Xiaomi

Xiaomi: The Brand
Having been a user of the Xiaomi Phones for the last 1.5 year, there could not been a better opportunity for me to explore the domain of Xiaomi phones, with my own experience and what not. They have been taking the market by rage. We can still hear people say that ‘made in china’ products do not last, but I beg to differ.
Where they started
It’s surprising to hear than Xiaomi was only found in 2010, yet today, it has reached worldwide. Xiaomi was officially found on 6th of April, 2010 with Lei Jun and 8 other co-founders. The company first started off as a software company creating a new custom ROM based on Google’s Android. Their initial aim was to provide additional functionalities that Android had yet to provide and an easy to use interface. The founder and chairman started Xiaomi by the simple belief that high-quality technology doesn’t need to cost a fortune.
The Logo
The “MI” logo of Xiaomi phones stands for “Mobile Internet”. Lei Jun said that the name is about revolution and being able to bring innovation into a new area. It also has other meanings, including “Mission Impossible”, because Xiaomi has faced many challenges that had seemed impossible to defy in the early days.
The Products
Xiaomi is not only popular for its phone, but it has a wide range of products like notebooks, TV, audio accessories, power banks, drones, Mi Band and other accessories.

The Guinness World Record
Xiaomi celebrated its 5th birthday on 6 April 2015 with the Mi Fan Festival, which includes an online shopping day with offers and discounts. Xiaomi managed to break the world record for “most mobile phones sold on a single online platform in 24 hours”, by selling 2,112,010 handsets through its direct-to-customer website Mi.com.

Where they are now
With more than 61 million handsets sold in 2014, and products launched in Taiwan, Hong Kong, Singapore, Malaysia, Philippines, India, Indonesia and Brazil, Xiaomi is expanding its footprint across the world to become a global brand.
As of 2017, Xiaomi was the world’s 5th largest smartphone company.
In 2018, Xiaomi has become the world’s 4th largest smartphone manufacturer.
Xiaomi has 15,000 employees in China, India, Malaysia, Singapore and is expanding to other countries such as Indonesia, the Philippines, and South Africa.
Lei Jun, the founder and CEO, has an estimated net worth of US$6.8 billion.

He is China’s 24th richest person in 2017.
Xiaomi’s valuation is more than US$46 billion.
Xiaomi is the world’s 4th most valuable technology start-up after receiving US$1.1 billion funding from investors

SWOT Analysis
Strengths Weaknesses
One of the largest Smart phone makers
Highest Selling smart phone
Huge market available
Penetrative pricing
Good Quality Products
Manufacturing advantage
Research and Development
Offline distribution
Advertising and marketing spends
Brand image and equity
More focus on variety of products rather than on their phone sector
Opportunities Threats
Expansion
Distribution
Penetration of smart phones Competition
Service
Strengths
One of the Largest Smartphone maker – Xiaomi is one of the largest smart phone makers in the world. In 2018, it has managed to become the 4th largest smart phone manufacturing company less than a decade of its existence, nonetheless!
Highest selling Smartphone – It is a proud fact to know that The REDMI Note 4, one of Xiaomi’s many models, became the highest selling smart phone in India and China and practically in 50% of the Asian market. This shows the strength and emergence of Xiaomi the smart phone market beating several giants.

Huge market available – it is not unknown to us that Xiaomi’s country of origin is China, which is, let us be realistic, a huge market in itself. Besides China, Xiaomi has the advantage of exploring the whole Asian market, already penetrating into the South East Asia successfully.
Penetrative Pricing – Xiaomi uses penetrative pricing. It has the strongest penetrative pricing advantage. And this is because Xiaomi mostly sells through flash and online retail that the company mostly uses direct marketing techniques and avoids dealer and distributor margins.

Good Quality products – as it has been aforementioned that Xiaomi believes that good technology need not be expensive, they are proving their point right. Their quality remains intact, despite low prices. Believe me, when I searched Xiaomi phones on YouTube, the highest recommended videos were all related to answering why Xiaomi phones were available at such cheap prices and in a good way. Xiaomi phones are especially renowned for their camera which is said to be very high resolution and gives excellent photos. I can readily agree on the quality of the pictures. Further, the smart phones are regularly rated high on all E-commerce portals, concrete evidence that Xiaomi does not compromise on quality even if lowers the price regularly.
Manufacturing Advantage – coming from the biggest economy in the world, Xiaomi phones has the advantages of manufacturing and exporting the smart phones.

E-commerce advantage – As it has been emphasized that Xiaomi relies on ecommerce portals for sale of phones, the Flash sale model is has worked wonders for Xiaomi. In this model, the product is made available only in limited quantities and sold at a very low price. This model made the consumers crazy and each Xiaomi looked like a price which was hard earned.

Research and Development – Xiaomi is a market follower. It persistently tries to look up what is happening around and for this, Xiaomi invests heavily in R&D. However, its major R&D expenses are focused towards cost advantage and not differentiation advantage. 
Weaknesses
Offline Distribution – While Xiaomi phones sell exceptionally through their online streams, customers can find it difficult to get their hands on a REDMI or MI model phone outside the digital world. This is because their offline distribution is not up to mark and Xiaomi phones sell mainly via E-commerce.

Advertising and Marketing spends – due to online sales through their website and such, the advertising and marketing spends of the brand besides the digital world is very low. The brand launches ATL campaigns only when coming up with a new product. And even that is not consistent.

Brand Image and Equity – Owing to the prior mentioned poor advertising and marketing efforts, the brand image is not so good as Samsung or Apple or other such competitors. The product portfolio of Xiaomi is also limited which further affects the brand image. The fact that service centers are also limited does not help either.

Opportunities
Expansion – while the Asian market itself is huge for Xiaomi phones but there is a lot of potential markets to explore, reach and conquer. Covering the developing countries and the emerging markets should be the priority for Xiaomi. As it mainly follows online sales model, which is becoming popular in many countries, it would be beneficiary for the company to expand to countries where E-commerce mode of purchase is well established
Distribution – Online distribution of phones are keeping it going for the company but, Xiaomi also needs to concentrate on offline distribution if it ever wants to be consistent like some of its top competitors. It would help the company with the brand image.

Penetration of Smart phones – Across the world, there is no doubt that the smart phones as a product is being adopted taking over many substitute products. This market penetration of smart phones is for the benefit of Xiaomi. The better phones they are able to manufacture, the more they will be able to capture market share.

Threats
Competition – The Chinese market is Red Ocean, so as to speak with smart phones. And to pinpoint, Oppo and Vivo, 2 other largely selling Chinese companies have the same manufacturing advantages like Xiaomi. Besides this, Oppo and Vivo have a strong offline presence and have huge distribution network. Thus, they are a huge threat to Xiaomi.

Service – The lack of service centers equivalent to the number of sales by the brand is a worrying statistic. Xiaomi needs to increase its sales and service centers both if it wants to retain its customers.

TOWS Matrix
SO Strategies
WO Strategies
Using high-end smart phones to catch customers in USA and European Union.
Going to emerging market by selling Red Mi smart phone in order to increase market shares worldwide.
Put money in R&D in order to build up quantity and quality patents.
Building good relationships with suppliers in order to have enough products on time.
ST Strategies
WT Strategies
Keep providing low price models of Red Mi phones for young customers in China.
Offering higher price models Mi flagship phones, in which price can up to 2999 for high-end user in China.
Cooperating with car firms to enlarge its smart home system into Internet of things.

Rivals such as OPPO and VIVO have more 200 thousands stores in China, Xiaomi may open thousands stores to sell smart phones soon.
Using low- price models under 100 USD for budget customers in Africa.

Industry Competitiveness
While the smart phone industry is no easy industry to sustain, Xiaomi phones have proudly been able to hold on to their end, competing fierce fully in less than a decade of their existence.
Xiaomi’s corporate strategy could be inferred as the following:
To seize large market share, pursue high growth and profitability, and dominate the connected home by:
1) Growing its three layers of ecosystem simultaneously with a combination of in-house core product development and investments in smart home devices,
2) Acquiring users aggressively with a large catalog of affordable and high-quality products of its own and those of its Ecosystem Companies, and
3) Retaining users through active engagement and competitive internet services, in self-contained divisions that share the brand association, supply chain relationships, and distribution channels.

The fact that Xiaomi has grown to the ?1 market leader in Chinese smart phone industry in just three years is appreciable. Xiaomi is able to sells smart phones in many aspects similar to phones from Apple and Samsung for less than half the price; something the users would greatly look forward to. One of Xiaomi’s biggest advantages is its global supply chain. It can make almost any hardware cheaper than the competitors’. While it is undoubtedly very difficult to control an extensive supply chain, Xiaomi is able to leverage its innovative limited flash sales to turn disadvantages into advantages. The company coordinates its industrial design to ensure that the smart phones do not risk running into manufacturing shortage or low throughput yield. Xiaomi’s economies of scale, knowledgebase on marketing and product development, are not easy to be copied.

This is the last market hold of Xiaomi phones and other smart phones in the Chinese and global market. We can see why Oppo and Huawei are its biggest competitors.

Worldwide Smart phones Sales to End Users by Vendor in 1Q18 (Thousands of Units)
Vendor 1Q18
units 1Q18 Market
Share (%) 1Q17
units 1Q17 Market
Share (%)
Samsung 78,564.8 20.5 78,776.2 20.8
Apple 54,058.9 14.1 51,992.5 13.7
Huawei40,426.7 10.5 34,181.2 9.0
OPPO 28,173.1 7.3 30,992.3 8.2
Others 153,782.1 40.1 169,921.1 44.9
Total 383,503.9 100.0 378,500.6 100.0
Source: Gartner (May 2018)
Xiaomi was the clear winner of the first quarter, achieving a growth of 124 percent year on year. Xiaomi’s refreshed portfolio of smartphones and aggressive pricing strategy helped it hold the No. 4 spot in the first quarter of 2018. “This strategy led Xiaomi to achieve 330 percent growth in the Emerging Asia/Pacific region,”
Xiaomi has always targeted the young people in fast-growing, nascent and immense middle class who desire to buy products next to top brands at an affordable price. This group became Xiaomi’s large user-base that fueled its growth.

Xiaomi in Nepal
How they started and where they are now
Xiaomi entered Nepal in the year 2016. They are dealing directly with Xiaomi in China and not with Xiaomi in India. Xiaomi is doing excellent in Nepal having opened several outlets within 2 years of its existence. I will be honest when I say that when I got my Xiaomi phone, I had a hard time initially when I could not find screen protectors or phone covers for my phone and I had to tell my brother to bring some along from China. But now I can find them easily over town, which means that Xiaomi is visibly growing in Nepal.

In the starting stage Xiaomi adopted the Nepalese marketing strategy which is lots of advertising due to the fact that while Samsung and Apple are popular brands very few people had heard about Xiaomi and it was difficult to gain the trust of people for a Chinese brand. For Xiaomi Nepal, Social Media has been a great medium to communicate about their phones. And besides this brand activation in colleges, outlets easy locations and positive word of mouth have helped.

As it has been aforementioned, Xiaomi phones sell very well through flash sales and their online website in China and other countries. Xiaomi Nepal has tried this approach as well with flash sales through Daraz. However, the outcome was not as expected. While the target was of sale of 2000 phones through the said medium, only 900 phones were sold. Nevertheless, Xiaomi phones are available for online purchase on their website www.xiaominepal.com.np.

Initially, Xiaomi Nepal at Vatsal Impex, Panchayan Marg, Thapathali were the sole distributors of Xiaomi phones. However, recently, Xiaomi has set up another distributor in Nepal: Teletalk. As of now, Xiaomi Nepal at Thapathali is primarily looking over the distribution and promotion in the Kathmandu valley and Teletalk is responsible for distribution outside the valley; the two companies being in good cooperation with one another.

Details
Date of entering in Nepal: 2016
Bestselling phone in Nepal: Redmi Note 5AI
Best features of Xiaomi: best product at best price
Position in the Nepalese market: no 3
Showroom/ Outlets in Nepal
2nd Floor, Labim Mall, Pulchowk, PatanPako Newroad (Opposite of Tamrakar complex)
Pulchowk- Damkal ChowkMain Road, Biratnagar (Opposite of Jain Bhawan)

Xiaomi Nepal SWOT Analysis
Strengths
Weaknesses
Best price for best features
Variety of products
Positive reviews of people
Innovation
There are a lot of dealers and distributors of Xiaomi phones around the world and less priority is given to Nepal
Products reach late to Nepal
Opportunities
Threats
People are believing in the great features of Xiaomi phones at a reasonable price compared to other smart phones
Large market to explore outside the valley
competition

TOWS Matrix of Xiaomi Nepal
SO Strategies
WO Strategies
Identify demand of Band II and power banks Divert the customers to other phones
ST Strategies
WT Strategies
Open more outlets outside the valley
Show customers other models before they consider competitors phones
SO strategy: Xiaomi Nepal has realized that while earphones are sold for Rs. 400 in the Mahabouddha area, a very popular place for electronics and such, they are able to provide earphones for Rs. 700. While this is a little bit expensive than the ones found in Mahabouddha, the quality is much higher. Given that many people are starting to recognize Xiaomi as a brand, they can use this positive word of mouth to sell equipment at a little higher price but that are more durable. Since they were successful with their earphones story, they would like to identify the demand of power banks and bands.

WO strategy: As previously mentioned in the SWOT analysis, with dealers all around the world, Nepal is given less priority to products being delivered. So the situation is such that there is growing demand of latest phones, but the phones will not have arrived yet. They could be from a month or 2 delayed in arrival. At such a situation, Xiaomi Nepal divert their customers to other smart phones in their range which are equally good.

ST strategy: while things are going visibly great inside the valley, there is a large market to explore outside the valley. With the positive mouth and the response Xiaomi is getting, and the service centers in Nepal, they should open more outlets outside the valley despite Teletalk distributing outside the valley.

WT strategy: As previously mentioned in the SWOT analysis, with dealers all around the world, Nepal is given less priority to products being delivered. Xiaomi Nepal needs to make sure with all the competitors lying around in the market, users or potential users do not flock over to their customers by giving them certain time limit or some sort or discount or guarantee.

Industry Competitiveness in Nepal
It is impressive that while it has been only 2 years that Xiaomi has entered the Nepalese market they are already the no 3 smartphone in Nepal:
No 1: Samsung
No 2: HuaweiNo 3: Xiaomi
In Nepal, Xiaomi is extremely active on their social media pages, which I observed. Not only are they conducting activities, but they also publish holiday based posts like this on Valentine’s Day. Look at the cuteness!

Xiaomi Nepal’s target group is population of 18-30 years of age because they know that such an age group is dynamic and flexible to innovations and new things, while being equally sensitive to prices.
Their main motive being providing the best features at the best price, Xiaomi Nepal is affirmative that more and more people are starting to believe in the specifications of the phone and hence the positive word of mouth going around.
As mentioned above, in the smart phone market, Xiaomi is number 3 in Nepal. However, what Xiaomi Nepal at Vatsal Impex has to consider is that Xiaomi has made a contract with Teletalk to be their 2nd distributor in Nepal. Although these two companies are on good terms, when Teletalk began selling Xiaomi phones at lower prices than Xiaomi Nepal outside the valley, Xiaomi Nepal took a step forward by their lowering their own prices which we can see as follows:
Xiaomi smartphones price in Nepal (2018)
Model Price (Vatsal) Price (Teletalk)
Xiaomi Redmi 4A (16GB storage) Rs.11,499 Rs.9,999
Xiaomi Redmi 4A (32GB storage) Rs.12,999 N/A
Xiaomi Redmi 5A Rs.13,499 Rs.12,999
Xiaomi Redmi Note 5A Rs.14,999 Rs.14,999
Xiaomi Redmi 5 (2/16GB) Rs.17,499 Rs.17,499
Xiaomi Redmi 5 (3/32GB) Rs.19,499 N/A
Xiaomi Redmi 4X (3GB/32GB) Rs.15,999 Rs.14,999
Xiaomi Redmi Note 5A Prime Rs.17,499 Rs.17,499
Xiaomi Redmi Note 4 (3GB/32GB) Rs.18,999 N/A
Xiaomi Redmi Note 4 (4GB/64GB) Rs.20,999 N/A
Xiaomi Redmi 5 Plus (3/32GB) Rs.20,999 Rs.20,999
Xiaomi Redmi 5 Plus (4/64GB) Rs.24,999 Rs.24,499
Xiaomi MI A1 (4/32GB) Rs.24,499 Rs.24,499
Xiaomi MI A1 (4/64GB) N/A Rs.25,999
Xiaomi Redmi S2 (4/64GB) Rs.26,999 N/A
Xiaomi Redmi Note 5 AI (3/32GB) Rs.25,999 N/A
Xiaomi Redmi Note 5 AI (4/64GB) Rs.29,999 N/A
Xiaomi MI Max 2 Rs.34,999 N/A
Xiaomi MI 5 Rs. 39,999 Rs. 33,999 N/A
Xiaomi MI 5s Rs. 48,999 Rs. 36,999 N/A
Xiaomi MI 5s Plus Rs. 52,999 Rs. 39,999 N/A
Xiaomi MI 6 Rs. 48,999 (64GB)Rs. 57,999 (128GB) N/A
Xiaomi MI Note 2 Rs.76,999 Rs. 59,999 N/A
Xiaomi MI Mix Rs.94,999 Rs.61,999 N/A
Xiaomi Mi Mix 2 Rs. 63,999 N/A
While it is true that Xiaomi Nepal is more focused on the pricing strategy in Nepal also, there is no denying that people are getting a great phone for the price, some of the features of which are impeccable; especially the camera, and as a fellow Xiaomi phone user, I can agree to that.

The Question
Xiaomi is the Chinese manufacturer of mobile phone and other electrical equipment. Drawing from secondary sources critically evaluate Xiaomi SWOT, industry competitiveness and provide recommendations if Xiaomi should expand to Nepalese market?
I would like to take a very practical approach to answer to this question. While we have analyzed both the global market and the Nepalese market for Xiaomi phones referring to the above content, it would not be a good idea for Xiaomi to expand to the Nepalese market. Hear me out when I say that, Xiaomi Nepal are only authorized distributors of Nepal and do not manufacture the phones; I refer the prospect of a manufacturing unit in Nepal. While it is true that Xiaomi phones are doing amazingly well in the Nepalese market to start with, post only 2 years of their entering Nepal, a manufacturing unit would still be a bad idea.
Xiaomi phones are only growing, with more and more people appreciating the fact that they are getting such good features of a smart phone at the best prices. Would this still cater the idea of opening a manufacturing unit in Nepal? No. We can see that Xiaomi has opened a number of manufacturing units in our neighboring country India, but we must also keep in mind that India has 500 times the number of customers that Nepal has and the resources to manufacture the phones at home. Let us suppose that Xiaomi were to expand to Nepal and open a manufacturing unit in Nepal as they did in India; this would only make the prices of the phones higher, because Xiaomi would have to import everything considering that we do not have the resources for manufacturing a phone. High prices of phone would trigger Xiaomi from its original motto which is that high quality phones need not necessarily cost much.

We can also take a look around the existing market of Nepal where Samsung stands as no 1 in the Nepalese smart phone market and Huawei as no 2. If a manufacturing unit were a good idea, Samsung would have long opened a manufacturing unit in Nepal, granted that they sell many a times more of smart phones compared to that of Xiaomi. For Xiaomi to open a manufacturing unit in Nepal, they would have to sell at least 500000 units of smart phones every year, which would be realistically difficult given the anticipated rise in the price of phones.
I will not say that the idea of Xiaomi extending to Nepal is a bad idea at all or a bad idea in the long run. If the resources for a smartphone are easily available in Nepal itself, without the need to import everything, it would be a great idea. That being said, in the near future, the idea of distribution and sales of Xiaomi phones through authorized dealers seems to be the best option.