Bhagwati Products Limited - Making in India for Micromax
Emerging markets have become an attractive destination for multinationals as they provide these companies with high growth potential due to low product penetration and also help them in reducing costs of production due to reduced labor costs. The case brings out the trajectory of growth of Micromax Informatics Limited which started as a company depending on China and Taiwan for manufacturing of their handsets because of better technological infrastructure, stronger supply chain and cost effective workforce. As the government enhanced import duty on CBU (Completely Built Unit) electronic products and reduced excise duty and import duty on SKD (Semi Knocked Down) units required for manufacturing of electronic products, Micromax started its production facility, Bhagwati Products Limited in India and reduced import of finished electronic products to a large extent. To keep the cost low all across the value chain, it focused on development of indigenous design and manufacturing capabilities to achieve higher localization. This helped Micromax in keeping the cost of the products low and thus being a cost leader in the market. The case also brings out how costs can be kept low by utilizing central and state government initiatives in providing subsidies that helped the company build competitive advantage and how these specific actions resulted in creation of a vibrant electronics industry in the country. This case focuses on the specific issues faced by Bhagwati Products Limited, the production arm of Micromax in production of mobile phones locally, with regard to sourcing of raw material, manpower, research and development, competition and reduction in cost of production. The case also discusses the decision dilemma faced by the chairman on diversification of products to consumer electronics or to move into new territories with the core product in context of increased competition from multinationals in India.