Major assignment The mother depot of Nokia is in North India in Gurgaon, all the high end sets which are imported and all the sets which are manufactured in Chennai are transferred here first. As we mentioned in the distribution channel diagram as how the distribution is handled by HCL in Himachal Pradesh, the stock will transported from Gurgaon to a small center in Parvanu, Himachal Pradesh which is owned by HCL. HCL will receive orders from various distributers in the region, after taking the orders the RDSS will take care of the further flow in the supply chain, this is how the retailers receive the product. As the RDSS is divided in to two parts, the RDSS-city will distribute the products directly to the retailers in the region then, the RDSS-MD will take care of the regions outside the city and small towns. (Distribution Structure of Nokia, 2007) Firstly the products will be distributed to the micro distributes and then the micro distributer will distribute to the retailers in small towns and places outside the city, by this way they are trying to supply the demanded quantity to smaller towns and remote location. This is the same format used by HCL in all states of north and east India. In the regions where HCL does not operate Nokia outsources some other regional distribution company and this company holds all the responsibilities to appoint a sales force and take care of other requirements of the distribution channel. This outsourced company reports to Nokia¶s Area Sales manager. They have Regional Manager¶s for north, south, east and west part of that area, for each part there are three to four Regional sales manager and one area sales manager per state, the area sales managers are segregated on the basis of up market and a sales force. (Distribution Agreement for Nokia, 2008) 8|Page MBA 12 SADM Major assignment Table of Management structure for Nokia channel distribution: Regional GM (one each for N, S, W & E) Regional sales Manager (3 to 4 in every region) Area sales mangers Sales forces (Distribution Structure of Nokia, 2007) Interview with HOTSPOT mobile distribution member: Hotspot mobile retailer is considered as a leading multi-brand mobile store in India for its wide range of varieties and mobile enhancement spares. The owner of HOTSPOT mobile store Mr. Chandraprakash chopra says, ³The store gets its supply for many brand like Nokia, Sony Ericson, Fly, Samsung, Motorola and many other but the Nokia is the best brand whose supply is appropriate in nature which helps in saving cost on inventory´. After a detailed interview with him, we found out the following positive and negative aspects relationship between Nokia brand manufacture and HOTSPOT dealers. They are Positive relationship aspect: 1. Nokia had chosen HCL as its distribution partner which is well known for its largest redistribution points in India; hence the product delivery is flawless and 2. The capital, logistics and business information are provided for time to time operation period which helps the company to improve its operation 9|Page MBA 12 SADM Major assignment Negative relationship aspect: 1.The main negative aspect is that the Nokia is not concentrating more on tapping rural market which restrict the retailer to open up a store in rural premises and 2. The company had chosen two different channel distribution systems based on CDMA and GSM handsets model which brings a differentiation in handset receiving time and also the retailers need to maintain two different suppliers profile. (Distribution Structure of Nokia, 2007) Conclusion: Finally, our team had found out that the distribution system of Nokia is well designed and properly structured for both CDMA and GSM model handsets in India. The company¶s distribution system is strong in north & east part of India as it is taken care by HCL distribution and also efficient in south and west part of India as it is taken care by Nokia itself. The company is planning to increase its market share by covering up rural market through expanded distribution network. The company is also planning to come up with micro-finance idea for its handset purchasers. And our recommendation for the company is to maintain the existing distribution network and to take measure for filling the time gap between the CDMA & GSM handsets¶ product delivery time to the retailer. References Consumer durables. (n.d.). Retrieved 10 12, 2009, from Naukrihub: http://www.naukrihub.com/india/consumer-durables/companies-list/top-players/nokia/ Distribution Agreement for Nokia. (2008). Retrieved 10 12, 2009, from Forum Nokia: http://www.forum.nokia.com/info/sw.nokia.com/id/674508ed-ab06-40e4-8bc5b1189c2b492c/Nokia_PC_connectivity_solution_distribution_agreement.pdf.html Distribution Structure of Nokia. (2007). Retrieved 10 12, 2009, from Siliconindia: http://www.siliconindia.com/shownews/HCL_Info_Nokia_in_new_5_year_deal -nid31038.html 10 | P a g e MBA 12 SADM Major assignment Handset distribution business ² HCL Info, Nokia in new 5-year deal . (2006, 2 20). Retrieved 10 12, 2009, from Thehindubusinessline: http://www.thehindubusinessline.com/2006/02/21/stories/2006022102340400.htm Nokia HCl. (n.d.). Retrieved 10 12, 2009, from Hclinfosystems: http://www.hclinfosystems.com/hcl_nokia.pdf 11 | P a g e