XIAOMI: ENTERING INTERNATIONAL MARKETS

CASE STUDY ANALYSIS

BACKGROUND OF THE CASE
Xiaomi Technology Corporation Ltd. (Xiaomi), based in Beijing, founded by Lei Jun in the year
2010, had rapidly end up being a market leader in the Chinese Smartphone market.
They generate revenue through four primary business segments: Smartphone, Internet of
Things (IoT) and lifestyle products, internet services, and miscellaneous additional services and
products. The company joined hands with Hugo Barra, a leading Android executive, who had
actually left Google previously which improved the corporate governance strength of the
company. On 16 August 2010, Xiaomi officially launched its first Android-based firmware MIUI.
Smartphone shipments grew by 100 per cent each year in the next three years, but began to
decline dramatically in 2013. At the end of 2015, about 95 per cent of China’s population had a
Smartphone with them. This increasing saturation in china market and growing rivalry made
Internationalization become a being a vital part of the business's total strategy. After
recognizing numerous opportunities in the global market, it had begun its global market
strategy in 2013. However, opportunities came with challenges, and the company encountered
many problems. Compared with Xiaomi’s domestic success, its global market share was
unsatisfactory. The case study tries to find answer for identifying the roadblocks for
internationalization and find solutions to tackle them.

ISSUES FACED BY THE COMPANY DURING INTERNATIONALISATION

 Unsatisfactory sales
 In 2019, Xiaomi surpassed all giants and stood
first in India, owing to multiple rounds of
shopping festivals by the online platforms
{source:IDC}
 According to the case, in 2015, Huawei surpasses
Xiaomi accounting for 41 per cent of the total
Chinese overseas smart phones sales. Same trend

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 is seen in 2019.

{SOURCE: Global Smartphone Market Share: By Quarter,Counterpoint}

 Trust issues
 Violation of Taiwan Trade Fair Act during December 2013 flash sales for irregularities in
Xiaomi's online sales of the phone as was fined heavily. This led to loss of brand image in
the country.
 Patent Deficiency [1]
 Ericsson sued Xiaomi in India stating that it hadn’t licensed inventions by Ericsson that
enable wireless devices to connect to networks resulting in temporary ban of Xiaomi
sales
 Cool pad subsidiary, Yulong Computer Telecommunication Scientific (Shenzhen) Co has
filed a lawsuit against Xiaomi for patent infringement demanding it immediately stop
production and sale of some Smartphone models, including the flagship Mi Mix 2
 Blue Spike LLC, accused patent infringement on the grounds that Xiaomi Mi5 designs,
develops or manufactures Address Space Layout Randomization software, systems
which they import and offer service of it into the U.S. market.
TIMELINE OF INTERNATIONALIZATION

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SNO. COUNTRY YEAR HIGHLIGHTS
1 Hongkong [2] 2013 E-commerce -Hong Kong Telecommunications Limited ; MIUI
forum
2 Taiwan 2013 E-commerce - FarEasTone Telecommunications ; warehouse in
Taiwan ; MIUI forum
SOUTH EAST ASIA
3 Singapore, 2014 Singapore - The Xiaomi Mi 3 flash sale sold out within 2 minutes
Malaysia, India, Malaysia -
Indonesia, India - Two of India's major e-commerce sites and through offline
Philippines retailers for the first time. After-sales services was outsourced to
Gadget Wood eServices Pvt. Ltd, “Xiaomi fan festivals
Indonesia- Lazada Groups built a giant warehouse for Xiaomi, 22
percent market share in Indonesia while Samsung holds 25
percent market share.
Philippines – Local distributors, Mi Stores for boosting sales in
late 2018
4 Australia[3] 2014 A Store in Australia began selling Xiaomi mobile phones online
through its website XiaomiStore.com.au. Xiaomi soon "requested"
that the store be shut down within few months as it was an
unrelated business
5 Africa 2015 Xiaomi reached an agreement with Mobile in Africa (MIA) Group
to provide selling, marketing, and after-sale service in 50 countries
in sub-Saharan and released Redmi 2 and Xiaomi Mi 4 smart
phones, available in South Africa, Kenya, and Nigeria
6 Brazil 2015 They locally assembled a Smartphone outside of China for first
time and Launched Redmi 2 but shortly after starting operations in
Brazil the company left the country in the second half of 2016. In
2019, Xiaomi Brazil’s Twitter account tweeted that they would
return to Brazil again [4]
7 Bangladesh 2016 Xiaomi entered Bangladesh via Solar Electro Bangladesh
Limited[5]
8 Pakistan 2017 On August, opened its first flagship Mi Store in Faisalabad[6]
9 European Union 2017 Xiaomi smart phones became officially available in the European
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 [7] Union through their partnership with ABC Data
EU's first Mi Store has been opened in Athens, Greece
Xiaomi started operating in Spain, making available the Mi A1 and
Mi Mix 2 smart phones
Xiaomi opens, in Paris, its first French store
Xiaomi opens, in Arese Mall (Milan), its first Italian Mi Store.
10 US [8] 2018  Xiaomi only opened its smart hardware—including the power
bank, Mi band, and in-ear headphones—for sale in the United
States through Amazon

XIAOMI’S BUSINESS STRATEGIES [9]

 TRIATHLON BUSINESS MODEL: Hardware + New Retail + Internet --- Company position itself
as an internet and software company to a greater extent than a hardware company. The
company perceives the sales of hardware as a means to deliver software and services in the
long-term perspective. 
 Large fan base: They have a large fan base involving millions of who spend countless hours
online discussing Xiaomi products on various forums. This helps company in increasing the
level of brand awareness with no extra cost for the company. Xiaomi fosters, develops and
encourages its fans via Mi Fan Festivals that involves discounts and gifts. The motto of the
company is “Just for Fans” and the company is also known to recruit its new employees
among Mi Fans.
 Reasonable price: Xiaomi practices ‘design as you built’ philosophy, incorporating Mi Fans
feedback in a constant manner at all stages of new product development. Cheap costs of
Xiaomi products and services are the main reason for consumers buying those products and
services.
 Optimization of products through eco-chain: Xiaomi ecosystem comprises 55 companies
which produces ever-increasing range of products ranging from Smartphone to rice cookers.
This segment includes a wide variety of Internet-capable products such as smart TVs, electric
scooters, vacuum cleaners, cameras, rear view mirrors, and more. Revenue from the sale of
smart TVs and laptops was particularly strong; it nearly doubled from 2017 to 2018.

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 SWOT ANALYSIS

Most phones are Dual/Triple sim phones 

Effective promotion campaigns
Low selling price of product
Innovative & Featured products.
Launching of new products in market frequently
STRENGHTS
SWOT
WEAKNESS
Lack of experience in the global marketplace
Poor service after sales support
No strong patent and trademarks
More on Online sale strategies
Need fo more R&D

OPPOURTUNITIES
Entry into more international markets
Low-end phones market has increasing demand
Brick and mortar stores
Escalating tariffs and a looming global trade war
etc
Entry of new players Eg:- Maxx, Gionee, Intex,
players Eg:- Samsung, Nokia, Karbonn
High competition from local & international
THREATS

PESTEL ANALYSIS

Political Economic Social

 Chinese brand gets exposed to  Disposable income, has  More customers are switching to
import tariffs in all the countries
 The current trade war between
China and the United States
 Chinese political system allows it
to thrive in its home country
Technological
 Gadgets with the latest  It becomes difficult to  Blue Spike LLC, accused patent
technology in each segment at a
pocket-friendly pricing scheme
 Implements frequent and latest
hardware and software upgrades.
 Xiaomi has ventured in all
possible facets of electronics and
gadgets with their cutting edge
technology
made demand for cutting
edge technology
Smartphone have  Labeled ‘Made in China’ is a notion
skyrocketed.
 Easy on the pockets of
budget-conscious customers
Environmental
completely analyze the level
of commitment of the
company towards reducing
its environment impact, as it
does not publish any CSR
activity in its report [10]
Smartphone and other electronic
gadgets
for substandard and judgment
which makes it a daunting task for
Xiaomi to make it big in the US
market.
Legal
infringement on the grounds that
Xiaomi Mi5 designs, develops or
manufactures Address Space
Layout Randomization software,
systems which they import and
offer service of it into the U.S.
market.
 In India, after Ericsson sued the
company infringing upon its
Standard Essential Patents, related
to violation of eight patents [11]

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 PORTER FIVE FORCES ANALYSIS

Bargaining Power of Buyers

Build a large customer base and
WEAK FORCE
brand loyalty, MIUI Forum
Attract low-income buyers of the
industry

Threat of New Rivalry from existing Bargaining

Entrants  Understand the supply- Power of
demand situation within the Suppliers WEAK FORCE
Cost advantage
industry Build robust
Focus on
innovation Create Competitive and efficient
advantage supply chain

STRONG
WEAK FORCE

Threat from substitutes

Focus Product
differentiation WEAK FORCE

SUGGESTIONS AND RECOMMENDATIONS

The case study revolves around the challenges faced by Xiaomi during the process of its
internationalisation. As seen in the beginning the company was facing trust issues which led to
low brand image. Unsatisfactory sales with reducing market share in the global Smartphone
market. Based on the analysis of the company, both external and internal environment analysis,
we got a picture about the problems the company is facing. Here are few recommendations and
suggestions for the Xiaomi to over the road blocks while expanding globally:
 One major issue identified in the case is thin patent portfolio. Patents are territorial
rights, so as Xiaomi moves into different regions. Xiaomi should find ways to get patents
to stay away from lawsuits. Patent trolls tend to reduce the brand image and create an
impact on brand loyalty. As on march 2020, Xiaomi now has more than
28,000 patents in its portfolio globally (14,000+ unique patents per family) with more
than 60% Chinese patents [12]. Biggest patent deal was with Microsoft to remove some
obstacles from its US invasion plan in 2017.

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  Lack of Offline options: Xiaomi boost the sales directly through its online store, allowing
it to bypass the costs of operating brick-and-mortar locations. Not all countries are fond
of online shopping. Increasing the Mi retail outlets is required when the company try to
expand globally. For example, In India, Xiaomi partnered with the largest e-commerce
for its sales but however they had increased the number of retail outlets due to
stagnation in their online sales. In 2018, they planned to have 5,000 Mi outlets. A
thorough market research on the buying behaviour of the customers before entering
the company is suggested.
 Home and other electronic products as a pavement to increase brand image: Although
Smartphone is the major source of revenue generation, Other Mi Home products like Mi
TVs and electronic gadgets like Mi smart bands can help company improve its brand
image. With growing technology, more people prefer tech gadgets Xiaomi’s ecosystem
of products can deliver a great impact in improving their lifestyle and social status. This
might also help the company to come out the common notion “Made in China”
 Need for Innovation: Though threat from substitute is weak for Xiaomi because of its
low price, the problem still exists with High ranked competitors like Apple, Samsung. A
recent example of accusation for copying Apple includes Xiaomi’s Mi 9 smartphones
having resemblance to the iPhone X when it was released last year. They also unveiled
its Air Dots product that looked like an Air Pods of Apple. [14] .Company should strive for
creating unique product which should have different characteristic and position in the
minds of the customers.
 Building strong finance structure: For any company to work o its expansion and
innovation, it requires sound finance for it to carry out the operations. Xiaomi’s first
round of funding, Series A, was concluded on December 1, 2010, and amounted to $41
million with in- vestments made by QiMing Venture Partners and Morningside Group.
Xiaomi debut to IPO in Hongkong and India failed and fell up to 30%. Company should
identify ways to raise its fund because it is crucial for them to invest more in R&D.
 MIUI: MIUI is the one important strong feature for the company. Their characteristic
feature which attracts customers is Second Space, creation of different profiles for
different pass codes or fingerprints, scrolling screenshot, app lock, and Themes and
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 much more. Though, MIUI offers more unique features and customizations than Android
One phones, clutter and layers with MIUI will eventually make the phone bloated and
heavy, affecting day-to-day performance. Company should look into these problems and
come up with solutions.
CONCLUSION
Although Xiaomi has a very unique and novel business model and has done
considerably well in such a short period of time but in spite of that the company is and
will face some significant challenges which they need to overcome so that this burst
prevails in long run.
Concluding the case study on Lei’s disappointment during his annual meeting on
pursuing his global expansion dream Lei reached out to co-founder Wanqiang Li, asking
for suggestions. He suggested two option Seek offline partners and Development of
strong MIUI platform to reduce patent disputes. Based on the above analysis both the
options has to be considered for internationalization because expanding globally should
be dealt holistically considering into various options available.
REFERNCES
1. Xiaomi May Have A Major Patent Problem – Forbes ;
https://www.forbes.com/sites/parmyolson/2015/01/29/xiaomi-patent-problem/#4f5e21023ace
2. Xiaomi extends its footprint to Taiwan and Hong Kong;
http://www.china.org.cn/business/2013-04/10/content_28498543.htm
3.  Xiaomi Global shuts down Australian online stores ;
https://www.pcworld.idg.com.au/article/552482/exclusive_xiaomi_global_shuts_down_australi
an_online_stores/
4. Xiaomi on its way back to Brazil, reveals an official tweet ;
https://www.gizmochina.com/2019/03/29/xiaomi-on-its-way-back-to-brazil-reveals-an-official-
tweet/
5. China's Xiaomi smart phones launched in Bangladesh;
http://www.chinadaily.com.cn/business/2016-08/19/content_26530468.htm
6. Xiaomi enter Pakistan ; https://propakistani.pk/2017/08/31/breaking-xiaomi-opening-first-
physical-store-pakistan-today/
7. Xiaomi ; https://en.wikipedia.org/wiki/Xiaomi

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 8. Xiaomi is bringing its smart home devices to the US — but still no phones yet;
https://techcrunch.com/2018/05/10/xiaomi-is-bringing-its-smart-home-devices-to-the-us-but-
still-no-phones-yet/
9. Panigrahi, Ashok. (2019). A Case Study on Marketing Strategy of Xiaomi. 4. 46-52.
10.5281/zenodo.3466131.
10. Xiaomi CSR: lack of information and CSR activities ; https://research-
methodology.net/xiaomi-csr-lack-of-information-and-csr-activities/
11. How and why Ericsson banned sale of Xiaomi phones in India ;
https://www.techinasia.com/ericsson-banned-xiaomi-selling-phones-india
12. Xiaomi’s Global Expansion Plan is Steered by Patents – A Patent Portfolio Analysis ;
https://www.greyb.com/xiaomi-patents/
13. Xiaomi to expand India stores 10-fold as online sales stagnate ;
https://asia.nikkei.com/Business/Companies/Xiaomi-to-expand-India-stores-10-fold-as-online-
sales-stagnate
14. Xiaomi has returned to its playbook of copying Apple ;
https://bgr.com/2019/07/02/xiaomi-vs-apple-mimoji-looks-like-memoji/

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