MARKETING STRATEGY OF XIAOMI INC. LTD
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Executive Summary
In the recent years, China has grown in their China’s mobile communication and technology has received tremendous development and growth. The global demand of smartphones for mobile users in the world has led to manufacturers to take advantage of the situation to make profit. In the world today, approximately one billion people use smartphones. The high demand has led to birth of various mobile phones brands that can attract several diverse groups in the world. In the year 2010, Xiaomi emerged as one of the latest brands that successfully attracted the larger part of the market. In this paper, it will present the SWOT analysis and the marketing plan that Xiaomi has implemented to attract foreign countries. Moreover, the paper will provide the business models used by Xiaomi to remain successful in the market and the exponential development of the company. Information from different current sources have assisted in the performance the study. The success of Xiaomi Company has happened because of the initiative of the form to produce quality products at a cheaper rate. The company does provide a customer feedback system that allows the firm to understand different ways to improve their services to the clients. When we do focus on the expanding portfolio of the company. We find several domains such as home manufacturers , personal computers, smart TV’s and speakers.
Introduction
We have experienced a massive growth and development in the smartphone industry over the last 5years. Xiaomi is a company founded in the year 2010 by Lei Jun who was a serial businessperson. The entrepreneur focused on providing high quality products to the market but at a cheaper cost compared to other companies. Xiaomi has employees from diverse places and the population comprises of individuals from Microsoft, Motorola, Google, Yahoo and Kingsoft. Moreover, Xiaomi has workers from tech companies who come from different countries around the world to provide the best vision for the company. Currently the products that Xiaomi produces around the globe includes MI TV, Redmi IS, MI 4, MI 3, and Redmi Note, MI Power Bank and other accessories. In order to provide a stiff competitive pricing in the market, the company does sell directly to clients. In the year 2013, the company sold over 18 million handsets in China. Xiaomi has expanded its market share to countries such as Taiwan, Malaysia, India, Indonesia, Philippines and Singapore. The company is ready to expand globally to ensure they maximize their production of quality products to earn a larger share in the market thus high profit.
Background of the Organization
Xiaomi technology Co. LTD founded in April 2010, which is an internet company with mobile phone and smart hardware connected by an IoT platform at its core. At the 7th years, the annual income of Xiaomi Company exceeded 100 billion RMB. It is the world’s fourth largest smart phone brand. Has established a large consumer IoT platform. It has estimated that more than 213.2 million smart device (excluding smart phones and laptops) connected to its platform.
The continuous growing of mobile phones industry has made the market to remain so competitive making it hard for start-up industry to survive. Xiaomi has had some difficulties with established companies such as Samsung and Apple who have attracted the market for so many years (Chen et al, 2019). The marketing strategy of Xiaomi has enabled the company to succeed in the market. According to the reports from the Forbes magazine (2015), it reports that nearly 90% of new companies in the mobile business fail to compete favorably in the market. We have experienced established companies in the smartphone and computer electronics having many difficulties to compete in the market because of the high consumer expectation and stiff competition.
Overview of the Product
Xiaomi has become one of the most valued technology in the world. In the year 2014 on December, the company received a total of US$ 1.1 billion from different investors making the company more valuable. The company did enlarge its marketplace in India on July 2014and attracted many consumers in the nation. Xiaomi agreed different partnership with the likes of Amazon and Snap deal to ensure they occupy the full share of the market. Moreover, the company has teamed up with several retail store in the world to ensure they continue to provide their products to clients easily. The Mobile and Airtel store have remained one of the main stores the company sells their products. The company does has vision and mission that has helped the company to market their products extensively in the world. The firm’s vision involves providing high quality products to clients globally at an affordable price. Secondly, Xiaomi vision is to ensure that more than 100 million smart phones supplied around the world globally.
In less than four years since its start up, Xiaomi has become one of the largest producing smart phones company in the world. In the world, most firms have mission and vision that drives them towards success but Xiaomi success over the short period means they had better marketing management and financial resources (Boscor, 2016). The company did stick at providing high quality products at a cheaper price because it allows the firm to make more revenue at a short period. Moreover, the business does not worry so much about the fluctuation of price in the market. It enables them to focus more on producing latest technology to the middle class who can afford the goods. Going global with an effective marketing strategy allows Xiaomi to enjoy benefits in the future.
Situational Analysis – Market Strategies
Xiaomi has had its success over the years because of effective marketing strategies that have brought several accomplishments. In order to achieve success in the business then one requires confidence, customer satisfaction and innovation. When a firm has confidence in their products then their marketing plan will work successfully because it will fulfil the needs of the clients. Xiaomi has operated with two brands namely Mi and Redmi, which successfully worked in India and in the world. In India, the market share of Xiaomi has grown tremendously from 6 percent to 22 percent. The increase in percentage share in the mobile share in the country shows that the firm marketing strategy is effective. Xiaomi has a strong supply chain and the company can sell its products in any price sensitive market. Secondly, Xiaomi does follow the demographic segmentation-marketing plan (Aldashova et al, 2020). Moreover, the reason to its success is that Xiaomi has considered different factors such as income, Age and lifecycle and Age stage to target its customers around the globe.
Figure 1: An Example of Xiaomi Brand
The India market is one of the places that Xiaomi has successful stormed because the country consist of consumers segregated in rural and urban markets. The broad segregation allows marketers to remain attracted because it consist of small economically disadvantaged class and relatively large affluent class. Xiaomi Inc. targets different age groups when marketing their products. Age 18-35 remain the main target and those who are tech-savvy because most of them students (Robustelli et al, 2019). They ready join working class and cannot afford the overpriced mobile phones from other brands. Students and middle class people in the economy remain attracted to quality products that have affordable prices. Samsung, Apple and LG provide high quality products but they overprice their specs, which makes it difficult for middle-income fellows to afford. Students, Social media users, heavy internet and working class people do drive the e-commerce market.
Xiaomi Inc. has made sure it attracts all the classes in both India and around the globe to ensure their new products and existing brands attracts the customers. They have different products such as the power banks, Smartphones accessories, TV, Bluetooth speakers and wearables that have the same quality and cost effective. The company did reduce the gap between the supply chain and the demand by reducing the cost they incur in promoting online shopping. The marketing strategy allowed the company to save on other unnecessary cost by using Mi online stores and Flipkart.
The Four P’s Marketing Strategy of Xiaomi
Price, Product, Place and Promotion are the four main marketing strategy that Xiaomi uses to attract and sell their products. Place involves the fact that Xiaomi has a bigger basement in China, Singapore and Malaysia. However, the company has expanded its selling of products to India, Philippines and targets areas that Samsung and Apple has dominated to ensure competition in developing countries in Asia Pacific regions. Secondly, Product consist of the strategy of Xiaomi producing quality products with latest technology at an affordable price different from two big competitors Samsung and Apple (Hyun, 2017). The strategy drives Xiaomi above the top list because it has MIUI fully customized and best UI for their mobile phones. Besides, Price involves Xiaomi ability sell its products through Mi India and flipkart.com allowing them to reduce extra costs by only covering the cost of device. Moreover, promotion is a strategy that Xiaomi uses through word of mouth. It does reduce the cost of advertising because they use flash sales. More so, the use of flash sales creates urgency and anticipation on clients.
Figure 2: The Market Share of Smart Phones in the year 2016 to 2017
The success of Redmi Note 4 in India market made it easier for Xiaomi Inc. to gain popularity around the world. The strategy worked as they advertised their link, which tried to talk about best phones in the market. The success of the company in Asian countries and in India has made it to grow in popularity making it attract many consumers. Availability of quality products at an affordable pricing is a plan that most companies cannot risk using because of their inability to control the extra costs incurred in production.
The SWOT Analysis of Xiaomi Inc.
Figure 3: A summary of the SWOT Analysis of Xiaomi
Strengths
Xiaomi Inc. uses a different approach from established companies such as Apple and Samsung. The company possess a business model that is different from other companies, “The Triathlon Model” which uses internet services, hardware and software services. China is the only place where Xiaomi has physical retail shop and in other market, it avoids the extra costs. The company focuses internet and software services to ensure their products can attract a certain age group in the society. Moreover, the company uses the bill-of-material price approach, which provides Xiaomi ability to penetrate the market and acquire higher market share. The revenue of the company does come from aftersales service. Complementary goods provides revenue to the company and they consist of headphones and other products. The use of word of mouth, social media and online sales is the main marketing approach that Xiaomi uses to ensure they cut the cost of intermediaries in the business (Wanqiang, 2016). The company does produce high quality products that have a longer product life cycle, which attracts customers from all sectors of class in an economy.
The Indian market has remained the strength of Xiaomi Inc. strong momentum. The company has a marketing strategy that has acquired more than 10 percent of the market. Xiaomi did introduce WeChat, which became the distribution channel of the company and it took the market base as intended. The brand awareness and good customer relationship as remained a success over the years. The availability of Indian online shops such as Flipkart has made it easy for the company to swell its products in India. Moreover, the success of the company in the country has made Indian’s government to allow setup of a production plant in the country, which has allowed Xiaomi to secure a higher market share and compete favorably with other companies. Xiaomi does manufacture an estimated 75 percent of products in India. Xiaomi has experienced employees form better companies, which allows them to improve their software and production rate in the world. For instance, the cameras of Xiaomi phones have sharp touchscreens, Snapdragon processors and Sony modules. Moreover, the design of their products do attract customers because they consider the technical features that consumers want.
Weaknesses
Established companies such as Apple and Samsung may consider the competency of Xiaomi as a weakness although it is strategy to increase market share and market penetration. The use of bill-of-material approach has made the company’s net profit to remain less than the total revenue. In the year 2014, Xiaomi produced a net profit of about 56 million dollars and a revenue of about 4.3 billion dollars. World leaders like Samsung and Apple do have an operating margin of about 28.7 percent for Apple and 18.7 percent for Samsung. Xiaomi does have an operating margin of about 1.8 percent lower than that of Samsung and Apple. The nametag that people refer to products makes its brand to have less sell in the market than expected (Aldashova et al, 2020). The tag, “made in China” makes it difficult for some consumers to trust the long life cycle of the products. The nametag does influence how consumers perceive the product making it a weakness to strive in the market. The label of a product is a vital thing because the tag, “made in china” affects the statistics of the sell and the image of the company. Moreover, Xiaomi has had critics and accusations from companies like Apple who claim the company copies its design and software of the products. The unfavorable reputation that Apple Company has created against Xiaomi affects has a negative image on the marketing and branding of the company.
The low quality of aftersales services and lack of enough services in various centers in India are feedbacks that consumers provide about the company. It creates a sense of doubt about the company’s reputation because the field service connects the company with the consumers. The negative feedback will absolutely affect the firm’s credibility and market share in India and the rest of the world. Xiaomi uses different approaches to attract consumers and improves market share by having experienced workers to do business and setting up a production plant in India. However, the rate of corruption in the company makes it difficult for them to achieve the vision and mission of the company (Aldashova et al, 2020). Moreover, availability of bureaucracy and lack of enough knowledge of marketing technique in India and the rest of the world makes it difficult for the company to compete favorably. Besides, the lack of internationalization has a negative effect to the company because new markets require resource commitment, products and adaptation of services.
Opportunities
Xiaomi success and marketing strategies show that the company has the opportunities and reasons to expand globally and acquire a larger market share. Economies with less government regulation for instance India, is one the perfect market that Xiaomi has used to acquire to introduce digital infrastructure through high tech production. Moreover, the company will acquire a higher market share and less competition from other companies such as Samsung Apple. Xiaomi has a potential to grow in countries like India than China because China has a penetration rate of 70 percent while India stands at 30 percent. Other continents like Africa has emerged to attract Xiaomi‘s products which will work because of the favorable pricing of the products. Acquiring production plant around the world will ensure the firm achieve a higher market share. Government policies will help the firm to remain at peak because most of policies require citizens to purchase smartphones to operate in certain activities in a country. Moreover, Xiaomi can expand internationally if the decide to establish an English speaking center. An English-speaking center in India will allow the company to have 24/7 communication center around the globe due to different time zone (Satya & Irna 2016). The potential market for smartphones in India is huge and the company the opportunity to achieve the whole market share with right marketing strategies.
Threats
Xiaomi has to invest in the R & D due to large number competitors in both international market and domestic market. Lenovo and Vivo have the same percentage of market share in India as Xiaomi. They both own a 10 percent market share making them struggle for the consumers in the country. The setting of retail stores will increase the expenditure cost and aggressive marketing strategy that will require resources. Even with the extra costs, the company cannot increase the price of the phones because it will lure away consumers. More companies that willing to share the 41 percent share that Xiaomi has in India if they decide to overprice their products due to high demand of penetration rate (Aldashova et al, 2020). The ban of certain products in countries like the United States makes it difficult for the company to make enough revenue. Continuous trade wars and economic disaster like the Corvid 19 pandemic makes it difficult for the company to achieve the estimated growth. Economical disasters cannot controlled and in most times, companies do not prepare appropriately for the losses, which makes it difficult for them to operate.
Competitor Analysis
Xiaomi has achieved tremendous success with expansion in Singapore, Philippines and India where the company holds the largest market share. However, presence of companies such as Lenovo, Volvo, Samsung and Apple have made it hard for Xiaomi to increase its market share around the world. Apple for instance has accused Xiaomi of copying their design of production therefore decreasing the brand image of Xiaomi. Apple and Samsung despite their pricing methods people still buy the products because of the quality and the image of the companies over the years.
Marketing Plan
The production approach of Xiaomi is to attract experienced employees to help them in production of phones and other tech accessories. The benefit of the approach is to enable a mobile phone to have perfect specifications in all sectors. The company has a marketing plan that will enable it to continue thriving and achieve more market share in India and internationally. The marketing plan consist of four stages, which include place, promotion and pricing. Price of smartphones varies from $93 to $420 in Indian market. Xiaomi produces Redmi and MI smartphones models, which they offer them at mid-range pricing. The marketing plan of Xiaomi is to ensure products are of high quality and with affordable pricing (Pan & Kang, 2017). For instance, Samsung Galaxy S8 and iPhone 7 do cost up to $900 in India market and globally. Besides, a brandy Mi5 in the same range as the Samsung and iPhone7 will cost $355 making it affordable and yet they have same features. The pricing marketing plan helps the company to continue attaining higher market share globally
Secondly, place is another marketing plan that Xiaomi using to achieve more market share. Xiaomi has entered markets such as Singapore, Philippines and India where Samsung, Apple and Lenovo have dominated. Even with stiff competition, Xiaomi has achieved a higher market share and plans to have a service center in Indian market to attain more shares in the country to low penetration and favorable government policies. Promotion has remained a vital strategy for Xiaomi Company as the firm largely rely on social media and does not rely on printed ads and TV. The company prefer using the strategy to reduce the extra costs that other companies incur when marketing their products. Xiaomi plans to focus on word-of-mouth strategy, which can easily influence the decision of a consumer and thus increasing market share.
Recommendation
The company should continue with the current marketing strategies because they seem to work and attract more market share globally. Xiaomi should consider using expanding to other markets because most people prefer high quality products at affordable pricing. Moreover, the companies should find more solutions to reduce the effects of negative brand image (“made in china”, “copying Apple”) and focus on how to they can achieve positive remarks from consumers.
Conclusion
In the paper, different analysis show that Xiaomi has achieved tremendous success in the mobile phone industry. The SWOT analysis has provided strategic study in terms of strengths, weaknesses, Opportunities and Threats. The SWOT analysis has provided enough strategic understanding of the Xiaomi performance in the market. We understand that the business model of Xiaomi helped the company to achieve success in the market. The company did offer consumers with high quality smartphones and made sure they remained affordable to buyers. Moreover, Xiaomi did cut cost significantly to enable the company to use cheaper marketing strategies such as ads and social media services. Despite the continuous growth of corruption in the company, Xiaomi should expand globally and set a base in Indian market because it is favorable for business.
References
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