SWOT ANALYSIS OF XIAOMI

Strengths
As Xiaomi is a leading brand in China, it has a number of strengths compared
to other competitors. The first and strongest advantage is its affordable price
yet good quality. While most of the smart devices companies focus on
making profits from hardware (Apple, Samsung), Xiaomi carries out a
different business model cost leadership, which focuses on making profits
from services ( apps, games, theme customizations). Moreover ,only selling
its product online and utilizing the word-of-mouth marketing strategy helps
cut its middlemen and distribution costs, thus enabling Xiaomi to offer
products at prices closest to the manufacturing costs (Kan, 2014). The price
of Xiaomis newest handset - MI4 sells for $320, whereas products with
similar specifications of Apple and Samsung are sold at around $750 (KVN,
2015). Though its products are inexpensive, they receive lots of praises from
critics and users for features and designs. According to Low (2014), Xiaomi's
Mi 4 offers almost everything you want in a high-end flagship smartphone at
a low price. As a result, the sales of Xiaomi products, mostly smartphones
and tablets increase drastically for the past 3 years. In 2015, the company
overtakes Samsung as China top smartphone vendors and becomes the
worlds third largest smartphone vendor, selling 2.1 million mobile phones in
24 hours (Culpan, 2015). Its success not only comes from cost leadership
strategy but also comes from its skilled workforce. In recent years, it has
recruited several managers from Google such as Hugo Barra, Jai Mani or Lin
Bin to help expand the company globally (Krishna and Purnell, 2014).
Moreover, its innovative marketing approach is also a strong advantage over
other competitors. Xiaomi relies heavily on internet to market products and
fuel sales. It leverages social media and word-of-mouth marketing to create a
viral effect among the internet acquainted youth its main target market.
Also, it adopts a customer-oriented strategy to draw a loyal fan base. For
example, Xiaomi host parties for its fans every few weeks, allots half of the
seats at each launch for regular customers instead of the press, continuously
take feedback from customers to improve. As a result, Xiaomi users are twice
as engaged as other Iphone/Android users, always strongly recommend its
products and contribute largely to its sales. (Dou, 2015)
Weakness
Its cost leadership strategy, in which products are sold at the closest prices
to costs, while helps boost its sales considerable, brings in razor-thin profits.

In 2013, while it earns a $4.3 billion of sales, its net profit is only $56 million,
which is only 1.8% operating margins compared to Apples 28.7% and
Samsungs 18..7% (Olson, 2014). While Xiaomi is one of the fastest growing
vendors of all time, these above numbers indicate an uncertain profitability
in the future. Furthermore, one of its weakness is its patent portfolio. Xiaomi
becomes the third largest smartphone vendors in the world without intensive
patent collections, unlike other

competitors. However, this low-cost strategy is backfiring as over the past

year, Xiaomi has been caught up in patent lawsuits, most notably is the
lawsuits with Ericsson in India, resulting in the ban of several Xiaomis
products. This litigation has halted the growing sales in India threatened the
companys near-cost strategy as now it has to increase its spending on
researching and licensing (www.bloomberg.com). Moreover, given its lack of
patents, in the future, Xiaomi can face more disputes especially in developed
markets such as Europe or US (CKGSB Knowledge, 2014). Xiaomi makes
most of its revenues in China due to services, yet this tactic may not work in
other markets because overseas, Xiaomi uses Google apps for its smart
devices. Therefore, Xiaomi will not earn much profit from overseas markets.
Furthermore, endless accusations and criticisms of being an Apple copycat
also create bad reputation for the company, negatively affecting its future in
potential markets (Griffin, 2015). Also, being a Chinese brand in foreign
countries can cast a doubt on qualities. For example, in Vietnam, though the
prices are cheap, not many consumers decide to buy Xiaomi mobile phones
as they think that Chinese mobile phones do not have high qualities. This is
one disadvantage that the company needs to overcome in order to reach its
goal of becoming a global brand.
Opportunities
As the smartphone market is booming in recent years, there are many
opportunities for Xiaomi to grow beyond China. Danova (2015) reports that
the global smartphone market is growing at a steady pace, exceeding 1
billion units threshold in 2013 thanks to widespread adoption of smartphone
in emerging markets