Implementation Plan of the Market Entry Mode in UK and US - Case Study Example

Case Study on Xiaomi Inc. - Implementation Plan of the Market Entry Mode (Direct Exporting and E-Commerce) in UK and US

Table of Contents

1.0 Introduction3

2.0 Implementation Plan3

3.0 Mode of Entry4

4.0 Business Model Replication8

4.1 Technology Adaptation9

4.1(a) Manufacturing9

4.1(b) Services10

5.0 Conclusion11

12

6.0 Reference List13

• 1.0 Introduction

This project is typically based on the implementation plan of the internationalisation motives of Xiaomi Inc. in the markets of UK and USA. The company, which is best known for its marketing and selling of low-priced smartphones in China, is now planning to operate on a global platform. It has chosen the markets in UK and USA to initiate this particular venture.

This project puts forward all the probable barriers and constraints that the company may face in making this venture a successful one. This project also explains what modes of entry are to be undertaken by Xiaomi for the above purpose and how those plans are to be effectively executed.

• 2.0 Implementation Plan

The company Xiaomi Inc. is planning to enter into the US and UK markets. Since, it has been declared as the world’s 3rd largest smartphone manufacturer in 2016, it has the power to penetrate into these markets. The most appropriate mode of entry into these markets would be Direct Exporting through Sales Representatives and providing E-Commerce facilities. By adopting these market entry strategies, Xiaomi will be able to expand its business into the UK and US markets and will thus be able to increase its customers in these locations. The barriers to such a market diversification are:

• Xiaomi’s main business is in China and in the Eastern region. It serves the emerging markets mainly. Therefore, it may find difficulties in expanding its business in the developed markets western countries.
• Xiaomi can also get accused by its competitors in the west for imitating designs of their products.
• Xiaomi can also face a challenge to prove its Android-based software.
• It may also face legal barriers in the western countries in carrying out trade practices in UK and US (International Business Times, 2014).

• 3.0 Mode of Entry

Direct Exporting refers to the situation when the manufacturer exports its products directly to the customers who are willing to purchase it. This may involve the responsibilities for managing the marketing logistics of transportation or shipment, physical distribution of the finished product and collection of payments from the debtors (Keillor, 2013). In order to sell its smartphones and tablets in the western markets, it should at first make the customers in those countries aware about the launching of its products in their region. For this, the company may take the help of advertising through global newspapers and TV channels. At present, Xiaomi has been restricted from selling its smartphones in UK and US due to patent-gap (Lifestyle, 2015).

The following steps are necessary to practically execute the above mode of entry and actually get a break-through in the markets of UK and USA:

• Gathering Information about Customers’ Preferences in UK and USA

In order to penetrate the markets of UK and USA, at first, Xiaomi needs to extract information about the tastes and preferences of the customers over there. It should assess, what features in a smartphone or a tablet satisfy those customers, since these are the main products of Xiaomi. For this, Xiaomi can gather information about the preferences of the customers in UK and USA through internet, since reaching out to the customers in person in those countries will not be cost-effective for start-ups like Xiaomi.

• Designing the Products accordingly

The next strategic step would be to design their products according to the preferences of the consumers in UK and USA and to make sure that these productions meet their requirements.

• Promotional Techniques

Once the product has been designed, the next task is to promote the product and make the target audience in UK and US aware of the launching and arrival of its smartphones and tablets in their countries. This can be done by means of advertising its products by developing its own mobile application or a website, where its products are going to be advertised. These advertisements should not only focus on signifying the arrival of the product but should also aim at demonstrating the utilities of the product and its advantages over the already existing brands of the same product-line, such as low cost, added features and so on.

• Scanning the Competitors – Market Analysis

After promotions, Xiaomi should indulge in scanning its competitors and draw an inference as regards, what level of competition it will have to face in entering the markets of UK and USA. It should have to do a vivid analysis of the market as well identify the areas of weakness of its competitors. It should compare its ability to satisfy the customers with that of its prospective competitors.

Figure 1: Market-Share of Xiaomi and its Competitors till 2015

(Source: Smartphone Market Research, 2016)

• Formulation of Marketing Strategies

The next activity on behalf of Xiaomi would be to formulate appropriate marketing strategies in order to invade the UK and US markets. This includes the identification of the possible ways to actually sell its products to the proposed location. This may be done either by direct exporting of its goods to UK and US or by availing e-commerce facilities, since entering into those markets through FDI for a start-up like Xiaomi will be quite costly. Again, there might be some political issues which may prove to be a barrier for Xiaomi to make direct investments. Tax liability will become high if Xiaomi happens to set up a manufacturing unit in UK or in the US to operate directly from those countries.

• Developing E-Commerce Facilities

The concept of e-commerce has been explained in different ways by different personalities that it has become difficult to explain the natural meaning of the term (Hassanien, Khalil and Rouibah, 2009). The most important step to be taken by the company is to develop appropriate e-commerce facilities across UK and USA, so that it can make its products available to all the customers out there without having to reach out to them personally which might involve heavy costs, since setting up a production unit or retail outlet in those countries may prove to be a costly venture and other legal constraints. Xiaomi has already decided to step into the markets of USA by starting online stores of the company’s products, but has decided not to sell its smart handsets to the western customers at present (The Telegraph, 2015).

• Developing Supply-Chain

In order to directly sell its products to its prospective customers in the proposed locations through its sales representatives, Xiaomi needs to develop a proper supply-chain starting from exporting the goods to making it actually available to the end consumers. For this, it can employ distributors or suppliers in those countries to make its products available in the famous electronic retail outlets of UK and USA, or develop its own distribution unit over there, so that the retailers of those countries can convince the customers to invest in Xiaomi’s products.

• Removing Legal Barriers

In order to operate in UK and USA without any legal or regulatory problems and make its business hassle-free, Xiaomi needs to make sure that it removes all the legal barriers that might come in the way of its business in those countries. Xiaomi has entered into a patent deal with Qualcomm which will help Xiaomi to expand in USA (Recode, 2015).

• 4.0 Business Model Replication

Xiaomi should modify its present model in order to invade the markets of UK and USA since the likes and dislikes of the customers in those locations may not be similar to that of the customers in China.

The company presently follows an Asset-Light Model. This model gives the freedom to Xiaomi to leverage the various assets of other companies. It undoubtedly a very helpful business model for Xiaomi, since this strategy is at par with the requirement of those industries where manufacturing is not a proprietary. This model enables Xiaomi to have communication with all the best suppliers from all over the world. These suppliers are connected with the leading mobile phone companies across the globe (CKGSB Knowledge, 2015).

Xiaomi will possibly face tight competition with the leading smartphone manufacturers in UK and USA, such as, Samsung and Apple Inc., once it opts for entering into the Western Nations to sell its tablets and smartphones. This is indeed a great threat to Xiaomi since, its basic products are these items and is known to be a hardcore player in the smartphone market. It is highly popular for providing its sleak handsets at low and reasonable prices. For this, at present, Xiaomi should aim at entering into its target market. It is not important for Xiaomi to sell its core products at this point of time rather at first, it is important to make its presence felt in the markets of UK and USA. It has taken a good step to achieve this aim. It has started to sell accessories in UK, USA, France and Germany which depicts that, Xiaomi has shifted its concern from its core product-line to a different segment when it comes to invading the western markets and making business. Xiaomi has set up its first stores in North America and Europe to sell its accessories at a low cost which may be indicated as a prelude to the eventual launching of smart and sleak handsets and tablet computers in these countries. The Mi-store opened by Xiaomi in UK and USA has become a five year old online retail outlet selling headphones at low cost and portable battery at a competitive price (The Guardian, 2015).

• • 4.1 Technology Adaptation

Nowadays, technology is a major aspect in the business world. The new era of technological and scientific developments has unfolded many facets of global business on various fronts and paved a way for something better to happen in the long run in the field of International Business (McKinsey Global Institute, 2013). With the advent of globalization and technological advancement, business units all over the world need to be updated and dynamic as well in terms of technological infrastructure. They are required to continuously upgrade their technological state of affairs in order to keep pace with the growing and cut-throat competition in the global industry and hence internationalise their business and eventually make impacts in the global business economy.

• • • 4.1(a) Manufacturing

It will not be profitable for Xiaomi to make its presence felt in the markets of UK and USA by offering products from its core product-line viz. smart handsets and mobile phones. Instead, it can invade the western markets by offering a different range of products. This will initially pave the way for Xiaomi to enter into the target markets.

Xiaomi follows the Limited Inventory Concept. The carrying cost of the inventory increases the overall costs of the company to a huge extent. This is applicable only in case of companies that provide tangible products and not services. Xiaomi offers its products at a very cheaper rate which is a great concern for its prospective rivals in the smartphones industry of UK and USA, like Apple, since it is next to impossible for companies like Apple to provide electronic devices at the rate at which Xiaomi does. This can probably pass on the risks to these companies as the customers are always interested in varied features in their products that are available at an affordable price. Xiaomi maintains a very low inventory level and therefore becomes capable of delivering goods at a comparatively lower price. The smartphone industry in China is expected to get saturated in the coming few years. Xiaomi has predicted this future risk and has thus started to diversify its products within the same product-line of electronic devices. It has started to manufacture and launch a second television model, set-top boxes, tablet computer and routers that connect multiple electronic devices and has a motive for building an ecosystem of smart products. Xiaomi is planning to enter the western markets through the sale of these products rather than the mainstream smartphones. This business model adopted by Xiaomi can evolve the value-chain in the industries of smartphones and will make the smartphone industry to witness massive financial gains which are expected to arise from the selling of these electronic devices (Dhillon and Gupta, 2014).

• • • 4.1(b) Services

Penetration in the UK and USA market is more than a challenge to Xiaomi. The present business models need to modified and made flexible in order to sell its varied range of electronic products in the proposed locations. Not only making its products available at a cheaper rate will help its business growth in the west, but also smart services are to be developed for the purpose of expanding its business in its areas of expertise. Electronic devices often require after-sales services in terms of demonstrating its usage and services related to its further repairment (if necessary). Therefore, these services are to be developed so as to ensure the availability of the same at an earliest time whenever it is required by the customer. Xiaomi has developed a system for the customers, where they can give a missed call for Pick Mi service, which enables the customers to avail the facility of after-sales service without facing any trouble. This service method has been designed in such a way where, the sales personnel of Xiaomi will pick up the device from the homes of the customers and will deliver the repaired product at the doorsteps of the customers (The Indian Express, 2015).

• 5.0 Conclusion

The above report on Xiaomi’s business expansion plans in the west reveals that, there are a number of legal barriers and constraints to its entry in these locations and numerous challenges on the business front from its competitors are to be faced by the Chinese smartphone company. The company will have to face rivals who are global performers since the last few decades. Out-numbering these companies and popularising its own brand in the west would be a great deal of pressure for Xiaomi, but certainly not an impossible venture.

Therefore, Xiaomi will have to develop its own e-commerce facilities, such as its own website or application, where its products are to be advertised and people in UK and USA can have a view of its products from home before making the final purchase. Further, it needs to develop a proper physical distribution channel so as to make its products available to the end consumers through direct exporting with the help of its distribution team in UK and USA. This will lead to the effective internationalisation of Xiaomi Inc. in UK and USA.

• 6.0 Reference List

CKGSB Knowledge, 2015. China-Focussed Leadership and Business Analysis – The Xiaomi Business Model: Built to Last? [online] Available at: <http://knowledge.ckgsb.edu.cn/2015/03/18/china-business-strategy/the-xiaomi-business-model-built-to-last/> [Accessed 27 June 2016]

Dhillon, I. and Gupta, S., 2014. AIMA Journal of Management & Research. [pdf] Available at: <https://apps.aima.in/ejournal_new/articlesPDF/338-Sonam%20Gupta.pdf > [Accessed 27 June 2016]

Hassanien, A.E., Khalil, O. and Rouibah, K., 2009. Emerging Markets and E-Commerce in Developing Economies, pp. 3. New York: Information Science Reference

International Business Times, 2014. Xiaomi’s International Expansion; 5 Reasons the Chinese Smartphone Maker will have trouble going Global. [online] Available at: <http://www.ibtimes.com/xiaomis-international-expansion-5-reasons-chinese-smartphone-maker-will-have-trouble-going-1717145 > [Accessed 27 June 2016]

Keillor, B.D., 2013. Understanding the Global Market: Navigating the International Business Environment, pp. 63. Santa Barbara: Praeger

Lifestyle, 2015. Xiaomi coming to US and Europe, but no smartphones yet due to ‘patent gap’. [online] Available at: <http://www.scmp.com/lifestyle/technology/article/1729342/xiaomi-coming-us-and-europe-no-smartphones-yet-due-patent-gap> [Accessed 27 June 2016]

McKinsey Global Institute, 2013. Disruptive technologies: Advances that will transform life, business, and the global economy. [online] Available at: <http://stratresearch.se/wp-content/uploads/mgi_disruptive_technologies_executive_summary_may2013.pdf> [Accessed 27 June 2016]

Recode, 2015. Qualcomm’s Patent Deal with Xiaomi gives each something it badly needs. [online] Available at: <http://www.recode.net/2015/12/2/11621086/qualcomms-patent-deal-with-xiaomi-gives-each-something-it-badly-needs> [Accessed 27 June 2016]

Smartphone Market Research, 2016. Apple, Huawei, and Xiaomi Finish 2015 with Above Average Year-Over-Year Growth. [online] Available at: <http://www.smartphonemarketresearch.com/> [Accessed 27 June 2016]

The Guardian, 2015. Xiaomi starts selling accessories in the UK, US, France and Germany. [online] Available at: <https://www.theguardian.com/technology/2015/may/18/xiaomi-selling-accessories-uk-us-france-germany > [Accessed 27 June 2016]

The Indian Express, 2015. Xiaomi customers can now give a missed call for Pick Mi service. [online] Available at: <http://indianexpress.com/article/technology/tech-news-technology/xiaomi-customers-can-now-give-a-missed-call-for-pick-mi-service/> [Accessed 27 June 2016]

The Telegraph, 2015. Chinese smartphone maker Xiaomi steps into US market. [online] Available at: <http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/electronics/11410115/Chinese-smartphone-maker-Xiaomi-steps-into-US-market.html> [Accessed 27 June 2016]