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Individual Management Report

Selected multinational: Xiaomi

Student ID:
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Table of Contents
Introduction 3

Findings 5

Current strategic positioning of Xiaomi in India 5

PESTEL Analysis 5

Porter’s 5 forces 8

Xiaomi’s VRIO analysis 9

TOWS analysis of Xiaomi 11

Innovation Strategy 12

Forms of Innovation 12

Sources of Innovation 13

Strategic Situation 14

Future competitive strategies 14

Recommendation 16

Justification for choosing the optimal recommendation 18

Conclusion 18

Reference List 21

Appendix 28
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Introduction
Xiaomi is a Chinese multinational electronics company which is among the largest smartphone
makers in the world and is renowned for its affordable and high-quality products. The
organisation designs develop and sells a wide range of consumer electronics and lifestyle
products which include smartphones, laptops, smart home devices, and wearables. The firm also
has a significant presence in the market of the Internet of Things (IoT) and has expanded into
several other product categories like televisions and speakers. Also, it provides several online
services such as cloud storage, an app store, and online payment services. The firm operates in
several markets including Asia, Europe, and South America. Some of its crucial operational
markets include India, China Spain, Russia, and Indonesia.

According to Companies Market Cap (2022), the annual revenue of the firm, as of 2022 (TTM),
is reported as $47.52 billion. The firm has shown promising growth in increasing its revenue

over recent years (see figure 1.

Figure 1: Xiaomi’s revenue history (2017-2022)

Source: (Companies Market Cap, 2022)

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In the Indian market, Xiaomi enjoyed a 24.26% market share, as of December 2022 (Sun,
2023a). It was the largest vendor and manufacturer of smartphones in that year (Sun, 2023b; Sun,
2023c). The Indian market is one of its high-growth operative markets and it has been successful
in expanding its wide range of product portfolio further solidifying its presence. Its market
capitalisation is recorded as $40.83 billion as of February 2023 (Companies Market Cap, 2023).
As of 2022, the total number of employees at Xiaomi are 33427 (Forbes, n.d).

Figure 2: Xiaomi’s market capitalisation

Source: (Companies Market Cap, 2023)

Xiaomi has been at the forefront of incorporating new technologies into its products like IoT,
Artificial Intelligence, and 5G connectivity. Its MIUI systems and software applications have
successfully multiplied their presence on its mobile devices.

The main aim of this report is to conduct a PESTEL analysis of Xiaomi in India along with
Porter’s 5 forces analysis. Also, the report focuses on conducting an internal analysis of the firm
using the VRIO framework justifying the scalability of its resources and TOWS analysis, and
identifying the existing innovation strategy of Xiaomi and competitive strategies which are
currently adopted by the firm. All this will be done using secondary research and based on the
analysis, two optimal recommendations would be provided of which one would be justified with
a business model canvas of 2022-2025.
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Findings
Current strategic positioning of Xiaomi in India
PESTEL Analysis
Political: The corporate tax rate as per Tax summaries PWC (2022) in India which is applicable
for foreign companies is 43.68% with revenues of more than 1 billion. Any negative changes in
revenue of Xiaomi or an increase in the corporate tax rate by the Indian government can
significantly decrease the net income of the firm.

The Indian government supports foreign investment in the technology sector in terms of
manufacturing recognizing its growth potential in the future. In this view, the Indian government
has implemented several policies and initiatives to encourage the growth of the manufacturing
sector like offering investment subsidies and tax incentives (Garg, 2022; Meity GOV, n.d).
Xiaomi can get benefited from this and look forward to disrupt the technological sector of India.

Trade relations between the country have been generally stable. However, a high trade deficit has
been experienced by India recently (Economic Times, 2023). Moreover, The Indo-China clash is
causing high border tensions (Tyagi, 2022). Such factors can significantly impact relations in the
future thereby causing trouble for Xiaomi to operate in India.

Economic: The inflation rate of India, as of 2023, is 5% (The Hindu, 2023). Moreover, it is
forecasted that the inflation rate is expected to come down to 4% in 2024. With lower rates of
inflation, Xiaomi can sell its products cheaper and make it affordable for those who are still
unable to afford them thereby increasing its demand and sales.

The consumer electronics industry of India contributed around 3.4% to the country’s overall
GDP in 2022 (IBEF, 2022; Telecom economic times, 2021). Forecasts estimate that this figure
will increase to 6.4% in the future (Telecom economic times, 2021). Moreover, the government
has committed to invest around US $17 billion in the next 6 years across vital 4 Production
Linked Incentive (PLI) schemes; Smartphones, Semiconductors and design, IT components, and
hardware (IBEF, 2022). Such aspects can create economic benefits for Xiaomi in the future
thereby increasing its prospects to reach higher demand levels.

Covid-19 has had major effects on increasing the unemployment rate in India during the early
months of 2020. As per Nayak et al. (2022), the unemployment rate surged to 23.8% in March
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2020 (figure 3). However, this rate has decreased to 8% in November 2022 (Statista, 2022)
(figure 4). Hence, Xiaomi can plan to expand its business in the Indian market where it can
deploy more workforce from the local market thereby increasing organisational productivity and
revenue through meeting the demands of the target consumers. This will further help in the
growth of the Indian economy.

Figure 3: The unemployment rate in India (2020)

Source: (Nayak et al. 2022)

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Figure 4: Monthly unemployment rate in India (2022)

Source: (Statista 2022)

Social: According to Trading economics (2021), it is perceived that from 2013-2019, there has
been a steady growth in disposable income among Indians. However, in 2020, there has been a
decline which is primarily due to Covid-19 which had forced the population to shift towards
buying only necessities. Besides, there has been a growth in disposable income in 2022
demonstrating the demand for consumer electronics products and the power to buy them among
consumers. Moreover, as per Statista (n.d.), the Indian consumer electronics market is estimated
to grow at a Compound Annual Growth Rate (CAGR) of 5.61% (2023-2027). Hence, it is quite
evident that consumer demand will be increasing in the future for such products and which can
financially benefit Xiaomi.

Technological: With the rise in digitalisation, technological advancement is increasing. The

advent of 5G technology is becoming the new normal for every smartphone company. Xiaomi
also is stepping into this field of installing 5G technology in its devices like Redmi mobile
devices. It can help it to cater to the market with its early inventions at affordable prices.

The wearable market in India is also rising at a rapid pace. Fitness devices, real-time data
collection devices, etc., are the new technological advancements in the sector The market is
growing due to the rise in strategic investments to create smart technologies which can further
assist in healthcare services (Mordor Intelligence, n.d). Xiaomi needs to continuously adapt to
such technologies to increase its market exposure and profitability.

The consumer electronics market has been witnessing rigorous advancements in technology like
AI, Virtual and augmented reality, and cloud computing (Precedence research, n.d). Hence,
Xiaomi must adapt itself with newer technologies which can help it to capture a large market
share in India.
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Environmental: The Indian government aims at achieving net-zero carbon emissions by 2070
(Hindustan times, 2022). Xiaomi should dispose of its electronic waste complying with the rules
and regulations of the government and any failure to do so can negatively affect the reputation of
the company.

Further, sustainability in the supply chain is becoming a major focus in the current world.
Harmful emission reduction, decreasing product waste, and responsible sourcing are much-
needed initiatives to be taken by companies. Hence, Xiaomi must comply with such measures to
ensure sustainability (Steers, 2021).

Legal: Regulations related to Data privacy and security are implemented by the Indian
government related to import and data storage. Xiaomi must comply with all such laws to ensure
the privacy of customers are maintained and hence, avoid penalties.

Porter’s 5 forces
Bargaining Power of buyers (high): The Indian Smartphone market has a lot of players which
offer competitive prices like Xiaomi such as OPPO and Vivo. Hence, the switching cost is very
low and which enables buyers to choose from a wide variety of options (Wang 2021, July, p. 32).
However, Xiaomi has developed a loyal customer base over time and it is quite obvious that such
consumers will continue to buy products from the brand due to its prolonged product strategy of
selling high-quality products at reasonable prices.

Bargaining Power of suppliers (low): Xiaomi does not mostly use its own chipsets for
manufacturing smartphones. It sources these chips from suppliers. The chipset market has a huge
number of suppliers (Wang 2021, July, p. 32). Hence, Xiaomi can easily bargain with them.
Also, Xiaomi orders a large shipment of chips at reasonable prices to make it affordable for its
consumers. Hence, suppliers will definitely want to earn a profit from shipping and bargain with
the firm.

The threat of New Entrants (low): Setting up a new company in the consumer electronics sector
in India requires huge amounts of investments. Also, meeting the demands of the consumers will
not be easy for new comers without investing heavily in Research and Development (Wang,
2021, July, p. 32). Moreover, with already established brands like Xiaomi, Samsung, and Apple
 9

in the Indian market, it would be difficult for new firms to cater to a large amount of loyal
customer base.

The threat of substitutes (moderate): This threat arises from other brands in the Indian market
offering products at similar prices but additional or modified features. Brands like OPPO and
Realme offer smartphones that are competitively priced like that of the Redmi Note series and
also offer high-end features like high-quality cameras and processors. However, Xiaomi is a
large company whose core is innovation. Its consistent R&D investment helps it to overcome
this obstacle.

Rivalry (High): As per Chawla (2022) a survey finds that the smartphone market of India is
penetrated by big brands like Apple, Samsung, and One plus which have developed a huge
customer base through their unique product offerings and are most preferred by users. Xiaomi
has established its own position in the market as an affordable brand. However, due to high
competition among the smartphone brands in the market, Xiaomi needs to continuously innovate
new products with excellent features to attract customers.

Xiaomi’s VRIO analysis

Xiaomi has positioned itself as a highly innovative and affordable brand amongst consumers
who strive to purchase high-tech technological devices. Its primary source of competitive
advantage has always been its highly innovative products at almost half the price of leading
brands like Samsung and Apple (Canto and Pardo, n.d). It has invested heavily in Research and
development to design its products as per consumer demands and make them affordable to
mainly the middle-income and lower-middle-income groups over the years (see figure 5). In the
year 2021, it invested approximately 13.17 billion yuan (Slotta, 2022). This demonstrates its
extensive innovation capabilities and the power to acquire and inherit resources. Moreover, it has
set-ups production facilities in major countries where it operates. For example: In India, Xiaomi
has 2 facilities which are Sriperumbudur in Tamil Nadu and Sri City's special economic zone in
Andhra Pradesh (Business-standard, 2019). Further, it has 6 smartphone manufacturing plants in
India (Singh, 2018). Also, in the year 2019, 99% of the Xiaomi phones sold in India were made
in the country (Business-standard, 2019). This demonstrates the firm’s extensive resource
capabilities to manufacture their products with the ‘Made in India’ tag and their power of using
high-end financial resources.
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Apart from hardware products, Xiaomi's intensive core competencies include its high-end
operating systems which is MIUI (Me You I). This operating system is utilised by the brand to
power its other operating devices like MIUI for Watch and POCO. Its extensive expansion of
business segments to tap into new markets shows its capabilities to efficiently use its scarce
resources to become a tech giant in the consumer electronics market.

Xiaomi’s source of competitive advantage in the smartphone market is its different and unique
design. It also offers products to its customer with many types of colours to choose from. Fast-
charging technology, high-quality camera specifications, and high-end Qualcomm processors are
the massive features its offers in its smartphones which are sold at a reasonable price to its
customers.

Further, after the Covid-19 pandemic, Xiaomi’s distribution channels have expanded giving it
more strength to market exposure such as retail outlets, and online stores like Amazon and Mi
store which is its official offline store for direct sales (Li, 2021, p.68).

Overall, it is perceived that Xiaomi contains abundant resources and extensive capabilities to
compete with its rivals in the market and innovate products continuously.
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Figure 5: Xiaomi’s R&D investment from 2017-2021

Source: (Slotta 2022)

TOWS analysis of Xiaomi

Xiaomi's primary strength is its affordable pricing. A major reason for this is its focus on
volume over high-profit margins through low manufacturing costs. It is the largest producer
of smartphones in the world and keeps its profit margin roughly at around 8-9% which is much
low compared to its competitors (Milano, 2021). Despite selling cheaper, it is able to deliver a
high-quality product to its customers with innovative features and designs. However, a
weakness of the firm is its low reliance on advertising. Consumer brand perception towards
Xiaomi is that of a cheap brand and which questions its capability of producing high-end devices
at low rates. However, with time it has grown as a popular and reliable brand. Further, Xiaomi
mostly sells its products in online stores. Consumers who prefer purchasing phones from offline
stores might need to travel a long distance to find a Mi store. Also, it is hard to find a Mi service
centre. This can affect the brand reputation of the firm. Further, Xiaomi mostly sources the
chips for its smartphones from different suppliers. It increases its dependency upon them and
can affect its production in case of chip shortages.

The middle-class population in India has been growing at a rapid rate. According to (BS Web
Team, 2022), 1 out of 3 Indians are forecasted to be in the middle-class group by 2047. The
share of the middle class is going to rise to 63% by 2047 from 31% this year (Gupta, 2022). This
is a great opportunity for Xiaomi to tap more into the market and sell more products to its target
consumers. Moreover, 5G subscriptions are estimated to reach around 690 million in India by
the year 2028 (Ghosh, 2022). Hence, Xiaomi can explore more into the 5G market through
developing more 5 G-enabled products. Also, the increasing smartphone market in India can
enable the firm to produce more high-quality products and sell them at affordable rates to book
profits.

There is a high degree of competition in the Indian smartphone market among big brands and
Xiaomi needs to continuously innovate its products to achieve a competitive edge. Also, Xiaomi
has been facing issues in terms of customer complaints regarding technical issues like reduced
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battery life, fingerprint sensor not working properly, etc. Such factors can tarnish the reputation
of the firm and lead to business disruption if not dealt with appropriately.

Innovation Strategy
Forms of Innovation
Xiaomi is an innovation hub and represents itself as a smart manufacturing company in the
market. Its vision is to position itself as the coolest company in the hearts of users (Mi, n.d). For
achieving this vision, the firm is committed towards manufacturing unique products for its
consumers. The firm uses Disruptive innovation as its primary form of innovation to do so. It
consistently pursues innovation, operational efficiency, and high-quality experience for users.
For example, Its first launched smartphone in India in 2014, which was the Mi3, was in direct
competition with mid-range smartphone brands in terms of price and specifications, it was in
direct competition with features offered by Apple, Samsung, and Sony, (Aulakh, 2014). It posed
a great threat for other brands with its price of just Rs. 14,999 since 30% of the overall sales of
smartphones in India are in the price range of Rs. 10,000 – 20,000 (Aulakh, 2014). Moreover, its
Redmi series had been a disruption for other brands due to their high-end specifications and low
prices. Over time, this form of innovation had helped the firm to grow a large customer base.
Besides, becoming a smartphone giant producer and seller, it also has been a powerhouse for the
Internet of Things (IoT) technology. A classic example of its IoT synergy is its ‘omni-remote
control’ facility. It offers its users services like operating Television, ACs, and smart lamps with
a single application operative from its mobile device (Yang et al, 2021). Xiaomi was the first
brand in the market to invent and integrate such kind of technology. This raised consumers’
interest in its product in the Indian market and which is why Xiaomi has become such a big
brand today. Extending to this fact includes its technological advancement in offering the MIUI
OS in all its devices like the POCO and Redmi series.

Incremental innovation has also been a part of its innovation strategy. For example: In 2013,
Xiaomi successfully modified its MIUI OS through its User Experience (UX) strategy
demonstrating its knack for continuously improving its services integrated into its smartphone
devices (Zhou, 2013). It has released a wide range of updates for its MIUI system. As of 2022,
the latest update is the MIUI 13 version in India with lots of features like the iOS 14 widgets
available on the home screen (My smart price, 2022). Xiaomi has successfully demonstrated its
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customer-driven innovation strategy of providing high-quality products at affordable prices to

disrupt the market.

Sources of Innovation
Xiaomi has been highly competitive in the consumer electronics market through its consistency
in innovating new products and modifying existing ones. It pursues such innovation abilities
through both internal and external sources of innovation.

Xiaomi has a huge employee base who are highly skilled and possess excellent technical
capabilities. Its R&D team is constantly involved in innovating new products and services
through collaboration with different companies around the world. For example, Xiaomi recently
collaborated with Leica to unleash mobile imaging technology in its smartphone devices
(Upadhyay, 2023). Xiaomi is aiming at drawing innovative solutions in the camera portion of the
phone and also optimizing performance.

With context to an external source of innovation, Xiaomi encourages open innovation. For
example, it regularly asks for feedback from its customers using the MIUI system for
upgradation and modification requirements so that they realise the flaws (Vertigo, 2018). Based
on customer feedback, Xiaomi innovates its products in an enhanced manner. Further, as of
2022, Xiaomi started to focus on manufacturing their own chips for installing them in its
smartphones. Also, it has been consistently investing in semiconductor companies. For example,
Yinlefei Semiconductor which is a sub-brand of Xiaomi has invested in about 100 Chinese
companies which are in the business of manufacturing chips (Yanık, 2022).

Xiaomi is, therefore, focused on building an ecosystem of sustainable and innovative products
through its enthusiastic team of employees and an innovative fan base (Li et al, 2019, p. 204)

(see figure 6).

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Figure 6: The characteristics of innovation of Xiaomi’s open innovation ecology

Source: (Ortiz et al. 2019, p.10)

Strategic Situation
Future competitive strategies
Porter’s 3 generic strategies are used by Xiaomi to establish its competitive edge in the market
over other competitors. The model helps in understanding the approach of a firm for gaining an
advantage over its rivals (Peterdy, 2022) (see figure 7).
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Figure 7: Porter’s 3 generic strategies

Source: (Peterdy, 2022)

Based on the above model, Xiaomi primarily uses the Cost Focus strategy to establish its
competitive advantage in the Indian market. Xiaomi entered the smartphone market with the aim
of making its products available to consumers at a reasonable price along with users enjoying the
high specifications of the devices. With this strategy, it competes with brands like Apple and
Samsung in the Indian market since it provides similar features like theirs at a very low price.
Also, contributing to this is its strategy of keeping a very low-profit margin and manufacturing in
bulk. It aims at becoming the low-cost manufacturer in India and should continue this strategy to
grab maximum consumer attention and attain a competitive edge. In addition, it must focus on
the differentiation of its unique products and designs which are highly admired by its customers.

The differentiation focus strategy is another aspect of Xiaomi’s future competitive strategy.
Xiaomi has already established itself in segments like smartphones, laptops, and televisions with
its loads of innovative features in the Indian market. It should continue to foster innovation and
improve them. Moreover, Xiaomi should focus on exploring new segments of innovation
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disruption such that it can identify a niche segment in the market and develop products and
services as per demands in this ever-changing technological world.

Considering the two generic strategies, Xiaomi must adopt product development as its
expansion strategy in the future. Xiaomi has the resources and capabilities which it can use to
consistently focus on its Research and development strategy. Moreover, it is well known for its
innovative products in many different segments of the market. Consumers have been highly
interested in its products and Xiaomi also has a loyal customer base. Hence, such customers
would be wanting to try its new innovative products which look cool and makes their life better
and enhanced.

Recommendation
Focus more on 5 G-enabled services & devices

A new technological revolution is starting to take place in India with the launch of 5G services.
India is seeking to become a developed nation in the coming 25 years and 5G is going to serve as
an excellent opportunity for the country to achieve its dream (ET Telecom, 2022). Moreover,
with the estimates of Ghosh (2022) of 690 5G subscriptions by 2028, as discussed earlier, it is
quite evident that India is going to adopt the 5G technology and services at a rapid pace. Fixed
Wireless Access (FWA) and enhanced Mobile Broadband (eMBB) are highly expected to
become the early use cases for the 5G service in the country (Kashyap, 2022). However, this is
going to be achieved through the sale of high-quality affordable 5G smartphones in India such
that every user is able to efficiently use the service and enjoy high data speeds.

In this respect, Xiaomi bears a great opportunity to focus on enabling access to 5G services for
users in the early access periods of high-intensity data networks. Xiaomi has introduced 5 G-
enabled smartphones such as Mi11 Ultra 5G, Xiaomi 12 Pro, etc., (Live mint, 2022). In view of
the ever-growing response of consumers towards 5G services, Xiaomi announced its
collaboration with Reliance JIO in India so that 5G services and network speeds are available in
its smartphones (Live mint, 2022). The collaboration would enable the smartphone maker to give
its users access to stream videos using JIO 5G services. However, this association is yet to be
established successfully at its fullest potential. Moreover, some of its smartphones like the
Xiaomi Mi 10 & Xiaomi Mi 10i do not support the JIO 5G services till now which can
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dishearten the consumers who are willing to purchase this premium segment phone offered by
the brand (Bhati, 2023). Xiaomi has the resources and capabilities needed to focus more on the
5G services and launch them early in the market in order to create an enhanced experience for its
loyal and also potential consumers. It is trying to do so also with Airtel in the Indian market in a
collaboration to use its non-standalone network in all premium phones (Pathak, 2022). Also,
along with 5G, it should incrementally modify its existing smartphones and launch them with all
types of innovative features available at affordable prices.

Innovation Improvements

India is one of the fastest-growing economies in the world in which Innovation is a critical
component of its success. Different markets have evolved over time and so does innovation as
technological advancements is the area where brands compete in order to deliver the best and
most competitive services to consumers (Manoramayear book, 2022). Xiaomi has explored and
disrupted several markets across the globe through its innovation and R&D capabilities and
investments among which India has served as a highly profitable and prospective market for the
firm. Consumers have positively responded to its high-quality and affordable products and have
happily accepted them as a part of easing their daily life. Xiaomi has established itself as a brand
that is driven by Innovation and its capability to produce more and demand less compared to big
brands. It has helped it to gain a loyal customer base who seek to use the different types of
products of Xiaomi like smartphones, laptops, and also services like MIUI OS. To further meet
customer demands, Xiaomi has planned to invest more than $15 billion from 2021 till 2026
(Business-standard, 2021). It demonstrates its focus on improving more and more to deliver
exceptional products to its customers. In this view, one of the sectors which Xiaomi should
explore is that of Smart cars. The Indian market has experienced the wave of Electric Vehicles
(EVs) being highly produced and becoming the new normal roads. Companies like Tata have
entered the market with their EVs which are extremely getting positive responses from
customers. Hence, there is scope for innovation in the market. Xiaomi can use this opportunity to
invent smart cars which are yet to be introduced fully in the Indian market. Whilst Tesla has been
in talks with the Indian government to sell its self-driving vehicles in India through exporting,
the vehicles are yet to be seen on Indian roads. Xiaomi, however, has been planning to invest in
Smart cars through its investments in semiconductor companies (Yanık, 2022). It is due to the
 18

fact that the organisation will be able to manufacture the chipsets for its smart cars more cheaply
and introduce them in the market at a reasonable price as its source of primary competitive
advantage. Also, Xiaomi should focus on sustainable smart cars like smart EVs such that they
comply with the new normal on Indian roads. Therefore, with this innovation, Xiaomi can
explore a new sector and establish its presence early and gain a high market share out coming
late arrivals by other companies.

Justification for choosing the optimal recommendation

Xiaomi should primarily focus more on introducing 5 G-enabled services & devices as the
smartphone segment is the brand’s main market which it deals in. With the advent of 5G services
in the upcoming years in India at a rapid pace, the brand must focus on enabling its
collaborations to work appropriately so that they enhance the consumer experience. This can
preferably help it in the early penetration of its services in the market than other brands thereby
grabbing customer attention. On the other hand, smart cars need more research and development
and this should be the firm’s secondary focus as this is a new segment that it is planning to
explore. The smart car sector is a new concept for Xiaomi and which comes with new challenges
of customer attention despite being loyal; however, which can be coped with over time.

The Business Model Canvas of Xiaomi for 2022-205 depicts its strategic moves to achieve the
objective of focusing more on 5G enables services (see Appendix 5). The collaboration with JIO
and Airtel will allow Xiaomi to provide its customers with 5G services with high data transfer
speed. Alongside this, Xiaomi needs to invest heavily in R&D to achieve its plans for the future
of ensuring 5G services in all its smartphones. Also, enhanced customer experience is and will
be its main focus which will be achieved through offering 5G services in all its devices at the
earliest in the market.

Conclusion
Xiaomi has been a technologically disruptive brand globally and in the Indian market it has been
in direct competition with big brands like Apple, Samsung, OPPO, and Vivo. Through its highly
innovative Research and Development team, Xiaomi has been able to manufacture highly
innovative and technologically advanced products. Xiaomi entered the smartphone market in
2010 with just a single service of the MIUI operating system. Its journey into the Indian
Smartphone market started in 2014 with the launch of Mi3 at a reasonable price for the middle-
 19

class and lower-middle-class groups. India has a growing population of the middle-class group.
Xiaomi saw this as an opportunity to enter the market such that it can offer high-specification
smartphones at a very low price. Xiaomi has always been following the cost-focus strategy and
concentrated on becoming the lowest cost-producer in the Indian market thereby maintaining a
very low-profit margin such that consumers are able to afford its products and in the process, it
grew a very large customer base. Apart from this, its products also differentiate from what
competitors offer in terms of designs and product variety. Moreover, it installs similar features in
its smartphones which brands like Apple and Samsung offer to their customers. Even with this
strategy, it is able to keep its prices only because of its low-profit margin.

Besides, being in the smartphone market, Xiaomi also has considerably explored other market
segments in India like laptops, smart home devices, etc. It has shown promising growth in the
Indian market with a significant market share in 2022. However, a 2022 survey finds that
consumers will be willing to purchase phones from brands like Samsung and Apple for their next
purchase. It can mean that Xiaomi’s wave can seemingly end in the Indian market. With its
incremental innovation and product development strategy, the brand commits to innovating
newer products and services to serve its customers better each time and meet their demands.
Therefore, its innovations have always been a piece of news among consumers and on the lack of
solid evidence, it is apparent to say that Xiaomi’s innovations are still a breakthrough for many
of its customers who plan to buy affordable technology products.

India is roaring towards being a high-tech economy in the future and which the government has
plans to implement in order to achieve this vision. The advent of 5G services in the Indian
market is rising at a rapid rate which is estimated to contribute heavily towards making the
Indian government achieve its objectives. The 5G market will be seeing 690 million 5G
subscriptions by 2028. Hence, Xiaomi bears a very good opportunity in this area with its 5 G-
enabled devices in all its smartphones. Early access to such services in its affordable products
can give it a lead in the competition between brands to capture the 5G market. Moreover, Xiaomi
is known for Innovation and with this notion, it also has been silently planning to invest in Smart
cars which is a yet-to-be-established market in India with no such company offering any type of
product which can run on Indian roads. It can give it access to a niche market and develop a
competitive advantage.
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Market competition is high and in this process, Xiaomi has been planning to manufacture chips
for its smartphones for lessening its dependency on suppliers. Hence, considering all the above
facts it is apparent that R&D is at the core of business development. However, numerous
obligations such as high tax rates and legal threats might negatively affect it in case of non-
compliance. On a contrary, opportunities in terms of the growing middle-class population and
rising smartphone market in India can help it to earn a high market share in the Indian market
through its strategic innovation plans.
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Reference List
Aulakh, G. (2014) China's Xiaomi launches first smartphone in India at Rs 14,999. Available
from: https://economictimes.indiatimes.com/tech/hardware/chinas-xiaomi-launches-first-
smartphone-in-india-at-rs-14999/articleshow/38002556.cms?from=mdr [Accessed 11 February
2023]

Bhati, D. (2023) Jio 5G will not be available on these Xiaomi 5G smartphones, check list.
Available from: https://www.indiatoday.in/technology/news/story/jio-5g-will-not-be-available-
on-these-xiaomi-5g-smartphones-check-list-2323458-2023-01-19 [Accessed 11 February 2023]

BS Web Team (2022) One out of every three Indians 'middle class'; to double by 2047: Report.
Accessed February 11, 2023, Available from: https://www.business-standard.com/article/current-
affairs/every-one-in-three-indians-middle-class-to-double-by-2047-report-122110200522_1.html
[Accessed 11 February 2023]

Business-standard (2019) About 99% of phones Xiaomi sold in India were made in the country,
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 28

Appendix
1. PESTEL Analysis

PESTEL of Xiaomi

Political
● High Tax Rates

● Positive Government initiatives

● Fluctuating Trade relations and policy

changes

Economic
● Decreasing Inflation rate

● Increasing Contribution of Consumer

electronics towards Indian GDP

● Impact of Covid-19

● Decreasing Unemployment Rate

Social
● Increasing consumer demand

● Rising Disposable Income

● Impact of Covid-19

Technological
● Increasing 5G penetration

● Wearable technology
 29

● Technological advancements in VR

and AR

Environmental
● Government aims at Net-zero carbon

emissions

● Increasing focus on sustainability in

supply chain

Legal
● Data and privacy regulations related to

import and data storage implemented

by the Indian government

● All laws must be adhered to by

Xiaomi in India to avoid penalties

2. Porter’s 5 forces

Porter’s 5 forces analysis

Bargaining power of buyers – high

● Low switching cost

● Many players offering similar features

Bargaining power of suppliers – low

● Huge number of players in the chipset

market

● Suppliers would want bulk order to

make profits

Threat of New entrants – low

● High set-up cost to enter the Indian
 30

market

● Heavy investments in R&D

● Competing with established brands

would be difficult

Threat of substitutes – moderate

● Rivals offering products at

competitive prices but with additional

and unique features are substitutes

Rivalry – high
● Consumers have preference over

brands for purchasing new phones

● Competition is very high.

3. VRIO of Xiaomi

Resources and Valuable Rare Inimitability Organisation Type of

Capabilities advantage

Market position Yes No No Yes Temporary

advantage

Product range Yes No No Yes Temporary

advantage

Innovation strength Yes No No Yes Temporary

competitive
advantage

Unique designs Yes Yes Yes Yes Source of

competitive
 31

advantage

Brand Name Yes Yes Yes Yes Source of

competitive
advantage

Pricing Yes Yes No Yes Temporary

Competitive
advantage

Operating system Yes Yes Yes Yes Source of

competitive
advantage

In-house production Yes Yes Yes Yes Source of

competitive
advantage

Distribution Yes No No Yes Temporary

channels Competitive
advantage

4. TOWS of Xiaomi

External Factors

Opportunities Threats

● Growing ● High degree

middle-class of competition
population in
● Technical
India
issues
 32

● Increasing 5G

subscriptions

● Increasing

smartphone
market in
India

Internal factors Strengths SO strategy SW strategy

● Affordable ● Focusing ● Using

pricing more on 5G competitive

innovation advantage to
● Low
into mobile overcome
manufacturing devices at low competition
costs costs.
● Ensuring
● Largest ● Manufacturing high-quality
smartphone high-quality product
maker in the products at delivery for
world affordable minimizing
prices to cater technical
● High-quality
high market issues
product share in the
future.

Weaknesses WO strategy WT strategy

● Consumer ● Increasing ● Increase

 33

perception awareness on revenue from

brand offline stores
● Negligible
perceptions and achieve
advertisements among competitive
growing advantage.
● Less number
population.
of service ● Manufacturing
centres ● Increasing the own chips and
number of installing
● Less offline
services and them in
stores offline stores smartphones
to sell 5G to achieve
● Supplier
phones in the competitive
dependency is growing advantage in
high market of case of chips
smartphones shortage in
and 5G market.
services.

5. Business Model Canvas

Key Partners Key Activities Value Customer Customer segments

Propositions relationship

● Reliance JIO ● Research and ● 5G ● Customer ● Premium

development supported experience customers

● Bharti Airtel smartphones
● Software ● Brand name ● Middle-class
with high
● 5G improvements speed data groups
networks ● Brand
collaboratio ● 5G enabled ● Lower-
 34

n partners devices in all reputation middle class

● Use of
phones groups
technology ● Business-to-
to enable
customer
5G in
sales.
premium
devices.

Key Resources Channels

● Highly skilled ● Network

employees services

● Research and ● 5G phone

development sales through

team online and
offline stores.
● Engineering

and Designing ● Events

Cost Structure Revenue Streams

● Research and development cost ● Revenue generated from selling of

5G smartphones
● Employee cost
● Investment revenue

● Administrative cost
● Revenue from other business

● Manufacturing cost segments