Global Operations Management at Xiaomi Inc - Case Study Example

Global operations management

(Case study on Xiaomi Inc.)

Table of content

1. Introduction3

2. Overview of the company3

3. Company’s business operations4

4. Internationalisation theories4

5. Identification of new location through internationalisation theories8

6. Recommendations9

7. Conclusion10

Reference list11

• 1. Introduction

Global operation management is necessary in such an edge of increasing international competition and the brands in the recent years implement several effective strategies to expand the business operation across the word (Johanson and Mattsson, 2015). The internationalisation theories are important in this assignment to choose an appropriate market place where it is beneficial for the business to expand. The internationalisation theories also provide several strategies to expand the business activities and gain competitive advantage over other existing competitive brands in the new international market (Ribau, Moreira and Raposo, 2015). The purpose of this business assignment is to identify a new market where the organisation, Xiaomi Inc. can expand the business for gaining high market share by ensuring high profitability and sales volume.

• 2. Overview of the company

Xiaomi Inc., headquartered in Beijing, China, is a privately owned electronics company. It is the fifth largest Smartphone Company and the main products of the company are smart phones, tablet, mobile phones and home devices. The company was founded in 2010 and in 2015; it was successful in selling more than 70.8 million units which is counted as almost 5% global share of smart phones. The total revenue in the last year was approximately $20 billion and the number of employees was more than 8100. Xiaomi Inc. is successful in expanding the business in China, Hong kong, India, Singapore, Taiwan, Philippines, Indonesia and Brazil. The company tries to expand the business in other international location through e-commerce facility.

The company has launched the products named Mi series, MIUI Operating system, Mi note, MiWiFi, Redmi series, MiPad etc (Xiaomi, 2016). The company is successful in serving high quality products and services at an affordable price rate to the customers worldwide. The efficient service quality and differentiated products of the company help the brand to win market order. In order to improve order qualifiers, the brand tries to meet the customer’s requirement and give attractive products that influence the consumers in the global market. The company is successful to be an order qualifier as the products and services of Xiaomi Inc. meet the performance standard (Xiaomi, 2016).

• 3. Company’s business operations

The organisation mainly focuses on the strategy of delivering high quality smart phones and other electronics products and services to the customers at an affordable rate. This business strategy ensures high competitive advantage over other competitive brands in the global market. The company tries to provide positive footprint to expand the brand in global market successfully. The company tries to maintain flexibility and transparency of the business activities to improve brand loyalty and customer’s trust. Xiaomi Inc. the company tries to satisfy the Xiaomi fans and the employees such that it is possible to build corporate relationship with the employees and customers through more interactions (Xiaomi, 2016). Continuous process of innovation in hardware, software and technical services help to achieve the aim of the organisation. In order to reduce the cost of business operations, the company did not own any physical stores in the international market and fully focus on online sales facilities. In such an edge of technological up gradation, the company mainly focuses on the social media marketing and internet advertising rather than following the traditional form of brand advertisement. Moreover, word-of-mouth is also another strategy which the brand tries to follow for improving social community involvement in the international market such as India, Hong Kong, Singapore, and Taiwan etc (Xiaomi, 2016).

• 4. Internationalisation theories

In order to discuss the internationalisation process of the organisation, it is important to evaluate some theories such as Dunning’s Eclectic Paradigm, internationalisation process theory by Uppsala and network theory.

• Dunning’s Eclectic Paradigm:

As per the theory, the internationalisation process depends on the value chain operations that the companies adopt during global expansion. There are three conditions through which it is possible to identify whether the brand internalise the business or not. The three conditions are ownership specific advantage, location specific advantage and internationalisation advantage (Wach and Wehrman, 2014). The advantage of business ownership is important to expand the business and the upper level management team tries to focus business trademark, brand name, economies of scale and technological advancement to gain ownership advantage.

Figure 1: Dunning’s Eclectic Paradigm

(Source: Buckley, 2016)

The firms need to develop unique knowledge and skills, improve organisational resources and capabilities and maintain corporate relations to run the business and gain specific advantage. Secondly, location advantage is necessary to gain competitive advantage over other existing firms (Evers, Kuivalainen and Andersson, 2015). As per the location advantage, the firms need to evaluate the existing raw materials, wage rate of the country, taste and preferences of the local communities and legal system of the country. Thirdly, it is also necessary to gain internationalisation advantage such that the firms are better off for implementing g the decision of brand expansion.

• Internationalisation process theory by Uppsala:

The theory explores that the process of internationalisation depends on number of volume of export, exporting via agents, joint venture strategy in entering new market and wholly owned subsidiary (Reuwer, Jansen and Brinkkemper, 2013). The internationalisation process of the businesses mainly depends on the knowledge, commitment and trust to grab the market opportunities. The businesses mainly strengthen the domestic and foreign distribution network to expand the brand in a new market place. This process of internationalisation assists the brand to gain proper market information from the distributors (Lynn Childs and Jin, 2014).

Figure 2: Uppsala model of internationalisation

(Source: Gammeltoft and Kokko, 2013)

As per the model, it is necessary to improve knowledge through more interaction, organisational learning and outperforming competitors which further helps to expand the business activities in new market segments. The organisations also try to build trust by maintaining organisational commitment and this working practice helps the brand to strengthen the supply chain of the businesses. Strong distribution network of the organisations further helps to identify geographical market, organisational changes, success to the resources and capabilities and investment (Bartha and Gubik, 2014). Thus, as per the model of internationalisation, the process ensures high market knowledge and market commitment that the brands try to maintain in order to gain competitive advantage from such international business operations (Kauppinen and Juho, 2012).

• Network theory:

As per the network theory of internationalisation, the businesses need to develop corporate relations with other business entities as it helps to access all the relevant market information. Network theory is useful to grab market opportunities after analysing the information and it allows rapid internationalisation (Besley, 2015). Under the theory, the organisations try to build strong relationship with all the business stakeholders such as customers, employees, distributors, public agencies, managers, suppliers and other business entities. Corporate relationship and brand commitment are thus effective to build customer trust and strengthen customer base for the organisational products and services.

Figure 3: Network theory

(Source: Doloreux and Laperriere, 2014)

Under this theory, the organisations internationalise the businesses after analysing the market environment and firm’s relationship where the brand scan develop strong foreign network for gaining penetration. After gaining market penetration, the brands try to gain international integration by utilising the distribution network.

• 5. Identification of new location through internationalisation theories

After evaluating the theories of internationalisation, it is important to choose proper location for the business Xiaomi Inc. where the organisation can expand successfully. In this regard, as UK and USA are the developed nation and growth rate of the country and economic development are sustainable, it is suitable for the company to expand the business in UK and USA. Political stability and government intervention help can help the business to expand and run the organisational activities successfully (Cavusgil et al., 2014). Social background of the people in UK and increasing amount of internet users are useful for the company to retain more consumers with more innovations and technological advancement. Internationalisation also provides a scope to the company to share technology and human resource which is useful for the company to manage efficient supply chain.

Figure 4: Ease of doing business in UK

Diversified economy and number of investors in UK foster more growth in business

The country is fourth in doing the business and the market is culturally efficient to encourage new investors.

Reputed jurisdiction and flexible business locations as well as mobile and high skilled labour attract more businesses.

Largest treaty network and new immigration rules ensures high net worth for individuals and entrepreneurs investing in UK.

Transparency, government intervention and fiscal reforms enhance more market opportunities.

(Source: Besley, 2015)

Figure 5: Ease of entering into US market

Free trade facility helps the businesses to create more jobs in US an delivers more opportunities in the market

As export market is growing rapidly, the export promotional strategies of the country foster more growth of the new organisations.

The Australian e-commerce industry is well developed and it is beneficial for the organisations to enter into the market of US though utilising the e-commerce facilities.

Strict labour rules and business ethical policies ensure more sustainable development of the companies.

The factors such as data protection, high skilled labour, sharing of knowledge and techniques and marketing agreements ensures successful expansion of the businesses.

(Source: Bartha and Gubik, 2014)

As per the internationalisation process, the company can gain location advantage and internationalisation advantage for successful business expansion in the UK. On the other hand, US is also another market place with high market growth, effective legal rules and labour laws which help the company to expand the business smoothly without any ethical issues. As per the theories, regular export and export through the independent agents are helpful for the company to expand the business in UK and US. The efficient distribution network and skilled employees of the country can help the brand to place the organisational products and service to the right customers as per their requirements.

• 6. Recommendations

Both the countries US and UK are beneficial for the company, Xiaomi Inc. to expand the business operations and gain competitive advantage in the international market. The brand needs to export the organisational products and services directly by maintaining proper economies of scale. Both the locations are helpful for retaining more customers towards the brand by delivering high quality products and services. As the income level of the people and purchasing power parity is high in both the locations, UK and US, it will be beneficial to retain a wide range of customers in the market. The efficient production and direct exporting is helpful for the company develop better relationship with the suppliers, customers, employees and shareholders. The companies also need to maintain better protection of trademarks, goodwill, intangible property and patents to expand the business in both the countries US and UK. Direct exports through sales representatives also may also help the company to increase sales volume and yearly turnover of the business.

Moreover, as such an edge of technological advancement, the number of internet users is rising rapidly; it is useful for the company to utilise online marketing. As Xiaomi Inc. focuses on selling the products and service online, it will be beneficial for the business to retain more online customers by online advertising and social media interaction. Social media interaction can help the brand to improve community involvement and identify the needs of the local people of UK and US as per their needs and preferences. Thus, direct exporting through ales representatives is an appropriate strategy for the brand to enter into new market segment like UK or US. As per the internationalisation network theory, direct exporting and interaction with the sales representatives help to access relevant market information which is useful for market penetration and international integration. Thus, online expansion and e-commerce facility provide an opportunity to the company, Xiaomi Inc. to enter into the new market place such as UK and US and target potential buyers to retain the consumers towards the brand.

• 7. Conclusion

Xiaomi Inc. is mainly situated in Beijing and the business tries to enter into new location to expand the organisational activities and gain high market share in the international market. In this regard, the internationalisation theories are helpful in this assignment to identify the market advantages and way to expanding the business. The theories also help to identify the international location where the company can gain more advantage for running the business activities successfully. It will be helpful for the company to choose direct exporting though sales representatives and e-commerce facilities to enter into the new markets both UK and US.

• Reference list

Bartha, Z. and Gubik, A., 2014. The Role of Business Knowledge in the Internationalisation Process of Hungarian Corporations. International Competitiveness in Visegrad Countries: Macro and Micro Perspectives, 1(2), pp.125-142.

Besley, T., 2015. Law, regulation, and the business climate: The nature and influence of the World Bank Doing Business project. The Journal of Economic Perspectives, 29(3), pp.99-120.

Buckley, P.J., 2016. The contribution of internalisation theory to international business: New realities and unanswered questions. Journal of World Business, 51(1), pp.74-82.

Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014. International business. London: Pearson.

Doloreux, D. and Laperriere, A., 2014. Internationalisation and innovation in the knowledge-intensive business services. Service Business, 8(4), pp.635-657.

Evers, N., Kuivalainen, O. and Andersson, S., 2015. Industry Factors Influencing International New Ventures’ Internationalisation Processes. The Rise of Multinationals from Emerging Economies, 2(1), pp. 226-242.

Gammeltoft, P. and Kokko, A., 2013. Introduction: Outward foreign direct investment from emerging economies and national development strategies: three regimes. International Journal of Technological Learning, Innovation and Development, 6(2), pp.1-20.

Johanson, J. and Mattsson, L.G., 2015. Internationalisation in industrial systems—a network approach. London: Palgrave Macmillan.

Kauppinen, A. and Juho, A., 2012. Internationalisation of SMEs from the perspective of social learning theory. Journal of International Entrepreneurship, 10(3), pp.200-231.

Lynn Childs, M. and Jin, B., 2014. Is Uppsala model valid to fashion retailers? An analysis from internationalisation patterns of fast fashion retailers. Journal of Fashion Marketing and Management, 18(1), pp.36-51.

Reuwer, T., Jansen, S. and Brinkkemper, S., 2013. Key factors in the internationalisation process of SMEs exporting business software as a service. International Journal of Business Information Systems, 12(2), pp.140-162.

Ribau, C.P., Moreira, A.C. and Raposo, M., 2015. Internationalisation of the firm theories: a schematic synthesis. International Journal of Business and Globalisation, 15(4), pp.528-554.

Wach, K. and Wehrman, C., 2014. Entrepreneurship in International Business: International Entrepreneurship as the Intersection of Two Fields. International Entrepreneurship and Corporate Growth in Visegrad Countries, 1(2), pp.9-22.

Xiaomi, 2016. About us. [Online] Available at: < http://www.mi.com/en/about/> [Accessed 25 May, 2016].