Case Study Description of Xiaomi's Globalization Strategy and Challenges
Xiaomi, the Chinese smartphone company founded in 2010, had quickly become an industry leader in the Chinese market. By 2016 it had started to expand internationally, and this case lays out the company's globalization strategies and challenges moving forward. Hugo Barra, a top Android executive, had left Google a few years earlier to lead Xiaomi's international growth. Xiaomi's founder and CEO, Lei Jun, said the company's ultimate goal was "making good but cheap things," a low pricing strategy that had succeeded in China. The company sold over 70 million mobile phones in 2015-while aggressively building out a robust ecosystem. However, Xiaomi had expected to sell 80 to 100 million units that year; it was facing a declining domestic market and increased competition. Therefore, international expansion had become an important part of the company's overall strategy. But expanding to other countries would be a challenging road. For one, it would take considerable time and effort to tailor the company's Android-based MIUI operating system for diversified markets-and obtain market-access qualifications. Xiaomi's patent portfolio was thin compared to those of large competitors, and it ran the risk of lawsuits from companies that held patent rights in the countries it wanted to enter. Other challenges included building out sales channels, output capacity, and cross-culture management development. Xiaomi's international plan included ten countries in Asia, Europe, and Latin America. The next year or two would be critical for Xiaomi-and it needed to make the right strategic decisions to succeed in its globalization efforts.
Authors :: Gang Zheng, Yanting Guo, Robert A. Burgelman
Swot Analysis of "Xiaomi's Globalization Strategy and Challenges" written by Gang Zheng, Yanting Guo, Robert A. Burgelman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Xiaomi's Xiaomi facing as an external strategic factors. Some of the topics covered in Xiaomi's Globalization Strategy and Challenges case study are - Strategic Management Strategies, Globalization, Mobile and Global Business.
Some of the macro environment factors that can be used to understand the Xiaomi's Globalization Strategy and Challenges casestudy better are - – increasing energy prices, there is backlash against globalization, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, technology disruption, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing,
increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Xiaomi's Globalization Strategy and Challenges
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Xiaomi's Globalization Strategy and Challenges case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Xiaomi's Xiaomi, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Xiaomi's Xiaomi operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Xiaomi's Globalization Strategy and Challenges can be done for the following purposes –
1. Strategic planning using facts provided in Xiaomi's Globalization Strategy and Challenges case study
2. Improving business portfolio management of Xiaomi's Xiaomi
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Xiaomi's Xiaomi
Strengths Xiaomi's Globalization Strategy and Challenges | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Xiaomi's Xiaomi in Xiaomi's Globalization Strategy and Challenges Harvard Business Review case study are -
Sustainable margins compare to other players in Global Business industry
– Xiaomi's Globalization Strategy and Challenges firm has clearly differentiated products in the market place. This has enabled Xiaomi's Xiaomi to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Xiaomi's Xiaomi to invest into research and development (R&D) and innovation.
Learning organization
- Xiaomi's Xiaomi is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Xiaomi's Xiaomi is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Xiaomi's Globalization Strategy and Challenges Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Global Business field
– Xiaomi's Xiaomi is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Xiaomi's Xiaomi in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Xiaomi's Xiaomi digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Xiaomi's Xiaomi has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Superior customer experience
– The customer experience strategy of Xiaomi's Xiaomi in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Xiaomi's Xiaomi has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Xiaomi's Xiaomi has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Diverse revenue streams
– Xiaomi's Xiaomi is present in almost all the verticals within the industry. This has provided firm in Xiaomi's Globalization Strategy and Challenges case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High brand equity
– Xiaomi's Xiaomi has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Xiaomi's Xiaomi to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Xiaomi's Xiaomi is one of the most innovative firm in sector. Manager in Xiaomi's Globalization Strategy and Challenges Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Xiaomi's Xiaomi has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Xiaomi's Globalization Strategy and Challenges Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Strong track record of project management
– Xiaomi's Xiaomi is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Xiaomi's Xiaomi has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses Xiaomi's Globalization Strategy and Challenges | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Xiaomi's Globalization Strategy and Challenges are -
No frontier risks strategy
– After analyzing the HBR case study Xiaomi's Globalization Strategy and Challenges, it seems that company is thinking about the frontier risks that can impact Global Business strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Xiaomi's Globalization Strategy and Challenges, in the dynamic environment Xiaomi's Xiaomi has struggled to respond to the nimble upstart competition. Xiaomi's Xiaomi has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Xiaomi's Xiaomi needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Xiaomi's Globalization Strategy and Challenges, it seems that the employees of Xiaomi's Xiaomi don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Products dominated business model
– Even though Xiaomi's Xiaomi has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Xiaomi's Globalization Strategy and Challenges should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Xiaomi's Xiaomi is dominated by functional specialists. It is not different from other players in the Global Business segment. Xiaomi's Xiaomi needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Xiaomi's Xiaomi to focus more on services rather than just following the product oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Xiaomi's Xiaomi supply chain. Even after few cautionary changes mentioned in the HBR case study - Xiaomi's Globalization Strategy and Challenges, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Xiaomi's Xiaomi vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Xiaomi's Xiaomi has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow decision making process
– As mentioned earlier in the report, Xiaomi's Xiaomi has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Xiaomi's Xiaomi even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Xiaomi's Xiaomi is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Xiaomi's Globalization Strategy and Challenges can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Xiaomi's Xiaomi products
– To increase the profitability and margins on the products, Xiaomi's Xiaomi needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Xiaomi's Globalization Strategy and Challenges | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Xiaomi's Globalization Strategy and Challenges are -
Leveraging digital technologies
– Xiaomi's Xiaomi can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Better consumer reach
– The expansion of the 5G network will help Xiaomi's Xiaomi to increase its market reach. Xiaomi's Xiaomi will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Xiaomi's Xiaomi to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Xiaomi's Xiaomi to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Xiaomi's Xiaomi to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Xiaomi's Xiaomi can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Xiaomi's Xiaomi can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Xiaomi's Xiaomi can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Xiaomi's Xiaomi has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Xiaomi's Globalization Strategy and Challenges - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Xiaomi's Xiaomi to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Xiaomi's Xiaomi can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Xiaomi's Xiaomi can use these opportunities to build new business models that can help the communities that Xiaomi's Xiaomi operates in. Secondly it can use opportunities from government spending in Global Business sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Xiaomi's Xiaomi in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Xiaomi's Xiaomi to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Xiaomi's Xiaomi can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Xiaomi's Globalization Strategy and Challenges, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Xiaomi's Xiaomi in the consumer business. Now Xiaomi's Xiaomi can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Xiaomi's Globalization Strategy and Challenges External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Xiaomi's Globalization Strategy and Challenges are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Xiaomi's Globalization Strategy and Challenges, Xiaomi's Xiaomi may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Xiaomi's Xiaomi business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Xiaomi's Xiaomi can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Regulatory challenges
– Xiaomi's Xiaomi needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
Consumer confidence and its impact on Xiaomi's Xiaomi demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Xiaomi's Xiaomi with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Xiaomi's Xiaomi can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Xiaomi's Xiaomi needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Xiaomi's Xiaomi can take advantage of this fund but it will also bring new competitors in the Global Business industry.
High dependence on third party suppliers
– Xiaomi's Xiaomi high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Xiaomi's Xiaomi in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Xiaomi's Xiaomi can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Xiaomi's Globalization Strategy and Challenges .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Xiaomi's Xiaomi will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing wage structure of Xiaomi's Xiaomi
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Xiaomi's Xiaomi.
Weighted SWOT Analysis of Xiaomi's Globalization Strategy and Challenges Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Xiaomi's Globalization Strategy and Challenges needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Xiaomi's Globalization Strategy and Challenges is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Xiaomi's Globalization Strategy and Challenges is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Xiaomi's Globalization Strategy and Challenges is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Xiaomi's Xiaomi needs to make to build a sustainable competitive advantage.
