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ISSN: 2278-3369 International Journal of Advances in Management and Economics Available online at: www.managementjournal.info

RESEARCH ARTICLE The Problem Faced and the Solution of Company in

Li Kai-Sheng

International Business School, Jinan University, Qianshan, , , . Abstract

This paper mainly talked about the problem faced and the recommend solution of Xiaomi Company in India. The first two parts are introduction and why Xiaomi targeting at the India respectively. The third part is the three problems faced when Xiaomi operate on India, first is low brand awareness can’t attract consumes; second, lack of patent reserves and Standard Essential Patent which result in patent dispute; at last, the quality problems after-sales service problems which will influence the purchase intention and word of mouth. The fourth part analysis the cause of the problem by the SWOT analysis of Xiaomi. The fifth part is the decision criteria and alternative solutions for the problems proposed above. The last part has described the recommend solution, in short, firstly, make good use of original advantage and increase the advertising investment in spokesman and TV show; then, in long run, improve the its ability of research and development; next, increase the number of after-sales service staff and service centers, at the same, the quality of service; finally, train the local employee accept company’s culture, enhance the cross-culture management capability of managers, incentive different staff with different programs.

Keywords: Cross-cultural Management, India, , Xiaomi.

Introduction Xiaomi was founded in 2010 by serial faces different problem inevitably. So, this entrepreneur , who believes that passage further discus what cause those high-quality technology doesn't need to cost a problems and how to solve them. fortune. Create remarkable hardware, The Reasons for Targeting at the India , and internet services for and with the help of our Mi fans. Xiaomi incorporate In China, except Apple, , HTC and Mi fans feedback into their product range, others international well-known band, there which currently includes the Mi Note Pro, Mi many domestic mobile band, Note, Mi 6, 5, Mix, Mi TV, Mi Band such as the , , , and other accessories. With more than 100 etc. Chinese smart smartphone market had million handsets sold in 2017, and products become red sea. According the Worldwide launched in , , , Quarterly Mobile Smartphone Tracker which Malaysia, Philippines, India, and publish by International Data Corporation , Xiaomi is expanding its footprint (IDC) ① , the demand of Chinese market across the world to become a global brand. slowdown significantly, shipments grew up 52.5% in 2013, but 2.5% in 2015, even -12.3% In recent years, Xiaomi had made great in 2017. So XiaomiCompany’s sales volume success in China, at the same time, Xiaomi couldn’t keep in high growth as before in had developing the India market actively, China. In order to make more profit, it must why the xiaomi company targeting at the for Xiaomi sale its smartphone to other India market. and in different country, it ①http://www.idc.com/ Li Kai-Sheng | March.-April. 2018| Vol.7| Issue 2|16-24 16

http://www.managementjournal.info country. There some reasons for target at the now, there is an ongoing smartphone India. upgrading trend in the Indian markets. Thence, whether the price or the style Huge Potential Markets matches Xiaomi phone perfectly, which It is widely known that is the means Xiaomi phone is very promising in this main driver of global smartphone growth and part of the world. is a large and fast-Bowing market for mobile The Problem faced in India technologies, especially in India. Telecom Regulatory Authority of India② announced Xiaomihad facing fierce competition in on December 30, 2015, cellphone user had India.In order to improve its competence, breakthrough 1 billion, became the second Xiaomi must solve the problem it faced. The largest cellphone market in the world. major problem of Xiaomi faced as flowed.

Low Brand Awareness According the reached data from IDC, the sales volume of cellphone in India reached to The brand awareness is very important for a 111 million, but the percentage of company opera in a new market. Although smartphone just 15%. Means Indian Xiaomi is very popular and sell well in china, cellphone market likes Chinese market a few it’s stranger for oversea customer compare to years ago, there much feature phones will Apple and Samsung, even Huawei. There replace by . In the second have several reasons. Firstly, Xiaomi was quarter of 2016, the sales volume of found in 2010, just 8 years old, it was young smartphone in India is 2.75 million, growth compare to other vendors. rate up to 17.1% compare to second quarter of 2015, even growth 3.7% compare to last Secondly, two years ago, most smart quarter. From the statistics above, the Indian smartphone made by Xiaomi sold in the main smartphone is a huge potential market. china, didn’t have brand strategy for the oversea market. Thirdly, the competition of Similar Demand Preference with smartphone industry was fierce, there so Chinese many smartphone brands and smart According to statisticsdata from market smartphone’s upgrade quickly year and year, research GfK, among the seven major all smartphone trends to homogeneity, if markets, India, Indonesia, Vietnam, want consumer remember your brand, it need Cambodia, Singapore, Philippines and special characteristic or have famous stars as Thailand, smartphone volume sales reached spokesman continuity. 415 million units with revenue of $10.8 billion Lack of Patent Reserves and Standard and a growth of 61 percent during last year. Essential Patent (SEP)

That means each smartphone sells at a price From the statistics which State Intellectual of about $250, which just conforms to the Property Office of the P.R.③. The patent market price of Xiaomi smartphone, apply by the Xiaomi company was 7153, but $100-$300. In addition, India consumers have the number of Huawei’s patent is 77042 and shown their thirst for high cost performance ZTE is 63707. Maybe this compartment is not smartphones. Considering the relatively fair for Xiaomi, because Huawei and ZTE higher price, it should be no surprise that both had built up more than 30 years and smartphone is not that popular in this region. their main business weren’t smart Therefore, low cost smartphone with good smartphone. But from the number of patent, quality and stylish design, are expected to we can find out that Xiaomi’s research and attract a lot of consumers in India. Especially development is not enough.

②http://www.trai.gov.in/ ③ http://www.sipo.gov.cn

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The most important patent does a has some quality problems, it can’t avoid for smartphone vendors need is the Standard any vendors. So, another problems arouse, Essential Patent (SEP), Xiaomi had been that is after-sales service problems. sued because of this patent. In December 8, 2014, the Delhi High Court of Indian Services refer to labor activities that can forbidden Xiaomi Company sells xiaomi directly meet consumers' needs and desires smartphone in India market, because those and are available for sale, which concludes product infringe technology patent of not only intangible service with no physical Company, this patent belong to the goods but also intangible services with SEP. physical ones. No longer just limited to mobile phone's use value, consumers are now more Ericsson Company doesn’t produce focused on the service that buying products smartphone, even Xiaomi Company have will bring. much patent, it can’t struck patent cross-licensing agreements with Ericsson. All There two after-sales service ways in China, the company which lack of this patent will consult the customer service of official face the patent conflict. Most of the way to website and there have service center in solve the conflict is patent fee. In this event, major city of China, called Mi Home. In India, Xiaomi and Ericsson made a private there only individual service center, if some negotiation to mediate the dispute, in hardware needs to be replace, it’s not enough. December 16, Delhi High Court of Indian had The most of the software problems be solved dissolute the ban, declared the Xiaomi thought customer service of official website, Company’s smartphone can sell in India. because of the different language and culture background, it needs hire local employee to Quality Problems and After-Sales solve this problem. In general, pressure of Service Problems after-sales service will increase, at the same In Xiaomi phone forums there are up to 6,000 time, the cost as well. problems of Xiaomi phone, which mainly Causes of the Problem include paint loss, short standby time and unable to take pictures. This seriously affects Swot Analysis of Xiaomi Company consumers' satisfaction with Xiaomi phone Strengths and, to some extent, influences the establishment and maintenance of its Effective Team Working among credibility Co-Founders Lei Jun, founder of Xiaomi, is chairman of What must be state again is Xiaomi Company . Lei Jun calls on top players of the just be found 8 years, its foundation about industry and builds a super-luxury joint made hardware of smartphones is not solid founding team with eight elite, includes Lin enough. According to the update of Bin, Li Wanqiang, Zhou Guangping, Wong smartphones, the new problem of Mi phones Jiangji, Hong Feng, Wang Chuang, Liu De, also emerges. Except the MIUI system, Mi and . All co-founders of Xiaomi phones other hardware was made by other have over 15-years business experience at manufacture, such as the CPU, most of the both international and domestic first-class android smartphones use or companies.; at the same time, by relying on MTK’s CPU. Now, Huawei has its own his good personal relationships, he CPU--Kirin. As we all know,the fluency of successfully cooperates with Vancl logistics Android system is worse than apple’s IOS and achieves an exclusive online sale mode; system. In a word, the quality of smartphones by counting on his powerful celebrity charm, of xiaomi had improved gradually, but still he successfully fires the opening shot for

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Xiaomi. system has exceeded Apple's IOS and obtained a market share proportion of 84.6%. Continuous Upgrading of Core Android-based games and applications are Technologies becoming richer. MIUI, as a heavily Any mobile phone is not perfect, but for the customized Android , can be inadequacy the phone need continuous built in thirty or forty mainstream flagship updates. For example, Xiaomi will release a phones in addition to Xiaomi smartphone, routine update on every Friday, not only which means that as long as MIUI is good fixing the former problem but also adding enough, Xiaomi can have a large number of some useful functions. Continuous iteration customers through refurbishment of of MIDI and software of Xiaomi is the key to operating system. arouse public attention, especial MiFans'. Huge Potentials of Emerging Markets Weakness In emerging markets, smartphone growth Inadequate After-sales Services shows a remarkable opportunity for Xiaomi, The main after-sales service of Xiaomi although Xiaomi makes wafer-thin margins includes direct hotline and online customer on devices. However, the vast ecosystem service. However, according to Internet users, revenues from software, application Xiaomi's hotline is always too busy and downloads and services are even more always engaged; online and MIUI community important. As in many emerging markets, customer service does not do well in solving smartphone is the only or primary Internet users' problems. Without enough after-sales apparatus, making it effective to service center and a lack of employees who influence them through social media and are skilled in local language in overseas Internet. Marketing through Internet is the markets, Xiaomi's after-sales service is the thing Xiaomi is extremely adept at. issue that Xiaomi phone users concern most. Threats As the quality issues have led to users' hatred Intensified Market Competition in many markets outside of China, the after-sales service of Xiaomi is becoming more Existing competition among enterprises is the and more serious. most intuitive, most direct and most important threat factors. Both in the Weakness in R&D Compared with international market or domestic market, the Foreign Competitors competition between smartphones Compared with established international manufacturers is fierce. Internationally, manufacturers and powerful local mobile Apple, Samsung, HTC and LG, are strong phone vendors in overseas market, Xiaomi is competitor of Xiaomi Company. These dwarfed. As mobile phone industry is companies are strong in capital and developing rapidly, the industrial technology, brand recognition, loyal concentration will become higher. In other customers. Meanwhile, China's domestic words, just like the household appliance mobile phone brand in these years industry there are only a few first-class development rapidly, not only a large market enterprises such as , TCL, and share in the domestic market, in the left ultimately and participated in international market also has a place, such as market competition. Huawei ,OPPO, VIVO, and Lenovo. Opportunities In summary, it is the advantage and disadvantage of Xiaomi Company that result Strong Augmentation of MIUI Operation in the problem above. System Decision Criteria and Alternative Currently in China, Android operating Solutions

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To solve the three problems that mention and meet Mi Fans' demand of high cost above. Now, put forward some alternative performance. solutions follow. Thirdly, Xiaomi is the first Internet phone Increase the Brand Awareness brand: in terms of product level, its To Increase the Brand Awareness, there innovative mode is "Highest Cost have Several Alternative Solutions as Performance + Internet Development + Follow Crafted"; in terms of operation level its Localize Xiaomi’s core competence in innovative mode is "Internet Marketing + India.First of all; create operating system Online Sales". For traditional mobile phone independently for Indian only. In China, the manufacturers, it is an untouchable rule to operating system of Xiaomi is MIUI; it is a make money through selling hardware. Chinese customized version of Android operating system. Although based on Android, Even Apple who does Internet experience MIUI is very different from Android as it has extremely well also gets considerable profit a more beautiful interface, a blazing speed, from selling hardware. So at the very and numerous extra features. MIUI is beginning, Xiaomi, as a pure Internet phone completely user driven because it updates on brand, did not follow the old path of the every Friday based mostly on MiFans' domestic mobile phone manufacturers who suggestions and community input. According mainly profit from quantity but specially customers’ needs improve user experience, devote itself to developing a single type of cell have attracted customers and develop its own phone and making it to be a boutique by fan base.Xiaomi should create an Indian making the best of Internet Marketing mode. customized version operating system; this differential strategy must attract Indian Successful experience of Xiaomi in china are customers. undoubtedly a good reference for other companies who are about to enter into Indian Secondly, sells value-for-money products. mobile phone market. Mobile phone makers From the first-generation Mil in 2011 to Mi6 should not only simply engage in research in 2017, Xiaomi smartphone always and development, sales and selling mobile maintains a high cost-effective phones and focus only on product marketing advantage.Xiaomi’s flagship smartphone through the Internet but also fully equipped with the world's fastest and most understand users’ needs, create innovations powerful Qualcomm mobile phone chip which in product details, and improve the user ensures the fluency and high definition of experience based on customers' needs. phone system. The workmanship of Xiaomi phone has reached the standard of some Except the core competence, it’s necessary international brands such as and learning from other vendors to enhance brand Samsung. awareness. In China, the shipments of OPPO and VIVO had exceeded Xiaomi this year, The price of$100-$300 is an absolute price advancing to top five around the world. advantage compared with other peer brands, which is universally called Xiaomi's According to the analysis report, the main aggressive price strategy. Separately, each customers of xiaomi focus on who understand configuration of Xiaomi phone is not the smartphones and the mobile internet user, necessarily the best but together they show a those people know phone’s chip, screen and good performance, especially the processor, camera, such as the male students, office screen and camera which are in full workers at the age from 20 to 40. Unlike three compliance with positioning of "Just for Fans" years ago, there have more and more high

Li Kai-Sheng | March.-April. 2018| Vol.7| Issue 2|16-24 20 http://www.managementjournal.info cost-effective smartphones can be chosen didn’t an internet user and lived in rural, nowadays, the group of people described internet social network software can’t cover above had trended to saturation and may try enough population anymore, it need another other phones too. Result the decrease of the media to propaganda products, the TV or growth. OPPO and VIVO didn’t stress on radio broadcast, if necessary, put some huge their phone’s performance data, but invited advertising in the main road of towns. fashion celebrities endorse their products and advertised on most popular TV show. OPPO’s Thirdly, increases produce capacity in order spokesman includes Super Junior-, to sufficient in inventory. Open direct sale Leonardo, Mi, Li Yi Feng, , TF store or agent store in the main town of India, Boys, and and so on.The one hand, the rural people can buy spokesman of VIVO is the protagonist of smartphones conveniently and quickly, not Descendants of the Sun, Joong-ki Song. They panic buying thought internet; on other hand, have the same feature that is they were most it good for improving the after-sales service if popular star at that time and young fashion, the smartphone broke. in line with the temperament of phone. Solve the Patent Issues

The TV shows of their advertised on are most To increasing the patent reserves, solve the popular in China, with a high rating, patent dispute about SEP of smartphones. such as the Hunan TVs’ Happy Camp, The easiest way is pay the license fee, all Zhejiang Satellite TVs’ Sing! China.These company which has patents wants to make marketing had extremely increased the brand more money from their patent but not use by awareness of OPPO and VIVO.Except other freely. Such as the Ericsson mentioned celebrity’s endorsement and advertised on TV, before, Ericsson requested Xiaomi pay for the their direct sales store and advertising could patent in July, 2014, but xiaomi didn’t be seem everywhere in rural areas of China, answered, as a result Xiaomi sued by increased the brand awareness further and Ericsson. Although pay the license fee can get buy conveniently. Unlike xiaomi, you may be the patent, the cost you can’t control by not being able to buy Xiaomi’s phone when yourself, pay constant percentage of turnover you want it. or profit which negotiate with the authorizer, can’t get the economics of scale. In the We know that there about 1 billion people negotiations, the licensee always is in the isn’t internet user, and in the rural areas are passive side. In long run, especially in this the fastest growing of internet user. Xiaomi “red sea” market, is bad for Xiaomi Company, must pay more intention to this situation. In for its healthy development. order to the brand awareness, put more investment in advertising, form the The second way is develop the patents by experience of OPPO and VIVO, it is worth to themselves. It’s no doubt that increase do it. Firstly, invite popular stars in India as investment to develop patents is spokesman, Xiaomi had invited Liu Shi Shi, time-consuming, laborious, and costly. Liu Hao Ran and Wu XiuBo as the Difference with Ericsson and Huawei, they spokesman of Red Mi, it illustrate that good at communications technology, Xiaomi Xiaomi had changed its online marketing Company not good at this filed, the marketing strategy which always be before. So xiaomi be and software is his specialty. Need huge able to invite the local or international capital to recruit new talented persons; do celebrities whom accepted by many Indian, research again and again, it’s a long time the cost will be large, but for Xiaomi investment. There has another question, the Company, it can be accepted nowadays. result of investments is uncertain, it may fail, Secondly, in India, because most of Indian and it is great loss.

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The third way is corporate with other the quality of service. More detail, this also smartphones vendors which have same goals requires the company to focus on improving that sell phones to around the world but employees' service awareness and carry out a restraint by the patents, combine advantage full range of training for repair shop staff to of difference firms to develop the patents. improve their service quality. Furthermore, Developing together, on one hand, can the building of the sale outlets is very crucial. combine different advantage of difference Setting up more direct sales service points firms, improve the quality of innovation; on and Xiaomi Home in big and medium sized other hand, can reduce the investment and cities can help to ensure the timely risk of each company. It seems win-win maintenance of Xiaomi phone; Corporate with cooperation, corporate with other company is local retail outlets in small cities in order to a hard things, they are competitors, always service rural customers. hate each other ordinarily. Except related to Recommended Solution converge of difference company culture; how to develop, how much pay for the investment To increase the brand awareness, there and how to share the achievement and so on, alternative solutions above all are important. it’s hard to negotiation. First of all, localize Xiaomi’s core competence in India. That is creating an Indian Improve the Quality of Smartphone and customized version operating system if After-Sales Service possible; sells value-for-money products. The quality of smartphones includes hardware and software becauseXiaomi’s Then, continual reliance on mobile internet smartphone assembles by other OEM and social media, in Indian market, Xiaomi manufacturers, the quality of hardware can’t has to set up a robust social ecosystem and not control by Xiaomi Company itself, as the make full use of local social media such as development of the assembling, the issue of , Plus and , because hardware creates less and less, unless the there no Weibo and WeChat is not popular. man-made issue. Another problem of quality Except the online strategy, according to the is the software, such as system update, actual situation of India and successful software incompatibility and so on. As sell experience of other company, it is very many phones, the problem can’t avoid.As a important to invite most popular stars as the result, the after-sales service business is very spokesman of Xiaomi phone, and advertising crucial for Xiaomi. on TV shows which had high audience rate. It may increase the cost of product, as Xiaomi So it is an important thing for Xiaomi to had done this in China and received ensure that the user experience is as fantastic appreciate, I think xiaomi has the ability all along even when Xiaomi phone user have execute this strategy in India, increase the a problem with their handsets in India total shipment, the average fix cost will markets. Therefore, it is urgent for Xiaomi to decrease. set up sufficient online communities and forums, direct phone hotlines and even As far as I am concern, in order to solve the service centers throughout the market. patent issues. In short run, it can’t avoid Furthermore, Xiaomi has to build local teams paying the license fee. What Xiaomi must to consisted of Xiaomi advisor who is good at do is improve other core competence for local language and even local people. In increase the shipments, thus strengthen the addition, in order to provide excellent service, bargaining chips with the authorizer. In long Xiaomi has to keep these service centers run, Xiaomi Company must emphasis on competitive with each other and set up a independent innovation, although this move range of key performance indicators to ensure will cost a lot of time and money in the initial

Li Kai-Sheng | March.-April. 2018| Vol.7| Issue 2|16-24 22 http://www.managementjournal.info period, Xiaomi has to do so. Because there is employee. Xiaomi must train for Indian no well-known companies who do not have employee; explain characteristics and their own core technology in the world. Core specifications of company’s culture, but do not technology is the only way that one company force it to accept all. Also requires the must take to develop into a well-known one: management of Xiaomi Company to actively To be specific, firstly, the company must put organize employees from different cultural emphasis on technological innovation and backgrounds to communicate effectively increase investment in research. No within the company. investments, no outputs. No innovations, no improvements. Just as the old saying goes," For example, Xiaomi can often arrange tea no pains, no gains". Secondly, the company party, dinners and other activities to deepen must pay attention to personnel training: mutual understanding, and to clear enlist the talents all over the world and understanding of each other cultural establish effective personnel training differences. The company's incentives are also mechanism, ensuring that every staff has can be different, develop different incentive given full scope to his/her talents. And the programs to meet the different needs of way corporate with other smartphones employees. Only in this way can guarantee vendors is hard to carry out. The keep point is the effectiveness of incentives, can fully improved independent research and mobilize the staff's enthusiasm and initiative. development. Conclusion

To improve the after-sales service, firstly, set This passage systematically discusses what up enough online communities and forums, the problems of Xiaomi company operate in direct phone hotlines, ensure consumer India, what cause those problem, presented advisory and solve the common problem of alternative solutions and recommended Xiaomi phone. Second, set up more direct solution at last. sales service points and Xiaomi Home in big and medium sized cities can help to ensure In a word, to increase the brand awareness, the timely maintenance of Xiaomi phone; localize Xiaomi’s core competence in India Corporate with local retail outlets in small and reliance on mobile internet and social cities in order to service rural customers and media, in Indian market. In order to solve the repair the phone. patent issues. In short run, it can’t avoid paying the license fee.Long-run Xiaomi Then, in order to provide excellent service, Company must emphasis on independent Xiaomi has to keep improving employees' innovation, to improve the after-sales service, service awareness and carry out a full range firstly, set up enough online communities and of training for repair shop staff to improve forums, second, set up more direct sales their service quality; service centers should service points and Xiaomi Home in big and competitive with each other and set up a medium sized cities. range of key performance indicators to ensure the quality of service. Above solutions suitable for Xiaomi Company, it also may suitable for other China company Xiaomi Company will set up online which wants to expand the India market. communities, direct sales service points, There no standard method to solve every Xiaomi Home and other localized activity; it problem, administrators should take a way to can’t avoid recruiting local people, which will suit you. relate to cross-culture management of

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