Fundamentals of Marketing BEM1019

Individual Assignment

Name of Course: BSc Business and Management

University of Exeter
Year 2023

Word Count:
1. Introduction
2. Environmental Analysis
2.1 Macro-Environment: Xiaomi in China, a PESTEL analysis
2.1.1 Political Factors
2.1.2 Economic Factors
2.1.3 Social Factors
2.1.4 Technological Factors
2.1.5 Environmental Factors
2.1.6 Legal Factors
2.2 Micro-Environment: Porter’s Five Forces Analysis
2.2.1 Rivalry among existing competitors: High
2.2.2 Threat of New Entrants: Low
2.2.3 Bargaining power of supplier: Low
2.2.4 Bargaining power of buyers: High
2.2.5 Threat of Substitutes: Low

3. SEGMENTATION, TARGETING, POSITIONING

3.1 SEGMENTATION FOR XIAOMI
3.1.1 Geographic:
3.1.2 Demographic:
3.1.3 Psychographic:
3.1.4 Behavioural:
3.2 TARGETING FOR XIAOMI
3.3 POSITIONING FOR XIAOMI
4. THE MARKETING MIX
4.1.1 Price
4.1.2 Product
4.1.3 Place

Introduction
In 2007, Lei, the chairman of Kingsoft Co. Ltd. (Kingsoft)19 and an investor in Vancl,20

Duowan.com21 and UCWeb Inc.,22 carefully studied the trajectory of the iPhone and
developed an idea to create a phone of his own — a high-performance Internet mobile. Lei’s

dream of building a “mobile Internet” company was the origin of the company’s logo “MI”,

and he added word “Xiao” to name the company, as the Chinese word “Xiaomi” means

millet, which implied that Xiaomi would win the market by using a grassroots mode. 23 In

late 2009, Lei believed that mobile phones would take the place of personal computers and

become more Internet-based. This belief further strengthened his idea to enter the mobile.

phone industry.24 He invited Bin Lin (former vice-president of the Google China Institute) to

serve as Xiaomi’s president, and Jiangji Huang (former development director of the

Microsoft China Academy of Engineering) and De Liu (former head of the Department of

Industrial Design at Beijing University of Science and Technology) to become vice-

presidents. Lei also invited Wanqiang Li (Human-computer interaction design director,

design center director of Kingsoft and the general manager of Kingsoft Powerword Division),

Feng Hong (senior product manager of Google China), Guangping Zhou (senior engineer

with Motorola), Chuan Wang (founder of Beijing Duokan Science and Technology Co.,

Ltd.)25 and Hugo Barra (vice-president of product management for Google Android) to join

his team26 (see Exhibit 3).

 2. Environmental Analysis

2.1 Macro-Environment: Xiaomi in China, a PESTEL analysis

PESTLE analysis investigates the important external elements (political, economic,

sociological, technological, legal, and environmental) that influence an organisation. It can be

applied in a variety of circumstances and can help people professionals and senior managers

make strategic decisions (CIPD, 2023)

2.1.1 Political Factors

Xiaomi tried to gain back its strong position in their mainland that is China. They launched a

couple of flagship smartphones such as Mi 8 and Mi MIX 3 which enjoyed a very significant

amount of popularity. Due to significant potential for growth opportunities, the company

shipped increasing number of smartphones in the developed markets. At the same time the

increased demand led to an year on year growth of 9.7% in the international markets. For

particularly the international markets, Xiaomi achieved very large amount of growth in

revenue.

Their shipments in 2018, to international markets continued to demonstrate strong growth

momentum. The smartphones achieved of Xiaomi successfully gained the largest market

share in India for sixth consecutive quarter. In Indonesia the company was second largest in

terms of smartphones shipments and in western Europe, they were ranked fourth in terms of

shipments. Their new segments that is IOT business also achieved a very good progress in the

international markets.
2.1.2 Economic Factors
In 2018, the Xiaomi corporation interfaced with a 52.6% growth in overall revenue share.

Revenue climbed by 41.3%, primarily in the smartphone market. The company saw a gain

due to strong sales of its mid to high end sector models in the Chinese market, which

corresponded to swings in consumer demand in the company's mainland, i.e. China's

smartphone market. Xiaomi has devised a strategy to optimise its product portfolio. Revenue

surged by 118.4% (Statista, 2023) following a significant increase in demand for the

company's smart TVs and other sought-after goods including as the Mi Band, Mi Electric

Scooter, and Mi Robot Vacuum Cleaner. The cost of sales for cellphones grew by 45.3%.

The reason for this was a rise in smartphone sales, as well as an increase in the value of the

US dollar against the RMB and Indian Rupees.(Avid et al, 2012)

2.1.3 Social Factors

Consumers all across the world are increasingly eager to buy and utilise their own mobile

phones. This shift in consumer preferences has boosted the sales of Android phone sellers.

The consumer is growing more demanding, not only in terms of the quality of the cellphones

offered, but also in terms of the features of the devices offered at a much cheaper cost. One of

the key obstacles that Xiaomi has experienced in the market is its connection to the Chinese

mainland, which acts as a trigger for bad perception in the eyes of consumers. Western

buyers feel that everything from the Chinese markets or manufactured in China is of inferior

quality. This makes market penetration harder for a manufacturer like Xiaomi. Before

entering a specific market, the corporation must determine which form of product will be

most beneficial to the economy. The corporation would be unable to offer its premium

product line in a market where the bulk of consumers are from the lower income bracket.

2.1.4 Technological Factors

The company launches a variety of schemes and invests continuously in innovative

technologies to keep up with industry trends. They officially launched the "smartphones +

AIoT" dual-engine strategy in 2019. Continuous investment in innovation, quality control,

and supply chain management are some of the key areas on which it focuses. Xiaomi has also

expressed a strong desire to invest in the development of a fully open AIoT platform. With

the introduction of 5G, an upcoming platform, more innovative applications, particularly for

AIoT, will be available. To gain a market share, the company has invested RMB10 billion in

the development of AIoT. Their primary focus in China is on diversifying, improving, and

optimising their internet services.

2.1.5 Environmental Factors

Xiaomi follows the concept of circular economy. They incorporate such concepts into

product design that acts as a prerequisite for reducing the impact of the activities of the

company on the environment. They believe that the product should be developed in

alignment with the beliefs and values of the consumers. While designing the product they use

recyclable and renewable materials which are not hazardous to the environment (Shru et al,

2015). They have also committed themselves towards adopting business practices that are

responsible and ethical in nature. They believe in holding their standards high for achieving

excellence in governing laws.

2.1.6 Legal Factors

Xiaomi has previously faced serious legal issues. This has had a negative impact on the

consumer's perception of the brand. The company's flagship products, the MI 5 and MI 5

Plus, were accused of patent infringement by Blue Spike LLC, a company based in the

United States. The claim was established on the basis that Xiaomi designs, develops, or

manufactures Address Space Layout Randomization (ASLR) software, systems, and services

for the US market. Despite the fact that both Xiaomi models have already been approved by

the US FCC. After Ericsson sued the company for infringing on its patents, the company was
barred from selling, advertising, or manufacturing its products in India. Ericsson had

previously attempted to contact the company regarding the infringement of eight patents.

However, Xiaomi had ignored Ericsson's request for communication.

 2.2 Micro-Environment: Porter’s Five Forces Analysis

According to (Ben et al, 2019) understanding the forces affects your industry, you can

adjust your strategy, boost your profitability, and stay ahead of the competition. You

can take fair advantage of a strong position or improve a weak one and avoid taking

wrong steps in the future.

Competition amongst competitos: High

With the popularity of the Internet, the size of the smartphone industry market has been

enlarged with more brands joining the fierce competition. Customers have more options

when it comes to picking the right phones for themselves. Even in China, Xiaomi has to face

many other competitive rivals like Huawei, OPPO, and Vivo, etc, let alone the brands outside

the country like Apple and Samsung. However, Xiaomi has its charm which is offering high-

quality products at an honest price, helping it attract and retain a lot of loyal customers all

around the world. However, Xiaomi also needs to face the challenges from its current

competitive rivals since cost-effective strategy is easy to copy by other companies. Huawei is

known by its strong R & D capability. While OPPO, and Vivo put more energy on designing

their products, which helps them earn many female customers. Outside of China, Huawei got

sanction from U.S and its selling declined, giving Xiaomi a chance to enlarge its market share

overseas. According to a report by Canalys, Xiaomi occupied third place in the global

smartphone market during the first quarter of 2021, which reflects that Xiaomi’s status and

ability even though there are many competitive rivals in the industry.
Threat of new entrants: Low

Although there are many players in the smartphone industry, it is not easy for a newcomer to

enter the industry or even achieve good results immediately. The smartphone industry

requires the existing companies to invest lots of money on product research and development,

letting alone a new company without any base to support. Newcomers need to spend much

more energy and capital to catch up with the current technology that is being used by existing

industry players.

Bargaining power of supplier: Low

Since Xiaomi doesn’t have its own-designed system nor widely use its own-designed chips,

Xiaomi has a relatively weak supplier power. Especially during the pandemic, many

smartphone companies faced a shortage of chips. Therefore, the chip market becomes a

seller's market. Chip manufactures who made limited chips are being watched closely by

smartphone buyers. Other component suppliers not only offer components to Xiaomi but also

other companies. They are driven by money. Xiaomi advocates using the least of money to

buy relatively high-quality products, indicating that its component suppliers won’t earn much

profit on a single product. Xiaomi’s advantage is the large shipment, so component suppliers

could still earn more money from Xiaomi by producing more products. Due to the obstacles

given by suppliers outside of China in early time, and the growth of domestic suppliers,

Xiaomi switched its strategy to work more with Chinese suppliers. Inside of China, many

component suppliers wanted to cooperate with Xiaomi because it could increase their

reputation and quickly rank the top if they take the big orders from Xiaomi.

Bargaining power of buyer:

Xiaomi has accumulated a lot of loyal customers. The contributor to this is Xiaomi’s product

strategy that only sells good quality products at an affordable price, which helped Xiaomi got

the very first customers in the market even now. Young people are the main buyer power

because they recognize the concept of Xiaomi products. Now with the good economic

environment, and more available money that can be used by people, Xiaomi’s price

advantage isn’t that obvious, especially with the competition of Huawei, OPPO, and Vivo,

which promote the fancy-looking product with similar price. The rivals’ competition put

Xiaomi under pressure. However, Xiaomi has already explored another field to gain more

competition. That is Xiaomi’s IoT ecosystem, which connecting other products like floor

sweeping robots, smart home door lock, and Internet washing and drying machine, etc, to

Xiaomi’s platform to create a smart life for customers at an affordable price.

Threat of substitutes: Low

Xiaomi is facing a high threat of substitutes in the industry. As we all know, Xiaomi’s

strategy is offering relatively high-quality products at an extremely honest price, helping

Xiaomi take over a large market share at the beginning. However, with the brands like OPPO

and Vivo, and Huawei getting popular with similar pricing positions, Xiaomi seems to have

less advantage in front of price competition. Except for form the price, Xiaomi also faces

technology challenges from its substitutes. Apple is famous for its own-designed system IOS,

and the relevant products based on the systems like IPad, Apple Watch, etc, to fit its laptop

system macOS.
 3. SEGMENTATION, TARGETING, POSITIONING
3.1 SEGMENTATION FOR XIAOMI

3.1.1 Geographic:
3.1.2 Demographic:
3.1.3 Psychographic:
3.1.4 Behavioural:

3.2 TARGETING FOR XIAOMI

Xiaomi’s focuses its smartphone strategy on multi-segment strategy where they have phones

priced for low-end to high end market allowing to target higher range of consumers for all

price range. This allows Xiaomi to gain a larger consumer base where consumers with

different purchasing powers.

3.3 POSITIONING FOR XIAOMI

What made Xiaomi differ from its competitors was that Xiaomi portrays its firm’s image as a

value for money brand that focuses on innovation and tech for young consumers.
 4. THE MARKETING MIX
4.1.1 Price:

4.1.2 Product

4.1.3 Place

4.1.4 Promotion
5. Ansoff Matrix