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  • Published on: 14th September 2019
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Nowadays, the world is in rapid and continuous change and the global economic environment is becoming more and more competitive. Lately, most companies decided to internationalize in order to gain a higher market share, attract new customers, and develop competitive advantages. By internationalization, it is meant the gradual process a company follows to operate across national boundaries (Oviatt & McDougall, 2005). Focusing on firms from developing countries, it is highly probable that their want to go global and compete with giants is driven by the aim to achieve substantial growth, but also to sustain the strong growth it already had, exploit resources and increase them (Madsen & Servais, 1997).

More in specific, during the last decade, a new and innovative company called Xiaomi corporation appeared. It is a mobile internet based Chinese company founded in 2010 by the entrepreneur Lei Jun with the aim of developing quality technology affordable to everyone (Xiaomi, 2018). It produces internet services, software and hardware such as Mi Note Pro, Mi note, Mi TV, Mi Band, but its success are due to smartphones. (Xiaomi, 2018). Since the first year of life, the company registered a rapid increase in sales as it reaches 1$ billion in revenues only in a few months. Moreover, in 2013, it reaches 10$ billion and sold over 15 million smartphones, increasingly in 2014 to more than 60 million phones sold and becoming the world's fourth largest mobile phone company (Liu, 2016; Tse, 2015).

The aim of this paper is to show if Xiaomi has the characteristics to succeed in the US market, so it will be articulated as follows: An explanation of the Uppsala Internationalization model will be given, followed by an analysis of the company through the theory. Then, a comparison with Apple will be made, to conclude with a few suggestions for entering and succeed in the US market.

The Uppsala internationalization model was proposed in 1977 by Jan Johanson and Jan Erik-Vahlne, and it explains the slow and gradual process companies follow to internationalize. It was based on state and change variables. The former includes network position, market commitment, and knowledge. Whilst, change variables were current activities, and the establishment chain steps which are: entering a near market in terms of physic distance helped by an agent, establish sales subsidiaries, begin to manufacture in the foreign countries, and after having acquired experience and overcome cultural differences finally enter in more distant (Forsgren, 2002).

However, that model has been largely criticized and challenged (Forsgren, 2002) as it was considered as not sufficiently developed to be applied in the new era. So, further research has been done in 2009 in order to put in evidence network's importance in internationalized firms and adapt the theory to the new business environment which is always in transformation. Another core focus is the development of the relationship between client and supplier through which the firm can accumulate knowledge, fundamental for expand and build trust and an eventual great reciprocal commitment (Johanson & Vahlne, 2009). Furthermore, there have been experts that pointed out that the model was inconsistent such as Oviatt & McDougall (2005) according to whom today's firms began to expand soon after their birth. Moreover, it has been argued that the market entry mode is not linked to psychic distance, but instead, it is a matter of acquisitions (Madsen & Servais, 1997). It has also pointed out that the Uppsala internationalization model is not appropriate because the process today is more rapid than it was in the last century, but the authors replied explaining that it does not matter how long will the process be, the constant is the need for the firm to learn, create or strengthen relationships in order to exploit new opportunities. (Johanson & Vahlne, 2009).

Taking all the critics into account, in the revised model, the internationalization process is considered as being more related to develop new opportunities that overcome uncertainty (Tse, 2015). A few modifications have been done: it was added the recognition of opportunities into knowledge's concept (Johanson & Vahlne, 2009), and the relationship commitment decision has been adapted in terms of the decision of increase or not the level of commitment with partners (Johanson & Vahlne, 2009). All the mentioned arrangements lead to a more efficient and creative process. As implications for the Uppsala model, the companies are expected to expand globally depending on its relationships and network. Two are the reasons for internationalizing: the partner goes abroad so the focal firm follows, or the partner goes abroad and wants the focal firm to follow as this demonstrate the commitment to the relationship (Forsgren, 2002; Johanson & Vahlne, 2009). Also, the model is considered to not be adapted for Chinese companies and especially for large firms, but according to the authors, internationalization is more a matter of experience that of size (Johanson & Vahlne, 2009), so what really counts is the state variable i.e. knowledge, trust, and commitment.

Considering all the previous considerations, the model can partially be used to analyze the process of internationalization Xiaomi company and show its unique features in comparison with Apple. As it has been stated, the firm had an explosive and miraculous rise (Liu, 2016) since the beginning and its sales were made exclusively in China relying on internet sales through the company website or Sina Weibo and thanks to word-of-mouth (Liu, 2016). According to the Uppsala model, the company began its internationalization process expanding in nearest countries. In fact, after having built a strong presence within the country, in 2014, it began to expand starting from Singapore where it had stunning success as when the Red MI 3 smartphone was released, it took only two minutes to become sold out. After the first success abroad, the firm entered in countries such as Malaysia, Philippines, Indonesia, Hong Kong, Thailand, and India (Shirky, 2015; Tse, 2015; Xiaomi, 2018) which are all developing countries, near to China in terms of physic distance and has a lot in common it.

The following step has been the enter developed countries' marketplaces and starting from the European market. In 2017, Xiaomi opened its first store in Athene, a few months later entered in the Spanish market, and subsequently, the year after, it opened a store in France. Furthermore, to become more attractive, the company is establishing partnerships with western firms. For example, it decided to work with Google creating the first Android One so-called MiA1 and with 3 to sell in the United Kingdom, Ireland, Austria, Denmark, and Sweden (Shirky, 2015). However, Lei Jun's aim has always been to take over Apple and its iPhone, firstly in China and the all over the world (Tse, 2015). Related to this, the company is planning to launch a new smartphone in the US at the beginning of 2019, and by now it has already started selling Mi's products via Amazon.

 The focal point in Xiaomi's international strategy is the building of trust. “Just for fans” is the company belief (Xiaomi, 2018), and at Xiaomi everything is driven by its fan-centric social media strategy which allows the firm to have quick and direct contact with its fans (Shih, et al., 2013). The firm is interacting with the customers using social networks where pages dedicated to the company has been created, but also via MIUI which is an Android smartphone user interface, weekly updates with the idea of making customers "dependent", and always answering to their feedback (Shih, et al., 2013). The aim is to build a strong relationship with them, listening to their need, their suggestions, and their expectations and acts immediately on the feedback fans, and constantly exceed expectations through innovation in software, services, and hardware, core force to continue expanding (Xiaomi, 2018).  Fans have a key role to the company as they help for further development, and this relationship creates benefit in terms of reducing research costs of identifying a product that matches the consumer's preference, the most important are fans' review of products and services (Shih, et al., 2013).  

The Uppsala Model is a dynamic model made of gradual step and correlated decisions with respect to market entry mode, policies and geographical markets (Madsen & Servais, 1997), but today's process is more rapid, all the steps predicted are not obligatory followed. Companies are also more involved in building a business network and create strong relationships. It is then clear that it is not completely applicable to modern born global firms like Xiaomi as it begun its internationalization just after 4 years after its birth, its knowledge is gained by a new approach which is an imitative-learning behavior as the company is considered as taking ideas, especially in term of design and services, as it is known as the Chinese Apple and its founder as the Chinese Steve Jobs.  

Comparing the two companies, neither Apple nor Xiaomi has manufacturing facilities, instead, their production is given to contract manufacturers such as Taiwan's Foxconn (Tse, 2015). Also, both firm's success is due to innovation. Moreover, while Apple is a luxury brand and its products are sold at a high price (Montgomerie & Roscoe, 2013), Xiaomi decided to create product targeted for everyone i.e. that it sells high-quality smartphones at a cheap price with the goal of achieving the greater part of its revenues from sales of software, services, advertising, and accessories- a successful strategy that is not in common with Apple. (Tse, 2015) Taking as example Xiaomi's Red Rice smartphone announced in mid-2013, it was explicitly targeted to compete with Apple's lower-priced iPhone 5C, but with a substantial difference in terms of price as Xiaomi's phone was sold at $130 which was less than one-quarter of its competitor's price (Shirky, 2015). The strategy allows the company to receive more than 7 million pre-orders. This direct sale model not only benefits the company in the number of acquired products but also helped the firm on spending less money on advertising and distribution channels and encourage direct contact with users. The incredible achievement, since the opening of the company, is due to the idea of selling customers an opportunity to participate instead of selling only the product. (Liu, et al., 2018) Nevertheless, another point in favors of Xiaomi is its business model where directly communicating with users is considered fundamental and it is totally different from the business model of Apple's mobile phone. The key of Xiaomi is to iterate quickly and establish a test version as since Xiaomi began to update the software every week, users may often find a lot of new functions (Liu, et al., 2018). On the other hand, Apple is famous for its ability to own the consumer which means that it can drive them into Apple's ecosystem and hold them there (Montgomerie & Roscoe, 2013). Nevertheless, the most striking feature is that even if Apple is a giant in the smartphone market, it is facing difficulty in competing with companies coming from emerging countries (Montgomerie & Roscoe, 2013). Xiaomi is able to gain market share selling high-quality products but at a competitive price, while Apple does not want to develop cheaper product preferring to maintain the brand image intact. In fact, to enter Chinese market it is making an agreement with China Telecom for the introduction of tariff scheme where customers sign contract for 18-24 months so they will be committed to the company until the end of the payment and this lead the company to enter the market. (Montgomerie & Roscoe, 2013). Lastly, related to retailers, Apple has a high number of retailer all over the world to help the company manage the higher demand, while Xiaomi's most important channel still remain sales through internet, even if it is starting to sell its products through retailers and has just started to open its own shop in several countries, planning to open more than 2000 all over the world before the end of 2019 (Xiaomi, 2018).

To sum up, thanks to the above comparison and analysis of the internationalization process through the Uppsala internationalization model, Xiaomi has shown some unique features which are the company strong suits and reasons behind its enormous success. Those characteristics are the following: at first place, there is the fundamental role played by the fan-centric social media strategy thanks to which the company extracts information such as where to focus or what to improve. Secondly, the capability to produce high-quality smartphones and sell them at a low-price making money from selling additional services. Thirdly, the release of just a few models per year in order to maintain every smartphone profitable for the longest time possible. Finally, the effective management of its working capital making pre-sell on new models directly online reducing working capital required.  

As it is clearly noticeable, the Uppsala model is not perfectly applicable to modern companies acting in an environment where everything is in continuous change as the process of internationalization is not following proper steps, but instead favorable opportunities. Related to Xiaomi, being it a company with less than 10 years of life, it achieved impressive goals and even if it has a difficult period in 2016, it is still on the top of the wave of success, but to do that it had to move strategically and be always ready to changes and to take new opportunities.

What stands out from the paper is that Xiaomi objective is the US market. The company seems to have favorable characteristics for a high success there, but to overcome tech-giants, it must work on some aspects. The most crucial feature will probably be gaining customers' trust due to lack of credibility as the "made in China" is associated with bad quality. So, the first action the company should do is focusing on customers expanding the fan-centric social media strategy also trough the US social media Facebook, Twitter, and Instagram. Then, as the strong suit of the company is its capacity to maintain a low price selling excellent products, the focus should be put on advertising to show how good products are, and to show similarity Mi's products have in comparison with Apple to convince people that not only is more convenient buy Xiaomi's smartphone, but it also has better services. Correspondingly, it is important to continually improve the quality and the design in order to make a product even more attractive and create more and more customers' dependence. Xiaomi has several competitive advantages that can lead to a huge success in the US market, now it only remains to see if it will be able to exploit and manage the expansion properly.

[2430 words]

Bibliography

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