Political Factors
This report is based on scenario planning for xiaomi making assumptions of what the future state of business is going to be life and how the business environment in the various markets of xiaomi will change dynamically in the future. A PEST analysis of Xiaomi has been conducted in this report in order to highlight the current state of business affairs and the future implications of the various external factors on the business of the company. Deriving from the same research, a sales scenario has been planned to identify the future set of uncertainty is that Xiaomi will face and lastly a set of business implications have also been provided for the organisation.
The present system of governance in Hong Kong has helped xiaomi to come up front into the line of mainstream mobile networking companies. It can be predicted that in the future there’s also the managerial leaders of xiaomi will not be taking any divergent policy abstract from this historical norm. As highlighted by Cai (2016), the industrialized government priority towards the mobile communication sector in order to develop innovative and disruptive technologies with an eye on capturing the foreign markets has benefited the growth of Xiaomi to much an extent. Another Important political factor that will go in favour of the company in future is the political stability of the current market where Xiaomi operates. The company has her business spread over numerous countries. This is why the written technology is supposed to be industry specific. However, populism across the mobile and Smartphones market especially in the European market will have its Shadow fast on the market of Hong Kong also. As an outcome Tse (2015), states that greater instability is expected to develop in the Hong Kong telecommunications sector. In turn Shih, Lin and Luarn (2014), comments that this will raise the competition for xiaomi in the other potential Asian markets like China and India also. All the Chinese mainland is a free trade area more stringent in China along with higher corporate tax levels that makes the profit biting lower compared to other Asian markets. Leading telecommunication brands Like Xiaomi and Tencent have the priority the influence local political factors in favour of their business. However, Chen et al. (2014) states that along with popular political support from the home market in China, adverse political factors affect the company outside China also. For evidence the Taiwanese government regulated third party survey in order to detect cybersecurity threat in Xiaomi in the year 2014 which cause severe damage to the brand equity of the company in the Asian market.
Economic factors that can affect technological companies are diverse and multifarious. Factors including the microeconomics climate of the country, taxation rate, inflation interest rates as well as currency exchange rates along with other analogous factors can impact the business of xiaomi, economically. For evidence, Glowik (2016), provides that the cost of labour in specification market is low due to the high and unemployment rate in the regions. The average cost of labour for workers in China had been 360 US dollar per hour in 2017. Since Xiaomi started its market operations in the country 2011, they have seen a growth in factory workers’ wages by about 64% (Gupta & Dhillon, 2014). Search economic tendencies directly impact the competitive advantage of organisations. It can be implied that the cost of operations of other brands like Honor will become less in the Asian markets compared to xiaomi if the wage rate enhance by another 6 to 10% within 2 years (Hyun, 2017). This is why, in order to keep the sales parity balanced, xiaomi needs to explore more new market with easy penetration opportunities. In this context, the markets of India and UK can turn out to be most favourable business loan for the organisation vision 2020 to 2025.
Economic Factors
The gender roles are involved in the Asian market where Xiaomi has maximum sales. Another important factor is growing education level in the countries like Hong Kong, China and India. As a part of the globalisation strategy, the company can develop research and development centres in the local markets. As Rawal, Awasthi and Upadhayay (2017), states, this will have a major impact on the cost starting of the company in future when the market stability will fall and competitiveness of the market will be higher. The power structures are also variable in the various markets where the company operates. As an evidence, high level of income in equality is a stock factor in the Asian markets. The same is applicable for the home market of Xiaomi that is Hong Kong. This is why the company has face difficulty in developing a strong base of target customers. Moreover, as highlighted by Xie and Liang (2013), the acquisition of marketing to Capital has also been slower because of which xiaomi has still not been able to enter into the major European markets like Samsung. In future the organisation should focus more upon dynamic and open market for telecommunications like India, Bangladesh and other countries of Southeast Asia along with Australia, New Zealand and other countries in the same geographical zones. In the South Eastern countries, the market of mobile technology is highly emerging. There is huge scope for Innovation and market acquisition in markets like India. On the contrary in the Australian market, market entry with less capital is possible and the saturation level in the telecommunication market in the country is very low along with high retail opportunities. This is because the spread of disruptive mobile Technology has not yet been achieved in Australia.
Companies like Xiaomi survive much on technology transfer. However, since most of the innovative mobile communication brands have developed From Asian market, in the modern domain of globalisation technology transfer directly accountable to increasing market competition for the companies of Asia. The culture of technological innovation is very strong in the mobile manufacturing sphere. This is why, Pon, Seppälä and Kenney (2014), states that the companies like Xiaomi are reluctant to transfer a licence of their patented Technologies out of the fear of creating competition out of collaboration. The cost of investment in both macro and micro level in the Global mobile business sphere is increasing at a high rate. Hence, in this context it is also essential that the newly emerging organisations maintain their sales parity and attempt to garner higher market share.
The company should conduct proper market analysis for technological innovations by the competitors in the specific market before making market entry. This will help them to develop a good insight regarding the technological disruption that the competitors are planning and also understand how the Global Business industry of Telecommunication is expanding and thereby they can frame their future strategies also. Another important technological factors that xiaomi should consider is intellectual property rights and protection of patents. If Xiaomi gets more protection against their Intellectual Property Rights, then they can freely invest in research and development. The potential of 5G in attracting customers is also needed to be considered under this domain of social factors. The company is highly engaged in to developing the User experience with five G by gradually increasing speed and access of this network in almost all the countries where they are operating (Steenkamp, 2017). If they are able to offer a global 5G network in a span of another 5 years from now, the customer experience of xiaomi will be dramatically transferred by then.
Social Factors
Xiaomi started their mobile sale 4 years ago. Given that, they have made astonishing progress in the smartphone market of Asia. In the first and second quarter of the financial year 2017-18, they were the largest vendor of the Southeast Asian market before falling out to Apple, Inc. However, recent scenario of the smartphone market of the most dynamic business sectors of Asia show that the higher bargaining power of customers and demand for feature high end specs at most competitive prices is going to be the biggest challenge for Xiaomi in the upcoming years. According to Guoling and Xiaolin (2012), another threatening scenario is that the smartphone demand is gradually weakening in the home market of Xiaomi that is China. On the contrary, with market entry of two more potential brands like Honor from Huawei and RealMe along with Oppo and Vivo has made the market competition most intense in the domain of budget mobile phones. The company has also failed to implement the lean production model by means of reach the targeted to make a market entry in Europe. Without tactful production and proper manufacturing Cost Management, show me would not be able to offer phones at a competitive fries like ZTE or Huawei technologies in European market also.
The failure to enter into the European market prompted xiaomi to explore other less feasible market options like Brazil and India. The company launched to their first phone for Brazil in 2018 and they have indulged in Rapid expansion across Asia, specifically in India which is the biggest scope for market expansion in Asia for xiaomi. In the future, the sales from home market will not be able to keep the brand equity or sales parity in a similar position. Hence Steenkamp (2017), expect that xiaomi would eagerly look forward at the overseas market. Nevertheless Pon, Seppälä and Kenney (2014), also we use that xiaomi will take at least 5 to 6 years to establish their presence outside China. This is because, enjoying the benefit of free corporate trade, they had to put in very less effort in fostering relationship which distributors, careers, promotional agent as well as other market stakeholders. However, under stringent local regulations and largely competitive market presence of various potential brands, Xiaomi will have a hard time to allocate distributors, foster relationship with mobile carriers and generate their brand value in a new market. The company will face ample competition from Samsung, Motorola LG and other latest handset vendors like Oppo and Vivo also.
Conclusions
In the first place in the online marketing visible to serve only 28% of customers when new markets like India. This is why xiaomi needs to drastically plan for entering the offline physical retail market also. More than 50% smartphone purchasing customers still prefer to buy handset from physical outlets.
The company also needs to set up new manufacturing plants in the different markets where they are operating. In the Asian countries, production with local workers and local equipment can help Xiaomi to reduce their manufacturing and assembly cost. Steenkamp (2017), states that the recent sales value of xiaomi in India is 1 billion US dollar. They should utilise the market capital to setup manufacturing plant. This is because 95% of most profitable smartphone sales campaigns have been successful through local market manufacturing only.
The organisation can also reduce cost of market entry by establishing investment and distribution tie ups with other companies. Whereas technological collaboration with local companies require immediate funding, establishment of tie up for financial and distribution partnership health accompany to avoid paying the transfer capital and diminish the risk of operations.
Reference List
Cai, L. (2016). Motivation of Crowds’ Online Participation in Crowdsourcing Community: A case of XIAOMI MIUI.
Chen, Y., Kuo, C. J., Jhan, Y. C., & Chiu, P. N. (2014, July). Hunger marketing on smartphone. In Proceedings of PICMET’14 Conference: Portland International Center for Management of Engineering and Technology; Infrastructure and Service Integration (pp. 1950-1957). IEEE.
Glowik, M. (2016). Market Entry Strategies: Internationalization Theories, Concepts and Cases of Asian High-Technology Firms: Haier, Hon Hai Precision, Lenovo, LG Electronics, Panasonic, Samsung, Sharp, Sony, TCL, Xiaomi. Walter de Gruyter GmbH & Co KG.
Guoling, Z., & Xiaolin, L. (2012). The Marketing Strategy based on Online Brand Community: A Case Study on Beijing Xiaomi Science and Technology Co., Ltd.[J]. Enterprise Vitality, 12.
Gupta, S., & Dhillon, I. (2014). Can Xiaomi shake the global smartphone industry with an innovative “services-based business model”?. AIMA Journal of Management & Research, 8(3/4), 2177-97.
Hyun, J. H. (2017). Emerging Multinationals in Emerging Markets: Xiaomi Experience in the Indian Smartphone Market.
Pon, B., Seppälä, T., & Kenney, M. (2014). Android and the demise of operating system-based power: Firm strategy and platform control in the post-PC world. Telecommunications Policy, 38(11), 979-991.
Rawal, P., Awasthi, A., & Upadhayay, S. (2017). Creating a Hunger Driven Smartphone Market by Xiaomi. International Journal of Engineering Science, 11250.
Shih, C. C., Lin, T. M., & Luarn, P. (2014). Fan-centric social media: The Xiaomi phenomenon in China. Business Horizons, 57(3), 349-358.
Steenkamp, J. B. (2017). Global brand strategy: World-wise marketing in the age of branding. Springer.
Tse, E. (2015). China’s disruptors: How Alibaba, Xiaomi, Tencent, and other companies are changing the rules of business. Penguin.
Xie, W., & Liang, H. (2013, July). A case study: Innovation strategy assessment of the leading smartphone companies. In 2013 Suzhou-Silicon Valley-Beijing International Innovation Conference (pp. 121-126). IEEE.
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