Market Entry Proposal of Xiaomi in the UK - Case Study Example

Market Entry Proposal of Xiaomi in the UK Table of Contents Table of Contents 1 Brief Synopsis 2 Introduction 2 National Level Analysis 2 Country Attractiveness 2 Five Porter Analysis Model 4 Application and Understanding of the Tool in the UK market 5 Firm Level Analysis 6 Market Entry Strategy 7 Implementation of Market Entry Strategy 7 Exporting 7 Licensing 8 Joint Venture 9 Recommendations 9 Conclusion 11 Bibliography 11 Brief Synopsis Xiaomi is a mobile phone industry with its headquarters in China. Currently the company enjoys good conditions in the Chinese market especially in the Smartphone sector that also serves as the biggest Smartphone market in the world. The company is now making in-roads into the United Kingdom market following successes at home and parts of Asia. This paper takes the initiative to analyze available opportunities for Xiaomi in the UK market as well as the best available entry strategies into the same market. Introduction Xiaomi launched the first Smartphone product in market in August two thousand and eleven. The growth of Xiaomi in its native China is extraordinary and now strategizes on extending its tentacles into the United Kingdom market. Information provided flurry, a mobile measurement and advertising company, Xiaomi is providing a serious threat to the stability of Apple in both the Asian and Chinese market. Based on this success, the company has ambitious plans to penetrate fully into the United Kingdom market and cut its niche. The quantity of Xiaomi installed base of phones continues to increase tremendously quadrupling from half of the last financial year. Xiaomi is now a serious competitor in both the mobile phone and Smartphone industry. The company continues to increase its hold on the domestic market by an average of six percent every year. National Level Analysis Country Attractiveness To understand the attractiveness of Xiaomi at the national level, a person needs to review the resource-based view that considers the VRIN characteristics. This is a methodology of assessing a business company such as Xiaomi considering its approach strategy. This paper considers the approach strategy applicable to Xiaomi while making entry into the United Kingdom market. Primarily, VRIN describes the company as a bundle of resources (Wilson, 1980, 39). The resources and the mode of combination set the business company apart from the rest in the competition. It takes an inside-outside mechanism of evaluating a business company. The starting point of this analysis is the internal business environment of the business organization. Resources owned by Xiaomi entail all assets, capacities, processes of organization, company attributes, knowledge, and skills. Currently, Xiaomi controls seven percent of the Chinese market considering the fact that this is the largest Smartphone market in the world. This is a new position after overtaking Lenovo and HTC, which dominated this market in the previous two years. The Smartphone business is only three years old and yet Xiaomi is threatening the dominance of Samsung and Apple. This is despite the fact the company is only three years old with less than five thousand employees. However, it is important to note that not all resources that Xiaomi has will be relevant while penetrating the UK market. Only few of these resources will be crucial because some of them do not carry strategic relevance. The four attributes that Xiaomi has that give it the competitive advantage form the VRIN features. First, the company will use only use valuable resources. The management should only consider resources that add competitive value to Xiaomi. Rare resources ensure that products produced by Xiaomi unique. Production of an effective operating system in its Smartphones and efficient software provides the competitive advantage to the company over the rivals in the market. Other features in this factor are considering resources that competitors have but bring competitive advantage although not unique. Inimitable resources are essential to Xiaomi for its survival in the new market. Difficult resources to imitate provide a sustained advantage because competitors cannot use them. Finally, non-substitutable resources create sustained production of commodities. If consumers can substitute a resource with others and derive similar utility, then the business will fail. The company currently, sells more Smartphone in the domestic market than the giant Apple. Comparatively, Xiaomi is a small company compared to both Samsung and Apple in terms of capital, operational activities, and human capital as well. This company defies the notion that to compete with giants, a company needs to grow extensively. The company beats other traditional struggling companies such as Blackberry whereas Apple and Samsung continue to remain dominant. Assessing the explosive growth plans by Xiaomi, its market entry strategies into the global market, and competitive advantages results in the conclusion that Xiaomi is not just about to be another Blackberry in the market. Five Porter Analysis Model It is essential for Xiaomi to select one particular entry mode following the five-porter analysis model that will have a significant influence on its performance in the British market. The five forces provided by Porter appear simple but they powerful in application. They will help the management at Xiaomi to comprehend the source of power in the United Kingdom market. The significance of this is that Xiaomi will be aware of the strengths of the current competitive position considering the fact it is moving into a new international market. The company can utilize its strengths in the new market to gain competitive advantage and avoid wrong diversions in the process of establishing itself in the United Kingdom market. Therefore, the five Porter’s forces are essential tools of analysis that Xiaomi cannot afford to ignore. In summary, Xiaomi will use the forces to identify whether their new phones such as the Smartphone carries the potential to remain profitable in a market where others such as BlackBerry are struggling while Apple remains the dominant force. However, the management at Xiaomi needs to understand that the tool becomes more valuable when used to evaluate the balance of power in the new market. Application and Understanding of the Tool in the UK market The model makes five assumptions about a market pertaining to the forces that facilitate and support competitive strengths within the same business environment. The supplier power is the first essential determinant in this case. The executive management at Xiaomi ought to evaluate the possibility and strengths that the company possess to drive up phone prices. However, the total number of other competing suppliers of phones including Apple, Nokia, and BlackBerry drive this factor apart from the uniqueness of the product supplied by Xiaomi. Other factors include the strengths possessed by rivals over Xiaomi within the mobile phone industry in the United Kingdom as well as the cost incurred in switching from one factor to another. Few supplier choices mean that the new entrant will need more help from suppliers and this results in the suppliers wielding more power over the company. Buyer power is the second assumption in the market that will determine the competitive power of Xiaomi in the UK market. Decision makers at Xiaomi will have to assess how easy it is for buyers to drive the prices of phones down within the market. Just like the first feature, many factors redirect the flow of this factor. They include among others the number of potential buyers and real buyers, the value the company puts on individual buyers, and the cost the buyers will incur if they switch to using company products considering the fact that Xiaomi is a new entrant in the British market. Dealing with few but powerful buyers means that the company will find it rough because they will dictate the terms (Theories of MNE Activity, 2010, 29). The third factor is competitive rivalry. The carrying capacities as well as the number of competitors are crucial in this instance. The presence of many competitors offering products with quality features means that Xiaomi will have little influence in the market. However, Xiaomi only needs to find ways of dealing Apple that is the market leader and provides quality products to the clients. Their products are equally attractive and competitive on the market. The threat provided by this scenario is that clients might not leave the current company to start using Xiaomi products. The threat of substitution is the fourth factor. The ability of potential customers developing a different mechanism of acquiring what Xiaomi offers to the market affects this force dearly. This is significant considering the fact that the company offers the hardware free of charge and relies on its software products for profits. Xiaomi needs to make sure that substitution of what they provide to the United Kingdom market is not easy. Finally, the threat to new entry is the last factor. Xiaomi is a new entrant in the market therefore; existing companies will find mechanisms of restraining successful entry. Firm Level Analysis In technological development, Xiaomi replaced Google features with its new versions of cloud alternatives including paid themes, games, as well as apps store. In this case, it is clear that the technology team at Xiaomi appreciates and embraces the value of iTunes and Google Play in-built in the Apple cash flow and Google (Kogut, 1989, 63). Xiaomi is smart in the sense that as much as its apps store is not as elaborate as that of Google or iTunes, users can rely on what Google Play offers to access the services that it does not offer. This is a complete opposite of OS offered by BlackBerry. The app store provided by Xiaomi is performing beyond what other players in the market expected in spite of its limitations in size. Within the first four hundred days, the number of users hit one billion. This type of performance is above board. The hardware product sold by Xiaomi is the best in the market as well as the industry. Mi3 TD ran as the company’s flagship commodity in this sector. The device has an improved resolution compared to the iPhone produced by Apple. Mi3 TD has a more advanced camera with an elaborate display. This device offered by Xiaomi entails the most powerful processors ever manufactured in the globe. Users of the Xiaomi product have two options to choose from including Tegra 4 quad-core, which is the first 1.8 GHZ quad-core processor in the world manufactured by Nvidia as well as the Snapdragon 800 produced by Qualcomm. The effectiveness of the Smartphone produced by Xiaomi is great to the degree that the latest device from Samsung, the Galaxy Note 3, finds it difficult to outmuscle it in the market. The biggest selling for Xiaomi is that it offers the best product at an affordable price. Market Entry Strategy The modes of entry available to Xiaomi joint venture, licensing, sole venture, and exporting. Implementation of Market Entry Strategy Exporting This is marketing and selling of products and services in the United Kingdom that Xiaomi produces in China. China remains the domestic market for Xiaomi while the United Kingdom in this case, is the company’s foreign market. In this case, the management at Xiaomi will put into consideration marketing costs also referred to as marketing expenses because it manufactures the phones in China and not in the United Kingdom (Kogut, 1989, 386). To start with, it might difficult for Xiaomi to manufacture the phones in the foreign market, which is its international market. By considering this option, Xiaomi will eliminate investment in production requirements and facilities in the British market. This is a foreign country with its operation policies. Xiaomi will have the duty of coordinating four significant players in market once it makes a decision in using exporting as the entry mode. The players are the importer, exporter, the government, as well as the transport provider. Xiaomi should make arrangements regarding the means of transport from China to United Kingdom with clear preparations on the destination of the products. Government policies on both side that is China and United Kingdom are central to exporting. Xiaomi must ensure that it works within stipulated policies considering the fact that the country of origin pursues a closed economy while the new market follows an open economy. However, one of the biggest advantages is that the two countries continue to loosen the trade conditions between the two and Xiaomi is likely to benefit from the same. Licensing Scholars define licensing as a process where a business organization charges a specific amount of money sometimes referred to as royalty by other scholars to allow other companies to use its brand, technology, and expertise, patents, trademark, and production techniques. Licensing will allow other mobile phone countries in the United Kingdom to use the property of Xiaomi in their market with the British jurisdiction. Little investment by Xiaomi in licensing can assure the company of good returns on investment (Martin, 1988, 959). It is important to comprehend that Xiaomi might lose possible returns on promotional activities and manufacturing because the collaborating companies takes the responsibilities of producing and marketing products. To arrive at this decision, Xiaomi will have to assess and sieve through potential licensees to decide on those with good qualities of business partnership. Joint Venture The main reason why Xiaomi might opt to setup a joint venture with a competitor in the British market is to access the entry of the same market for effective results. In this case, Xiaomi should source for a British company such as the British telecom or any other company already in the British market such as Apple or BlackBerry. Experts define a joint venture as a process where a new company such as Xiaomi set up business with parties according to agreed proportions. Other alternatives would be sharing technology, management skills, joint development, and production of products and services, as well as tuning into government policies and regulations. However, if Xiaomi considers this option, then it must pursue in the direction of distribution mechanisms, R & D, as well as manufacturing. Recommendations The first major study undertaken by the management at Xiaomi was to assess the pitfalls of Blackberry, the Canadian mobile manufacturer. In all its aspects, the company continues to avoid mistakes made by Blackberry. The management comprehends that the most appropriate way to enhance the promotion of its payment ecosystem is by developing a mobile operating system. This was the procedure adopted by Google, Blackberry, and Apple. The Android developed by Google as well as IOS by Apple account for a combined ninety-one percent of the entire market share. This meant that to succeed, Xiaomi had to develop a cordial operating system as well as a system that is compatible with both IOS and Android considering that they are the market leaders. This is explains the reason the company included the MIUI mode of operating system in their Android product a feat that Blackberry failed to internalize (Theories of MNE Activity, 2010, 171). The MIUI operating system is a pro-active open-source to the community. This allows the device to run the Android operating system for Xiaomi. Presently, the company boasts more than twenty million users including among others those using the Android device. Technology applied in the Android device developed by Xiaomi is much more than an advancement of what other Android manufacturers produced. The operating system contains a lock screen flashlight and a clean-up option that the user only uses one click. In addition to these two, the company has more than two hundred other new features. The Android gives more personalized service power to the user. Xiaomi now markets and promotes its products through different means compared to competitors in the industry. The company offers its products and accessories cheaply. The management makes sure that the price is a real cost price. This leaves the software as the main source of profit to the Xiaomi. Conclusion Xiaomi stands a great opportunity of cutting its niche in the United Kingdom market. The success of the company in other complex markets such as China and Asia means that the management has good arrangement strategies to survive in the British market. Furthermore, the company continues to fight giants such as Apple and Samsung with a lot of success and avoids pitfalls that failed predecessors including BlackBerry. Success in technological advancements means that the company can compete with other mobile phone giants currently dominating the United Kingdom market. Bibliography Davidson, W. H. (1982), Global Strategic Management, New York: John Wiley and Sons. Kogut, Bruce. (1989). A note on global strategies. Strategic Management Journal, 10: 383-89, Martin, R. (1988). Franchising and risk management. American economic review 78:954-968. Wilson, Brent D. (1980). Disinvestment of Foreign Subsidiaries. Ann Arbour: UMI Press. Sabi, Manijeh. (1988). 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