SECTION A [100 MARKS] Read the case study below and answer ALL the following questions A Case Study on Marketing Strategy of Xiaomi In the last 5 years it has been observed that the smartphone industry has grown exponentially. Long gone is the time when the consumers needed to carry 2-3 kg laptops for their daily requirements. Nowadays big brands like Xiaomi have been adopting the strategies of hunger marketing where the availability of the product is intentionally restricted by the manufacturer to create surplus demand in the market. A major change has been identified in the usage pattern of consumers which has been strategically tapped by companies [2]. Xiaomis first android based firmware MiUi was launched on 16th August 2010 and a year later it launched is first smartphone Mi1 in China [5]. The product became successful and further new models were launched namely M2, M3 and Redmi phones on the domestic front. Xiaomi hired Hugo Barra (ex. Google Android Executive) who paved the way for its expansion in the offshore markets. After successfully capturing significant market shares in the rest of Asia, Xiaomi entered Indian markets in July 2014. Initially Xiaomi made an exclusive partnership with ecommerce giant Flipkart to sell its smartphones but later on 7th April 2015 they changed their distribution strategy and announced partnership with Amazon and Snapdeal. They first started productions in Sri city (A.P.) at that time 200 million people owned a smartphone out of 1.2 billion people. By the end same year, they captured 1.5% of Indian market share which doubled in 2015 competing along with home grown brands like Micromax, Lava and other international brands like Samsung.77% of the smartphones were locally made that benefited them in reducing the operational costs. By the same time Xiaomi had overtook Samsung and Apple by the end of 2015 in China. Xiaomi.inc which was ranked 2nd amongst 50 other reviewed reputed companies (viz. Apple, Google, Microsoft etc.) by MIT technology review (2015). This happened just within a year Xiaomi stepped in the Indian markets. MARKETING STRATEGIES: Introduction to marketing strategy Penetration into any foreign markets requires various mix of marketing strategies which will impact success of any firm. It can be achieved in two ways. They can either use traditional marketing mix or can customize their existing mix according to the requirement of the country. If same marketing mix is used in the export country to attract customers, standardization strategy is normally used by the firm as it requires less investment as compared to adaptation strategy but the trends observed in the present scenario reveals that companies are customizing products according to consumer needs rather than providing a single product throughout its worldwide market. Creating brand loyal customers is an important step to ensure future expansion and it can be done by exceeding their expectations. Companies need to face competition in order to survive in the market. As smartphone manufacturing has gained momentum the primary way of having a competitive advantage and ensure survival it is important that firms maintain their profit margins while simultaneously expanding the customer base. Marketing Strategies adopted by Xiaomi Xiaomi has expanded and established itself as a valued startup and it has a chance of becoming the world's top most smartphone company. There are two basic competitive strategies followed by Xiaomi that are manufacturing products with superior qualities and features and produced at a lesser cost. In addition, there are certain extra features that are present in Xiaomi phones that drive the attention of the customers towards it. Before launching its phone, the company had surveyed the market aggressively and analyzed the competitive strategies of smartphone giants like Apple and Samsung. Those were having strong customer loyalty having a robust operating system that is Android. Android was chosen as the operating system and Xiaomi designed MI UI its own customized operating system based on Android with added cloud services, security, apps, music, video player, browser and many more common items. The core competitive strategies adopted by Xiaomi competitive cost, quick expansion in the offshore markets, less margins and selling products 2 online exclusively. Indian market is very diverse and large and it is difficult to penetrate it in one go hence Xiaomi chose a narrow segment to cater initially which aspired to produce a great product but at the same time at lower costs for the cost conscious customers. These are the following market strategies adopted by Xiaomi. Innovating the products Xiaomi always believed in a system in which there is continuous innovation not only for their operating system but also for their marketing strategies and programs. The products mainly smartphones manufactured by the company are of superior quality and their aimed to provide value for money proposition to their customers its sub brands known as MI and Redmi have been delivering great value for money smartphone models. Some of its famous mobile phones were 4S, MI 4 and Redmi Note 3. These mobile phones had rocked the market with huge sales and continue to do so with their latest upgraded models being released regularly by the company. Redmi Note 3 as per IDC was the highest shipped device in the history of online smartphone industry with more than 2.4 million within 6 months. Focusing on aggressive pricing and maintaining high quality standards Initially, the markets were dominated by the smartphone giants like Samsung and Apple, and local players of the specific market and Xiaomi had realized that it is very difficult to compete with them and hence had to focus on expanding its customer base by providing high quality products and charging low premium for them. Xiaomi did this by offering limited number of products toward targeted customer base of range 10000 -15000 rupees in Indian market by reducing its advertisement cost by adopting the online advertisement strategies. Another way of reducing the price was exclusive partnership with online retailers like Flipkart and Amazon that reduced the logistic costs. These online retailers also had history of consumer satisfaction and trust which was also utilized buy Xiaomi. Minimum investment on conventional advertising Xiaomi was one of the few brands which promoted a unique marketing approach to appeal the market it was the brainchild of CEO of the company Lei Gen. Word of mouth publicity was used as it was believed by the company that satisfied customers create positive vibes in the market and it is also a cost effective way to penetrate into the other international markets. Minimum expenditure was made on traditional advertising and instead social media online forums were used to connect with the target audience. The engineers of Xiaomi had direct contact with the consumers and hence helped them to gather useful information to overcome the difficulties and modify the software according to the consumer needs. Another plus point with Xiaomi was that it advertised itself as a consumer friendly brand with establishment of customer care centers which catered the problems and continuously improve upon them. Loyal fan base Xiaomi had created a huge fan following who were the early adopters and the first ones to buy MI UI smartphones they were known as MI- fans these were the people mainly consisting of bloggers, patrons who constantly created buzz on the internet about the company, its products and services it provided. China had a micro blogging platform with more than 400 million subscribers known as Sina Weibo and it was used as a Now a days Xiaomi uses online channels like Flipkart, Snapdeal and Amazon for advertisement and selling of products to its target customers. Customers being the most important aspect also involve themselves completely in designing and development process where their inputs are taken through the online mediums such as social media sites, micro blogging platforms and are incorporated suggesting changes in the new products. Earning revenue from the software This strategy used by Xiaomi was one of its most effective strategies executed. Xiaomi, having excellent software based on Android having a customer base of more than 50 million users, Xiaomi developed its own themes, games and apps which work pre-installed on MI UI and helped contribute more than 6 million sales revenue on a monthly basis. Just like Amazon and other e-commerce Xiaomi worked and aspired to earn profits via its ecosystems and marketing various goodies. In recent times Xiaomi has allowed advertisement into sum of its apps installed on MI UI that further help generate revenue and has received mixed response from the consumers as well as critics. The method of flash sales 3 Older and more established brands like HTC, Samsung, Apple and many more local players make their products available in the market through third party retailers and stores but on the other hand Xiaomi does not follow this method and sells its products via online flash sales. In these flash sales a limited quantity of product is available for sale at a particular time, and the sale continues till the stock lasts with an intention to encourage customers to go for impulse buying. The limited quantity also motivates the customers to buy the product on spot this method increases the profits of the company, prevent the hoarding of stock and over production. The main advantage of flash sales is that it aids in inventory management avoid the over production and create scarcity. For example, a flash sale of company in which Xiaomi launched MI 4. It went on sale via Flipkart in 2015 and in the first flash sale the demand of the mobile exceeded it supply by at least 10 times. CONCLUSIONS AND FINDINGS: Xiaomi has become one of the most valuable startup from valued currently at US 50 Billion Dollars. It made huge successin the smartphone selling business by implementing mix market strategies which have proven highly successful in the global as well as domestic markets. Xiaomi has marketed itself in the lower and mid-tier of the market and has not established or tried to establish itself only apremium product manufacturer which has become one of its biggest strength. The strategy of creating the buzz of a company which has also been adopted by top tier brands like Apple and Samsunghas been successfully created by Xiaomi and has beaten Apple and Samsung on the price fronts. Adopting guerilla marketing as a way of reducing costs along with use of word of mouth publicity and building strongconsumer bond has helped Xiaomi to come this far [8]. The study has helped to understand how well planned and perfectly executing marketing strategy of Xiaomi has helped it come this far and helped it over take international and critically acclaimed brands. There is a huge opportunity for Xiaomi that lies ahead. (Source: Adapted from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3469979) Answer All FOUR (4) Questions QUESTION 1 25 Marks) With reference to the case study, critically explain the marketing strategies that Xiaomi have to prioritise to avoid financial loss? QUESTION 2 (25 Marks) In order to improve brand and achieve competitive advantage in the market, a marketer should make innovative changes to the brand on an annual basis. This is achieved in three ways: brand alignment, brand rejuvenation and brand repositioning. Discuss these THREE (3) elements and critically evaluate whether Xiaomi engages in these brand activities QUESTION 3 (25 Marks) Provide an analysis of Xiaomis Life cycle assessment (LCA). How can you further assess Xiaomis market leadership in a different marketing strategies adaptable to different market conditions