AND ITS ENTRANCE TO THE HONDURAN MARKET E- COMMERCE IN HONDURAS

1CHRISTIAN MAURICIO REYES, 2WU, CHING-SUNG

1,2Internationall Business Department Chinese Culture University, Taiwan E-mail: 1christianmreyes88@.com, [email protected]

Abstract— The following paper will mainly be discussing how a Chinese cellphone brand such as Xiaomi can be able to enter emerging markets in Latin America and especially in the Honduran Market. A detailed description of the company has been made as a means of explaining its growth and their desire of incurring in emerging mobile markets. We will talk about their price strategies, branding strategies, product innovation and their international marketing strategies as a means of approaching their target markets. Also a series of questions are provided as a means of seeing this as a case study in case the brand ever decides to enter the previously said market.

Keywords— Xiaomi, E-commerce, word of mouth.

I. INTRODUCTION they could have. Little by little and mainly through word of mouth Xiaomi grew in popularity in China Xiaomi or 小 米 meaning little rice is a Chinese and even went overseas thanks to the internet. Electronics company headquartered in Beijing, China. Nowadays the MIUI ROM can be ported to over 200 In recent years after it was founded it has come up to different cellphones and tablets since Xiaomi being be one of China's leading companies in consumer different from the competition and after releasing electronics. They design and develop , their own cellphone line decided to let people with TV sets, even their own power banks, headphones different brand cellphones to be able to enjoy their and cellphone accessories as well as their own experience. Xiaomi currently has over 30 million version of the Android Operating System (OS) name users of their MIUI ROM located not only in China MIUI. but in many countries in the world. Led by Lei Jun ex CEO at Kingsoft, Xiaomi has After the great success Xiaomi had with MIUI they made a rapid increase in less than 5 years up to the decided to take the next step and actually release their point that they are one of China’s leading tech related own cellphone line. In August 2011 roughly a year companies gaining market share rapidly. after the company was founded they released their Originally Xiaomi was mainly a software company flagship phone the Xiaomi Mi1 . By this with the aim of creating their own custom ROM time the company was not only producing their own based on ’s Android OS. Their main idea was software but also their own hardware, this gave to make a custom ROM with a more intuitive feel and fruition to comparisons of Xiaomi and Apple. ease of use for people who weren’t so tech savvy. Their first flagship phone had top tier specs and a This ROM later became to be known as MIUI very attractive price, it also included out of the box (Xiaomi ), MIUI at first started to gain a Xiaomi’s own MIUI plus some software goodies for lot of popularity due to its resemblance to Apple’s those who purchased it. Later on in the following IOS. years Xiaomi has released their Xiaomi Mi2 in 2012 Consumers liked the fact that it was so easy to use and in 2103 released the Xiaomi Mi3 alongside with and even intuitive and that it also provided extra their MiTV an android based smart TV with 3D features not present in other manufacturers version of capabilities and running MIUI. Android. One of the most appealing ones and the one In 2012 Xiaomi shipped over 7.9 million units and in where Xiaomi actually started to capitalize was the 2013 around 18.7 million smartphones. Not bad for a use of themes in the operating system. Xiaomi will startup in the mobile cellphone industry. actually sell this themes on their own Xiaomi Xiaomi’s marketing techniques can be described as appstore. either smart or deceiving in a certain way. They have Besides this they will actually invite people who used no retail or physical stores whatsoever and on the their free MIUI ROM to give feedback on the OS and contrary of other big companies like Huawei they actually use their suggestions in new iterations of the don’t partner with any telecom carriers and ROM since they make updates once per week to completely sell their units online and in small batches. either add new features or for bug fixes. The company constantly refers to this “technique” as This way of approaching and actually hearing their a way of actually controlling production and sell units users made Xiaomi even more popular since it gave as soon as they are ready to their consumers. But this the sense that the company actually cared for their constant way of selling through batches actually users and wanted to give them the best experience angers consumers since most units are sold within

Proceedings of ISER 15th International Conference, Taipei, Taiwan, 26th December 2015, ISBN: 978-93-85832-80-2 52 Xiaomi and Its Entrance to the Honduran Market E-Commerce in Honduras minutes and they have to wait till the next batch is Even though they are used to pay up to $1000 for a available. This sense of exclusivity creates a constant premium device not everyone has one and their demand giving Xiaomi free marketing and exposure options are limited, but with a price of less than $300 but this technique might have issues in other regions with the specifications of Xiaomi’s latest phone this were they decide to expand. will definitely change.

Why enter an Emerging Market? II. MODELS AND METHODS

In emerging markets such as country Honduras there Porter’s Five Model is a vast need for units like the ones Xiaomi has to Threat of New Entrants offer; they are not only affordable but actually really There is a reduced barrier of entry due to the fact that good products on par and with the same specs as Xiaomi has no need of physical shops since they sell other more notorious brands. People normally are their units through the internet and also there is no ripped off by carriers and established brands having need of a sales staff due to the same premise. units sold at around $1000 plus contract, there is little Threat of Substitutes to none subsidy whatsoever by carriers while in most There is an additional threat for this market by other countries having telecom companies subsidize the companies such as Huawei from China which already unit is a normal practice. has started to slowly enter this particular market. Besides this, the units that are being sold normally are Currently they offer cellphones through certain “old units” from around 1 -2 years old. Talking about carriers. Another threat for them might also be the smartphones this is a lot of time since components new company OnePlus also from China which has normally have a depreciation of 3 months minimum recently made headlines due to their new flagship due to the rapid increase of new technologies and the cellphone just under $400 with specs even better than vast amount of devices being released every month. Xiaomi’s current flagship phone. One Plus currently For a company like Xiaomi to target and emerging started to incur in international markets it might still market such as Honduras in Central America along be sometime before they might reach this market but with other nearby countries means that they can have it is necessary for Xiaomi to keep them under their an opportunity to capture a large share of the global watch since they barely are less than 8 months old but near-term growth market. are already talked about around the world. According to reports by GSMA on their Mobile Suppliers Economy Paper of 2013- “Africa and Latin America The internet provides a direct channel for Xiaomi to accounted for over 20% of the global mobile growth reach their customers, this activity lowers their costs in the period of 2008-2012, predictions are being letting them also sell the unit for a lower price. The made to have a constant increase of 7-8% per year issue that can be mentioned about this part of the over the next few years till 2017. This will account model is the fact that in Honduras there is a lack of for 0.6 billion customers located in these areas alone” overall good quality internet but due to the fact the In Honduras due to the lack of proper DSL or cable mobile internet is more widely used it won’t be such modem internet speeds people have recurred to the big of an issue as long as the local Xiaomi webpage is mobile industry as a more convenient and in some optimized for mobile browsing. cases even cheaper way of accessing the internet. Buyers Bargaining Power This has led to an increase of mobile penetration up Since currently Xiaomi only offers their products to 20% over the average in the Central American through batches and not all of them are present in region. international markets they initially won’t have a wide variety to offer the Honduran Market, nonetheless it gives buyers a more affordable option promising a “bang for their buck” which can be interpreted as more functionality and premium specifications for a lower price. Switching Costs are actually low for interested buyers since the pricing of Xiaomi’s units are actually lower than more than half of the price of the competition. This actually even makes the risk of trusting a new Table 1.1 brand even less since in case you get a defective unit or it ends up being not what you expected the cost In other words Honduras represents an adequate was minimum compared to actually buying a phone springboard for a company such as Xiaomi to disrupt from the competition at around three times the price. the market and later on expand to the region. The Rivalry among Competitors competitive pricing of their units are adequate for the This part of the model mainly migrates competition to Honduran market and for what people can actually price by reducing differences between competitors. afford. Meaning that in order to compete other brands

Proceedings of ISER 15th International Conference, Taipei, Taiwan, 26th December 2015, ISBN: 978-93-85832-80-2 53 Xiaomi and Its Entrance to the Honduran Market E-Commerce in Honduras actually will have an issue since spec wise they have same type of interface making it easy to share content the same components with some minor differences in among them. the processor being used. Regarding which products will appeal the most to the But for them to actually compete they will be forced Honduran market it is safe to say that cellphones will to sell their devices at a cheaper price which is not as be their more popular products. This is due to the easy as it sounds due to costs of production and demand of this units Honduran people have and to the marketting. On the other hand e-retailers such as ease of use and portability natural of cellphones. Due Amazon, Ebay and specifically XiaomiWorld are to the pricing we can also determine that their most selling Xiaomi’s products now with no need of popular phone could be their Note just the waiting for it to reach a market. same as it has been in the countries it is already This means that Xiaomi will not only have local but available due to the size of the device appealing specs also global competition in case their units aren’t and mainly the price. available to be sold to the public when they decide to enter the Honduran market. Which type of difficulties will Xiaomi have in the Honduran market? 2.1 PROCEDURES As part of the research done for this paper a The main issue Xiaomi can face in the Honduran questionnaire was utilized to approach two different market is the fact that their units are only sold samples of the Honduran society. First the through the internet. For people there is normally a questionnaire was sent to experts of the certain distrust towards units being sold through the telecommunication industry in Honduras; both internet this is mainly due to the fact that you haven’t governmental and non-governmental entities. After actually seen nor experienced the product by this data was collected the questionnaire was sent to a themselves. representative sample of Honduran end consumers. This issue is especially particular in the Latin- American society people normally buy what they The questionnaire was initially only going to be sent have seen and experienced. For them anything in the to experts of the telecommunication industry, but as a internet can actually be a scam. It is necessary for means of aiding in further studies and to correctly Xiaomi to start making their products visible and give have an idea of what Honduran end consumers think the chance of people to experience them first hand of e-commerce it was later decided to also have a either via small kiosks in shopping malls or places representative sample for them. where people gather as a means of directly reaching to the public. III. RESULTS AND DISCUSSION By doing so and through word of mouth the brand can be assured of being on people’s radar, and with Will Xiaomi’s products appeal to the Honduran the help of social media and special offers they can Market? In case they do so which ones specifically? create a hype of their products and earn customer loyalty on the long run. But ideally what would be the The answer is simple YES they will. Xiaomi’s best is to have their own store that way people who products are not only cheap (competitive price) but might not have a direct access to the internet or are also good products if they weren’t the company distrust using their credit cards through the web can wouldn’t have sold so many millions of units. What still be reached and units can be sold to them you get by buying their products is a “bang for your whenever they want them. buck” meaning for the amount of money being paid you get as much as possible functionalities from it. For the Honduran market which would be on your Besides offering their products as hardware Xiaomi opinion the best possible strategy for Xiaomi to sell also offers an entire ecosystem around their brand. their products and disrupt the market? They have their own UI (user interface) based on Android the MIUI ROM. Making it easy for What Xiaomi needs to do is to first slowly start to consumers to simply transfer their favorite Android create hype through social media and target young apps to Xiaomi’s phones without any issues. Also the people first and even make flash promotions through MIUI ROM offers the Xiaomistore with the social media. Once the hype starts going on they need possibility of acquiring themes for your phone to make an official appearance and event to announce actually making it your very own personal experience. themselves to the Honduran Market. Having Xiaomi offer other products besides Later on through kiosks and events in hotspots with cellphones, such as smart TV’s like their MITV gives much affluence of people they need to sell the whole Honduran consumers the chance of actually enjoy the experience of their products instead of just approach latest in technology at an affordable price and without each product individually. Being a Honduran myself I any negative aspects whatsoever. And they can even think that selling the overall experience of their have an overall uniform experience across their products and uniformity across them is better to target devices since Xiaomi’s products all work under the our market. This way people can see that they can

Proceedings of ISER 15th International Conference, Taipei, Taiwan, 26th December 2015, ISBN: 978-93-85832-80-2 54 Xiaomi and Its Entrance to the Honduran Market E-Commerce in Honduras have a Xiaomi phone a Xiaomi tablet and even a well it might even become a springboard for them on Xiaomi smart 4K TV all through a very cheap price the region. A better way to actually reach the public comparing it to the competition such as Apple or even more might be by either having a physical store Samsung whose offerings are less consistent and at a or kiosk for people to be able to see and touch the higher cost. phones and other products they might have to offer It would be key to show them the main features and convince themselves if it is worth their money or across products and how easy it is to share their not. Coming from a Latin background this is a norm content among devices with ease. Another good point in our culture you trust and buy what you can see and to exploit would be how with the Xiaomi TV Box or touch anything else can be a scam. It is necessary and Xiaomi TV Honduran customers can access for free even imperative for Xiaomi to do this in order to to the latest movies and series online. This being enter the market with full force and become a big possible thanks to the agreements Xiaomi has with player in this mentioned market. media content providers. Although the experience might be completely REFERENCES appealing this can only be achieved if the software is in the local language and if they have enough units to [1] Paper - Upstream/ YouGov & Vanson Bourne, 15th sell at the beginning. If this is not the case it can be March 2013 http://www.upstreamsystems.com/wpcontent/themes/up harmful for Xiaomi, in Latin America people don’t stream/research/2013/infographic2013.Pdf like waiting they want their experience now. [2] Press Release- FRAMINGHAM, Mass. September 4, 2013 CONCLUSIONS http://www.idc.com/getdoc.jsp?containerId=prUS24302 813 [3] Paper- GSM/AT KERNEY 2013 Xiaomi seems as a promising new company with the http://www.gsmamobileeconomy.com/GSMA%20Mobi desire to disrupt markets and gain as quickly as le%20Economy%202013.pdf possible market share by providing top tier [4] Paper – Henry Lancaster May 2014 http://www.budde.com.au/Research/Honduras- cellphones at a mid-tier price. In order for Xiaomi to Telecoms-Mobile-and-Broadband-Market-Insights-and- make it into emerging markets they need to first sort Statistics.html out the proper way of approaching each market [5] Blog- Owen- April 10 2014 specifically since they cannot treat them the same and http://blog.prcfrog.com/xiaomis-internal-sales-data-and- interpretation/ also sort out if their way of selling by batches is [6] Article- GizChina – Daniel Ahmad April 2014 appealing to said markets since consumers that are http://www.gizchina.com/2014/04/18/brief-history- interested in a product might want to buy it now xiaomi-chinas-tech-success-story/ instead of waiting. By having them wait there is a [7] Article- ported from Reuters – Melanie Lee – December 2012 huge risk of having them to instead be interested in http://www.huffingtonpost.com/2012/12/07/lei-jun- the competition and what they might have to offer. xiaomi_n_2255953.html Honduras is a good market for them to try out emerging markets and gain practical knowledge as

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Proceedings of ISER 15th International Conference, Taipei, Taiwan, 26th December 2015, ISBN: 978-93-85832-80-2 55