Module: Design Management
Assignment 3: Market Strategy For Teletalk
M.Des 1.1
Name: Harshal Desai
Lecturer: Dr Kelvin Lee
Date of Submission
9/30/2011
Word Count: 4405
TABLE OF CONTENTS
Executive Summary .................................................................. 3
Teletalk Pvt. Ltd. ........................................................................ 4
Spice Mobile .............................................................................. 5
P.E.S.T.E.L. Analysis .................................................................... 6
Political Trends ........................................................................ 6
Economic Trends .................................................................... 7
Social Trends ........................................................................... 9
Technological Trends ............................................................ 9
Environmental Trends .......................................................... 10
Legal Trends .......................................................................... 11
Market Research .................................................................... 12
Market Dynamics ................................................................. 12
Competitive Landscape .................................................... 14
Macro-Economic Outlook .................................................. 15
S.W.O.T. Analysis ................................................................... 16
Strategic Proposal .................................................................. 17
Tactical launch plan ........................................................... 17
Products and services ...................................................... 18
Pricing ................................................................................. 18
Brand Communication AND ADVERTISING ................... 23
Sales and distribution channels ...................................... 23
Contingency plan................................................................ 24
Conclusion ............................................................................... 25
Works Cited ............................................................................. 26
APPENDIX ................................................................................. 28
EXECUTIVE SUMMARY
With the Telecommunication sector booming in Nepal, the industries
compete in terms of introducing new features and cheaper costs of mobile
handsets. The market is nearly saturated with cell phones ranging from prices
of Rs 2000 to Rs 65000, catering to all types of consumers.
The overall economy is still quite low with nearly 25% of the nation living below
the poverty line and a vast majority of the people earning a bare minimum of
$1500 annually.
While reducing the price of mobile handsets is one strategy, it is not a truly
effective one.
Our report focuses on examining the Nepal market in depth, analysing the
political, economic and social trends, researching on an average consumer
and eventually giving out a more effective holistic solution.
Based on our research, we aim to increase market revenue for Teletalk and
expand their consumer base, and at the same time, create new job
opportunities in the market to contribute towards the betterment of the
country’s economy.
TELETALK PVT. LTD.
Teletalk is a fast growing Telecommunication and IT Company in Nepal. It is
also a licensed supplier of BlackBerry, Spice and Colors handsets in the Nepal
market, the latter being an in-house brand, and functions through several
retailers set up across the country. The current supply chain network has
allowed Teletalk to venture into CDMA mobile handsets in Nepal. They have
a strong business ties with trader bases in China namely Lenovo, Konka,
Inventec Appliances for obtaining mobile handsets and other accessories for
Nepal market.
Teletalk works with both CDMA and GSM telecom operators in Nepal,
exploring possible corporate opportunities, and provides the operators with
feedbacks and recommendations to strengthen the industry and keep up
with the global technology. The firm is associated with one of the country’s
leading telecommunication organisations, Nepal Telecom that has a
customer range of 4.02 million subscribers. (Teletalk: Company Background)
Teletalk’s vision is to manufacture, deal and supply quality mobile handsets
and service for telecom and IT sector in the country. They intend to
revolutionize the market with their superior telecom services and venture into
new quality electronic and telecom products. With integrity and honesty at
the heart of their business, they are determined to attain distinction in Nepal.
(Teletalk: Mission & Vision)
SPICE MOBILE
Spice Mobile is a global organisation and one of the leading mobile handset
brands in the Indian market. With over 30 years of experience, they have built
few of Asia’s most successful joint venture partnerships in innovative
technologies. They were the first Indian company to market high-end printing
systems, manufacturing 3.5” floppy disks, setting up private telecom services,
launching a handset for less than Rs.1000 ($24.5 SGD), another first in creating
a dual mode handset and recently launching India’s first 3D cellphone.
Their brand promise is to deliver quality and use their intelligence and
familiarity to discover innovative means to revitalize the market and delight
people by providing them reasonable value for their services. (Spice: About
Us)
Teletalk launched Spice Mobile in the Nepal market in mid-2008. It rapidly
grew in the market offering mid and premium level mobile phones. Teletalk
imports these handsets from India and has currently brought over fifty models
in the Nepali market. (Teletalk: Spice Mobile)
P.E.S.T.E.L. ANALYSIS
Before recommending any market recommendations, we need to
investigate at the current trends in the Nepali market. These will provide
better clarity on the overall telecommunication market and allow us to
compare whether Teletalk is keeping pace with current trends or has fallen
behind.
POLITICAL TRENDS
In 2004, the government introduced open licensing and restructuring of the
Nepal Telecommunications Corporation as part of its Poverty Reduction
Strategy. Global firms received trade prospects including provision for
infrastructure to set up an expanded GSM network and to install a new
CDMA network. Nepal has been a difficult market due to political instability,
having gone through 15 governments in the last 14 years, and subjected to
an eight year long “People’s war” launched by Maoist insurgents in February,
1996. This affected the speed of globalization and Nepal fell back in the race.
While the government is open to foreign investments, the bureaucratic
suspensions, disorganisation and widespread exploitation delayed
implementation of these policies. (Zita, 2004)
Apart from inconsistent government policies, foreign companies need to
factor in the political risks during the eight-year-old Maoist insurgency as
many organisations, specifically from U.S. were often extorted and faced
intimidation threats. (Zita, 2004)
The political instability still exists as the Nepali public felt like “the government
is at best, useless”, stating that the politicians are obsessed to achieve power,
forcing the public to make their own arrangements to supply homes with
water, electricity, to fix the local roads and maintain the drain pipes. The
public tends to favour the private sectors rather than the government. This
realization came during January 2011 when political candidates were more
concerned about the vacant Prime Minister’s seat rather than preparing for a
potentially devastating earthquake. (Panday, 2011)
To sum up, due to the disorderly political segments it is hard for businesses to
stick with the plans within the specified period. Thus, the bureaucratic systems
of the government greatly hamper the growth of the service sector.
ECONOMIC TRENDS
Nepal's gross domestic product (GDP) for 2008 was assessed at USD $12 billion
making it the 115th-largest economy in the world. Nepal is isolated from the
world’s major land air and sea routes, having just one main airport in
Kathmandu. Their ideal trade route is by road from India and the only possible
entry by sea is via Kolkata. Currently India is Nepal’s largest foreign investor
and trading partner, greatly increasing the potential market and
development of the telecommunication sector in Nepal. Internally, there is a
lack of a developed road system, with 22 out of 75 districts lacking road links.
This makes it difficult to distribute products within the country. (Zita, 2004)
Nearly 86% of the population still lives in rural areas and depends on
agriculture as their primary source of income, though only 20% of Nepal’s
terrain is suitable for growing crops. (Rai, 2004)
A long-standing economic treaty reinforces a close affiliation with India. The
country obtains foreign relief from India, Japan, the UK, the US, China,
Switzerland, and Scandinavian countries. Poverty is severe in the country with
the per-capita income being roughly USD$1,000. (CIA World Fact Book :
Nepal Economy)
On the fiscal side, the government commenced numerous transformations
on revenue utilisation, including the introduction of an income disclosure
scheme and execution of a performance-based encouragement system for
tax officers. This resulted in 32% growth and was the first time income tax
collection exceeded customs revenue. External grants also expanded up by
70% as donors supported Nepal during the political transition. A majority of
this money was directed towards raising salaries and wages of civil servants
and security forces, while the remaining was invested in the IT and Telecom
sector (Acharya, 2010)
Figure 1: Revenue Indicators in 2009 1
The gross national income (GNI) based on Purchasing Power parity (PPP)
ranks Nepal as the 30th country with the lowest GNI, with the comparable
average income of a Nepali citizen being USD$1471 annually. (Nations
Online: Countries by Gross National Income)
Most of Nepal’s economic trends have the lowest percentage worldwide.
Almost 40% of its population have no access to healthcare and education;
nearly half the children under the age of five are malnourished; 38% of the
population is living below the poverty line earning barely Rs 150($4 SGD) a
day. With little to no access to proper education, science or technology, the
literacy rates in the country are low at only 53.7%, although these do not
include literacy in Information and Communication Technologies (ICT). (Zita,
2004)
1 Image retrieved from http://www.adb.org/documents/books/ado/2010/NEP.pdf
SOCIAL TRENDS
Socio-cultural trends consist of various class, structure, principles, morals,
social institutions, etc. Nepal has a multicultural society, with the dominant
religion being Hinduism at 81%, Buddhism at 10.7% and other minorities at
8.4%. (Zita, 2004)
The telecom industry must take note of the socio-cultural environment for
expanding its policy and strategy. Socio-cultural environment influences the
demand and supply of goods and services, particular mobile handsets as
new features at a cheaper rate are in constant demand.
The most auspicious festival is the Dashin Festival or Durga Puja Festival, which
lasts for a total of 15 days. It is the ideal time for new market strategies to be
implemented as the festival attracts many Nepalis all over the world to come
back and celebrate with their families in Nepal.
TECHNOLOGICAL TRENDS
Nepal Telcom has suffered from years of administrative uncertainty. Since
there was only one operator, the Nepal Telecommunications Corporation
(NTC), the lack of competition prevented expansion of basic mobile services.
There was one line per 1000 people in the rural regions with over 60% rural
districts having no telecommunication service whatsoever. In contrast,
Kathmandu had 21% telecommunication services with an estimated future
demand for 290,000 lines, which was much more than what the suppliers
could provide. (Zita, 2004)
By early 2007, the NTC and the other private operators set up aspiring
objectives for network expansion, aiming to attain a penetration percentage
of 20% in 2010. By end of 2009, the total telephone penetration had reached
30% having over 7.6 million mobile subscribers. Fixed line growth remained
slow, having just 3% increase in market penetration by 2010.
Despite the mobile handset growth, there was a substantial difference
between the high coverage levels in the cities and in underdeveloped rural
areas. However, the minimum basic access was made available to most of
the rural area with only 306 out of 3914 villages lacking telecom services. To
keep up the pace with future demand, it is estimated that Nepal needs to
invest around US$135 million in the telecommunication sector. (Evans, 2010)
Internet facilities are still inactive, with user penetration at a total of 2% in
2010, and broadband facilities are virtually non-existent. People seem to be
favouring mobile wireless technology more over the fixed lines. (Evans, 2010)
Recently the Nepal Telecommunications Authority (NTA) initiated a study
measuring the feasibility of 4G technology in Nepal. This would allow faster
data transfer speeds and superior quality video conferencing options. 4G
technology can allow users to surf at an internet speed of 100Mbps while
current telecom operators provide only 3.4Mbps under the 3G networks.
NTA Chairman Bhesh Raj Kanel stated the study is at a preliminary stage and
their team is reviewing data from other countries using 4G technology. Once
the analysis is complete, the final report will be submitted to the Radio
Frequency Policy Determination Committee (RFPDC) where they will take
necessary action and meet with the respective stakeholders. (NTA starts study
on 4G technology, 2011)
ENVIRONMENTAL TRENDS
At the 18th session of the United Nations Commission on Sustainable
Development, an official from Nepal stated, “The management of waste has
become further challenging with the increase in hazardous waste as the
situation becomes more complicated, confronting the continuing and
worsening effects of electronic waste” (Pradhan, 2010)
Nepal had expressed a Solid Waste Management Bill in 2008, which provided
instructions for handling and categorizing solid waste types. However, it was
specifically silent about electronic waste management.
Also, the country is highly vulnerable to bad climate, intensive rainfalls,
increasing intensity of floods, glacial lake outburst, dry spells etc. Not only do
these hazards cause damage and loss to human lives, they also hamper
development of the country.
According to (Pradhan, 2010) “ Going by the current rate, in ten years’ time it
can be projected that more than two million Nepali people will be using
computers and the internet. In addition, more than 25 people per 100 or 7.5
million Nepali people will be using mobile phones by 2020.”
A typical mobile phone is disposed quite rapidly as new, better and cheaper
models flood the market routinely, with mobile phone users changing their
handsets roughly every six to twelve months. According to information
available, a typical personal computer has three to five years of good use
before it needs to be replaced, upgraded, or completely discarded. One
can imagine how much e-waste mobile phones will generate in a decade or
so. Nepal needs to quickly adapt its current policies to include the role of ICTs
in a sustainable development and set up a separate division for electronic
waste to monitor and maintain the process.
LEGAL TRENDS
Nepal had developed two liberal policies and authorized framework for the
Telecommunication sector: - the National Communications Policy in 1992,
and a Telecommunications Act in 1997 that established the Nepal
Telecommunications Authority (NTA). A new draft was adopted in early 2004
to remove the restrictions on investment and accelerate a broader market
opening. The policy introduced a multi-service and multi operator
environment and to liberalise the telecommunication sector completely so
that it can be open for new operators without limitations. It also
commercialized the NTC, reducing the government ownership, being
restructured to keep pace with the increasing demands. (Zita, 2004)
MARKET RESEARCH
MARKET DYNAMICS
As of 2011, the country’s population was roughly 29 million, out of which only
18 million people had a source of income. The agriculture work force
constitutes 75% of this labour with industry and services being the remaining
25%. Nearly a quarter of the population is below the poverty line. (CIA World
Fact Book : Nepal Economy)
With an average income being roughly $1500 annually, the cost of living
expenses in Nepal is shown below:
Figure 2: Distribution of cost of living expenses in Nepal2
Based on the statistics, an average consumer spends only 11.6% of the $1500
or approximately $175 on other markets, which fall in our category.
As of December 2010, there are only 841,698 subscribers for fixed line
telephones whereas mobile handset subscribers range at 9.19 million. Nepal
Telecommunications is leading with 5.11 million subscribers and Spice Nepal
Pvt. Ltd, which is rebranded to NCell Pvt. Ltd, has a market penetration of
4.08 million subscribers. (Federation of Nepalese Chambers of Commerce
and Industry: Industrial Factor Costs , 2010)
2 Image retrieved from
http://www.numbeo.com/cost-of-living/country_result.jsp?country=Nepal
Teletalk Pvt Ltd rapidly expanded its market by providing quality mobile
handsets to middle and lower-middle class individuals at a much cheaper
rate than their competitors provide. Since Spice cell phones are widely
popular in India, the brand carried enough recognition to be purchased by
the local Nepal Population.
Sanjay Agrawal, director of Teletalk Pvt. Ltd. stated there is a vast market for
the mobile phone industry in Nepal as people living in the rural regions have
begun embracing the new mobile technologies that help them be
connected and increase business ventures.
TeleTalk is the first cell phone company in Nepal to introduce Indian mobile
phones in the Nepal market and to introduce both CDMA and GSM handsets
to consumers. Teletalk supports three major brands, namely, Spice mobile
phones that are priced between Rs 2,200 to Rs 25,000 with sales growth rising
at an annual rate of 15%, while handsets by Colors are available in the range
of Rs 2,100 to Rs 10,000, with sales growth rising at a 5% annual rate. HTC
handsets cater towards businesspersons and high-income people, priced
between Rs 17,000 to Rs 55,000. (Teletalk: Bringing mobile Technology to Rural
Folk, 2010)
Recently Teletalk introduced a new scheme in conjunction with their new
Colors X-9 mobile phone. These scheme gives you a cash offer on every X-9
cell phone purchase, along with a scratch coupon with a potential to win up
to Rs1000. It will be valid only through the Dashain Festival and will end on 1st
November. (Teletalk Dashain Offer, 2011)
COMPETITIVE LANDSCAPE
Current competition among the telecommunication operators is based on
wider network coverage, a variety of prepaid service plans, GPRS facilities,
increasing purchasing power of people by reducing costs of mobile handsets
etc.
Rival telecom operator NCell, has already revealed its strategy of wanting to
upgrade their networks to 4G once the government grants the licensing.
Ncell is asking for frequencies ranging from 700-2600MHz for this service. NTA
currently has recommended WiMax(Worldwide Interoperability for
Microwave access), a protocol that can allow up to 40Mbps and is awaiting
the committee’s decision on frequency allocation for the service. (NTA starts
study on 4G technology, 2011)
Phones have also become a status symbol in Nepal. For the people, flaunting
stylish expensive phones gives them confidence while meeting and talking
with others. They consider an expensive phone flaunts the success they have
attained in life. Nokia recently sold two of its most luxurious cell phones in the
Nepali market, the 8800 series, at Rs. 100,000 each. The features of these
models are out-dated by modern standards, but it is the sapphire studded
joystick and a titanium casing that boosted the price. While those who use
cell phones purely as a means for communication don’t see any difference
between a plastic joystick and a sapphire one, for some men mobile phones
are akin to what gold or diamond jewellery are to women. As new phones
enter the market with latest technologies, with an added demand for style,
the resources used in developing the phones and the money invested into
giving them a luxurious look are increasing the average market price.
(Republica: Business and Economy, 2009)
MACRO-ECONOMIC OUTLOOK
Nepal’s macroeconomic stability is sustained over the past few years, but the
recent global crunch is has slowed down the progress of Nepal’s economy
and exposed its structural weaknesses. Increasing fees and cost have
resulted in growing foreign exchange investments despite the lacklustre
export performance. Recently, however, international capitals have dropped
considerably due to a slowdown in transfer of funds and accelerating imports
partly because of continued rapid credit growth in the second quarter of
2009/10. (Sharma)
Nepal currently faces issues of increasing inflation. The annual average
consumer inflation has increased by 13% in 2009. Secondly, the high rate of
unemployment and loss of trade has set back the standard of living in many
districts. The ultimate goal of a government should be to generate economic
growth that favours the public.
The macroeconomic complications are sure to give rise to cost of living at the
household level unless the short-, medium- (Three Year Plan under
preparation) and long-term policies are prepared based on professionally
acceptable economic forecasting. (Pyakuryal, 2010)
While the country’s potential is quite high, progress is delayed due to poor
business climate, power shortages, infrastructure needs, weak governance
and difficult employment associations. These issues need to be addressed
immediately. (Sharma)
S.W.O.T. ANALYSIS
Strengths Weaknesses
Caters to all classes, lower,
middle and upper class.
Wide range of handsets
available from Spice
Dual-Sim Handsets
Average price range of Rs
2000- Rs15000
Associated with the NTA, has
over 9 major service centres
across Nepal.
Introduction of new Colors
Handsets every 4-6 months.
Customer complaints about
terrible network service (Towers
or New Services?, 2010)
No licence to distribute Nokia,
Sony Phones
Limited options for the Niche
market
Opportunities Threats
Assembling Spice phones in
Nepal
Introduction of instalment plans
Promoting in-house brand,
Colors
Expanding cell phone variety in
in-house brand to reduce
import costs
Eco-friendly initiatives
4G expansion
Better promotion offers than
competitors in terms of pricing.
Setup cellular service at Mt
Everest.
Rival company already
developing strategies for 4G
technology.
Difficulty introducing new
features, product saturation
imminent.
STRATEGIC PROPOSAL
TACTICAL LAUNCH PLAN
We are proposing a business strategy to increase market share of Teletalk
and simultaneously benefit the public and the government by boosting the
country’s economy and creating new job prospects for the people.
The strategy involves setting up an assembly base for Spice Mobiles in Nepal,
having just the spare parts imported from India, and selling them at a low
interest rate on a 12-month instalment plan so mid-range phones are
available to the lower-middle class target audiences.
We are choosing Spice Mobile over Colors because of its wider brand
awareness and diverse product range.
PRODUCTS AND SERVICES
While this strategy can be applied to mid-level phones of all ranges, for sake
of clarity our data focuses on the absolute low end and a middle price range
of cellphones, costing Rs 2000 and Rs 5000 respectively.
Importing just the spare parts allow greater quantity of parts to be traded into
the country. This also decreases the cost in terms of tax by an estimated 40%
since it is cheaper to export spare parts rather than the complete product. By
establishing an efficient assembly building, the sector introduces new job
prospects within the industry, increasing employment rates. It would also
boost the repairing service since people are more aware of the construction
of the product. This would create an higher overall revenue in the market
The phones would be sold at a 12% interest from the current market rate,
however the money could be paid in a twelve month instalment. This allows
the lower-middle class ability to afford mid-range cellphones.
PRICING
The following figures have been derived from the Federation of Nepalese Chambers Of
Commerce and Industry, with a copy of the Industrial Factor costs report attached in the
appendix for reference.
Current Population of Nepal is 25,000,000, out of which 18,000,000 people
have a net income above the poverty line. Approximately 500,000 are using
Nepal Telecom while 400,000 use the rival company Ncell. This still leaves
9,000,000 people who can be potential targets as our secondary market.
For implementation of our scheme, first we would need to look at the
industrial area and construction costs to set up an assembly division in
Kathmandu. We have picked Kathmandu since it is the primary trade city of
Nepal.
COST OF OVERALL ASSEMBLY LINE RS
COST OF INDUSTRIAL AREA 5400 SQ.FT 4,200,000
CONSTRUCTION COST ( APPROX RS.1300 P.SQ.FT X 5400 SQ.FT)
7,020,000
TOTAL COST OF INDUSTRIAL AREA AT 5400 SQ.FT
11,220,000
Table 1:COST OF ASSEMBLY LINE (SOURCE: APPENDIX POINTS 1 & 2)
In a 5400 sq.ft. plot, we can accommodate 450 employees, giving
approximately 10 sq. ft. space for each employee, with the remaining
amount excluded due to construction of walls, pillars etc.
By creating a job opening for 450 people, their annual salaries would be
differentiated according to skill level. Teletalk will also provide a 30% bonus
p.a. (assumed estimate) to boost employee morale and to generate interest
in the brand. Based on these estimates, the total salary cost for employees is:
LABOUR NO.OF EMPLOYEE
AVG SALARY P.M.
TOTAL SALARY
P.A
BONUS 30% P.A. SALARY
TOTAL COST OF LABOUR INCLUDING
BONUS
HGHLY SKILLED
100 4,950 495,000 148,500 643,500
SKILLED 250 4,760 1,190,000 357,000 1,547,000
UNSKILLED 100 4,600 460,000 138,000 598,000
TOTAL 450 14,310 2,145,000 643,500 2,788,500
Table 2: SALARY COSTS OF EMPLOYEES (SOURCE: APPENDIX POINT 5)
Let us assume that the company wants 10% profit on the manufacturing cost
of the mobile phones and the total sales demand from both, existing
subscribers and new consumers (Total consumer target: 9,500,000) is 200,000
mobile handsets per year, with a majority being sold at Rs 2000. We
conducted a comparison analysis between profits made while using the
instalment scheme and profits made without using the instalment scheme.
WITHOUT INSTALMENT
SCHEME
NO. OF HANDSET
MADE P.A
COMPANY COST PER HANDSET
PROFIT 10% PER
HANDSET
RETAIL PRICE PER HANDSET
TOTAL COST
PRICES P.A.
TOTAL RETAIL
PRICE P.A.
RS RS RS Rs Rs
HANDSET AT RS. 2000
150,000 1,800 200 2,000 270,000,000
300,000,000
HANDSET AT RS.5000
50,000 4,500 500 5,000 225,000,000
250,000,000
TOTAL 200,000 6,300 700 7,000 495,000,000
550,000,000
Table 3: PRICE STRUCTURE WITHOUT INSTALMENTS
Now, considering the 12-month instalment scheme, if Teletalk charges 12%
interest p.a. on the existing retail price of the mobile handset, the overall cost
structure changes to :
WITH INSTALMENT
SCHEME
NO. OF HANDSET
MADE P.A
COST PER HANDSET
PROFIT 10% PER HANDSET
RETAIL PRICE PER HANDSET
12% INTEREST
ON RETAIL PRICE
TOTAL RETAIL PRICE PER
HANDSET
TOTAL RETAIL PRICE P.A.
RS RS RS Rs Rs Rs
HANDSET AT RS. 2000
150,000 1,800 200 2,000 240 2,240 336,000,000
HANDSET AT RS.5000
50,000 4,500 500 5,000 540 5,540 277,000,000
TOTAL 200,000 6,300 700 7,000 780 7,780 613,000,000
Table 4: PRICE STRUCTURE WITH INSTALMENTS
To calculate the total net profit, we factor in the manufacturing costs and
annual salaries from our data. We also estimate 10% additional cost for
insurance for employees in case of accident at the workplace. Based on the
Industrial factor costs report, we estimate the industrial bank loan to have 10%
interest rate (Appendix point 10), and another 10% to serve as
commercial/industrial insurance in case of earthquakes, fire hazard, riots etc.
Water and electrical charges are also assumed from the report at their
maximum value (Appendix points 3 & 7) along with transportation charges
from Mumbai (Appendix point 8) since Mumbai is the leading trade city in
India. Since there is always a chance of damage to products or wastage, we
estimated a further 10% cost on manufacturing the handsets.
This gives us a final net profit comparison of
WITHOUT
INSTALMENT WITH INSTALMENT
TOTAL RETAIL PRICE P.A 550,000,000 613,000,000
SUBTRACTING COSTS:
COST OF MANUFACTURING -495,000,000 -495,000,000
ANNUAL SALARIES -2,788,500 -2,788,500
INSURANCE FOR EMPLOYEES -278,850 -278,850
INTEREST ON INDUSTRIAL 10% ON RS 11,220,000 -1,122,000 -1,122,000
COMMERCIAL/INDUSTRIAL INSURANCE 10% -1,122,000 -1,122,000
WATER CHARGE P.M RS. 25000 -300,000 -300,000
ELECTRIC CHARGES P.M RS.50000 -600,000 -600,000
TRANSPORTATION CHARGES P.M RS. 100000. -1,200,000 -1,200,000
DAMAGE/WASTAGE 10%TOTAL COST OF MANUFACTURING
-49,500,000 -49,500,000
TOTAL PROFIT 47,588,650 61,088,650
Table 5: NET PROFIT COMPARISON
In conclusion, using the instalment scheme, Teletalk can earn an estimated
net profit of Rs 61 million in their first year of business.
BRAND COMMUNICATION AND ADVERTISING
Teletalk Pvt Ltd would be the first company to sell their Spice Mobile Handsets
on a 12-month instalment basis. The company, under the NTA, already has
nearly 5.1 million subscribers. Still approximately 9 million consumers are not
using any form of mobile communication. By using the 12-month instalment
program, our primary consumers would be interested to purchase a higher
quality cell phone, and the potential secondary market would get an
incentive to purchase newer models at a lesser cost than provided by the
competitors.
The scheme could be introduced after the assembly setup is completed,
which would take roughly six to twelve months depending on the speed of
construction. If we assume a maximum of twelve months, then the scheme
could be introduced at an opportune moment during the next Dasain
Festival in October 2012, which is the most auspicious festival in the Nepalese
annual calendar. During this time, people often return from different parts of
the world to celebrate the festival together in their country. The instalment
plan would serve as an ideal gift during this fifteen-day festival.
SALES AND DISTRIBUTION CHANNELS
Current sales and distribution channels could remain as they are since the
market penetration through the channels is providing a satisfactory result.
Research would need to be undertaken in order to find out estimated
demand of the handsets under the instalment scheme to check if the
distributors can handle the quantity of the orders. In the event that demand
rises beyond amount of distribution, then there would be a need to set up
additional sales and distribution centres across the city in the form of smaller
retail outlets.
CONTINGENCY PLAN
In the event that the 12-month instalment plan does not appeal to the mass
market, additional schemes could be implemented to further entice the
target consumer.
One such scheme could include group purchasing where a family or a group
of friends can get 10% discount on the retail price under the instalment plan
should they purchase a mobile handset together. This would especially be
successful during the festival as it is a common occurrence to provide gifts for
an entire family.
Another scheme could be a good faith policy where if the instalments are
paid within the allotted time then the final month payment receives a refund
of Rs 100, which is still affordable and does not consume too much of the
company’s profits, and at the same time, makes the consumer happy.
There would be instances where consumers may stop paying altogether due
to numerous circumstances. To prevent a loss, countermeasures could be
placed within the phone, effectively locking the SIM card similar to T-Mobile
in the USA. The instalment plan could also be backed up by a bank, ensuring
that if the consumer does not pay up the charges, the amount will be
undertaken by their bank.
However, based on current projections, even if the instalment scheme does
not work, Teletalk still makes enough profit just by setting up an in-house
assembly line for Spice Mobile handsets.
CONCLUSION
By successfully penetrating the market with this new offer, Teletalk should
boost up market revenue, and follow their vision to revolutionize the Nepal
market with superior telecom services.
The reduced cost of expenditure, in terms of importing parts, could be used
by the government to invest in other sectors such as land development,
military, architecture etc.
Setting up just one assembly chain opens up roughly 450 job prospects. By
having a network of assembly chains across the country, the number can
greatly increase giving even unskilled workers an opportunity to work on a
decent job with insurance and bonus plans.
The knowledge of the IT and Telecom sector would improve since Teletalk is
actually manufacturing the Spice mobile phones. This has potential to
increase more service centers, further increasing job growth.
By adopting this strategy, Teletalk could effectively slash their competition
and commendably contribute towards a part of the solution for the
economic instability within the country.
It would open the market to many more consumers and significantly increase
the overall GDP of the telecommunications industry.
WORKS CITED Republica: Business and Economy. (2009, April 20). Retrieved September 28,
2011, from Myrepublica.com:
http://archives.myrepublica.com/portal/index.php?action=news_detai
ls&news_id=3573
Federation of Nepalese Chambers of Commerce and Industry: Industrial
Factor Costs . (2010). Retrieved September 28, 2011, from Fncci.org:
http://www.fncci.org/indicator.php
Teletalk: Bringing mobile Technology to Rural Folk. (2010, August 25).
Retrieved September 28, 2011, from Myrepublica.com:
http://archives.myrepublica.com/portal/index.php?action=news_detai
ls&news_id=22534
Towers or New Services? (2010, April 06). Retrieved September 28, 2011, from
TechSansar.com: http://techsansar.com/nepali-it/towers-or-new-
services-what-are-nepalese-telecom-operators-up-to-1412/
NTA starts study on 4G technology. (2011, May 26). Retrieved September 28,
2011, from Myrepublica.com:
http://archives.myrepublica.com/portal/index.php?action=news_detai
ls&news_id=31696
Teletalk Dashain Offer. (2011, September 21). Retrieved September 28, 2011,
from The Himalayan Times:
http://www.thehimalayantimes.com/fullNews.php?headline=Teletalk+
Dashain+offer&NewsID=303444
Acharya, Y. (2010). Economic performance of Nepal. Retrieved September
28, 2011, from ADB.org:
http://www.adb.org/documents/books/ado/2010/NEP.pdf
CIA World Fact Book : Nepal Economy. (n.d.). Retrieved September 28, 2011,
from CIA.gov: https://www.cia.gov/library/publications/the-world-
factbook/geos/np.html
Evans, P. (2010, October 01). Nepal - Telecoms, Mobile, Internet and
Forecasts. Retrieved September 28, 2011, from Budde.com.au:
https://www.budde.com.au/Research/Nepal-Telecoms-Mobile-
Internet-and-Forecasts.html?r=51
Nations Online: Countries by Gross National Income. (n.d.). Retrieved
September 28, 2011, from NationsOnline.org:
http://www.nationsonline.org/oneworld/GNI_PPP_of_countries.htm
Panday, K. (2011, January 14). What now? - Geopolitical Instability in Nepal.
Nepali Times, pp. 1-2.
Pradhan, K. (2010). 2010 - ICTs and Environmental Sustainability. Retrieved
SEptember 28, 2011, from giswatch.org:
http://www.giswatch.org/sites/default/files/gisw2010countrynepal_en.
Pyakuryal, B. (2010, January 21). 2010: Nepal's Macroeconomic outlook.
Retrieved September 28, 2011, from Nepalieconomy.blogspot.com:
http://nepalieconomy.blogspot.com/2010/01/2010-nepals-
macroeconomic-outlook.html
Rai, T. (2004). Mobile and Fixed Wireless Communication Technology in Nepal.
New Mexico: Magnus Consulting Group Pvt. Ltd.
Sharma, R. (n.d.). The Rising Nepal: Challenges, Opportunities before NRB's
Governer. Retrieved September 28, 2011, from Gorkhapatra.org.np:
http://www.gorkhapatra.org.np/gopa.detail.php?article_id=32515&ca
t_id=7
Spice: About Us. (n.d.). Retrieved September 28, 2011, from Spiceglobal.com:
http://www.spiceglobal.com/Corporate/AboutUs.aspx
Teletalk: Company Background. (n.d.). Retrieved September 28, 2011, from
Teletalk.com.np: http://teletalk.com.np/company-background/
Teletalk: Mission & Vision. (n.d.). Retrieved September 28, 2011, from
http://teletalk.com.np/mission-vision/
Teletalk: Spice Mobile. (n.d.). Retrieved September 28, 2011, from
Teletalk.com: http://teletalk.com.np/spice-mobile/
Zita, K. (2004). Nepal Telecom Brief. USTDA South Asia Communications
Infrastructure (pp. 1-10). New Delhi: Network Dynamics Associates LLC.
APPENDIX
The following is a partial report for Industrial Factor Costs from the Federation
of Nepalese Chambers of Commerce and Industry (FNCCI).
The full report is available on the FNCCI website at :
http://www.fncci.org/text/ind_fact.pdf