Xiaomi (1810) SWOT Analysis / TOWS Matrix / 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 – challanges to central banks by blockchain based private currencies, increasing energy prices, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, etc

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Introduction to SWOT Analysis of Xiaomi

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.

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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

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Strengths of Xiaomi | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Xiaomi are -

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.

Ability to recruit top talent

– Xiaomi is one of the leading players in the Retail (Technology) industry in Hong Kong. It is in a position to attract the best talent available in Hong Kong. The firm has a robust talent identification program that helps in identifying the brightest.

Effective Research and Development (R&D)

– Xiaomi has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Xiaomi staying ahead in the Retail (Technology) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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.

Digital Transformation in Retail (Technology) industry

- digital transformation varies from industry to industry. For Xiaomi digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. 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 in Retail (Technology) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Operational resilience

– The operational resilience strategy of Xiaomi comprises – understanding the underlying the factors in the Retail (Technology) 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.

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.

Ability to lead change in Retail (Technology)

– Xiaomi is one of the leading players in the Retail (Technology) industry in Hong Kong. Over the years it has not only transformed the business landscape in the Retail (Technology) industry in Hong Kong but also across the existing markets. The ability to lead change has enabled Xiaomi in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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.

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.

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.

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Weaknesses of Xiaomi | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Xiaomi are -

Interest costs

– Compare to the competition, 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.

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.

High cash cycle compare to competitors

Xiaomi has a high cash cycle compare to other players in the Retail (Technology) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Xiaomi is slow explore the new channels of communication. These new channels of communication can help Xiaomi to provide better information regarding Retail (Technology) products and services. It can also build an online community to further reach out to potential 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.

Compensation and incentives

– The revenue per employee of Xiaomi is just above the Retail (Technology) industry average. It 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.

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.

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.

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.

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.

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 supply chain. Even after few cautionary changes, Xiaomi is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Xiaomi vulnerable to further global disruptions in South East Asia.

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Xiaomi Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Xiaomi are -

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.

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.

Better consumer reach

– The expansion of the 5G network will help Xiaomi to increase its market reach. 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.

Use of Bitcoin and other crypto currencies for transactions in Retail (Technology) industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Xiaomi in the Retail (Technology) industry. Now Xiaomi can target international markets with far fewer capital restrictions requirements than the existing system.

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.

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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, 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 Xiaomi to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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 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 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.

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.

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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for 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 to hire the very best people irrespective of their geographical location.

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.

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Threats Xiaomi External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Xiaomi are -

Regulatory challenges

– 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 Retail (Technology) industry regulations.

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 in the Retail (Technology) sector and impact the bottomline of the organization.

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.

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.

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.

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.

Easy access to finance

– Easy access to finance in Retail (Technology) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. 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 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.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, 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 Retail (Technology) sector.

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 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 needs to understand the core reasons impacting the Retail (Technology) industry. This will help it in building a better workplace.

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.

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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.

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