Xiaomi (versus Samsung)

Team name C.I.J

Takashi Mori ID 20142292

Weihua Li ID 20142379

Weijun Liu ID 20142194

Jingting Liao ID 20101215

Plaban Roy ID 20141161

Abstract
 In smart phone industry, Xiaomi has been creating a sensation threatening Samsung as a

market leader in recent years. While Samsung decreased their market share and volume

shipments, Xiaomi impressively saw through the strategic gaps in smart phone industry,

occupied it and became number 1 smart phone vendor in Chinese market in 2014. The most

striking feature regarding this industry is that in two big markets of the world, local

companies are on the rise whereas global companies tend to wither and fall. Despite that,

however, Samsung retains a market leader worldwide. This essay will investigate feasibility

of Xiaomi’s expansion of market share or other options.

Our main Critical Analysis tool is SWOT Matrix Analysis. We will refer to other

analysis such as Porter generic and Robustness of strategic capabilities studying Xiaomi’s

strength and weakness, and also draw opportunities and threats of Xiaomi as the external

environment from PESTEL analysis, especially with a focus on a key driver of Technology.

Xiaomi’s strength is definitely inexpensive, high-end devices and can grab a lot of

nerds’ needs who want upscale smart phones but do not have adequate money. Nevertheless,

Xiaomi’s weak brand equity and no history and culture are remarkable. When connecting

with opportunities and threats, our conclusions to be drawn are obvious that Xiaomi should

not fight squarely with Samsung and Apple, pursue its unique market segment as nicher and

solidify its positioning by repelling other competitors in the niche market. This will lead to

expansion of market share.

Table of Contents
1.0 Introduction
1.1 The Strategy Purpose-The Smart phone Industry
1.2 How to approach and Strategic Management Tools
2.0 SWOT Matrix
2.1 Strength
2.1.1 Consistent Strategic Group-Specific Positioning as nicher
2.1.2 Product
2.1.3 Price
2.1.4 Place
2.1.5 Supply chain management-efficient operation management based
On Pull-system
2.2.6 Promotion
2.2 Weakness
2.2.1 The specific market segment
2.2.2 Insufficient brand power & Lack of Strategic Capabilities
2.2.3 Limited product range
2.2.4 Technological limit & Low Quality
2.2.5 Plagiarism
2.2.6 No advertisement Strategy, compared with Samsung’s Promotion
2.3 Opportunity
2.4 Threat
2.5 SWOT Matrix Analysis
3.0 Conclusion and Recommendation
4.0 Reference

1.0 Introduction
1.1 The Strategic Purpose- The Smart Phone Industry

Smartphone Shipment Market Share by Vendor in China

Date Xiaomi Samsung

2013 Q4 6.50% 18.80%
2014 Q1 11.00% 18.00%
2014 Q2 14.00% 12.00%
2014 Q3 14.80% 11.00%
2014 Q4 13.70% 7.90%

20.00%
18.00%
16.00%
14.00%
12.00%
10.00% Xiaomi
Samsung
8.00%
6.00%
4.00%
2.00%
0.00%
2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4

In smart phone industry, Xiaomi has been creating a sensation threating Samsung as a

market leader in recent years. The smart phone market has extremely been dynamic and

companies have waxed and waned over the past few years. Even though the market is

continuously growing, something revolutionary is invariably taking place. The dividing line

between the high-end market and the low-end market is obvious. In the third quarter of 2014,

Samsung, which attempts to cover both markets, really faced serious losses. While worldwide

327.6million smart phones shipped, an increase of 25.2%, Samsung’s share declined 8.2%
year on year. Despite that, however, Samsung retained a market leader worldwide making up

23.8% (78.1million units), followed by Apple. Apple, which sticks to the high-end market,

accounted for 12% of worldwide shares in spite of a marginal increase of sales

(Livedoornews, 2015). It is the established theory that high quality products correspond with

high price and low quality ones with low price. Nevertheless, it is Xiaomi that overturned this

theory in the blink of an eye. In particular, the demand for the affordable smart phones is

increasingly growing especially in developing countries. Xiaomi impressively saw through

the Strategic Gap in smart phone industry and successfully occupied it in the blink of an eye.
 According to Canalysis, (2014), in the second quarter of 2014, China accounted for

37% of world smart phone shipments at 108.5million units. In this Chinese market, Xiaomi

became the number 1 smart phone vendor, overtaking Samsung. Xiaomi comprised 14% of

Chinese market shares on the back of 240% year-on-year growth. Samsung made up 12%

with shipments of 13.2million units and fell to 2nd place in the rankings for the first time since

the fourth quarter of 2011 followed by Lenovo, Yulong, and Huawei. The eight Chinese

vendors in the top 10 together were responsible for shipments of 70.7million units and 65%

of this country’s market shares. These Chinese vendors reigned supreme in Chinese market.

Samsung and Apple, which were the only international vendors in the top 10, together made

up 20.0million units and 18% of the overall smart phone market in China. 97% of Xiaomi’s

shipments were into China in the second quarter of 2014. Xiaomi is about to expand into

south-east Asia market and Indian market. It is anticipated to increase the proportion of other

markets. On the other hands, Samsung made way for Xiaomi of a local company in China
smart phone market and was superseded by Micromax of a local company, sliding to 2nd

place in Indian market.

The most striking feature is that in two big markets such China and India, the local

companies go from strength to strength and the global companies tend to wither and fall.

None the less, Samsung is a market leader worldwide. This essay will investigate feasibility

of Xiaomi’s expansion of market shares or other options based on analysis of successful

factors in remarkable progress as well as negative factors.

1.2 How to approach and Strategic Management Tools

Our primary critical analysis tool is SWOT Matrix Analysis, because after analysing

the internal and external factors that the company faces, SWOT Matrix analysis is given to

provide further information about how the organization is going to use the SWOT analysis in

their future decision makings. SWOT Matrix “can be used to identify options that address a

different combination of the internal factors (strength and weakness) and the external factors

(opportunities and threats) (Johnson, Whittington, Scholes, Angwin, & Regner, 2014)”.

This essay will refer to other analysis such as Porter generic and Robustness of Strategic

Capabilities, gleaning Xiaomi’s strength and weakness from SWOT, and also draw

opportunity and threat as the external environment from PESTEL Analysis, especially with a

focus on a key driver of technology.

2.0 SWOT Matrix

2.1 Strength
Offering ultimate high-end devices at low price by reducing MUDA as much as

possible

Xiaomi’s specific strength is also Critical Success Factors.

2.1.1 Consistent Strategic Groups – Specific Positioning as nicher

According to Porter generic, Samsung uses Overall cost leadership. Samsung’s positioning is

apparently a market leader and targeting wide customer layer, ranging from the high-end

market to the low-end one with cost leadership. Samsung can hold off challengers by

homogenizing differentiated products of competitors at lower costs with an abundance of

resources. According to Kotler & Keller (2006),

Remaining number one calls for action on three fronts. Firstly, the firm must find ways

to expand total market demand. Second, the firm must protect its current market share

through good defensive and offensive actions. Third, the firm can try to increase its

market share, even if market size remains constant. (p.350)

On the other hand, Xiaomi is not a market leader, a challenger and a follower. Xiaomi is a

nicher. Xiaomi’s strategy is Focus. Kotler & Keller (2006) said that “Smaller firms normally

avoid competing with larger firms by targeting small markets of little or no interest to the

larger firms” (p.362). “The business focuses on one or more narrow market segments. The

firm gets to know these segments intimately and pursues either cost leadership or

differentiation within the target segment” (p.56).

Xiaomi’s strategic vision is to offer the mobile phone with high-end feature at low price

range. Its targeting segment is originally computer nerds who intend to an upmarket smart

phone but cannot do that. As mentioned above, the high-end devices are usually expensive
and cannot be available to anyone. So Xiaomi was gunning for such nerds, that is, niche

market as its targeting segment (Toyokeizai, 2013).

2.1.2 Product

Indeed, Xiaomi’s strength is the high quality and low price. However, only price is not

Xiaomi’s key strategy. For instance, regarding function, the latest model, Mi4, which was

sold on Chinese Website in July, 2014, with the size of display of 5.0 inches and 13 MP Sony

camera is second to none, compared with Apple’s iPhone series and Samsung’s GALAXY

series whereas its price is 1999 yuan, just more than a third the price of 5288 yuan for

Apple’s iPhone 6 in China. So it was at a premium among Chinese young people

(Livedoornews, 2015). Xiaomi has been sending out mainly high-end devices to the market

since the outset, overturning the established theory. It is the only one product strategy that

makes such this situation possible. Compared with Samsung, which sends out new products

one after the next to the market, Xiaomi focuses on just one product during a year and can

reduce costs of mass production. Xiaomi can make profits by contribution toward selling only

one product as maximum as possible. On the other hand, other competitors such as Samsung

taking various-range-products strategy suffer from their supply chain management costs

according to the number of product line (Toyokeizi, 2013).

2.1.3 Price

Surely, Xiaomi’s phones and tablets are considerably cheaper than its competitors’ such as

Samsung’s and Apple’s. Mi4 was offered at a third of the price of iPhone6. However, initially

Xiaomi does not intend to make profits by selling hardware.

According to China Marketing Tips (2014), Xiaomi “decided to go with the Amazon’s

model-just cover the cost of the devices and make money from selling content”. Even though
Xiaomi is often compared to Apple and Lei Jun resembles Steve Jobs in his style and

charisma, “it is clear that Xiaomi’s true inspiration comes from Amazon”. Xiaomi’s profits

are not made by selling hardware, but by contents offered to customers. Like Google and

Facebook, Xiaomi’s price strategy begins with getting customers, which eventually leads to

profits (Nikkei, 2013). After offering phones at the same costs or at a loss they were

manufactured, Xiaomi can make profits by selling services such as software and games.

2.1.4 Place

Xiaomi never use typical, traditional channel such as wholesalers and retailers, but the on-

demand style through the Internet, that is, the homepage of Xiaomi. According to the order

customers place, Xiaomi decides to manufacture products as small amounts as possible, at

short lead time. So these direct selling products and lean manufacturing enable Xiaomi to

reduce costs as much as possible and relieve stress such as price setting and relationship with

channel members.

2.1.5 Supply chain management-efficient operation management based on Pull-system

Xiaomi engages in just the development of software and application, and outsources the

designing and production of hardware. The supply chain consists of Apple’s OEM such as

Qualcomm, Samsung, LG and so on. As a result, Xiaomi can be exempted from high costs of

the study and development of hardware (Toyokeizai, 2013).

In addition, in the processes the impressive lean management can be seen. As mentioned

above, the manufacturing depends on the order customers place. “Once Xiaomi receives

orders through their own homepage, they decide the purchase of components and the amount

of production according to the information about the orders” (Tech-on, 2012). Xiaomi only
makes what is need, when it is needed and in the amount needed. So Xiaomi can reduce

inventory losses in terms of raw materials, components and finished goods at any process.

Furthermore, Xiaomi uses different raw materials from competitors. Xiaomi can express the

same function as Apple and Samsung with different components and raw materials.

According to Toyokeizai (2013), a supplier indicates that despite the same size of the screen

and the same camera function, there is a substantial difference in components of Apple and

Xiaomi such as Class-A and Class-B respectively. Conversely, it is this difference in

components and raw materials that provides the key to bring down the price.

On the other hand, Samsung keeps most of its supply chain in-house from development to

final assembly. Although it leverages some subcontractors to supply certain components,

Samsung only uses these suppliers for low-cost commoditized components that are more

easily replaceable (Asia Monitor Resource Centre 2013).

Samsung implement the ‘industrial park’ mode, the major suppliers located around the phone

factory, parts supplied directly from the supplier to the phone factory, reducing agency costs

and transportation costs, accelerate the reaction time.

In sales, Samsung began to try to direct supply model, reducing the supply level between

Samsung and consumers.

Samsung use vertically integrated production model, which provide a stable supply of parts to

Samsung mobile phones and other digital products, such as: Samsung Semiconductor Corp.

produces Semiconductor to Samsung phones, the proportion of semiconductor production for

own consumption reaches 50%, and increased year by year; Samsung Motor Company

produces chips and camera modules; Samsung SD I manufactures liquid crystal displays and

batteries; Samsung Corning manufactures monitor glass.

2.1.6 Promotion

In smart phone industry, companies usually spend lavish money on advertising in order to

impress their customers with their own brand image. However, Xiaomi never uses

advertising. They harness the power of word of mouth.

According to China Marketing Tips (2014)

Xiaomi has pioneered flash style sales which were done with little or no advertising.

Flash sales basically mean selling limited quantities during limited periods. They

always create anticipation and urgency – great factors to win customers’ mind and

heart. Needless to say, the units were sold quickly and talked over a lot over China’s

vibrant social media. Word of mouth marketing worked very well for Xiaomi and they

continue to take full advantage of it.

Xiaomi’s fans never fail to flock to social media, because Xiaomi’s targeting market segment

is nerds. Once Xiaomi grabs their fans’ heart, their commitment to the Xiaomi brand is

beyond question. Xiaomi takes advantage of their fans’ psychology and social media to the

full, and disseminate their own brand equity through word of mouth.

In addition, Xiaomi’s charismatic CEO, Lei Jun is an important play in making the brand

equity. He knows that an iconic image of Steve Jobs is still presented among Chinese. It is

well-known that he deliberately imitates Steve Jobs in the way of talking about the brand and

in the style such as T-shirt, denim pants and sneakers.

2.2 Weakness
Owing to reducing costs, Xiaomi cannot build their strong brand equity

Brand equity or brand power which is accompanied by loyal customers is crucial.

Customers tend to choose a product of high brand value if two products have the same quality

and the same price.

Xiaomi’s strength can become their weakness like heads and tails of a coin.

2.2.1 The specific market segment

Xiaomi targets unique market segment of nerds who are completely different from ordinary

customers. If Xiaomi sticks to this market segment, pursue this niche market and ignore the

mass market, these might be a barrier to expand the market share.

In addition to that, Samsung as a market leader could certainly participate even in a tiny

minority segment and attack Xiaomi with cost leadership. It is uncertain that Xiaomi can

repel Samsung and retain the overwhelming advantage in the market segment of niche.

2.2.2 Insufficient brand power & Lack of Robustness of Strategic Capabilities

Xiaomi launched at the end of 2010, that is, launched late. Samsung already occupied most of

the market worldwide. Xiaomi’s main market is in China and the brand image is less known

outside the country. From this viewpoint, Xiaomi’s unique brand image cannot establish in

customers’ mind. In addition, indeed, Xiaomi has got capabilities which are valuable to

customers and relatively rare. However, Xiaomi does not have robustness of strategic

capabilities, which is Complexity, Culture and History. In other words, it is the identity and

personality of Xiaomi which is a result of systematic and sustainable effort over years.

Xiaomi is devoid of its history and culture. So it leads to ease copy of capabilities by other

competitors. Accordingly, Xiaomi cannot retain sustainable competitive advantage.

2.2.3 Limited product range

Xiaomi focus on one product for a year. However, this limited product range is one of the

weaknesses.

According to Bloomberg (2012),

The problem with them is that they are relying on a single model, which wouldn’t help

them to get more market share or mind share of the user. When a new brand or product

comes in, they will have a hard time to defend their market share.

It is the key point whether Xiaomi can overcome this weakness or not in order to expand the

market share and win share from strong competitors.

2.2.4 Technological limit & Low Quality

Xiaomi is not a hardware manufacture. Xiaomi has been succeeding to reduce costs

ultimately and offer the low price by outsourcing the manufacturing of hardware. Conversely,

a lack of management and control of hardware is fatal.

Lack of Near Field Communication (NFC)

NFC technology enables smartphones and other digital devices to communicate by touching

them together or bring them close in a distance of 10 cm or less. Applying this technology,

people can only use smartphones to pay for public transportation or shopping in stores.

We compared five types of smartphones which have similar or better specs and same or even

cheaper price to analyse their features.

Mi 4 Galaxy S4 Honor 6 Nubia Z7 S90-t

Xiaomi Samsung Huawei Max Lenovo

 ZTE
Price RMB 1999 RMB 1888 RMB 1699 RMB 1999 RMB 1999
Released July 2014 May 2013 June 2014 July 2014 October

Date 2014
Display Size 5.0 5.0 5.0 5.5 5.0

(inches)
Resolution 1920X1080 1920X1080 1920X1080 1920X1080 1280X720
Network 4G 3G 4G 4G 4G
CPU Quad-core Quad-core Quad-core Quad-core Quad-core

2.5 GHz 1.9 GHz 1.7 GHz 2.5 GHz 2.5 GHz

Krait 400 Krait 300 Cortex-A15 Krait 400 Krait 400

& quad-core

1.3 GHz

Cortex-A7
RAM 3GB 2GB 3GB 2GB 1GB
Battery Non- Li-Ion 2600 Non- Non- Non-

removable mAh removable removable removable

Li-Ion 3080 Li-Po 3100 Li-Po 3100 Li-Po 2300

mAh mAh mAh mAh

Camera Primary 13 Primary 13 Primary 13 Primary 13 Primary 13

MP MP MP MP MP

Secondary 8 Secondary 2 Secondary 5 Secondary 5 Secondary 8

MP MP MP MP MP
NFC No Yes Yes (32GB Yes Yes

only)

Comparing to Xiaomi, its competitors, like Samsung, Huawei, ZTE and Lenovo, have been

integrated NFC technology. Especially for Samsung Galaxy S4, which was released on May

2013, already integrated with this technology ahead Xiao at least one year and a half. If
Xiaomi wants to keep increasing its market share, the forecasted commonly used

technologies, such as NFC should be introduced to its future products.

Heating Problem

As one consumer’s feedback, “Well, it is warm in winter, but too hot in summer!” According

to more than 1000 comments from gsmarena.com, part of the consumers comment that the

heating problem of Mi4 are serious problems. The biggest complains with Mi 4, besides the

prices, is heating (Thomas, 2015). Jaiob (2014) stated that Xiaomi Mi4 came at the worst

place during a heating test comparing with Huawei Honor 6 Plus and Meizu MX4 Pro. This

technical issue arose dissatisfactions from customers and is supposed to be solved on the new

generation of Xiaomi smartphone.

MIUI System

Xiaomi added many personalized and new features to MIUI system, which is built and

developed based on Android operating system, and bring much convenience and great

experience to customers. However, it keeps developing and releasing new version every

week, which may bring a high risk for customers who are not fanciers since the system may

not be stable enough.

2.2.5 Plagiarism

It has been a long time that customers keep criticizing Xiaomi’s copy from Apple. Especially

when Mi4 is unveiled in July 2014, from industry design to user interface design, you can

find the similar features of iphone (Vincent; Bell, 2014).

2.2.6 No advertisement strategy, compared with Samsun’s Promotion

Xiaomi’s flash style sales can reduce superfluous costs. None the less, this strategy cannot

instil the brand equity into customers.

Compared with Xiaomi, it is well known that Samsung splash out on its marketing strategy.

In the Chinese market, in order to maintain its own line of high-end brands, Samsung

launched a series of multi-level, all places of promotional activities, and use almost all of the

marketing channels. The investment funds and the intensity is very large.

Advertisement

As many other companies, Samsung smart phone advertisement is an essential part in its

marketing strategy. Including long-term advertising and short-term advertising. The Long-

term advertising investment is mainly to choose the best location of the cities core business

district. Maximum subtle impact on the mobile phone consumers. The short-term advertising

is when a new product launch in the market, the company choose the form of investment in

media advertising according to the company's main product consumer groups.

Among the many forms of advertising, Samsung mainly through large-screen video ads, light

boxes advertising, cinema posters advertising. Coupled with broadcasting ads on higher

ratings local television on prime time.

In addition, newspapers and magazines advertisements and other publicity campaign make

Samsung become a well-known brand.

Sports marketing strategy

Sports marketing strategy has been frequently used by Samsung. Samsung has been

sponsored many world’s top sport events ,such as1998 Bangkok Asian Games and 2008

Beijing Olympic Games, especially the strong support and sponsorship to give the Chinese

delegation.
Samsung invested annually in marketing costs about $ 2 billion, of which, the sports

marketing investment of about 20%.

Samsung's president has said publicly that Samsung's success in the global market, 80%

comes from the Samsung Group Olympic marketing strategy.(

http://enterprise.dbw.cn/system/2013/07/30/054944909.shtml)

In the 2008 Beijing Olympic Games, Samsung Electronics was the Beijing Olympic Games

as the world's mobile phone partner and also as the Chinese Olympic delegation partner.

This effectively into the branding strategy for sports, Samsung has won the trust and goodwill

of consumers, and Samsung has also got a satisfactory return.

Entertainment marketing strategy

Recently Samsung is planning a lot of entertainment activities, including organised the

percussion activities on behalf of Korean pop culture, micro-films.

In addition, in the social network interactive communication pathway, Samsung grabbed a

good social networking boom of the Internet era, opened Facebook, twitter and other social

networks, create two-way communication with the users, and provide a more perfect service,

and get the consumer good response.

Charity

Samsung has long adhered to a basic operating principle is to return to the community.

Samsung regularly organize employees in Beijing to Xiangshan and help to do the cleaning,

set up scholarships at many major colleges and universities. Through these public service

activities, Samsung shows to Chinese consumers that it is not just a company only produce

high-tech digital products, but also strive to return to the community.

Promotions

In China, on every New Year's Day, Spring Festival, May Day and National Day, Samsung

will take a variety of promotions to attract consumers. For example, Samsung makes large-

scale promotion in large digital stores or shopping malls, and arrange road shows, allow

consumers to experience the products and communicate with them.

2.3 Opportunity

The 4G development in China

On December 2013, China Mobile, China Unicom and China Telecom got the first license

(TD-LTE) of 4G network. In less than one year, the number of China Mobile’s 4G subscriber

has reached over 100 million (Jones, 2015). According to Chinese Academy of Information

and Communication Technology (CAICT, 2015), the shipment of 4G smartphones of

February accounted for 80% among the total shipment of mobile phones. Later on 27th

February 2015, both China Unicom and China Telecom received the second license (FDD-

LTE) of 4G network (Meng and Gao, 2015). It is predicable that the three telecommunication

companies will accelerate their development of 4G network in 2015 to acquire more

customers. Although Xiaomi’s smartphones are capable of supporting 4G network, it is

suggested to go further. Not only high price smartphones, like Mi 4 and Mi Note, but also

low price smartphones, like Redmi and Redmi Note, are expected to support all 4G networks

across the three communication carriers in one smartphone.

The development of E-Commerce

Cooperating with online shopping website is very necessary. According to Shengli Hu, the

Genearl manager of 360buy Ltd., (jd.com), the market share of online selling mobile phones
has been achieved 24% by the end of 2014. For 360buy, it achieved 53% in B2B online

market for selling mobile phones.

2.4 Threat

Xiaomi has built its success on low-cost smartphones with high specifications, appealing to

consumers in emerging markets such as China and India. But in western countries it has yet

to gain any kind of market share. (Kharpal, 2014). It has allegations of infringing other

company’s patents such as Ericsson and has legal issues in many countries halting its growth

outside China.

If other competitors brought down the price, Xiaomi would be implicated in price war. This

situation would be detrimental to Xiaomi which does not have strong brand equity.

2.5 SWOT Matrix Analysis

Strength Opportunity Strategic options

Combining strengths and opportunities, Xiaomi can generate options to use the company’s

strengths to take advantages of opportunities in the business environment. Before Xiaomi

launched its first smartphone, the company was developing its own Android-based firmware

MIUI online, and shared its resource to the public. It already gained a number of loyal

followers and fans before it decided to build their own smartphones. With these movements,

the company has already gain some reputation. It is also producing hardware and software

relating to network development at the same time, which gives them the ability to prove their

technology strengthens to other companies. Also, with the technology evolution, people has
shown their increasingly dependence on high-tech products. The new and modern

technologies will always take replacement of the old ones. For these opportunities, Xiaomi

can use its technology strengths to build up more customer focused devices, such as centre

controlled electrical home wares. And on 14th December last year, Xiaomi and Midea (one of

the largest electrical application manufactures) made an announcement saying that they

would work together in the future on home automation programs.

Adding more features and provide price competitive but high spec products to customers to

acquire the market share during the development of 4G. Chine Mobile, the biggest

communication operator in China, has over 800 million customers and over 100 million are

4G subscribers. Looking for the opportunity to gain the rest 700 million consumers is

significant for Xiaomi. Cooperating with China Mobile to promote contract phones should be

their main strategy at present. Meanwhile, China Unicom and China Telecom, who just

received second 4G license have prepared a long time to construct FDD-LTE base station,

will dedicate to develop their 4G network since they have been left far away than China

Mobile. Cooperation with these two companies in the beginning, also will help Xiaomi to

increase market share competing with other smartphone vendor.

Weakness Opportunity Strategic options

For the integration of weakness and opportunities, improvements can be made to take

advantage of opportunities by overcoming weaknesses. Xiaomi’s first smartphone

builds its brand late but it develops and spreads rapidly, which leads some flaws uncovered

and consumers can be picky. But thanks to the Internet, information flows in a flash. People
have more information access on comparing prices and bargains. Xiaomi’s low cost and

reasonable quality makes what the company is these days. Still, improvements can be made

on customer services and more maintaining services afterwards. Speed of solving problems

can be risen up, because one of Xiaomi’s selling strategy is by word of mouth. If complaints

cannot be handled well, then its sales will go down as quickly as it raised. Earlier this year,

Xiaomi announced that they are opening shops in the US this year, but not for phones.

Xiaomi was known as the “Apple” of China in previous years, similarities can be found in

Xiaomi’s products and Apple’s. So, if Xiaomi is thinking of spreading its business

internationally, which is a certainty for every business, specialization and patents is where

Xiaomi is going to put more efforts on.

Strength Threat &Weakness Threat Strategic options

The company can also use strengths to avoid threats. As we analysed before, the company

started late on this smartphone business, and the market has already fragmented. And other

competitors are also working on reducing their selling prices, which makes a real big threat to

Xiaomi smartphones. But Xiaomi has its own fans and followers and it is working on both

hardware and software and is developing its own firmware. By inventing more customer

focused and convenient devices to gain more customer loyalty can overcome the threats that

come from its competitors and find its own place in this market. Jun Lei, the CEO of Xiaomi

makes a target of 100 million phones selling in 2015. From previous years’ experience, this

target may not be hard to get. At a certain level, the more it produces, the less of the average

variable cost will be.

Furthermore, Xiaomi's strength is really inexpensive high-end devices. In India, 200 million

mobile phones can be sold in a year, but the smart phone makes up 20% of all shipments of

mobile phones (JBpress, 2014 ). Russia's second-largest wireless carrier is interested in

selling more low-end handsets, including Xiaomi Crop. phones, as the Chinese brand plans

entry to the country of more than 140million where demand for cheaper smartphones is

growing (Bloomberg, 2015).accordingly, this tendency coincides with Xiaomi's strength and

its weakness such as low brand power can be overcome. In developing countries, consumers

demand low price devices with high quality. They do not show concern for brand equity.

From the point of view of legal issues such as plagiarism and patents, Xiaomi should avoid

fighting squarely with Samsung and Apple in the United States and the Europa Union

markets, or Xiaomi would expose its weakness otherwise. Xiaomi should retain its own

unique positioning as nicher and pursue opportunities of developing countries such as

BRICKs.

3.0 Conclusion and Recommendation

There are two primary ways for feasibility of expansion of market share of Xiaomi. One

is to fight squarely with strong foes such as Samsung and Apple in the major markets.

Another one is to pave the way for getting share the developing markets. If Xiaomi uses its

strength efficiently, it should choose the latter. From the point of legal issues such as

plagiarism and patents, it seems to be difficult for Xiaomi to enter the United States and

Europa Union markets in which Samsung and Apple reigns supreme with their strong brand

powers. Judging from Xiaomi’s SWOT Matrix Analysis, Xiaomi could have a massive

impact in developing countries such as Asia, Russia and Brazil at current situation. Xiaomi is

a young company and does not have enough culture and history yet. None the less, a ray of

light in the dark can be found by keeping Xiaomi’s own specific positioning, developing its

brand equity and establishing its identity, history and culture longitudinally.
 4.0 Reference

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http://news.livedoor.com/article/detail/9704340/

Canalys. (2014). Xiaomi becomes China’s top smart phone vender. Retrieved

from http://www.canalys.com/newsroom/xiaomi-becomes-china-top-

phone-vender/

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Edinburgh Gate: Pearson Education Limited.

Kotler,P. & Keller,K (2006). Marketing Management (12th ed.). Upper Saddle:

Prentice Hall.

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