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 - – wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, increasing energy prices, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies,
there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, 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 -
Operational resilience
– The operational resilience strategy in the Xiaomi's Globalization Strategy and Challenges Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Analytics focus
– Xiaomi's Xiaomi is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Gang Zheng, Yanting Guo, Robert A. Burgelman can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
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.
Low bargaining power of suppliers
– Suppliers of Xiaomi's Xiaomi in the sector have low bargaining power. Xiaomi's Globalization Strategy and Challenges has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Xiaomi's Xiaomi to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Xiaomi's Xiaomi is one of the leading recruiters in the industry. Managers in the Xiaomi's Globalization Strategy and Challenges are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Effective Research and Development (R&D)
– Xiaomi's Xiaomi has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Xiaomi's Globalization Strategy and Challenges - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Highly skilled collaborators
– Xiaomi's Xiaomi has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Xiaomi's Globalization Strategy and Challenges HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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 -
Capital Spending Reduction
– Even during the low interest decade, Xiaomi's Xiaomi has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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.
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 bargaining power of channel partners
– Because of the regulatory requirements, Gang Zheng, Yanting Guo, Robert A. Burgelman suggests that, Xiaomi's Xiaomi is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High operating costs
– Compare to the competitors, firm in the HBR case study Xiaomi's Globalization Strategy and Challenges has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Xiaomi's Xiaomi 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Xiaomi's Globalization Strategy and Challenges that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Xiaomi's Globalization Strategy and Challenges can leverage the sales team experience to cultivate customer relationships as Xiaomi's Xiaomi is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Xiaomi's Globalization Strategy and Challenges HBR case study mentions - Xiaomi's Xiaomi takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Xiaomi's Globalization Strategy and Challenges, is just above the industry average. Xiaomi's Xiaomi needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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 -
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.
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.
Manufacturing automation
– Xiaomi's Xiaomi can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
Loyalty marketing
– Xiaomi's Xiaomi has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Building a culture of innovation
– managers at Xiaomi's Xiaomi can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Global Business segment.
Low interest rates
– Even though inflation is raising its head in most developed economies, Xiaomi's Xiaomi can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Xiaomi's Xiaomi can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Xiaomi's Xiaomi has opened avenues for new revenue streams for the organization in the industry. This can help Xiaomi's Xiaomi to build a more holistic ecosystem as suggested in the Xiaomi's Globalization Strategy and Challenges case study. Xiaomi's Xiaomi can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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 -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
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.
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.
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Xiaomi's Xiaomi.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Xiaomi's Xiaomi in the Global Business sector and impact the bottomline of the organization.
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.
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.
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.