There are indicators in global studies showing that organizations are undergoing different challenges in the quest to become multinational. Varying aspects of institutional based and resource based views extensively determine the way an organization will conduct its business transactions and activities. Among these activities is the development of much more efficient supply chain networks which have the ability to meet the demands of the new market. The failure to take on this analysis has always been the main reason behind companies’ failure, though this fact is always realized when it is too late.
The main problem focus is divided into two perspectives. Both perspectives regard how an online-based mobile company can penetrate a foreign market in Europe. The first aspect makes institutional-based view whiles the second one deals with the manner in which the supply chain should be designed and constructed to match the prevailing market conditions and the company’s business model.
Institutional-based view of Xiaomi Company Business Model
Unlike other mobile phone companies and brands such as Apple and Samsung, Xiaomi Inc uses a unique strategy. This strategy uses the bill-of-material pricing strategy to penetrate and curve its niche in the market. The company then sells a smartphone or mobile app model for one and a half months. This is different from the strategy that other phone companies and brands use. For instance, Samsung sells its model up to a period of 6 months as a way of making from the reduction of prices of components, over time. This strategy will significantly help Xiaomi penetrate the European market by toning down the competitive rivalry in the European market.
According to Zhang and Zhang, Xiaomi Inc also has a unique brand and logo. Specifically, Xiaomi Inc’s mascot and logo is a rabbit that is clothed in Ushanka. The rabbit has a red star and scarf draped around its neck. This quality absolves Xiaomi of the threat of competitive rivalry and the threat of substitution which are prime features in Porter’s entry model (Zhang & Zhang, 1).
As was previously stated, Xiaomi Inc has also diversified its products so as to diversify its risks. In particular, Xiaomi Inc deals in themes and mobile phone software and manifold phone-related accessories. This ensures that even those who do not use Xiaomi smartphones are also not locked out of Xiaomi Inc services. Other products that are Xiaomi Inc-specific include MiPad, MIUI operating systems, the MiWiFi network router, MiPower Bank, MiTalk, MiCloud storage services, MiBox set-top box, the Smart TV line (also known as MiTV). One of the products of Xiaomi Inc. that showcases the extent to which it is tech-savvy and distinct from other competitors is the Mi Band. The Mi Band is also known as the sleep tracker and fitness monitor. Xiaomi Inc introduced this product in the market in 2014. The product has a month-long battery life and can track sleep and fitness, besides acting as an alarm clock. The band can also unlock the buyer’s phone depending on proximity.
The quality and strategies above are takes care of many factors in Porter’s model. For one, the diversification of Xiaomi products significantly neutralizes the competitive rivalry. These products will ensure that Xiaomi does not run out of clients since they are precluded in competitive brands. The same also means that Xiaomi has significantly atrophied the threat of substitution in Europe (Porter, 82-4).
It is also a mark of great strategy on the side of Xiaomi Inc not to limit itself to the ownership of one physical store. Instead, Xiaomi Inc exclusively sells from its own online stores. This is because Xiaomi have been strategically lowered. This mixes well with the dynamic of Europe’s market. For one, Europe has a high buyer concentration versus industry and buyer volume because of a high population. Specifically, this is the case since Europe has a total population of 742 billion. Likewise, the number of competitors is quite low since it is merely made up of conventional brands such as Nokia, Samsung, Hauwei, Motorola and Ericson. This means that the prospects of Xiaomi’s success when it enters the European market are favorable (Beken & Balcean, 299-323 & Roda & Perry, 44).
As far as Porter’s model of entry is concerned, Inventec and Foxconn are large multinationals which have huge financial base and resources. The import of this is that Inventec and Foxconn are stable enough to provide Xiaomi with constant and consistent supply of its products. This means that Xiaomi has a very stable supplier power. However, the only setback in this development is that suppliers have a considerable extent of power to drive prices upwards. To an extent, Inventec and Foxconn may have control over Xiaomi and this may interfere with Xiaomi’s bill-of-material pricing strategy for entering Europe (Magretta, 22 & Huang, 16).
Supply Chain Literature
Xiaomi’s supply chain will appear as is shown below.
Designer (Xiaomi Inc) manufacturer (Inventec and Foxconn) designer factories cross-docking retailers and pick-up points consumers designer (Xiaomi Inc)
This model is mostly applicable as it is held as the most tenable for the smartphone industry by Chopra and Meindl (Chopra and Meindl, 3 & 385).
In the process above, the product design begins with Xiaomi Inc. The design is then taken to the manufacturer- Inventec and Foxconn, in this case. The model is then returned to the designer for confirmation that the production was in tandem with the design. After confirmations, the factories will then release the products for transportation to the retailing outlets. Just as Chopra and Meindl recommend, consumers can then pick up the finished products from the retailing shops. Consumers will then give their feedback. This feedback will then be integrated into the manufacturing and thereby serving as an endorsement and feedback to consumers’ feedback. This therefore makes Xiaomi’s supply chain an endless cyclic chain (Chopra and Meindl, 3 & 385).
Pros and Cons of Xiaomi Mobile Market Entrance Theory
Like any other human construct, there are advantages and disadvantages that follow Xiaomi’s use of the Porter’s model. For one, the use of Porter’s model allows Xiaomi or any other organization the chance to speed up the pace of change. This is because Xiaomi is able to analyze factors or elements that inform market competitiveness such as supplier power, the threat of new entry, threat of substitution, competitive rivalry and buyer power. By this virtue, Xiaomi can deliberately and calculatingly prepare its resources and channel its synergies for a faster realization of desired change. The change in this case can be as applicable as undergoing the transition which is entering the European market (Johanson & Vahlne, 27)
According to Peng, one of the drawbacks that will accompany the use of Porter’s model is the fact that the model treats market structures as though they were static. This quality prevents Xiaomi from comprehensively appreciating the actual market dynamics and forces that will affect the market in Europe and Xiaomi’s internal operations (Peng, 285-9),.
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