Programme Name: _MBA________________
Course Code: __________
Course Name: ________Strategic Management_________________________
Assignment / Lab Sheet / Project / Case Study No. _2___
Date of Submission: _______1st July, 2018________
Submitted By:Submitted To:
Student Name: Shraddha KhatiwadaFaculty Name: Mr. Nischal Raj Dawadi
IUKL ID: Department: Strategic Management
Semester: 3rd semester
Intake: May 2017
Xiaomi is the Chinese manufacturer of mobile phone and other electrical equipments. Drawing from secondary sources critically evaluate Xaomi SWOT, Industry competitiveness and provide recommendations if Xiaomi should expand to Nepalese market? Industry competitiveness, SWOT and TOWS Matrix.Ans: Xiaomi Inc. is a Chinese electronic company headquartered in Beijing. It is largest Smartphone maker in the world. Xiaomi designs, develop and sell smartphones, mobile apps, laptops and other electronic devices. The company started in August 2010 has a large market share in the China and Indian market. Xiaomi is the world’s 4th largest smartphone manufacturer as of the start of Q2 of 2018. The Company also develops mobile applications and targets the lower-middle market and has gained a loyal fan base by incorporating user feedback into the design of its latest sets and Android skins. It offers internet value-added products including TV boxes, backpacks, phone screen protectors, earphones, and more.
Xiaomi’s competitiveness lies in its software, allowing it to supply high-end products at relatively cheap prices. Xiaomi’s biggest competitiveness is that it sells hardware with better features than its rivals for less than half the price. It is offering its smartphones with specifications that are similar to ones of global maker’s flagship models at nearly half their prices. Moreover, it is also showing competitiveness not only in its smartphones with high-end features, but also in mid-range to low-end models equipped with performance that is relatively superior to other company’s models with similar specifications.
Xiaomi doesn’t spend money in advertising like its rivals. It cuts production costs through online distribution. Most of its smartphones are sold in online stores and mobile messengers, rather than offline, enabling the company to minimize costs in maintaining and managing offline stores. In 2013, Xiaomi sold about 80% of its products via online stores, and it is known to have spent costs one 50th of others per smartphone by trimming costs in inventories and distribution. Xiomi is an outstanding marketing firm.
The industry competitiveness of Xiaiomi can be explained using Porters Five Forces model.
Threat of new entrants-low: Barriers to entry are very high considering the fact that there are already established companies ahead of Xiaomi including Huawei, Oppo and Vivo as well as Apple and Samsung in the smartphone industry. All have high economies of scale and production which makes it very expensive for new entrants to compete unless highly capitalized. It is not a surprise that as a startup company growing at a high rate, Xiaomi couldn’t scale up its production capacity to meet the demand of its smartphone devices which contributed to pushing it from first to fifth position in China’s smartphone industry.
Threat of substitutes-low: The main substitutes for smartphones are tablets, laptops and mobile phones. The threat of substitutes could be described as low due to the added multi-functionality, services, and apps that smartphones and mobile phones have over single featured technology products. Xiaomi is differenitiated from its substitutes and the competition by its own exclusive platform called MIUI. This platform is based on Android operating system.
Industry Rivalry-High: The smartphone and electronic industry is very competitive as there are many majors players in this industry who have worked for years to create brand image and loyalty and are competiting on various factors like price, quality, consumers and brand loyalty. There are some major competitors competing with Xiaomi in Chinese mareket including Oppo, Huawei, and Vivo. All these Chinese companies are trying to capture the market share but Apple and Samsung are still major players in the smartphone industry.
Bargaining Power of Suppliers-medium: The major suppliers for Xiaomi were from Taiwan and over the year it has gained loyal supplier and build up a strong supply chain which is one of the success factor of Xiaomi. With the time Xiaomi has developed strong relationship with suppliers so the bargaining power of supplier is very moderate compare to the time when it was new to the market.
Bargaining Power of Buyers- high: In the smartphone industry there are many players in the market and buyers can switch from one brand to another as there are different choices among mobile phones. The bargaining power of buyer is high as there are many options and competition in the Chinese smartphone market from the low end and high end of the market which has resulted in sluggish growth in the Chinese smartphone market. While Xiaomi has managed to increase sales in 2018 because of its affordable prices putting it ahead of Apple which is now in fifth, its focus on low end low margin phones means its profits are extremely lower than Apple which still controls 80% of the premium end of the smartphone market in China.
SWOT ANALYSIS AND TOWS MATRIX:
External factors Strengths:
Largest smartphone maker
Skilled and experienced manpower
Huge China and Asian market available
Good quality product Weakness:
Lack of advertising and marketing spends
Brand image and equity
Problem in maintaining its qulaity
Penetration of smartphones
Product innovaton and differentiation
Increase brand awareness through advertisement
Developing innovative products with different price range
Build good relationship with suppliers to have enough products at a time. WO Strategy:
Advertisement should be done to form brand image
Offline distribution should be increased to change customer perception
R&D department inorder to build quality and quantity patents.
Focus on security feature
Brand differentiation(similarity in product)
Change in prices ST Strategy:
Increase service centers
Differentiate in product
Product design and innovation
Advertisement to create loyal customer and minimze competition WT Strategy:
Using low price model phones with qulaity and create brand image
Invest more in advertisement and increase customer than competitors
Provide free service facility and open more stores and distribution channels.
In Nepalese market, the market penetration of smartphones is increasing and the competition has grown. The globally-renowned companies are entering the Nepali market. The Nepali market is an attractive and high growth potential market. The development of mobile applications offering localized contents has helped the industry grow further. Smartphones are becoming more ubiquitous, content rich and powerful. As far as Samsung is concerned, we are the major market share holders thanks to the brand loyalty of our highly valued customers. The Nepali market is seeing rapid growth these days as more and more people are becoming technology-friendly.The market has gained pace in terms of revenue generation. The smartphone industry in Nepal is experiencing boom times. The competition has moved to the next level and the user base is also increasing rapidly.
Xiaomi should expand to Nepalese market as Nepalese market is the highly potential market where there is many opportunity for Xiaomi to build their brand image because in this market people believe in the services provided by the product. They believe that services are the important factors which satisfy their need about smartphones. As nowadays everyone is addictive using smartphones and is searching for innovative new phones having extra features and services at different price ranges. Xiaomi offers smartphones at different price ranges and have better quality products. There are many customers who want expensive smartphones as well as there are many customers who want smartphones at low prices. In today’s time there is a huge opportunity for Xiaomi to established brand image in Nepalese market. So, I think Xiaomi should expand to Nepalese market. Xiaomi can expand in Nepalese market through using social media marketing, e-commerce websites and using various distribution channels. It has larger scope as maximum numbers of people are searching for new innovative and quality products at reasonable price. The advertisement should be done properly and various service centers can be established and reaserch and development activities can be conducted to meet the needs and desires of customers. Xiaomi can establish good relationship with Nepali suppliers and distributors to increase customers and create brand image and loyalty which will help them to increase the market share and sales.
Competitive Profile Matrix (CPM) for Xiaomi and Its Competitors
The Competitive Profile Matrix (CPM) may identify a company’s key rivals. Identifying the critical success factors is the most important process in constructing the CPM. The most important factors in the Table are “pricing”, “Revenues and profits” and “E-commerce” as indicated by weights of 0.15. Xiaomi is doing well in “pricing” and “E-commerce” but scores quite low in “Revenues and profits”. Overall, Xiaomi is quite strong, as indicated by the total weighted score of 3.1, just after Huawei 3.4.
CRITICAL SUCCESS FACTORS XIAOMI HUAWEI OPPO
Weight Rating Weighted score Rating Weighted score Rating Weighted score
Product quality 0.1 3 0.3 4 0.4 3 0.3
Market share 0.1 2 0.2 4 0.4 3 0.3
Pricing 0.15 4 0.6 2 0.3 3 0.45
Innovation 0.1 3 0.3 4 0.4 2 0.2
Sales Distribution 0.05 2 0.1 3 0.15 4 0.2
Revenue and Profits 0.15 2 0.3 4 0.6 3 0.45
Customer loyalty 0.05 3 0.15 4 0.2 3 0.15
Global expansion 0.05 3 0.15 4 0.2 3 0.15
E-commerce 0.15 4 0.6 3 0.45 2 0.3
Leadership 0.1 4 0.4 3 0.3 2 0.2
Total 1 3.1 3.4 2.7