MANAGEMENT

CASE
describes a real-life situation
faced, a decision or action
taken by an individual
manager or by an organization at the strategic, functional or operational level

HCL: Facing the Challenge

of the Laptop Market
Jaydeep Mukherjee and Mahalingam Sundararajan

r. Ajai Chowdhry, Chairman and CEO at HCL Infosystems Limited, a

major technology hardware player in India, was pondering upon the
companys marketing strategies to build its laptop sales in 2010-111.
Driven by powerful and sustained marketing campaigns by the multinational companies (MNC), namely Dell and Acer, during 2009-10, the laptop market had witnessed tremendous growth. Dells 1,500 million Indian Rupee (INR) marketing
initiative had catapulted it from the fifth position (in terms of sales revenues) in
2008-09 to a second position in 2009-10 in the Indian laptop market2. Similarly, Acer
had gone on a marketing and distribution blitz that catapulted it from No. 6 to No. 3
in the market, thereby more than doubling its market share.
The reason for this sustained effort by the players could be attributed to the major
structural changes that were taking place in the rapidly growing Indian computer
marketplace. Traditionally, consumers preferred desktops due to lower costs. However, in 2008-09, consumer preference started shifting to laptops because of the mobility advantage and the falling prices of laptops leading to an exponential growth
of the laptop market. Households accounted for 56 per cent and business customers
accounted for 44 per cent of the market, growing at 83 per cent and 47 per cent
respectively on an annual basis. The laptop market was projected to overtake the
desktop market in 2013 (Refer to Exhibits 1, 2, and 3 for sales and projected sales of
the industry). Due to this, all hardware companies were forced to consolidate their
position in the laptop space. The predominant belief in the industry was that if this
window of opportunity was missed, it would be difficult to get a toehold in the large
and growing laptop market in the near future.

KEY WORDS
Marketing Strategy
Global Competition
MNC Brands
Consumer Behaviour

In 2009-10, HCL was the second largest brand in the desktop personal computer
(PC) category, but a poor sixth with only a 6 per cent revenue share in the laptop
market. It was important that HCL built its position in the laptop category too; it
needed at least a 15 per cent share of the growing laptop market in the next two
years; otherwise it risked facing a large negative impact on the profitability and
revenues of the company over the next few years. Ajai set his aim at 20 per cent
share of the overall laptop market in 2012, which would have allowed HCL to leverage the economies of scale in manufacturing and marketing.

Distribution Channel
Indian Desktop market
Laptop Sales

The accounting year is from April to March.

Laptop is used generically in the case for portable computing device and would include other products
typically called notebooks now as well as any such innovation in future.

VIKALPA VOLUME 37 NO 1 JANUARY - MARCH 2012

113

HCLS BUSINESS
HCL Infosystems was a $2.6 billion revenue company
in 2009-10 with businesses in various areas of technology hardware. The key divisions were Hardware Manufacture, System Integration, Telecom Product
Distribution, and Office Automation. These divisions
were independent profit centres and the decision-making rested on the heads of the individual divisions, who
reported to the CEO. Most of the divisional heads and
senior executives were veterans in the company and
were well-experienced in the various areas of technology hardware. Though the businesses were independent
as far as management was concerned, they also worked
together while facing challenges in the market.
HCL had been present in the Indian market from the
late 1970s, and it had unparalleled distribution reach in
the market space. It had a wide ranging service network
that was the envy of all its competitors. It was a household name in the country and people saw the HCL brand
as Indian, dependable, and trustworthy. It was perceived
as a value for money brand and not a premium one,
which appealed to the majority of the Indian desktop
consumers. Currently, it was the only domestic player
of any note in the Indian laptop market which was otherwise dominated by the MNC brands.
HCL also faced fairly steep challenges. It did not have
the deep pockets that its MNC competitors had. It was
also limited in terms of product portfolio as compared
to the MNCs who could offer products from their international portfolio into the Indian marketplace and enjoy economies of scale. There was also the prevalent and
widespread perception among laptop consumers that
foreign brands were better in terms of quality, which
was a problem that many Indian manufacturers like
HCL, faced in the marketplace. The HCL brand was also
perceived as old-fashioned as it had been around for so
long, whereas the foreign brands were seen as new and
exciting, especially among the 20-35 year age group, the
fastest growing segment of laptop buyers. Finally, while
HCL had a great distribution presence, this was built
for its desktop business; Exhibit 4 gives the details of
the share of the different players in the desktop market.
HCL faced the challenge of converting desktop retailers
into the laptop business.
The company performance was excellent and was growing from year to year. But due to the commoditized na-

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ture of the products, the margins were small and this

reflected in its profits. Exhibits 5 and 6 give a snapshot
of the business and its financials respectively.

LAPTOP MARKET IN INDIA

The market for laptop in India was growing rapidly and
the popularity was driven by the product attributes.
Though the product was introduced in the Indian market in mid-1990s, the acceptance was rather limited as it
was costly and quite heavy, and it therefore took time
for the market to develop. However, by 2008, it had become a very high-selling product with reasonably widespread acceptance among the executives and students.
The most appealing attributes for the consumers were
portability, internet connectivity at lower costs, many
inbuilt features that were not available in standard desktops, and most importantly, a substantial reduction in
the price difference between desktops and laptops
the laptop average prices fell from 55,000 INR in 2007 to
40,000 INR in 2008, while the desktop prices only came
down from INR 22,000 to 20,000. Also, the PC required
some additional costs like a computer table, uninterrupted power supply units, etc., which cost additional
INR 6,000, which made laptops a better value proposition compared to desktops to a large majority of Indian
population. This trend of at least an annual drop of 10
per cent in laptop market was expected to last till 2012,
which was likely to fuel the laptop sales.
In terms of product attributes, there was not much of
difference among the equivalent products of different
brands. However, MNC brands dominated the overall
market. The leader HP was the dominant player with a
32 per cent market share, followed by Dell, Acer, and
Lenovo with 23 per cent, 11 per cent, and 8 per cent respectively. HCL came in at 6 per cent, and a significant
part of the sales was to business customers. All the
brands were really putting in a lot of initiative in the
market, from a marketing and communication standpoint. Exhibits 7, 8, 9, and 10 may be referred to for sales
figures of different brands and city-wise breakups for
desktops and laptops.
All the competitive products were well distributed
through the retail chain, though each company followed
selective distribution. Most outlets were multi-brand but
only stocked a limited set of brands because of space
and investment constraints. It was a mature distribution system and all products were pushed on the basis
HCL: FACING THE CHALLENGE OF THE LAPTOP MARKET

of consumer interest and dealer incentive. The consumers were becoming more knowledgeable; thus, they were
less influenced by the sales pitch at the retail counters.
Retail consumers were able to negotiate prices on most
brands by comparing prices across different retail outlets. Thus, margins were thin for manufacturers as well
as dealers, but the volumes more than made up for it.
Interestingly, in 2009-10, the sales of laptops in the top
four metros grew by 173 per cent and in the rest of India
by 48 per cent; however, consumption in the next four
cities declined by 16 per cent. The sales of desktops in
the top four metros increased by 30 per cent, in the next
four metros by 21 per cent, while in other smaller towns,
it declined by 61 per cent.
The PC market in India was predominantly price-conscious; however, 5 per cent of the target market could
be termed affluent, capable of purchasing premium
products and typically residing in the metro cities. There
were a couple of brands, namely Sony and Apple, which
catered to this segment. They had excellent products,
great in quality and aesthetics and fitted with the best
features. Their customers were typically image-conscious people with not much of functional requirement
other than the desire to own the best. These brands offered higher trade margins as the products had a limited market, and they were also perceived as expensive
by the retail channel. Exhibit 11 gives the product features and Exhibit 12 the advertising spends.
One of the challenges that HCL faced in the branding of
laptop was that it was an Indian brand. Across consumer
durables and office automation products, it was observed that foreign brands were perceived to be better
by the consumers, even when the products for both foreign and Indian brands had the same specifications and
were made in the same factory. This could be attributed
to the Indian craze for all foreign products that existed
in the 80s and 90s when the economy was closed. With
the opening of the Indian economy in early 1990, though
there was a reversal in this trend, it still dominated many
product segments, including laptop. However, from
HCLs point of view, the positive aspect was that the
trend was changing with increasing international recognition of intellectual power of Indians as well as production and R&D capabilities of the Indian companies.
In fact, many industry analysts predicted that in another
decade, the India factor could play a positive role and
Indian brands could command premium.
VIKALPA VOLUME 37 NO 1 JANUARY - MARCH 2012

CONSUMER BEHAVIOUR
Laptops and desktops were different product categories which used the same distribution channel and
seemed to satisfy similar consumer needs. However,
they were considerably different from each other, as was
evident from the fact that except for the market leader
HP, the preeminent brands in the desktop space were
quite different from the laptop space. One way to explain the above could be the fact that while both the categories fulfilled the same functional need of computing,
the usage of desktops and laptops could be considerably dissimilar.
Desktops are used at a fixed place, either at office or
home, and for specific tasks, mostly work-related. They
need additional accessories for enhancement of the usage, like extra speakers, gaming cards, and some necessary additional gadgets like uninterrupted power supply
battery, computer table, etc. Laptops can be used virtually anywhere. Because of the portability feature, a significant part of the laptop usage is for entertainment.
Laptops are self-sufficient product, which come with
inbuilt speakers and adequate battery life so that it is
not necessary to plug in additional accessories most of
the time; hence the overall cost to the consumer is perceived to be lesser. Finally, desktops are preferred for
multi-people usage i.e., many people could use the
same machine, while laptops are generally seen as personal assets, meant more for a single user or at best the
family.
The decision criteria and the buying process of laptops
and desktops took different paths. While the basic use
of both was for computing, the trigger for desktop was
primarily work and study-related activities, whereas for
laptop, it was work and entertainment. Desktops were
perceived as a commodity; and so, the focus was more
on the amount of features that a certain price could buy.
This was the reason that there was a huge unorganized
sector in this market. Laptop was a more visible product; so, consumers were more image and brand conscious when it came to a buying decision.
There were two major segments in the laptop market:
the enterprise (also referred to as business or corporate)
segment and the consumer (retail) segment. The data
regarding the size of the segments are given in Exhibits
13 and 14. The enterprise segment had a collective decision making process; typically, it was decided by the

115

head of the IT department with inputs from the heads

of the user departments. The decision-making was apparently rational, specification-oriented, and consultative but the people involved were not really technically
savvy enough to discern the product differentiation. The
business buyers of laptops were also concerned with the
image connotations as the products were carried by
employees outside the office. Most marketers had specialist sales force to address this segment and much of
the sales were acquired directly or jointly along with
the sales team of the distributors.
The retail consumer segments buying these products
were also different. The desktops were primarily bought
for work-related purposes, be it at office or home. The
decision was of the elder member of the household like
the father. Laptops were purchased more often by
younger people who bought it for themselves and their
major decision criterion was entertainment and not
work. Even if the father paid the money, members of
the younger generation were the core decision
influencers specifying the product features, brand, etc.
The consumer segment was for individual buyers the
decision was made by the individuals and the selective
distribution channel was used to tap the same. This accounted for 60 per cent of the market and was the segment that was growing the most. While no manufacturer
was addressing specific segments, the market broadly
comprised three distinct groups. The fastest growing
segment included the young students or newly employed they were interested in lowest price offerings
with maximum features and were normally first time
buyers. The middle-aged consumers were typically users of desktops who were upgrading to laptops. They
were concerned about new features but their purchase
decision was mostly influenced by brands. There were
a few elderly buyers who depended on the retailers recommendation and service assurance.
Currently, the biggest segment for laptops was the midlevel corporate executives. They used laptop extensively
for work and play and saw it as a way to climb the corporate ladder. Typically, they had been PC users in the
past and laptop was their second computer purchase.
They knew what they wanted and were seeking value
and not really price. The smallest segment in terms of
number of units was the senior executives, who usually
had the best machines, but used only the basic features

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and were least knowledgeable. For them, it was a fashionable accessory, a talking point and more of a status
symbol.
The manufacturers had not designed the product portfolio specifically targeting any defined consumer segment in the retail market. The products could be broadly
classified as two core product ranges basic models with
minimal features, and the other range at the mid-end
with good styling and advanced features. Sony and
Apple were premium brands having only high-end
products, which were aspired for by many but had limited number of buyers because of their high price. The
manufacturers tried to create a generalized brand pull
across the segments, but provided a bouquet of products and features to meet the specific needs of the diverse consumers.

COMPETITIVE MARKET STRATEGIES FOR LAPTOP

The major determinants of success in the market were
distribution and communication, as products were similar and were priced competitively. The market leaders
traditionally had a slightly higher price for products
which were high on features as compared to the competitors; this scenario had changed since 2008. One of
the characteristics which prompted the change was that
a company would launch a product with a feature advantage, but that would be copied by the competitors in
two months. In fact, so huge was the possibility of obsolescence that premium pricing was no more in vogue.
Distribution was an important element in the marketing mix. The established players in the Indian market
like HP and Lenovo had excellent distribution coverage. The newer brands were aggressively building their
distribution networks and were likely to have adequate
reach in another two years. HCL was in a unique position in that it had excellent distribution as far as desktops were concerned, though it was still building its
laptop distribution network. This was because HCL had
launched its own range of laptops in 2008 and the channel was being built up from that period. However, HCL
enjoyed the benefit that it could build its laptop channel
on the back of its widespread desktop channel.
Communication and brand building provided the opportunity for creating differentiation that was being explored by all the brands. Each had its own
communication and media strategy. Some of them had
HCL: FACING THE CHALLENGE OF THE LAPTOP MARKET

international campaigns while some created specific

campaigns only for the Indian market. All of them used
both advertising and sales promotion aggressively,
though media strategy in terms of the budgets allocated
in different media varied from brand to brand. Exhibit
15 gives a brief idea about the positioning planks used
by competitors.
Another determinant of success in the market was after sales service. With the growth in the unit sales and
geographical spread across more and more remote locations, this was becoming important. The importance
of service increased as more and more people were using the machines heavily and many problems often
cropped up because of the rough usage. Thus manufacturers were forced to beef up their service infrastructure by increasing service locations, offering online and
telephone-based service solutions, and thus become
more service-driven. HCL had an advantage of having
a huge service base in place, due to its longevity in the
market and the preeminence in desktops.

tail consumers. While internationally Dell was a value

player, in India, they focused on being a high end player
(not premium, but on par with HP/Lenovo). They also
created a retail distribution model in India (unlike their
internet-based model followed globally), as they realized that not many people in India currently bought
laptops through the online channel. Dells huge marketing spends, brand salience, good performance, international name, and improved retail distribution helped
it in building a good market share.
Acers 2009 strategy was multi-pronged, with initiatives
in product, price, promotion, and channel. What they
did was spend hugely in the market, have many product variants and a slightly discounted price, and many
promotional offers. They also roped in a very popular
film celebrity to endorse their product. Industry analysts attributed the growth in market share to the increased spends which leveraged the overall buoyancy
in the laptop market.

HCL traditionally had products at the lower end of the

spectrum, and they were priced lower, to the tune of 25 per cent, than the comparable products from the MNC
brands. In future, HCL wanted to have a presence in the
premium customer segments also, and were slated to
bring in a new range of products with good looks and
features in early 2010. By end 2009, the MNC brands
had also dropped their prices and so there was virtually
no perceptible price differential between the different
key brands. HCL needed to work out its core positioning and appeal in the marketplace. Thus far the communication done by HCL had been purely functional,
and the brand value had not been strongly established
in the consumers minds.

Initially, most retail consumers and enterprises bought

desktops as there was a huge price difference between
desktops and laptops. Desktops were seen almost like a
commodity and the decision-making was based on the
best specification that was offered by the various brands
for the lowest price. After-sales service also played a part
in the decision-making, but its importance was limited
because all the manufacturers were now able to give at
least an acceptable level of service. The desktop marketers faced a much bigger and relatively uncontrollable
challenge from the unorganized sector entrepreneurs.
These entrepreneurs assembled the desktops, and could
offer a price advantage to the tune of 30 per cent, thus
having a huge market share in the price-sensitive customer base. With an all-round reduction in prices for
the hardware segment, consumers had started moving
to branded desktops from the unorganized sector as the
price difference had come down to only 10 per cent in
the last year. There was simultaneously a huge movement from the desktops to laptops. Laptop buying was
based on various factors. While price, specifications, and
after-sales service played a significant role, brand value
was becoming an important factor for choice.

Dell had a strong offering in the enterprise segment as it

was perceived as having very functional and high performance products. It leveraged this functionality along
with its competitive pricing when it focused on the re-

A laptop was more visible to others and more personal

than the desktop and hence buyers were becoming conscious of the brand that they would prefer to carry. This
was also impacting the decision-making criteria of the

All manufacturers offered both desktops and laptops,

though their sales performance in these two markets was
normally very different from each other. In the desktop
category, the market was dominated by HCL and HP
and followed by all the other players in equal measure.
The laptop market was led by HP, with Dell and Acer
building their market shares through huge marketing
investments.

VIKALPA VOLUME 37 NO 1 JANUARY - MARCH 2012

117

enterprise segment they were not factoring in the

image connotation of the brands as the users carried
these machines with them to meetings outside the office. This shift was also helped by the fact that the top
brands were reducing their prices, and there was less
differential between them and the value brands for comparable products.

The Distribution Channel Dynamics

The predominant distribution model used in the industry was standard across the major players. The commercial segment was addressed directly or through a handful of national distributors, who were directly billed from
the company. The smaller business customers were
marketed by the distributors sales team but major clients were also supported by the sales team of the principal.
The retail segment had a three-tier distribution. The
manufacturer supplied to the national distributors. These
national distributors supplied to the regional distributors, who serviced the retailers; they in turn sold to the
end consumer. Since most of the retailers were multibrand, they were motivated to sell only specific brands
and kept switching loyalty. Some manufacturers circumvented the problem by opening their own model stores,
typically located in high traffic markets, but these stores
were essentially for publicity. These stores were staffed
by well-trained and dedicated employees who sold the
brand rather than just generating product sales. The consumers typically understood the product features and
got educated in the model stores. Many consumers learnt
about products and features on the Internet and also took
advice from some young people who were known as
experts on technology.
There were also influential retail chains which dealt with
the manufacturers directly like Tatas Chroma, Future
Groups Home Town, etc. These retail chains accounted
for about 15 per cent of the entire retail market and thus
enjoyed a lot of clout. The online store was another channel which offered limited business currently but was
expected to grow in the future. In addition, each manufacturer had its own service chain a few of them were
company-owned and others were franchised.
There was no major difference in the distribution channel for laptops and desktops. However, the differences
in business were driven by the fact that desktop market

118

was in the maturity phase while the laptop was still

growing. Also, the consumers of desktops were more
conscious about prices and robustness of the product
while laptop customers were product feature-driven and
brand-conscious.

Debate on Marketing Strategy

Ajai met the top executives in December 2009 to discuss
the 2010 strategy. The abridged organization structure
is given in Exhibit 16. The following discussion took
place:
Ajai You are aware that we need to take some key
decisions in the laptop market. I wanted to get your inputs on the approach we should take.
George Paul, Executive Vice President (EVP), Marketing I suggest we go in for some detailed market research before taking any decisions. We dont have
sufficient information to take a call. We should do qualitative research to understand consumer attitudes and
gap areas and then ratify it through some detailed quantitative research. We can then work out detailed operations, marketing and sales plans.
EVP, Sales Yes, but the market is not going to wait
for you, it might be too late then, said EVP, Sales,
Rajinder Kumar. Every one of the competitors knows
the situation and will have their plans ready. Dell and
Acer have already moved ahead and the others are not
going to wait any longer. Anyway, the good thing is
that our product/brand is considered as good as any
other product/brand, or so I understand from the field.
We should just blitz our way through with some high
decibel communication.
EVP, Marketing But what will we say in the communication? Thats one of the key deliverables of consumer
research.
EVP, Sales Say anything, how does it matter, as long
as you plug the brand. Have you seen the competitors
communication? They are pretty bland, though effective.
Ajai Before we get into what we say in our communication, we need to think about our approach to the market. What sort of investments do we make? Do we go
into this with a heavy investment, or should we be more
cautious in our approach?
HCL: FACING THE CHALLENGE OF THE LAPTOP MARKET

J V Ramamurthy, COO, said I think we need to be

cautious. There is no way by which we can jump from a
weak No. 6 to No. 1 anytime soon. We dont have anything that the competitor doesnt have, and I dont think
we should do a price war, that might make us lose brand
equity in the corporate segment as well.
Ajai So youre saying that we shouldnt go for the
retail segment?
COO No, we should launch, but pretty much stick to
what we say in the Enterprise segment The high quality, no nonsense laptop. We should focus on building
the channel and become strong there. We should highlight our service credentials and build it into our communication. (The value proposition of HCL for the
enterprise segment is given in Exhibit 17).
EVP, Sales I dont think we can get anything by being
cautious. We have to go all out; otherwise we dont stand
a chance. Dont forget that Dell and Acer have huge
marketing and promotion spends and we will not be
able to do much if we take a slow stance.
Ajai Whatever investments we make, we should think
about how we approach the market. JVR wants to look
at it as an extension of the Enterprise market as we already have a very good equity there.
EVP, Marketing I think that is one possible approach.
But the core segment that decides on laptops is the youth.
I am not sure that our Enterprise positioning would be
relevant to that audience.
EVP, Sales Why dont we focus on a specific segment
within the youth? Nobody is doing that. We could build
a strong appeal on one segment and build from there.
Dell initially focused on the Small and Medium Enterprise segment, built its credibility and thats got them
returns across the market.
EVP, Marketing That is worth looking at, certainly.
But which segment? The younger segment does not have
the ability to spend much money and the older segment
is not so involved in decision-making. We need to understand this more closely.
COO You are right Youll never get a second chance
to make the first impression.
Ajai Can we create some new features to launch in
the market? Something the competitors do not have?
VIKALPA VOLUME 37 NO 1 JANUARY - MARCH 2012

COO All features are reproducible real fast. You know

all laptops are made by 3-4 OEMs from Taiwan. But Im
sure there would be some features that the competitors
dont have or have not used yet.
EVP, Marketing But how do we choose the features?
For that we need some solid consumer research. Sorry
to sound like a stuck record
Ajai OK, let all of us put our thoughts together and
meet next week. We have to use our existing knowledge
and experience to take the decisions, and that should be
adequate to start. We do not have the time to wait for
the formal market research findings to take our initial
decision. However, if need be, in future, we may commission market research to help us tinker with the strategy. Well close the action plan then. Thanks for your
time.

DILEMMAS OF THE CEO

Ajai had a few thoughts on the way forward. He could
replicate the Dell and Acer models of intense consumer
advertising by building adequate retail support. However, given the high investment necessary for this strategy, he would be putting all his eggs in one basket. Also,
he was not convinced about the success of following a
competitors strategy.
Another course of action could be to focus on a particular segment and build leadership there. One possible
segment was the B2B space and HCL had high visibility
due to its preeminence in desktops. The challenge here
was that the B2B buyers were notoriously price-sensitive and not brand loyal. HCL would continue to be a
value player and this segment would always be a low
margin one.
Ajai believed that the HCL brand had to be made more
relevant and appealing to the audiences. He felt that a
budget of 600-800 million INR would be optimal for the
organization to spend on advertising and that would
not be sufficient to have an impact on the entire consumer base for laptops. However, if they focused on the
specific lucrative market segments, it could be adequate;
thus there was the need to focus on a specific segment.
One important segment was the youth segment in the
retail market they were the highest users of computers and also the most influential and knowledgeable.
They currently perceived HCL as an old-fashioned brand

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The economies of scale were very pronounced both for

laptops and desktops. Thus the cost of production could
vary between 70-75 per cent of the selling price depending on the economies of scale achieved in manufacturing. The typical distribution costs were around 12 per
cent and the internal sales and marketing overheads
were in the range of 7-9 per cent based on the companys
market share and intensity of competition. As a thumb
rule, in the laptop market, economies of scale started
operating after reaching a market share of 10 per cent,
and the impact was around 2 per cent of the selling price.
For every additional market share of 5 per cent, the incremental advantage of economies of scale was 2 per
cent of the selling price. This effect was not really observable after reaching a market share of 30 per cent.
Also, the average selling price of the laptop was expected
to fall by 10 per cent year on year due to improvement
in technology and intense competition. The key challenge was to assess the impact that the rapid changes in
the market and strategic marketing shift could have on
the financial results.

and were more enamoured by the MNC brands. Also,

they could not afford to pay much; and so, most of them
purchased the entry level products.
There was also scope for learning from the mobile market. Since HCL was a distributor for Nokia mobile handsets, some insights from that market were available. The
mobile market was a high decibel market, which had
achieved huge penetration among Indian consumers. It
was focused on good product innovation, and price delivery. Service was turning out to be important and various segments were being created. Ajai reflected on this
category and on whether any points from this could be
applied for laptops. The problem was that the price of
the mobiles was considerably lesser which facilitated
adoption; also the category was entirely different from
the consumers expectation point of view.
In the mobile handset market, it was important that the
product delivered on the promised features. Most of the
consumers were not very technology-savvy; they only
knew certain basic features and hence just looked for
them. Hence a robust product design solved the product aspects quite well. Communication and marketing
would get the customers into the store, but unless the
product looked good and attracted customers, the sale
would not happen. A lot of purchase decisions changed
at the showroom; so, it was important that the distribution was enthused and well rewarded for the products.
This would put pressure on margins and that factor
needed to be looked at very carefully. In laptops, the
situation was quite different. The consumers were quite
technology-savvy and were expected to play with it and
use it in different ways. The experience hence could be
quite varied and difficult to manage.

It was also important that the after-sales service be good.

Laptops were a high-use category and needed good support service. It is one of the hygiene considerations for
consumers. Delivering good service also had an impact
on the margins due to the travel cost incurred for geographical coverage and for paying salary to a large number of trained service people. HCL was, however, in a
better position here due to its extended desktop service
and support staff, which could also service laptops at
no extra cost.
Ajai wanted to work out the numbers to be sure that his
marketing strategy and budgets were prudent.

Exhibit 1: Desktop Sales in India (in Units)

5,525,992

1,000,000

5,279,648

2,000,000

5,522,167

3,000,000

3,632,619

4,000,000

4,614,724

5,000,000

5,490,591

6,000,000

2006-07

2007-08

2008-09

2009-10

0
2004-05

2005-06

Source: IMRB Data.

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HCL: FACING THE CHALLENGE OF THE LAPTOP MARKET

Exhibit 2: Laptop Sales in India (in Units)

Source: IMRB Data.

Exhibit 3: Desktop and Laptop Sales Projection over 5 Years (in Units)
2009

2010

2011

2012

2013

2014

Consumer Desktop

1818,577

1863,476

1940,234

2035,166

2115,186

2168,819

Commercial Desktop

3389,476

4151,400

4570,582

4881,080

5172,600

5471,001

Total Desktop

5208,053

6014,876

6510,816

6916,246

7287,786

7639,820

Consumer Laptop

1292,013

2047,966

2657,145

3404,915

4290,879

5382,180

Commercial Laptop

1104,987

1452,642

1903,559

2438,754

3075,711

3809,661

Total Laptop

2397,000

3500,608

4560,704

5843,669

7366,590

9191,841

Source: IDC.

Exhibit 4: Percentage Sales of Indian, MNC, and Informal Sector in Desktop Market
Year

India

MNC Informal

2005-06

33

35

28

2006-07

32

39

23

2007-08

23

45

22

2008-09

25

51

18

2009-10

31

52

21

Source: IMRB Data

VIKALPA VOLUME 37 NO 1 JANUARY - MARCH 2012

121

Exhibit 5: HCL Infosystems Snapshot

Ajai Chowdhry
Chairman & CEO
HCL Infosystems

Services Footprint
Internet and
related services
4%

Computer
systems
26%

Telecom
and office
automation
70%

Largest manufacturer of PCs

State-of-the-art manufacturing for PCs, business servers,
workstations, colour monitors, etc.

Leading System Integration organization

Pan-India SI solution provider in verticals like Power, Telecom,
E-governance, Railways, Retail, BFSI, Media & Entertainment,
Health, Infrastructure, Education, etc.

Revenue: USD 2.6 Bn

Largest ICT distribution and retail Network

93,000 outlets, covering 11,000 towns
Largest pool of trained manpower handling 2.5 million
support incidents per annum
Support base of over 3 million assets in 75,000+ sites
1,200+ support locations coverage by team of 5,000+
engineers

Emerging businesses
HCL CDC - centres to bridge skilled manpower gap which
exists in the IT industry
HCL Security - to make the world a much safer place to be
in with its range of state-of-the-art end-to-end technology
solutions for security and surveillance

Ranked Best IT Employer in India by DataQuest - Sep 2009

Source: Company Brochures.

Exhibit 6: HCL Infosystems Abridged Financial Results (in INR million)

FY 2008-09

FY 2009-10

34,139
88,749
461
-821
122,528

35,340
85,290
767
-898
120,499

4,057
1,773
2,462
-178
3,513
2,400

3,925
1,904
2,159
-138
3,513
2,424

SALES
Computer Systems & Other Related Products and Services (Net)
Telecommunication & Office Automation
Internet & Related Services
Less Inter segment revenue
Total Sales
PROFITS
Net Profit/Loss before Tax and Interest
Computer Systems & Other Related Products and Services (Net)
Telecommunication & Office Automation
Internet & Related Services
Total Profit before Tax
Net Profit after Tax
Source: Annual Reports.

Exhibit 7: Desktop Market Shares (2007-09)

2007
Desktops
Hewlett-Packard
HCL
Dell
Lenovo
Acer
Wipro
Others
Total

2008

2009

Units

Market Share

Units

Market Share

Units

Market Share

757,415
724,830
302,091
386,089
263,711
158,770
2135,132
4728,038

16.02
15.33
6.39
8.17
5.58
3.36
45.16
100.00

727,073
660,113
339,990
296,309
317,611
182,660
3058,351
5582,107

13.03
11.83
6.09
5.31
5.69
3.27
54.79
100.00

642,792
550,689
288,701
211,792
359,623
163,655
2990,794
5208,046

12.34
10.57
5.54
4.07
6.91
3.14
57.43
100.00

Source: IDC Estimates.

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HCL: FACING THE CHALLENGE OF THE LAPTOP MARKET

Exhibit 8 Desktop Sales: City Spread

Spread of DESKTOP Sales in % of Annual Sales
Next 4

Rest of India

2004-05

Year

Top 4
38

11

51

2005-06

33

13

54

2006-07

32

60

2007-08

23

12

65

2008-09

25

68

2009-10

31

61

Source: IMRB Data.

Exhibit 9: Laptop Market Shares 2007-09

2007
Laptops

2008

2009

Units

Market Share

Units

Market Share

Units

HCL

131,683

7.44

161,088

6.96

292,785

Market Share
7.17

Hewlett-Packard

651,386

36.79

714,397

30.86

1,365,851

33.43

Lenovo

283,184

16

302,398

13.06

585,611

14.33

Acer

182,811

10.33

312,158

13.48

494,993

12.12

Dell

137,070

7.74

380,118

16.42

517,212

12.66

Toshiba

108,625

6.14

83,473

3.61

192,108

4.70

Sony

49,982

2.82

91,020

3.93

141,009

3.45

Others

225,588

12.74

270,562

11.69

496,174

12.14

Total

1770,329

100

2315,214

100

4,085,743

100

Source: IDC Estimates.

Exhibit 10: Laptop Sales: City Spread

Spread of LAPTOP Sales in % of Annual Sales
Year

Top 4

Next 4

Rest of India

Total

10

43

100

36

58

100

24

69

100

2008-09

18

75

100

2009-10

68

29

100

2005-06

47

2006-07
2007-08

Source: IMRB Data.

Exhibit 11: Features of Important Brands

HP

Dell

Display

Bright view
and flush glass

True life for clear

and bright view

Keyboard

Spill proof and

backlit (option)

Backlit (optional)
and spill proof

Spill proof

Security (against
unauthorized
booting)

Finger print
and spare key

Finger print
and password

Finger print
Veriface and
and password finger print

VIKALPA VOLUME 37 NO 1 JANUARY - MARCH 2012

Acer

Lenovo

HCL

Sony

Vibrant view

Perfect technology
for clear and
bright display

Spill proof and

backlit (option)

Isolated

Isolated,
backlit and
spill proof

Finger print
and password

Finger print
and password

123

Exhibit 11 (contd.)
HP

Dell

Acer

Lenovo

HCL

Sony

Data Safety
(Encryption)

TPM and
TPM
Privacy Manager

TPM

TPM

HCL Encryption
S/W and TPM

TPM

Data Recovery
against OS
Corruption,
Virus Attack, etc.

HP Recovery
Manager

Acer eRecovery
S/W

ThinkPad
restore
recovery

HCL EC2

Sony
Recovery
S/W

Dell Ultimate

Source: Internal Reports.

Exhibit 12: Advertising Spends

(INR million)
Advertisers
HP
HCL

2008

2009

130

470

10

140

Compaq

150

210

Sony

150

340

Toshiba
Dell
Wipro

90

200

500

1,150

20

Acer

120

250

Lenovo

230

150

Samsung

80

80

LG

50

Apple

30

Others

100

70

1,640

3,080

Grand Total
Source: Agency Estimates.

Exhibit 13: Desktop Sales in Different Segments

Source: IMRB Data.

124

HCL: FACING THE CHALLENGE OF THE LAPTOP MARKET

Exhibit 14: Laptop Sales in Different Segments

Source: IMRB Data.

Exhibit 15: Communication Strategy

Brand

Positioning

Communication Theme

Dell

Partner in Success

Take Your Own Path

HP

Innovator

Personal Again

Acer

Solution Provider

Life is Busy, Acer Makes it Easy

Compaq

Enabler of Mobile Computing

Get Going

Lenovo

Feature Rich

New World, New Thinking

Toshiba

Performance

Feel Quality, Feel Toshiba

Sony

Design / Aesthetics

Closer to You

Source: Advertising Agency Analysis.

Exhibit 16: Simplified Organization Structure

Source: Company Reports.

VIKALPA VOLUME 37 NO 1 JANUARY - MARCH 2012

125

Exhibit 17: HCL Value Proposition of the Enterprise Segment

Category: Corporate/SMB
1. Magnesium/Alumnium surface
2. Spill resistant keyboards
3. Latest technology and architecture

Category: Govt
1. Docking port
2. Battery life more than 4 hrs in working condition
3. Linux support

Category: Education
Category: BFSI

Feature

1. Basic computing device at good price

2. Linux support
3. Battery life more than 4 hrs

1.
2.
3.
4.

High Resolution Camera and Speakers

Sleek but not small display
Higher HDD and Memory
Colour/Design

Looks/Brand
Source: Company Documents.

Jaydeep Mukherjee is an Associate Professor at the Management Development Institute, Gurgaon. He completed his Ph.D
from IIT Kharagpur and PGDM from IIM Calcutta. Before joining academia, he had worked in various capacities in the sales
and marketing function of Godrej GE Appliances ICI India
Limited, and Aristocrat Marketing Limited for a decade. He
offers electives in Product Management, Marketing in the Virtual World, Marketing Strategy, and Sales and Distribution.
He advises HCL Infosystems Limited on their New Product
initiatives and has conducted customized training for executives from Nestle, HP, HMT, BSNL, etc. He takes keen interest
in developing cases from the Indian context for classroom
teaching.

Mahalingam Sundararajan is Vice President, Corporate Strategy - HCL and leads the brand building activities of HCL across
the Enterprise. He also spearheads the marketing activities of
the various initiatives of the Shiv Nadar Foundation. He has
worked for over 20 years in various roles in technology marketing and advertising. Prior to HCL, he has worked with
Microsoft and Hexaware Technologies. He has also worked
for eight years in strategy planning with advertising agency
JWT. Sundar has a degree in Chemical Engineering from IT
BHU, Varanasi and a PGDM from IIM, Bangalore. His interests include sports and fitness.
e-mail: mahalingams@hcl.com

e-mail: jmukherjee@mdi.ac.in

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HCL: FACING THE CHALLENGE OF THE LAPTOP MARKET

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