Market Entry Proposal for Xiaomi - Essay Example

Market Entry Proposal for Xiaomi Market Entry Proposal for Xiaomi Executive Summary Brief Synopsis of the Issue Xiaomi is one ofthe leading smart phone companies in China which overtook Apple’s market share in its region in 2013. The company focuses on changing the hardware rather than the software of smart phones (Olson, 2013). Hence it is having a successful business performance. This has subsequently motivated the organization to extend its business into the global markets. this paper aims to present a comprehensive proposal for Xiaomi’s market entry into Singapore. Market Entry Strategies are used by different corporations in order to expend their business in the global market. These strategies particularly associate with the goods and services delivery in to a foreign country. It facilitates an organization to increase its market share while building an international brand reputation. Moreover, it helps in long term growth and organizational sustenance. Following are the most important market entry strategies which are discussed in this proposal (Schermerhorn, 2011): Exporting: In this case a firm sells its products in to the foreign market. Licensing: Here, a local business purchases the manufacturing and selling rights of another business. Franchising: It relates to the sale of organizational rights along with the managerial procedures and branding strategies of a local firm. Joint venture: When a company establishes a mutual agreement with a regional business to expand its sales in a particular area then it is called joint venture. Wholly owned subsidies: In this situation the company directly enters in to the foreign market while reserving all its manufacturing, selling, profits and branding rights. The company should pursue the wholly owned subsidies market entry strategy particularly for Singapore. This is justified on the basis of research and analysis, for instance, Singapore acts as the regional headquarter of Xiaomi whereas the management is now considering opening a regional distribution center, customer support center, retail outlet and a corporate office (Yu, 2014). Hence the proposed market entry strategy will actually facilitate the organization in achieving the company’s strategic goals. Recommendations Research indicates that Xiaomi is now recognized as the fastest growing smart phone market in the China (Olson, 2013).. On the basis of its increasing market share and customer services in the homeland the company has decided to enter in to the global market. This will eventually help the organization in improving its profit margins while also gaining a significant global image in the smart phone industry. Xiaomi has a strong corporate management whereas the global expansion project is handed over to the former Google employee, Hugo Barra (Yu, 2014). Following recommendations are made for Xiaomi’s market entry into Singapore while considering its strategic position, customer attractiveness etc. 1. Initially the company should do an extensive research about the local smart phone market of Singapore while assessing various marketing strategies of different market leaders. 2. Subsequently the organization would have to develop a comprehensive market entry strategy which must be consistent with its business approach, corporate values and the smart phone’s feature preferences of the regional customers. 3. Since the company is aiming to establish a distribution centre in Singapore therefore it would have to consider logistics. Moreover, it will have to evaluate the effectiveness and profitability of this strategic decision. 4. On the basis of national and firm level analysis the company should implement the wholly owned subsidies strategy to enter into the Singapore’s smart phone market. 5. To pursue the wholly owned subsidies strategy the company will have to reserve all its manufacturing and selling rights while also recruiting a significant number of human resource including sales managers, executives, engineers etc. Company’s Situation Analysis Introduction and Background On 19 February 2014 the company has launched its products in Singapore in the supervision of Hugo Barra who facilitated the organization in its global expansion (Yu, 2014). This paper particularly aims to highlight the national level analysis, firm level analysis, issues, strategic choices, market entry strategies, implementations and recommendation for Xiaomi in regard to its global expansion and entrance into Singapore. In order to comprehensively present this proposal it has been organized in to different parts including the executive summary, synopsis, recommendations, introduction, analysis and discussions. The company is looking forward to hire employees at different organizational levels including legal, logistics, operations, finance, product managers etc. Moreover, Xiaomi is also recruiting engineers and executives for its new regional offices. Barra has specifically mentioned that the company needs an entirely new team of engineers so as to localize the development features of Xiaomi’s smart phones as per the customer needs (Yu, 2014). Presently logistics infrastructure is one of the primary concerns for the organization since it plans to sell its products online to the customers. Furthermore, after Singapore Xiaomi plan to enter in its neighboring country, Malaysia (Yu, 2014). Analysis of Market Opportunities National Level Analysis National level analysis is primarily done to assess the political situation in a specific region (Levels of Analysis, 2005). This helps in considering the state concerns, policies and procedures with respect to different corporations in global markets. Porter Diamond analysis Michael Porter’s Diamond Analysis focuses on different competitive advantage sources within a particular region (Shambi, 2011). It concerns with the rapid technological advancements after the initiation of globalization. The model consists of the following four attributes (Shambi, 2011): 1. Factor Conditions: In order to increase its market share in Singapore, Xiaomi would have to focus over the country’s factor conditions including the inputs which it would require for mass production and overall manufacturing infrastructure for the Singaporean customers. 2. Demand Conditions: Xiaomi can assess its market opportunities in Singapore through the country’s smart phone demand conditions. This will also help in updating the phone’s features as per the requirements of customers. 3. Supporting Industries: In order to pursue different market entry strategies the organization will have to gain the support of suppliers and regional distributors. This is extensively necessary so as to implement a shared and collaborative global expansion approach. 4. Organizational structures, strategies and rivalries: Xiaomi would have to face significant competition in Singapore where the smart phone market is already leading by different manufacturers. Here, the company would have to increase differentiation of its products while also increasing its innovativeness. Country Attractiveness Xiaomi will gain significant market share through entering in to the global smart phone industry while also offering its customers an entirely different smart phone experience. Moreover, the company will acquire huge benefits through selling its low cost smart phones and games in the Singaporean market. Here, Singapore was selected for the company’s first regional headquarter because of the country’s political and strategic position. However, this also includes significant risks including the acceptance of Xiaomi because of prominent cultural differences between Chine and Singapore (Can Xiaomi use its homegrown strategy abroad?, 2013). Furthermore, the company will have to invest a huge amount in building the new infrastructure in Singapore. Firm Level Analysis VRIN analysis, Readiness, and Global sourcing As per the VRIN analysis Xiaomi will have to exploit its rare and valuable resources which cannot be immediately imitated by the competitors (Talaja, 2012). For instance, it will have to frequently update its hardware and software technology. This can be done through adopting the readiness approach while evaluating different market opportunities and getting prepared for acquiring them. Global sourcing involves identifying location where company can manufacture its products cost effectively (Why global sourcing? Why now? 2010). Here, Singapore will facilitate Xiaomi in achieving the operational gains in its mass production cycles. Porter Five Forces Analysis Following are the Porter’s Five Forces (Ahlstrom, 2010): 1. Buyers: They include the actual consumers, distributors and retail stores. Xiaomi will have to first categorize its buyers, for instance, the buyers with weak or strong bargaining power. 2. Suppliers: Since the company will have to manufacture its products in Singapore therefore it will have to identify the most appropriate and cost effective suppliers. The bargaining power of suppliers will also significantly impact the overall market entry strategy of Xiaomi. 3. Substitutes: Organization would have to identify various substitutes of its smart phones in Singaporean market while also increasing its innovativeness to reduce the market share of other brands. 4. New Entrants: Due to technological advancement the global smart phone industry is rapidly growing. This has increased the chances of new entrants into the Singaporean smart phone market. 5. Rivalry: As discussed previously that Singapore is dominated by other smart phone brands therefore the company will have to face intense rivalry in this region. Market Entry Strategy Following are different market entry modes available to Xiaomi (Schermerhorn, 2011): Export: It is simply defined as the fundamental initiative to sell local good into the foreign market. Companies usually peruse this strategy as it is also supported by the governments. Moreover, it strengthens company’s global image while introducing it to completely new customers. Licensing: In this case one firm in the foreign market purchases the selling and manufacturing rights of the organization and subsequently sells its products in another region. The license is mostly associated with a distinctive technology, organization’s trademark or patent. Franchising: It allows a foreign company to use another company’s name and its operating procedures in return to a fee payment. In this situation the major corporation actually retains its global image while sharing some of its equipment, management process, design facilities etc. Joint Venture: Here, companies sign a contract with the local firms or businesses in order to enter in to a new market. This significantly helps an organization in gaining experience and knowledge about its new customers while facing fewer business risks. Wholly owned subsidies: In this case the company introduces its products into the foreign market while reserving all the processing, manufacturing, sales and profit rights. Recommendation Above research and analysis recommends that wholly owned subsidies would be highly suitable as Xiaomi’s market entry strategy. This is because of the fact that the company already owns a regional head office in Singapore which will significantly help it in establishing a subsidiary. Since the company is first time entering into the global market therefore it has to make profound strategic decisions. This particular approach will also help the organization in its future expansion as most of the Asian and Middle Eastern countries are closely affiliated with Singapore. Wholly owned subsidies will facilitate the organization in meeting all its factor requirements, customer demands and the competitive forces. Strengths and Weaknesses Following are the strengths and weakness of the proposed entry mode: Strengths: Xiaomi has already launched its brand in Singapore whereas the organization has also started recruiting employees for its different offices in the country. Moreover, the company is gaining much recognition in the world after overtaking Apple’s share in China. Weaknesses: Xiaomi will have to face significant cultural and political issues in order to set up a wholly owned subsidiary in Singapore. Additionally it will have to meet certain challenges related to logistics. Implementation of Market Entry Strategy To implement the effective market entry strategy Xiaomi will have to go through following step by step plan: 1. The company first has to identify its strategic objectives for entering into the global market. This primarily includes analyzing the internal and external organizational environment. 2. This should be followed by extensive research in order to recognize the distinctive needs of Singapore’s smart phone consumers. Here, the company will have to analyze its customers’ and suppliers’ bargaining power along with the competitive forces. 3. After finalizing all the logistic, financing, human resource, operational and production procedures Xiaomi will have to choose the appropriate market entry strategy. 4. The company would have to focus on its core values, innovative ideas, key product features, price and quality standards for acquiring customer satisfaction. 5. To establish wholly owned subsidiary the company will have to identify low cost and effective labour markets around the world. 6. Finally the company will have to focus on coordination of regional offices with the headquarters in Singapore and China. Conclusion Xiaomi is frequently increasing its market share in China which has persuaded the organization to enter in to new markets. Singapore is the best choice in this regard because it will connect other countries to the organization while also offering low wage rate and weak suppliers’ bargaining power. Xiaomi should implement the wholly owned subsidies market entry strategy in Singapore. This will facilitate the organization in overcoming the cultural challenges while providing improved customer services and reduced competition. References Ahlstrom, D & Bruton, GD 2010, International management: strategy and culture in the emerging world, Cengage Learning, Australia, South-Western. Can Xiaomi use its homegrown strategy abroad? 2013, Economic Review, China, viewed 28 March 2014, Levels of Analysis 2005, McGraw-Hill Higher Education, USA, viewed 28 March 2014, Olson, P 2013, How Chinas Xiaomi Does In a Week What Apple Does In a Year: Update Devices, Forbes, USA, viewed 28 March 2014, Schermerhorn, JR 2011, Exploring management, Wiley, Hoboken, N.J. Shambi, JS 2011, Analysis of and Recommendations for Kenyas Tourism Sector, Diplomarbeiten Agentur, Hamburg. Talaja, A 2012, Testing Vrin Framework: Resource Value and Rareness As Sources of Competitive Advantage and Above Average Performance, Management, vol. 17, no. 2, pp. 51-64. Why global sourcing? Why now? 2010, PricewaterhouseCoopers, New York, viewed 28 March 2014, Yu, E 2014, Xiaomi kicks off global expansion with Singapore launch, CBS Interactive, San Francisco, viewed 28 March 2014, Read More