Xiaomi G1 – College Essay Example
Xiaomi G1 – College Essay Example

Xiaomi G1 – College Essay Example

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  • Pages: 7 (1720 words)
  • Published: July 18, 2016
  • Type: Case Study
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The smart phone industry in China has been surrounded by controversy due to products made in China. This is mainly because of the Chinese culture of "Shan Zhai," which is known for imitation and has affected trust in Chinese products across different sectors. However, in 2011, the Xiaomi phone M1 brought about a revolution in the market. It became the first dual-core 1.5GHz smart phone to be released in China and had a significant impact on the Chinese smart phone industry. According to information from Xiaomi's official website, within two years, the M1 achieved remarkable sales of 3.52 million units—an outstanding achievement for a new company and product.

This article discusses how individuals can differentiate themselves from others. It specifically focuses on Xiaomi phones and highlights the reasons behind their success in the competitive Chinese market. The analysis will cover various factors s

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uch as Technology push and market pull, First Mover Advantage, Blue Ocean Strategy, Business Model Innovation, Technological Innovation, and Intellectual Property.

Xiaomi, established in April 2010 by a group of seven individuals from renowned companies including Google, Microsoft, and King Soft, concentrates on creating cutting-edge smartphones and delivering users with an all-inclusive mobile internet experience.

Xiaomi unveiled their self-made Xiaomi M1 smartphone on August 16, 2011. The device was priced at ?1999 and made available for purchase through their official website. This marked the beginning of Xiaomi's journey towards becoming a significant player in the Chinese mobile industry.

The phone has a dual-core 1.5GHz CPU, which is almost twice as fast as single-core smartphones. It also has an impressive adreno 220 graphics processor, 1GB RAM, 4GB ROM

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and a larger-than-average 1930mAH lithium polymer battery. What makes this phone unique is its affordable price of only ?1999, even though its specifications may not be the most advanced compared to other phones. This suggests that Xiaomi's success is driven by market demand rather than exceptional features. In China, there is widespread imitation of smartphones known as "Shan Zhai".

Despite their lower quality, these imitations have gained popularity among certain consumer groups who support the "Shan Zhai" culture. In China, where there is a population of 1.3 billion people, many individuals cannot afford cell phones that are priced at 400 euros or more. Some earn as little as 200 euros per month. According to Von Hippel (2011: 297), innovation in various markets is driven by lead-users rather than typical users. User demand in the market stimulates innovation. A high-quality product offered at a relatively low price appears to be an ideal solution for many individuals. Xiaomi has successfully recognized the needs of users, particularly those who desire advanced features.

There are three main categories of users in China. The first category includes users who prefer Apple, Samsung, or HTC smartphones. The second category consists of users who find 'Shan Zhai' smartphones suitable for their needs and are interested in affordable options. The majority of users belong to the third category, which comprises individuals seeking high-quality smartphones at a reasonable price. Xiaomi recognized this opportunity and successfully entered the market by meeting the actual demands of these user categories. As a result, they were able to appeal to users from all three categories.

The timing of entry is crucial when entering a new

market. Currently, Apple and Samsung dominate the market, while some customers prefer imitation phones. These two groups represent the high-end and low-end markets respectively. However, Xiaomi has taken a different approach by targeting both the medium-high level and low price market. Additionally, they have introduced a unique sales strategy of exclusively selling phones online. Xiaomi can be considered as the first company to combine these features. Although their profits may be lower, being an early entrant often requires sacrificing profit margins for sales growth, and monopolies are typically short-lived (Johnson et al., 2011: 307). Despite the success of their M1 phone, Xiaomi's monopoly will not last long as competitors like Meizu and Tianyu imitate their strategies. These competitors equip their phones with advanced configurations and sell them at discounted prices online to directly compete with Xiaomi.

M1 is classified as a process innovation, mainly due to its features and distribution method. Despite its advanced specifications, M1's competitive advantage stems from its affordable price point which is a result of the company's strategic choice to sell phones exclusively online rather than through traditional sales and distribution channels.

Radical Innovation versus Incremental Innovation: Although M1 can be considered as belonging to incremental innovation in the Chinese market due to its relatively minor change from existing practices, it differs from other phones in terms of its higher configuration and more direct distribution channels. Nevertheless, the transition from a one-core to a dual-core configuration in a smartphone, resulting in significantly faster and stronger performance, would represent incremental innovation. Furthermore, Google's adoption of distribution through an official website in 2006 cannot be considered a very radical change.

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The success of M1 can be attributed to its business model innovation. According to Alexander Osterwalder and Yves Pigneur (246), business model innovation does not happen by chance, but can be managed by companies and structured into processes to unlock creative potential. Xiaomi, an internet company, deliberately gained attention by deviating from the traditional approach followed by cell phone manufacturers like Apple, Samsung, and "Shan zhai" companies, who primarily earn profits through selling cell phones.

Xiaomi's M1 smartphone distinguishes itself in the Chinese market with its affordable price and impressive specifications, making it appealing to a specific group of users. To buy the M1, individuals must visit Xiaomi's official website. Unlike other smartphones available in China that target general consumers, Xiaomi specifically caters to young customers who prioritize customization, fashion, and advanced technology. These tech-savvy individuals possess a deep understanding of internet usage and frequently browse the web on their mobile devices. This particular segment serves as the primary target audience for Xiaomi.

This group of users differs from those who prioritize brand or price, as they are loyal to phones with high configurations. Despite being sold exclusively online, this phone achieved a sales record of 1 million within 3 months. This phenomenon generated significant discussion at the time, further confirming that they correctly identified their target customer segment. In addition, Xiaomi constantly updates the system version of the M1 every week to cater to their users' needs. Xiaomi views customers not just as consumers, but also as partners in technological development. Consequently, they engage Xiaomi fans in system development and make revisions based on user suggestions.

Xiaomi's Value Propositions are centered

around offering high-performance products at a reasonable cost to customers. The company aims to enhance the value of their products while minimizing customer expenses. Jun Lei, the CEO of Xiaomi, emphasizes the importance of quality in smartphones. Xiaomi differentiates itself in the Chinese phone market through features such as the unique MIUI system, large screens, and powerful CPUs. These advantages contribute to Xiaomi's relatively high value in the market. Xiaomi has established partnerships with over 100 trusted suppliers, including Toshiba, Samsung, and LG, to provide spare parts and accessories for their products. Additionally, recognizing that many local smartphones in China use the Android system, Xiaomi strategically positioned themselves as medium-high priced smartphones and exclusively adopted an online selling strategy to reduce customers' time costs.

The External Value Chain is an essential component.

Xiaomi has a distinct approach to building customer relationships by bridging the gap between the company and its customers. According to an interview with Bin Lin, CEO of Xiaomi, their aim is to minimize this distance. To achieve this, the management team acts as customer service representatives and actively participates in conversations with users, valuing their feedback. Additionally, all Xiaomi employees utilize Weibo, a renowned Chinese social media platform, to engage with internet users. This innovative strategy nurtures a strong bond between Xiaomi users and the brand.

Xiaomi differentiates itself from other companies in terms of its marketing and sales strategy, focusing on innovative business models, particularly in the selling of products. The internet has revolutionized product distribution, with e-business playing a crucial role. Xiaomi's unique approach involves exclusively selling their M1 smartphone online, while competitors primarily rely on retail stores.

By doing so, Xiaomi is able to significantly reduce distribution costs, resulting in a competitive price of only ?1999 for the M1. However, cost savings are not the only reason behind their online sales strategy. Xiaomi also implements limited-time panic selling events online by offering a restricted number of phones each week. This tactic creates a sense of scarcity and increases demand among users. The success of this approach is evident as Xiaomi managed to sell an impressive 3.52 million units of the M1.

Xiaomi utilizes a marketing strategy that combines online selling with online promotion, opting not to invest in advertisements. Instead, they rely on alternative methods to increase visibility. According to Sina Finance, there were 600 million users on Sina Weibo by June 2013. Xiaomi capitalized on the internet's potential for product promotion and prioritized creating high-quality products. They relied on customer word-of-mouth rather than conventional advertising techniques. Despite encountering both positive and negative user feedback, their determination remained unwavering.

Xiaomi CEO emphasizes the crucial role of the system in smart phones, stressing the need for fast updates in the mobile phone industry. Jun Lei reveals that they allocate two days every week to scale, develop, and test their own system, ensuring weekly updates.

The blue ocean strategy, as outlined by W. Chan Kim and Renee Mauborgne in their book 'Blue Ocean Strategy', suggests that organizations should focus on creating new demand in uncontested market spaces, or "Blue Oceans", instead of directly competing with other suppliers in established industries. This strategy involves creating uncontested market space, rendering competition irrelevant, generating and capturing new demand, breaking the value/cost trade-off, and aligning

the company's activities to achieve differentiation and low cost (W. Chan Kim and Renee Mauborgne 81).

According to a 2011 report by Gartner, smart phones accounted for 31% of global cell phone sales and were the preferred option in China's smart phone market. ZOL, a reputable business and IT website in China, conducted a study on the purchasing preferences of smart phone users during that year. The study found that these users consider factors such as price, configuration, quality, and operating system when selecting their phones. Compared to regular cell phone users, they show greater levels of discernment and knowledge.

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