Figure 1.1 Xiaomi Logo Source: Wikimedia Commons (2017)
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CHAPTER I INTRODUCTION 1.1 Research Object Overview 1.1.1 Company Profile Figure 1.1 Xiaomi Logo Source: Wikimedia Commons (2017) Xiaomi was established by Lei Jun in 2010, who believes to make high quality technology it doesn’t need a high cost. Xiaomi create hardware, software, and internet services with the help from Mi fans as well. Xiaomi incorporate Mi fans feedback for product range such as Mi Note Pro, Mi Note, Mi 4, Redmi 2, Mi TV, Mi Band, and other accessories. In 2014, Xiaomi sold more than 61 million handsets and products launched in Taiwan, Hong Kong, Singapore, Malaysia, Philippines, India, Indonesia, and Brazil. The meanings of “MI” in Xiaomi logo is stands for “Mobile Internet”. The other meanings of “MI” also defined as “Mission Impossible” because Xiaomi faced many challenges that seemed impossible to defy in our early days (Xiaomi, 2018). First Xiaomi’s operating system named MIUI V1 which is launched in August 16, 2010. This operating system was the work of 100 supporters, they had a same dream to customise Mobile Operating 1 System of Google’s Android. The first device to customized was Google Nexus One. MIUI V1 has more functionalities compared to the pure AOSP ROM and it was simple, pain, and easy to use (MIUI, 2016). In 2011, Xiaomi Mi 1 was launched by the company. Xiaomi Mi 1 became the first Xiaomi smartphone product to sold. It only takes 34 hours to run out of stock. Mi 1 has a Qualcomm Snapdragon S3 processor, 1GB of RAM, 4-inch 854 x 480 pixels, 8MP/2MP cameras, and 1930 mAh battery. The Xiaomi Mi 1 costed 1999 yuan or $314 USD at that time (Cervantes, 2015). This company was funded by a Temasek Holdings based in Singapore, IDG Capital with Qiming Venture Partners based in Hongkong, and Qualcomm as the company that supply processors for Xiaomi devices even today. Xiaomi Mi 2 was one of the Xiaomi first devices that featured the revolutionary and famous Qualcomm Snapdragon chip. This device Mi 2 sold close to 10 million units within first 11 months after launch (SuccessStory, 2018) 1.1.2 Company Slogan “Just for Fans” is Xiaomi’s slogan. Mi fans lead every step of the way. Based on the fact, many Xiaomi employees were first Mi fans before joining the team. As a team, we share the same relentless pursuit of perfection, constantly refining and enhancing our products to create the best user experience possible. Xiaomi team are also fearless in testing new ideas and pushing our own boundaries. Xiaomi dedication and belief in innovation, together with the support of Mi fans, are the driving forces behind our unique Mi products (Xiaomi, 2018). 2 1.2 Research Background The development of smartphone in Indonesia nowadays is growing rapidly. Smartphone becoming an important thing in our daily life. People always bring smartphones wherever they go for many purposes such as making and receiving a calls, sending and receiving a messages, taking a photo and video, and the others. A smartphone could also perform various activities through the internet connection such as browsing, sending and receiving an email, financial transactions, booking an online vehicle services through applications, map navigation, and others. According to data from Emarketer, Indonesia will be predicted to surpass 100 million active smartphone users in 2018 and this make Indonesia becoming a country with fourth largest smartphone users in the world behind China, India, and United States (Millward, 2014). Based on figure 1.2 below, it shows that smartphone users in Indonesia is increasing year by year in the periode of 2013 to 2017. Figure 1.2 Monthly active smartphone users in Indonesia Source: Millward (2014) 3 While the survey conducted by Asosiasi Penyelenggara Jasa Internet Indonesia (APJII) in 2016 stated that the most devices used by Indonesian people to browsing is “Smartphone” with percentage of 67,8% or 89,9 million users followed by Computer/PC (14,7% or 19,5 million users), Laptop (12,6% or 16,7 million users), and Tablet (3,8% or 5 million users). The figure 1.3 is on the following. Figure 1.3 Devices used for browsing Source: APJII (2016) Google Indonesia revealed that Indonesian people are no longer using smartphones to communicate or be active in social media, but tend to be higher for online shopping. This is related with mobile trends that dominates in Indonesia. Henky Prihatna as a Head of Google Indonesia said that Indonesia has the highest penetrations of smartphone adoption which is 71 percent higher than India (69 percent), Thailand (54 percent), and China (44 percent). This is supported by another Google findings that Indonesian people smartphone usage on average over two hours or 136 minutes a day (Wibisono, 2016). With the high penetration of smartphone adoption in Indonesia, many global smartphone vendors are coming to Indonesia to market their products with different innovations and make Indonesia as one of their potential market. One of the smartphone vendors that grow rapidly in Indonesia is smartphone vendor from China. 4 According to market conditions report released by International Data Corporation (IDC) in 2017 stated that China-based smartphone vendor is massively enter the Indonesian market. Risky Febrian as Associate Market Analyst from IDC Indonesia said that “Indonesia’s smartphone market has changed, China-based smartphone vendor now is more aggressive with its strategy”. As seen on the figure 1.4 below, China’s smartphone market share is growing up from 2015Q1 by 12 percent to 23 percent in 2016Q1, and it becomes 31 percent in the 1st quarter of 2017 (Nistanto, 2017). Figure 1.4 Indonesia Smartphone Market Share by Vendor Type Source: IDC (2017) Djatmiko Wardoyo as a representative of PT Erajaya Swasembada Tbk said that “We follow the market demand, in this year the industry sees a high growth from China’s smartphone products”. He also added that PT Erajaya Swasembada Tbk will also take many chinese brand and follow the growing trend in the market (gadget.bisnis.com, 2017). The China’s smartphone vendors which are currently competing in Indonesia there are Oppo, Vivo, Xiaomi, Huawei, and etc. This will create a competition among those vendors to sell their products and effort to gain their potential customers. 5 China’s smartphone vendors such as Oppo and Vivo have an aggressive and massive marketing strategy in Indonesia by intense to put advertising on billboards in the corners of the city, television and online. Also both vendors from Oppo and Vivo working with a number of top local celebrities to attract the public attention. While the Director of Product Management of Xiaomi Global, Donovan Sung said that “We will not waste money for the advertisings, that is not our style.” He also added that the main strategy of Xiaomi is providing a capable technology and can be enjoyed by the wider community (Bohang, 2017). Xiaomi was first launched on September 4, 2014 in Indonesia. The first product that marketed was Xiaomi Redmi 1S. Lin Bin as one of the Xiaomi founder, he optimist that Redmi 1S will be successfully sold in Indonesia because this product has affordable price with high specification. The price of Xiaomi Redmi 1S is only Rp 1,5 million. Xiaomi believed that online sales is very effective in terms of both marketing and sales. Xiaomi also use social media as a promotion way. By using social media, a good interaction between producer and customer will be created. From social media, Xiaomi successfully created a community lovers of Xiaomi products. This community helped Xiaomi to market their products , so the brand is known quickly. Lazada is a Xiaomi’s partner for online sales, while Trikomsel Oke and Erajaya Group are Xiaomi partners for distribution and after sales service (cnnindonesia.com, 2014). As shown on figure 1.5 below, according to the market report from Canalys shows that the market share of Xiaomi in the Indonesian smartphone market reached at 18.3 percent in the first quarter of 2018 with shipment of devices that reached at 1.7 million units. This number of shipment has increased in the first quarter of 2018 compared to the first quarter of 2017 when Xiaomi only shipped around 107,000 device units. The report also shows that the growth of Xiaomi smartphone shipments increased by 1455% from year to year (Yusuf, 2018). 6 Figure 1.5 Indonesia smartphone market – Top 5 vendors Source: Yusuf (2018) CEO Xiaomi, Lei Jun said that “I hope in the next two or three years, we can be the number one in Indonesian smartphone market.” He also added “in the next year, we hope the sales of Xiaomi smartphone can reach 10 million unit.” In order to support its effort to become the number one in Indonesian smartphone market, Xiaomi will expand more Mi store in Indonesia. Lei Jun hopes that Xiaomi products not only can be purchased through the online, but also can be purchased through offline store to facilitate customer in making purchases. Xiaomi also intend to increase the number of Authorized Service Center more than 100 places for their products in the upcoming year 2018 (Yusuf, 2017). The Authorized Mi Store was launched on August 30, 2017 at Summarecon Mall Serpong in Tangerang. Previously, Mi Store opened for the first time at Pondok Indah Mall in 2015. Through this Authorized Mi Store, customers can get quality products of Xiaomi such as smartphone, Mi Band 2, Mi Power Bank, Mi Bluetooth Speaker, etc. Head of Xiaomi South Pacific Region, Indonesia Country Manager, Steven Shi said that “Authorized Mi Store is a Xiaomi’s commitment to customer in Indonesia.