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Walton's 'Made In Bangladesh' phone, Walton’s Moats, And Why Walton Is A Hugely Underrated Company

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Dec 18, 2017

Walton, the homegrown consumer tech manufacturing giant, has done something incredible last week, it has launched first ever locally manufactured smartphone in Bangladesh.

The phone, call Primo E8i, carries the tag Made in Bangladesh and is now available in the market through Walton’s distribution network. It was manufactured at the mobile phone plant of Walton Digi-Tech Industries Ltd in Chandra, Gazipur.

Take a look at the specs of the phone which is priced at 3500 taka:

  • The phone runs on Android Marshmallow and a 1700 mAh Li-ion battery.
  • 3G-enabled and supports dual SIM
  • Available in three colors: Black, Glossy Golden, and Coffee.
  • The 4.5-inch Primo E8i features a 1.2 GHz Quad Core Processor, Mali-400 GPU, 512 megabytes of RAM with
  • 8-gigabyte internal storage expandable up to 32 gigabytes.
  • Has a 5MP rear camera with LED flash and a 2MP front camera for selfies.

Walton organized a relatively small launch party that too at a community center in Gazipur on December 10 and then sent out a press release about the launch. This is an important point, please note as we move forward.

I would argue that this is one of the most important events for consumer technology industry in Bangladesh and honestly, I expected way more fanfare. The event certainly deserves more attention than it was given by the local media outlets as well as by the Walton.

Despite the relatively low key launch event, it does not reduce the importance of the event. It remains a critical juncture for the consumer tech market in Dhaka as well as for Walton.

Understanding Walton

From A Brief History Of Walton ( a relatively long excerpt, please bear with me):

“It is hard to come by any tech products manufacturers in Bangladesh. Historically, we used to consume imported goods. However, Walton is one of the few exceptions that successfully made its transition from an importer to a manufacturer.

Over the years, the company has outgrown many of its local contemporaries. While growing its existing portfolios, the company has also successfully expanded into new domains including mobile, home appliances and more.

It has also shown a healthy sense of tenacity and ingenuity. In an interview with the Daily Star, SM Mahbubul Alam, a director of Walton Group said that the company takes innovation and R&D quite seriously and is investing heavily in both areas. “We have already realized that R&D would be the only weapon for us,” said Alam, “if we want to sustain our run in the market.”

1. Walton started its journey in 1997. It used to import black-and-white television and distribute in the local market.

2. Walton, like all major local conglomerates in Bangladesh, is largely a family business run by four brothers.

3. Walton Hi-tech Industries was set up in 2006 but it did not start manufacturing right away.

4. Instead, it started assembling products, TV sets, motorcycles etc. The company used to import parts from China and do light assembling in Bangladesh.

5. It did not have any manufacturing operation in Bangladesh until 2010.

6. It started with manufacturing motorcycles and refrigerators and then air conditioner.

7. Walton controls 80 percent of the local refrigerator market in terms of unit sales.

8. It controls 30 percent share in the local television market.”

Walton’s a relatively late entrant to the mobile phone market in Bangladesh. When it entered the market, it originally started with the low-end feature phone.

Although it could not translate its flying success in refrigerator and television market into the mobile phone, it has managed to build a solid operation.

In fact, along with another local brand Symphony, Walton has been leading the mobile handset market in Bangladesh.

According to research firm IDC, the company controls 10% of smartphone market in Bangladesh while Symphony has a market share of 28% up until second quarter of 2017. While both companies dominate the mobile handset market, their market share is eroding fast.

In the last one year, both companies lost significant market share to new players, particularly Chinese companies, and combined smartphone market share of two companies came down to 39% in 2017H1 from 55% in same period of 2016.

Bangladesh is the 6th largest mobile handset market in the world (IDC). Although feature phone continues to dominate the market, smartphone category is growing fast which now dominates 25% of the overall phone market.

Walton’s move is critical for several reasons. The company has been experiencing a consistent growth in the market. However, in the smartphone category, up until now, it had no leverage.

Then came the regulatory changes where Bangladesh government slashed the customs duty on electronic components to 1% which was 10-25% before. At the same time, doubled the customs duty on completely built units (CBU) from previously 5% to 10% offering a significant tax benefit to local manufacturers.

While a host of other smartphone brands such as Symphony, Huawei, Transsion announced that they would manufacture locally, Walton made the first move. It established a factory in October this year and within a few months launched a phone in the market.

There are other technical issues that you have already figured I suspect but broadly this was a bold move and Walton will enjoy the advantage going forward.

Walton’s success and a different strategy

As I noted above, Walton started its journey in 1997 as an importer and distributor of black-and-white television. It established a hi-tech park in 2006 and then started assembling products locally in 2010. It quickly became the market leader in a host of consumer electronics product categories including Refrigerator and a few others.

While we have a handful of successful local consumer tech companies, I would argue that Walton has always tried to chart a different path. It has consistently worked hard to position its products as made in Bangladesh.

It has invested in manufacturing, brand building and building a nation-wide distribution network.

It has positioned itself very differently than any other players in the same market, albeit there is room for improvements and they company should investment more in brand, and it has shown courage to invest in R&D. As I quoted SM Mahbubul Alam, a director of Walton Group above, saying that Walton takes innovation and R&D quite seriously and is investing heavily in both areas. “We have already realized that R&D would be the only weapon for us,” said Alam, “if we want to sustain our run in the market.”

This is a very powerful statement and I bet the company is aware of what it is doing.

This strategy has helped Walton sustain its growth and I would argue that these steps will help the brand in the coming days to retain and grow its business even further.

Consumer technology is a competitive market. Being a fast growing market, competition has been intensifying in Dhaka’s mobile handset market over the past several years.

I’m particularly interested in Walton because of this reality. I suspect that Walton has made some conscious decisions over the past years that will help it fend off competition in a market where going out of business is a pretty common thing.

Competition in Mobile handset market in Dhaka

From Symphony, Disruptive Innovation, Poor Man’s Phone and Symphony’s Future:

“Over the past few years, mobile handset market has changed in many ways 1) the rise of a new middle class with growing purchasing power that craves status even when they are price sensitive 2) A host of new competitors entered the market with competitive pricing and more aggressive strategies

These two changes will have a significant impact on Symphony’s business in the coming years.

In the opening example of our struggle with dealing with startups and SMEs and low-end clients is applicable in the case of Symphony that these low-end buyers are commonly not loyal in nature unless you can manage to build a cult following and they will go for another more recognized brand if they can afford or go for cheaper one if it is available in the market which is increasingly becoming the case due to the growing competition.”

Competition in Dhaka’s mobile market is growing rapidly, as I already mentioned. A host of Chinese brands is increasingly applying aggressive strategies to quickly gain market share. It can safely be predicted that competition will intensify in the coming years as more brands enter the market. Just last week we saw a new brand entering the mobile handset market.

This is an expected development given the size of the opportunity mobile phone market offers in Bangladesh. As I noted above, Bangladesh is the 6th largest mobile phone market in the world.

This warrants for a new kind of strategy from brands that want to capture market share and retain it. I would argue that building strong and wide competitive moats around brands will be increasingly important in the consumer tech market and I would also argue that Walton is best positioned among all the brands, not only local ones, as far as moats are concerned.

Walton’s moats

This is the point why I argued at the beginning of this piece that Walton’s launch of locally manufactured smartphone should have given much more attention. And this is why this is such an important move for Walton.

Every great business invariably builds competitive moats around its business. This is where Symphony is struggling today.

To give you a contextual understanding, again from Symphony, Disruptive Innovation, Poor Man’s Phone and Symphony’s Future:

“Symphony has built a great business. The company is doing very well even these days in terms of number. However, the challenges it faces today are around sustaining this success.

While Symphony has built a great business, it has equally failed to build a loyal fan base which Apple has or Oneplus has or even Xiaomi has, meaning Symphony’s competitive vulnerability is quite high.

Similarly, the company did a subpar job in building a high-end phone category that could significantly improve its profitability as well as improve its image in the market helping it retain its leadership in the low-end category by giving it a positing boost.

While it has been trying to do exactly that with Helio phone series for a while now, it seems the company has already wasted some crucial time.”

This is where Walton is different and I think the company is better positioned. Walton has consciously invested in building a brand image and this is exactly why I was surprised to see Walton launched its first locally manufactured phone without much fanfare. I would even argue that this was a wasted opportunity for the brand.

Walton has a long way to go, there is no denying to that. But I would like to argue that it has laid the foundation out well.

Now if you look at this smartphone manufacturing move of Walton, it genuinely impresses me how aggressive the company is about building moats to sustain its success.

While time will say how this move helps Walton in the coming years, I suspect this move alone will enable it to have a significant advantage over competitors in the market, both in the short term as well as in the long term.

What is a moat and why it is important?

From Warren Buffet:

“In business, I look for economic castles protected by unbreachable ‘moats’.”

The idea of moat came from the old days when a castle was protected by moats that circled it. The wider the moat was the protected the castle was against attacks of enemies.

If you are a modest student of history you know how importantly kings and military minds of the past treated a moat.

For a business, it is the same. Moats protects your business from competition and changes in the market and ensure sustainable profits.

Again from Buffet to give you further contextual understanding:

“So we think in terms of that moat and the ability to keep its width and its impossibility of being crossed as the primary criterion of a great business. And we tell our managers we want the moat widened every year. That doesn't necessarily mean the profit will be more this year than it was last year because it won't be sometimes. However, if the moat is widened every year, the business will do very well. When we see a moat that's tenuous in any way — it's just too risky. We don't know how to evaluate that. And, therefore, we leave it alone. We think that all of our businesses — or virtually all of our businesses — have pretty darned good moats.”

Traditionally, moats are of a handful of types: 1) scale - for GP or Pathao or Android as operating system scale is a moat because it makes it difficult for competitors to compete for 2) network effect - that is also tied to scale and the product has to be something that unleashes network effect i.e. a social network, a mobile network even 3) IP - if you have a patent for an advanced phone that’s it 4) brand and loyalty - being a reader of this site you already know what it is 5) high switching cost - for instance, to some extent a mobile phone number and there are a few others as well

For instance, the scale is really not a moat for businesses like Walton or Symphony as well as network effect or switching cost because there is no network at the first place and if you don’t like a phone brand, you buy a different one next time.

However, for Walton and Symphony, brand image and customers loyalty is an effective moat and at the same time any regulatory advantage that you can use in favor of building your brand.

This is exactly what I have noted above in favor of Walton. It has created an acceptance in the market, more work needs to be done there, but it has started off well. And it has taken the regulatory advantage that would give huge tax benefits before every other player which will give it at least price competitiveness in the short term and expertise competitiveness, in the long run, let’s not think about price competitiveness and other things.

Now if we note a couple of moats that Walton has at its disposal that would be:

  • It has invested in building a local brand image. I don’t deny that it will have to work more in order to cement its image further but it has at least started the work and progressed. I would argue the company should particularly focus on building a loyal fan base for its smartphone category
  • First local manufacturer. Now that it is manufacturing smartphone locally it is enjoying apparent tax benefits, labor cost, as I mentioned, that’s simple, which should enable the company to have a price competitiveness in the market. At the same, manufacturing, with all the challenges of it, in Bangladesh should prove a long-term advantage for the company because by the time other brands start manufacturing locally it would have significant expertise at its disposal.
  • Now if Walton can use number 02 moats to its advantage and build a loyal fan base on top of it. It is done for now. However, it has to work harder to widen its moats.

I suspect Walton understands this reality and it will further invest in building its brand not only in the form of tradition TVC and promotion dependent brand but in building a true fan base, at least for its smartphone category. It can certainly borrow Xiaomi or Oneplus playbook.

I think this new move puts Walton in a unique position and makes it a very interesting company to watch. I would look forward to seeing how they utilize it in the near future.


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Ruhul Kader is a technology and business analyst based in Dhaka, Bangladesh. He is also the co-founder and CEO of Future Startup and author of Rethinking Failure: A short guide to living an entrepreneurial life. He writes about internet business, strategy, technology, technology policy, and society. He can be reached at ruhul@futurestartup.com

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