Sunday, 24 January 2010

go on, be a Nokia- core purpose or core business?

By the title we dont ask you to adopt Nokia's business model. (we are far from convinced it is the right one). But we ask you to do what Nokia did in 1992, move away from its rubber, cable and non telecom businesses, to focus on telecom!


Core purpose or core business? What should really matter to an investor?

India and China are huge markets with unmet needs across a wide range of goods.
TV penetration in India is 60%, but
- refrigerator penetration is less than 10% (among 220 million households)
- car penetration is less than 4%
- microwaves at 4%
and so on....

Mobile phone usage is still very low, with 90% of the penetration accomplished with "pre-paid" users shelling out 2 USD per month as revenue.

Value added services are 6% of phone bills, which on average are 4 USD per qtr.

Consumption is so low, the only restraint on an organisation's growth is imagination and ambition.

Now, here is some back of the envelope calculation:
If 20% of the families bought cars at USD 6000 each, this is a 250 Bn USD industry
If 60% bought refrigerators at USD 200, this is a 25 Bn USD industry
If we could get current mobile users to spend USD 5 per month on VAS, its a 30Bn USD business PER YEAR.

Ok, so your core business may not be in any of the above. But if you truly want to grow, why would that be an excuse?

Indian companies are not lacking for innovation. They lack for capital. Which is abundant in the west.

Why not acquire aggressively Indian companies, and bring in capital to "go to market" faster, stronger?

On another note, water purification and electricity generation will be interesting businesses to get into. At the household level. Technologies that dont depend on the government grid.

Stop worrying about your core "business". Worry about your core "purpose". Profitable growth!

Ritu and Venkat

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