HYPERLINK “https://www.marketing91.com/china-fastest-growing-economy/” China is without a doubt one of the strongest manufacturers in the world. This is due to cheap labor and due to the technology built over time. Xiaomi is a company from Beijing in China which manufactures Smartphones. Its Mi and Redmi range of smartphones are famous and well adapted to the market. SWOT analysis is a vital strategic planning tool that can be used by Xiaomi managers to do a situational analysis of the organization. It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Xiaomi is facing in its current business environment. The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as – opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix. The main purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Xiaomi strengths, and eradicate its weaknesses.
INTERNAL AND EXTERNAL ANALYSIS OF XIAOMI by using SWOT ANALYSIS: STRENGHTS:
As one of the leading organizations in its industry, Xiaomi has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Xiaomi are –
Successful track record of developing new products – product innovation.
Highly successful at Go To Market strategies for its products.
Strong Free Cash Flow – Xiaomi has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Highly skilled workforce through successful training and learning programs. Xiaomi is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
Strong Brand Portfolio – Over the years Xiaomi has invested in building a strong brand portfolio. The SWOT analysis of Xiaomi just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
Having Skilled and Experienced Workforce in which the professionals from other leading companies like Google, Microsoft, Kingsoft, and Yahoo are also included.
It has Competent and Experienced Business Units. Have wide distribution and sales network to expand its business to new existing markets.
Providing Quality Components in Smartphones and other products at the most affordable prices, with specifications that won’t obsolete till next 12-18 months.
Added with Strong Management Team and has direct consumer sales as well.
Use Word of Mouth Advertising rather than other sources.
One of the Largest Smartphone maker – Xiaomi is one of the largest smartphone makers in the world. It is said to be the 5th largest smartphone manufacturer as of 2017. Originating from China, the Smartphones are manufactured in huge quantities and have wide acceptance across the world.
Highest selling Smartphone – The REDMI Note 4 became the highest selling smartphone in India and China and practically in 50% of the Asian market. This shows that Xiaomi is strongly rising in the smartphone market and has already beaten several giants.
Huge China and Asia market available – Another benefit to Xiaomi is that the whole Asian market is their playground. As China lies within Asia and as Chinese mobile brands are highly penetrated in the Asian markets, Xiaomi still has a lot of ground to explore.
Penetrative Pricing – Xiaomi has the strongest penetrative pricing advantage because it generally uses direct marketing techniques and avoids dealer and distributor margins.
Good Quality products – Even at such low prices, no one can doubt the quality of Xiaomi phones. The smartphones are regularly rated high on all E-commerce portals – a further proof that Xiaomi does not compromise on quality even if lowers the price regularly.
Manufacturing Advantage – China has a huge manufacturing advantage because the country in itself is known for manufacturing and exporting the products. China is also one of the largest consumers in the Asian market.
Rising Brand Awareness – Xiaomi’s brand awareness is rising and more and more people are getting to know about the brand thereby resulting in higher sales across the globe.
Growing year on year – The Company which started manufacturing in 2011 has grown by leaps and bounds and is regularly growing year on year.
E-commerce advantage – The Flash sale model is a very popular model which has worked wonders for Xiaomi. In this model, the product is made available only in limited quantities and sold at a very low price. This model made the consumers crazy and each Xiaomi looked like a price which was hard earned.
Specifications of the smartphones produced – Xiaomi smartphones are technologically advanced as well and they give higher tech specs at lower price. Xiaomi phones are especially renowned for their camera which is said to be very high resolution and gives excellent photos.
Research and Development – Xiaomi invests heavily in R;D and it is a market follower but its major R;D expenses are towards cost advantage and not differentiation advantage.
Weakness are the areas where Xiaomi can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
Limited success outside core business – Even though Xiaomi is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the day’s inventory is high compare to its competitors is that Xiaomi is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Xiaomi
Online Advertisement model and the Word of Mouth advertisement is not as effective as other sources like TV advertisements or Celebrity endorsements. Also Social media marketing is becoming popular but it is still in under developing stage and it takes time to get success in online business.
Lack of consistency in bringing more and more professionals in the company, who can guarantee its success. And Logistics issue due to direct consumer selling.
Weak After-Sales Service and Lack of enough technical staff to carry on their electronic work and introduce new and fresh specifications in it (System updates are rolled out every week in China).
Offline Distribution – Xiaomi mainly sold through the flash sale but at times, it was difficult for customers to get their hands on a REDMI or MI model phone. This is because their offline distribution is not up to mark and Xiaomi phones sell mainly via E-commerce.
Advertising and Marketing spends – The advertising and marketing spends of the brand is very low. The brand launches ATL campaigns only when coming up with a new product. However, the advertising is erratic at best and is never consistent.
Brand Image and Equity – Because the advertising and marketing efforts are poor, the brand image is not so good as Samsung or Apple or other such competitors. The product portfolio of Xiaomi is also limited which further effects the brand image. Service centers too are limited and all these factors contribute to the low brand equity and reputation.
Low Skimming price – While other smartphone manufacturers survive on skimming price, Xiaomi launches its own phones at low prices in the flash sales. As a result, it cannot take advantage of the skimming price or the advantage is not as profitable as it would be for Samsung or Apple or other such high end brands.
The market development will lead to dilution of competitor’s advantage and enable Xiaomi to increase its competitiveness compare to the other competitors.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Xiaomi to increase its profitability.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Xiaomi to capture new customers and increase its market share.
New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Xiaomi to drive home its advantage in new technology and gain market share in the new product category.
New trends in the consumer behavior can open up new market for the Xiaomi . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
The new technology provides an opportunity to Xiaomi to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
Government green drive also opens an opportunity for procurement of Xiaomi products by the state as well as federal government contractors.
New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Xiaomi. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Adopting Offline Sales Channel can really help company boost its sales along with the Online Sales Channel.
Explore new and existing markets while expanding the exhibition of their products, because they have a huge product line in China.
Having a huge product line consisting of many smart home devices, they can dominate Indian market and can create a great Internet Ecosystem outside China too.
Expansion – Covering the developing countries and the emerging markets should be the priority for Xiaomi. As it mainly follows online sales model, which is becoming popular in many countries, it should expand to countries where E-commerce mode of purchase is well established or in the process of establishment.
Distribution – Besides online distribution, Xiaomi also needs to concentrate on offline distribution if it ever wants to be consistent like some of its top competitors. Offline distribution would also mean higher expenses and therefore a rise in price. But it will help the brand to create a long term image and equity.
Brand Building – Brand building methods such as Sales promotions, Trade promotions, ATL campaigns and BTL campaigns should be launched as regularly as possible to build a better brand image. Xiaomi is far behind HYPERLINK “https://www.marketing91.com/marketing-mix-oppo/” Oppo and Vivo where BTL Campaigns are concerned.
Product Portfolio – Product portfolio of Xiaomi is limited and it has 2 major series which actually contribute to the complete revenue of the brand. Expanding the product portfolio will help the brand in brand building as well as in getting higher revenues.
Product innovations ; Differentiation – Being a market follower is tough and Xiaomi needs to get a step ahead by introducing highly differentiated phones which have innovative touches to it. Moreover, it needs to advertise these advantages to get more and more customers to buy their products.
Penetration of Smartphones – Across the world, the smartphone as a product is being adopted and people are using more and more smartphones with combination of Internet. This market penetration of Smartphones is for the benefit of Xiaomi. The better phones they manufacture, the more they will be able to capture market share.
The dying need for expensive smartphones – People are tired of spending money every year on a Samsung S8 or the latest Apple IPhone. People want cheaper alternatives so that they can change their phone every alternate year. As a result, most potential customers who have the potential to buy high end smartphones are also buying Chinese smartphones for their lower prices. This is why majorly all rising smartphone brands are from China – Xiaomi being one of them. This shift in consumer preference is to the benefit of Xiaomi
Imitation of the counterfeit and low quality product is also a threat to Xiaomi’s product especially in the emerging markets and low income markets.
New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
The company can face lawsuits in various markets given – different laws and continuous fluctuations regarding product standards in those markets.
As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
Liability laws in different countries are different and Xiaomi may be exposed to various liability claims given change in policies in those markets.
Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
Face strict Government Regulations and the effect gets transferred on manufacturing and transportation of their products.
Their Loss Leader strategy is laying a question mark on sustainable future of Company.
Profitability in future at stake, because many competitors are coming up with affordable products with handsome specs.
Competition – Oppo and Vivo are 2 of the biggest competitor for Xiaomi because they are themselves from China and have the same manufacturing advantages like Xiaomi. Besides this, Oppo and Vivo have a strong offline presence and have huge distribution network. Thus, they are a huge threat to Xiaomi.
Xiaomi also has many competitors with Samsung being the biggest of them and the nearest toughest competitors are: • Lenovo (Motorola including) with 9.6%, • Micromax with 7.5% if we go by market share, which is constantly falling due to non-satisfactory sales, poor marketing strategies and non-competent products. • Reliance Jio Smartphones, which as Smartphone product line started up in Q1 2016 and has gained 7% market share due to overwhelming marketing strategies such as free Jio 4G sim offer on buying their LYF branded smartphones. Brands mention above which their target group customers are middle and lower middle class people so I did not do the comparison with iPhone(target on high class people) although they all was segment in smart touch phones.
Service – The lack of service centers equivalent to the number of sales by the brand is a worrying statistic. Xiaomi needs to increase its sales and service centers both if it wants to retain its customers.
Brand Differentiation is absent – The smartphone segment has become such that brand differentiation is becoming very difficult. Each brand is coming up with products which are almost similar, thereby making it difficult for the customer to choose one brand over other. This will become especially difficult when more and more brands come from China.
FOUR P’s OF XIAOMI – MARKEING MIX:
Product: Having a cheap price in the market does not always refer to low quality. Xiaomi’s prices are lower than their two big competitors, Apple and Samsung. Presenting itself as the good Quality phone maker with the low prices is the good strategy that drives Xiaomi to the top spot in the smartphone industry in China. The phones consists of good quality, robust case, high Resolution screen, reasonable battery, and runs on the Android-based OS ROM called MIUI. It has more special features than the standard Android phones and has options for Customization. The biggest key that drives Xiaomi on becoming successful is the software rather than the hardware.
Price: Xiaomi sells its phones at a price that just covers the cost of the device rather than its cost of production. Xiaomi is focusing more on selling its phones at a low price today, but gaining more in the future from selling contents such as applications, services, and accessories. Moreover, Xiaomi mostly sells its products online which can reduce costs of opening stores, hiring staff, and inventory keeping, and also may lessen the problems in communication when dealing with distributors and retailers.
Place: There are many countries outside China where the smartphone market is dominated by Apple and Samsung. This is the main obstacle for Xiaomi in expanding its brand internationally. Xiaomi already has a strong base in mainland China, Malaysia, and Singapore. Currently, Xiaomi is expanding its market to India and the Philippines. Despite its expansion into other markets, the company’s main focus is still in China where its largest consumer base is located. And second most focus in all other developing countries in Asia Pacific, in which India is on the top. Xiaomi mostly sells its products online instead of opening physical stores. This is a win-win situation for both the company and consumers. The company can save a lot of money from building the stores while consumers can easily access the products. Because the company spends less money, the price of the phones will also be cheaper.
Promotion: Promotion of word of mouth. Xiaomi uses flash sales, a mean of selling their product in limited quantities within a limited period as part of their sales strategies. This strategy enables Xiaomi to save money from doing advertisement because it creates the anticipation and urgency on consumers. Only limited quantities are available in the market and they will be sold out quickly which means many people have to wait for the next slot. This strategy therefore makes people talk a lot all over China including in the social media. This also grabs lots of the consumer’s attention and makes the advertising less important for Xiaomi in promoting the launch of new products. Social media. Xiaomi uses social media not only to broadcast messages to actively get in touch with its customers, but the engineers from Xiaomi also use this platform to routinely communicate directly with users to get feedback. The engineers listen to the consumer’s needs and refine the software to complete those needs weekly. This distinguishes Xiaomi from other brands because it shows that the company is always concerned about its customers and immediately takes actions to improve the products.
In conclusion, Xiaomi has a unique business model and a very interesting method which is disrupting the smartphone and technology world. It has been successful at incorporating a crowd sourcing strategy into its product development process. At the same time, it has dispensed with all traditional marketing methods and is fully engaged in utilizing online communities ; social marketing for its marketing.