Branding key to Sony Ericsson growth plan

Sony Ericsson has succeeded in creating a compelling mobile handset portfolio that leverages the technical capabilities and brand heritage of its parent joint venture partners. Michael Thorne reports.

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By  Michael Thorne Published  August 13, 2006

|~|assi200.gif|~|Sony Ericsson general manager Middle East and Africa, Husni Al Assi, pictured holding one of the company’s new Cybershot camera phones.|~|In the booming worldwide market for mobile phone handsets and accessories, the technology gap separating mid-end handsets from top-end models is narrowing as manufacturers seek to bring high-tech features to a wider consumer base. With an increasingly liberalised regional telecommunications sector that is boosting cellular subscriptions and a transient labour force with high disposable incomes, the Middle East presents a lucrative market for handset vendors such as Sony Ericsson. The company has successfully fused innovative technology and core brand competencies to develop cellular products that are achieving significant business across the region, but particularly in the countries of the GCC. Sony Ericsson was established as a joint venture by handset manufacturer Ericsson and consumer electronics giant Sony in October 2001. Sony Ericsson general manager, MEA, Husni Al Assi claims the combination of each company’s core competencies provides the joint venture with clear advantages over its competitors in the handset market. With digital cameras and MP3 players fast becoming ubiquitous handset features, Sony Ericsson’s recent launch of its Cybershot and Walkman handset ranges can be seen as a direct attempt to tap the brand heritage forged by Sony in both markets respectively. “Both companies’ strengths are complementary; Ericsson is a leader in telecom infrastructure while Sony is a leader in the consumer electronics sector,” claims Al Assi. Al Assi describes the Middle East as one of Sony Ericsson’s key global markets in terms of sales growth potential, citing the dynamic nature of the regional retail sector and a consumer demographic flush with purchasing power. “The Middle East and Africa combined is one of the fastest growing regions in the world in terms of mobile subscription rates,” Al Assi explains. “Subsequently, the region has grown in commercial importance internationally. In an effort to tap this, we have expanded our marketing activities and are working more closely with channel partners in an effort to achieve a result.” Al Assi cites the company’s key growth markets as Saudi Arabia, Iran, Egypt, Algeria and Nigeria – the bulk of which are serviced by Sony Ericsson’s regional headquarters in Dubai. “The demand for mobile products is booming in most countries in the Middle East, especially as competition arises between operators as a result of increased cellular market liberalisation. We have achieved significant success in Saudi Arabia, UAE, Morocco, Algeria, Nigeria and South Africa.” Sony Ericsson recently established offices in Saudi Arabia and Algeria in a bid to better service both markets. “Our market share in the Middle East and Africa is growing rapidly – faster than our average rate of growth worldwide. Our core strengths lie in the features and technological specifications of our phones and the effective distribution and marketing strategies we employ as a corporation.” Al Assi explains that Sony Ericsson employs multiple distributors in most countries across the region, each of which work with the company on a non-exclusive basis. “These distributors deal with the retailers and resellers in each market. We support them with advertising and marketing and they manage our local activities. Many of the distributors also boast a retail presence themselves,” he says. “The mobile phone retail business is developing rapidly across the Middle East, particularly in countries such as Saudi Arabia. We are increasingly attracting interest from mainstream electronics stores looking to carry our Cybershot or Walkman handset ranges, thanks to the brand recognition in the consumer sector.” Al Assi explains that the Cybershot range of handsets boast features that have yet to be incorporated in Sony’s digital camera range. A key highlight in this respect is the ‘best pic’ feature, which works by taking a salvo of images whenever a user takes a photo, giving them an option of nine shots from which they can select the best one. As a user presses the trigger the camera takes four photos before the click, all in 3.2-megapixel quality. ||**||Broad product range|~|Bluetooth-Headset.gif|~|Sony Ericsson is expanding its range of mobile accessories, including its Bluetooth headsets. |~|Al Assi also cites the booming demand for low-cost handsets in the Middle East and Africa as key to the company’s growth strategy in both territories. “We are keen to expand our presence in the entry level sector by providing quality products with high feature specifications at affordable prices,” he says. In terms of premium handsets, Al Assi says demand for the company’s smartphones is also booming, with many consumers in the Middle East demanding premium products that can be used as business tools. “It’s a very important segment as 3G services become more widely available and the benefits become obvious to every day consumers as well as business people,” Al Assi says. “It is also becoming increasingly cost-effective to subscribe to GPRS and 3G services. Connectivity is key to the modern lifestyle on both a business and personal level, we feel that our products help to facilitate this.” Al Assi says Sony Ericsson’s P910 smartphone has generated strong sales for the company in the Middle East, and expects the forthcoming P990 to achieve similar success when it is released later this year. “We have had pre-booked orders from our retail distribution partners, several months before the products will even be launched on the market,” he says. When it comes to retail, Al Assi explains that Sony Ericsson works closely with its channel partners to ensure that each product launch is supported with the appropriate marketing strategy and after sales support. “In general, we make our entire portfolio available to all of our customers,” Al Assi explains. “We work on the forecasts in conjunction with them and we launch most of the products in all the countries we service. “We do have agreements at times with specific customers in specific markets for a window of exclusivity on a product, colour or a specific product segment – especially when we are launching a new handset and there may be limited availability of stock. “It’s important that distributors know what they’re getting into when they deal with us. There are a lot of distributors who are more interested in [grey market] trade, which is fine – it’s a business model – but then you have those who want to be authorised distributors. “We provide this latter sector with premium products and services before they’re available through secondary channels. We offer marketing services, terms and conditions such as price protection and after-sales support. “As products become more advanced the market expands for peripheral products and services, which we also offer. We also provide marketing support when we launch products with those customers.” Similarly to others in the Middle East mobile channel sector, Al Assi says that the grey market challenges the company’s channel management and relationships with its authorised distributors in certain markets. “Within our authorised distribution channel we nullify the impact of the grey market via day-to-day contact with our partners. We work continuously to avoid any conflict between authorised distributors through improper means, such as the grey market. It is in the contract that an authorised distributor cannot intentionally sell into another market, other than the one it has been assigned. “Each model in our handset range is Arabic, French and Farsi-language capable. We can also customise the handsets to meet specific requests from operators. In this way, we are working to nullify the impact of parallel imports and the grey market in the Middle East. “However, in general, grey market activities present a challenge to the mobile handset sector, due to the fact that many traders still view handsets as a commodity item. “There is also an added risk when trading on the grey market that products may include counterfeit accessories. Unfortunately a lot of traders view such trade as an easy opportunity to make money.” Al Assi believes the impact of grey market trade in the Middle East is gradually diminishing as a result of the more advanced nature and shorter product cycles of handsets in general. “The whole trade business is changing,” Al Assi explains. “If we’d discussed this a couple of years ago I would have told you it [the grey market] represented a potential disaster for the industry. Products are becoming more sophisticated and it’s not as easy for traders to source handsets from international markets. “There are warranty issues, software applications and the usage of that product, which may be tailored to specific markets – these issues didn’t exist when mobile phones were simpler. In addition, many former grey market traders have become authorised distributors – especially the professional and growing companies – because they saw the benefit of working with manufacturers, guaranteeing them a more stable and sustainable environment within which to grow their business. “We are also now more active and quick in responding to market fluctuations, more products are coming more frequently and the dynamic nature of the market is also making it more difficult to trade, have stocks and keep up – all of these things have reduced the impact of the grey market. “We are in a fast paced industry and we are growing faster than the average market growth. We are launching additional products, and we plan to further customise our range with a view to entering new markets such as Yemen, Kenya, Tanzania and Uganda. We are strengthening our presence in the Gulf and Levant markets as well.”||**||

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