Xiaomi Considers Expansion into the Indian Smartphone Market - Case Study Example

Xiaomi Considers Expansion into the Indian Smartphone Market Name Institution Course Instructor Date Xiaomi Considers Expansion into the Indian Smartphone Market Background In 2010, Lei Jun created Xiaomi Tech, a Beijing-based limited liability company specialized in production and marketing of Smartphone devices. It consists of highly talented staff members who previously worked in well-established companies such as Kingsoft, Microsoft and Google, among others. The company focuses on developing Android softwares with regards to Apple software developments for Smartphones and mobile internet operations (Kelleher 2013, p.1). In a period of four year since its inception, the company has risen to become the third largest seller of Smartphones in China behind the market leaders Samsung, Huawei and Lenovo. With such tremendous growth, it is ranked as the sixth largest mobile company in the world. Using the Xiaomi Tech case study as the basis of understanding the company and complementing this understanding with further research form extensive library resources; this paper seeks to present an analytical discussion as to how appropriate the Indian market is for the launch of Xiaomi Smartphone (s). It will achieve its objective by applying academic theory and models to the discussion, and illustrating an understanding of the models by applying them to the Xiaomi Company and analysing the findings. Porter’s value chain framework The company is faring well based on its competitive market advantage in China. It is evident that the company’s organizational structure plays an important role in its continuous expansion. Based on Porter’s value chain framework, Xiaomi Tech’s organization structure is made up systems and sub-systems operating in an interlinked network to produce unique mobile phone devices (“Porter's Value Chain: Understanding How Value is Created within Organizations” 2015, p.1). The systems and sub-systems are characterized by different inputs, processes and outputs. Due to the company’s effective management of its value chain framework activities, it is able to operate at low costs while maintaining high profit margins. Primarily, the company’s inbound logistics include trustworthy suppliers such as Taiwan’s Media Trek that provides affordable and high quality softwares. The same applies to the supply of hardwares for the company’s Smartphones and other wearable devices. Also, the company maintains its operations at low cost, upgrades the Smartphones’ softwares on a weekly basis based on consumers feedback, markets Smartphones via online and social media platforms, and finally, provides after sell services such as delivery of new Smartphones’ packages (Nunes & Downes 2014, p.1). Secondarily, the company relies on constant technological advancements, highly competent human resource, reliable organizational infrastructure and effective procurement services in production process compared to the secondary frameworks used by competing companies. Porter’s generic competitive strategy It is evident that the company’s low operation cost is the main contributor to its significant growth for the past four years. This means that the cost incurred by the company in production and marketing is lower than that of other competing companies (Wang & He 2014, p.115). That is why Xiaomi Tech’s Smartphones are not only less costly, but also profitable to the company. In this regard, despite the Smartphones low prices, the company still accrues high profits from Smartphones’ massive sales. With regards to Porter’s generic competitive strategy, the low operation cost remains the company’s long term competitive advantage strategy (“Porter's Generic Strategies: Choosing Your Route to Success” 2015, p.1). Xiaomi Tech’s profitability is above average in the mobile industry, which makes the company to concentrate on cost leadership, differentiation and focus strategies. In cost leadership, Xiaomi Tech exploits proprietary technology, affordable raw materials and economies of scale to control Smartphone prices in the Chinese mobile phone industry. In terms of differentiation, it sets its mobile phone technology apart from the others and provides a weekly upgrade of its Smartphones’ softwares. The differentiation uniqueness of Xiaomi Tech attracts and retains specific Smartphone consumers, especially middle class income earners. It is important to note that the China is highly populated with middle class income earners, who are increasing by each day. SWOT analysis summary In summary, Xiaomi Tech derives its strength from competent and motivated workforce, existing Smartphones’ sales and distribution channels, high profitability margins and qualified business products (Nunes & Downes 2014, p.1). Moreover, by exploiting its strengths, it creates new opportunities such as normalization of income returns and penetration of new national and global markets. However, Xiaomi Tech still faces competition weaknesses from well-established companies such as Samsung, Huawei and Lenovo. As such, the competing companies can lower their prices in the near future, which can affect Xiaomi Tech’s competitive advantage in profitability margins. Finally, the company faces threats from strict government-directed business regulations, escalating interests’ rates and unpredictable price changes of Smartphones. BRICs markets The strategies employed by Xiaomi Tech in producing and marketing Smartphones are applicable in Brazil, Russia, India, China, and to some extend South Africa (BRICs) mobile markets. This means that BRICs markets possess similar developmental stage characteristics. In other words, BRICs markets are new highly developed economic countries, characterized with a high population of middle class income earners. It is important to note that the middle class income earners tend to purchase affordable technologically advanced products (Schiavenza 2013, p.1). Also, middle class income earners are not only enthusiastic to try emerging products; they are also highly exposed to internet services. Basing on the aforementioned reasons, Xiaomi Tech produces highly advanced Smartphones that rivals those produced by well-established global companies such as Apple, but at an affordable price that suits the expectations of middle class income earners (Nunes & Downes 2014, p.1). Also, the company uses online marketing strategy to reach a high number of Smartphone consumers. Many middle class income earners are accessible to internet services and are frequent users of social media platforms. It is not only easier and inexpensive to market Smartphones via internet services and social media platforms, but also effective and reliable in capturing the attention of middle class income earners. Such undertakings are termed as cost leadership and differentiation. Therefore, Xiaomi Tech relies on cost leadership and differentiation strategies to maintain its competitive advantage in the mobile phone market. The strategies have propelled the company form rugs to riches in China. This implies that there is a high success-ability of the same in other BRICs countries. It is because; the BRICs countries portray similar economic trends in all sectors of the economy. Potential market assessment BRICs assessment shows that India is the highest potential market for Xiaomi Tech Smartphones. It is based on the fact that China and India share common economic characteristics ranging from high populations, increasing usage of internet services up to the increasing number of middle class income earners. The company’s success in China is clear evidence that the company is ready to expand globally. For instance, in 2014, it sold over 60 million Smartphones in China with prospected sells of over 100 million Smartphones in 2015 (Kelleher 2013, p.1). The company’s massive sales are attributed to its production and marketing strategy. In the production context, the company produces highly advanced Smartphones that rival the ones produced by the likes of Apple and Samsung. It sells the Smartphones at low prices making the devices highly marketable and affordable. In marketability, the company relies on online marketing and social media marketing strategy to reach a large number of Chinese populations and avoid the dilution of supply chain players such as distributors and retailers. The common social media platforms include Weibo and Wechat for marketing Xiaomi's Mi4 Smartphones. Alternatively, India is the fastest growing market of Smartphones. The market is prospected to increase with shipments of over 156 million imported Smartphones by the year 2017. It is an incredible increase compared to the 28 million imported shipments of Smartphones made in the year 2013. However, it is important to note that the Indian Smartphone market is characterized by a low entry percentage of Smartphones ( Schiavenza, M 2013, October 24, How Xiaomi's Hip, Inexpensive Smart Phones Conquered China, The Atlantic, viewed 3 March 2015, Wang, C & He, 2014, Brand management in emerging markets: Theories and practices, Business Science Reference, Hershey, PA. Will defective units, poor service put the brakes on India's Xiaomi Mi 3 excitement? 2014, January 1, viewed 3 March 2015, Xu, WL, Lin, WY & Chen, YP 2013, ‘Exploring the Attributes of Outstanding Entrepreneurial Teams: Case Analysis on the Start-up Team of Xiaomi Technology,’ Science Technology and Industry, vol. 6, pp. 028-037. Read More