Xiaomi (1810) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Technology)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Xiaomi (Hong Kong)
Based on various researches at Oak Spring University , Xiaomi is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, increasing energy prices,
increasing commodity prices, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Xiaomi can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Xiaomi, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which 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 can be done for the following purposes –
1. Strategic planning of Xiaomi
2. Improving business portfolio management of Xiaomi
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Retail (Technology) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Xiaomi
Strengths of Xiaomi | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Xiaomi are -
Analytics focus
– 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 Retail (Technology) industry. The technology infrastructure of Hong Kong is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Diverse revenue streams
– Xiaomi is present in almost all the verticals within the Retail (Technology) industry. This has provided Xiaomi 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.
Learning organization
- 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 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Xiaomi emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Xiaomi
– The covid-19 pandemic has put organizational resilience at the centre of everthing Xiaomi does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that 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.
Strong track record of project management in the Retail (Technology) industry
– 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.
Sustainable margins compare to other players in Retail (Technology) industry
– Xiaomi has clearly differentiated products in the market place. This has enabled Xiaomi to fetch slight price premium compare to the competitors in the Retail (Technology) industry. The sustainable margins have also helped Xiaomi to invest into research and development (R&D) and innovation.
Training and development
– Xiaomi has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– Xiaomi has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Technology) industry. Secondly the value chain collaborators of Xiaomi have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the 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.
Successful track record of launching new products
– Xiaomi has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. 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.
Low bargaining power of suppliers
– Suppliers of Xiaomi in the Services sector have low bargaining power. Xiaomi has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Xiaomi to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Xiaomi | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Xiaomi are -
Skills based hiring in Retail (Technology) industry
– The stress on hiring functional specialists at 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.
High operating costs
– Compare to the competitors, Xiaomi has high operating costs in the Retail (Technology) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Xiaomi lucrative customers.
Low market penetration in new markets
– Outside its home market of Hong Kong, Xiaomi needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners in Retail (Technology) industry
– because of the regulatory requirements in Hong Kong, 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 Retail (Technology) industry.
Ability to respond to the competition
– As the decision making is very deliberative at Xiaomi, in the dynamic environment of Retail (Technology) industry it has struggled to respond to the nimble upstart competition. Xiaomi has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, 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 Retail (Technology) industry over the last five years. 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.
No frontier risks strategy
– From the 10K / annual statement of Xiaomi, it seems that company is thinking out the frontier risks that can impact Retail (Technology) industry. 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.
Slow to strategic competitive environment developments
– As Xiaomi is one of the leading players in the Retail (Technology) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Technology) industry in last five years.
Employees’ less understanding of Xiaomi strategy
– From the outside it seems that the employees of 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.
Workers concerns about automation
– As automation is fast increasing in the Retail (Technology) industry, 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.
Products dominated business model
– Even though Xiaomi has some of the most successful models in the Retail (Technology) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Xiaomi should strive to include more intangible value offerings along with its core products and services.
Xiaomi Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Xiaomi are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Technology) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. 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 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects 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 has opened avenues for new revenue streams for the organization in Retail (Technology) industry. This can help Xiaomi to build a more holistic ecosystem for Xiaomi products in the Retail (Technology) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Xiaomi has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Technology) sector. This continuous investment in analytics has enabled Xiaomi to build a competitive advantage using analytics. The analytics driven competitive advantage can help Xiaomi to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, 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.
Manufacturing automation
– Xiaomi can use the latest technology developments to improve its manufacturing and designing process in Retail (Technology) sector. 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.
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 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Xiaomi can develop new processes and procedures in Retail (Technology) 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 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.
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 can use these opportunities to build new business models that can help the communities that Xiaomi operates in. Secondly it can use opportunities from government spending in Retail (Technology) sector.
Leveraging digital technologies
– 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Technology) industry, but it has also influenced the consumer preferences. Xiaomi can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Xiaomi can improve the customer journey of consumers in the Retail (Technology) industry by using analytics and artificial intelligence. It 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 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Xiaomi are -
Increasing wage structure of 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.
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 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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Xiaomi in Retail (Technology) industry. The Retail (Technology) 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 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 Retail (Technology) industry and other sectors.
Environmental challenges
– 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 can take advantage of this fund but it will also bring new competitors in the Retail (Technology) industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Technology) industry are lowering. It can presents Xiaomi with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Technology) sector.
High dependence on third party suppliers
– 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.
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.
Stagnating economy with rate increase
– 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 Retail (Technology) industry.
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 business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Xiaomi is facing in Retail (Technology) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Xiaomi Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Xiaomi 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 Xiaomi 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 Xiaomi 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 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 needs to make to build a sustainable competitive advantage.
