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 - – central banks are concerned over increasing inflation, technology disruption, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, wage bills are increasing,
increasing transportation and logistics costs, talent flight as more people leaving formal jobs, 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 -
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.
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.
Organizational Resilience of Xiaomi's Xiaomi
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Xiaomi's Xiaomi does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Xiaomi's Xiaomi are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Xiaomi's Globalization Strategy and Challenges HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Xiaomi's Xiaomi has relatively successful track record of launching new products.
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.
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.
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.
Interest costs
– Compare to the competition, Xiaomi's Xiaomi has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Xiaomi's Xiaomi is facing challenges because of the dominance of functional experts in the organization. Xiaomi's Globalization Strategy and Challenges case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Xiaomi's Xiaomi can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
Buying journey improvements
– Xiaomi's Xiaomi can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Xiaomi's Globalization Strategy and Challenges suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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 -
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Xiaomi's Xiaomi is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Xiaomi's Xiaomi needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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.
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.
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.
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.
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 .
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.
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.
