Problem Analysis

 Xiaomi’s CEO Lei Jun and his deputy Bin Lin went against their country’s traditional
value chain to start their venture with a strong belief that high-class technological
devices could not only be designed but also made in China.
 Such devices would range from smartphones to laptops and accessories. The portfolio
strategy through which the company sells its products and devices is, however, is not
very effective Xiaomi as most products sold are designed by other companies; out 600
range of items, Xiaomi only designs smartphones, set-top boxes, TV’s, tablets, and
routers.
 All the other items are either manufactured, produced, or designed by other
independent companies. Worse still, Xiaomi opts to invest in many start-up
companies that seem active in specific internet industries rather than expanding its
influence in different fields of technology. The top executive, however, is quick to
defend its strategy terming it as part of the broader business strategy to reduce costs
while expanding its range of business opportunities.
 Xiaomi instead acts as a supervisor and not an investor as it claims, since giving direct
access to its supply chain, sales channels, financing and branding to other firms could
be a way of assisting them in managing their production and design processes
independently. However, when it comes to selling their products, they use Xiaomi’s
website as the dominant digital sales platform for all the portfolio companies.

 A study of Xiaomi’s motive behind offering a diverse range of products and

technological services under the broader internet ecosystem relies on compatibility,
speed, adaptability, and flexibility to the current market trends. Xiaomi believes that
when devices are interconnected through a single platform, all the partner companies
become compatible but remain independent to develop faster since they have access
to a large consumer base.
 In its endeavor to build its volume and scale in sales, Xiaomi is keen on cost strategy
since the larger the sales volume, the lower the costs over time. Keeping in mind that
the company never began its operations as a smartphone designing company but
 began an internet company with internet enabled a platform where it could monetize
customer engagement. In this strategy, the firm succeeds in many aspects.
 First, the new product mix created provided exhaustive options to its customers,
therefore, helping Xiaomi cater to many customers segments. On the same note,
Xiaomi was able to get diverse revenue models by venturing into various businesses,
not within its scope; this was the main reason behind its diversified revenue stream
within the sector and segment.
 Another advantage was that all the partner companies gained the first-mover
advantage in the overcrowded market, to Xiaomi this was a way of increasing its
market share and enabling a strong brand recognition. Penetrating diverse customer
segments was now not a problem in the Strategy & Execution segments, hence
diversifying its revenue streams. These advantages were however limited due to some
setbacks in the strategy.
 The first setback in Xiaomi’s strategy was the continually declining market share due
to increased revenues as the industry was growing faster than the firm itself. They
ought to have analyzed the current trends in customer service, organization
management, design procedures, and the venture capital to find a proper strategy for
future growth.
 Again, the presence of competitors was a threat to Xiaomi’s business model which
could be imitated. Instead, they needed a platform model to integrate its customers,
vendors, and suppliers and not only the portfolio companies. Xiaomi had to incur
extra costs of creating a new supply chain for its Ecosystem due to the decreasing
significance of the old dealer networks. “Xiaomi never concentrated in customer-
oriented services in the network but chose to invest in other portfolio company design
and products” (Dann, et al. 2017).
 This was a chance for competitors to market their products and gain advantages in
the near future, as such, niche markets and local monopolies were fast disappearances
based on its less effective customer networks. Again, competitiveness was continually
putting affecting profitability due to declining revenue for the Ecosystem.
Nonetheless, there were many opportunities for Xiaomi to grow, expand its profit
margin, and increase its market share but all depend on an improved strategy.