1

Sylhet International University

Assignment
on
Best Cost Strategy of Xiaomi Smartphone
Course Code: MGT-601
Course Title: Strategic Management & Cases

Submitted To:
Professor Md. Ruhul Amin
Dean
Sylhet International University

Submitted By:
Gourab Mitra
ID: 20101
Semester: 1-2, MBA (1 year)
Major: Finance & Banking
Sylhet International University

Date: October 21, 2016

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Table of Content
Particular

Page No.

Introduction

Company Profile

Competitive Strategy

Best Cost Strategy

Why Best Cost Strategy

Competitive Strategy of Xiaomi

Assessing Competitive Strategy

Xiaomi Mi 5 vs Samsung Galaxy S7

8-9

Recommendation

Conclusion

Introduction:
Nowadays each industry has to face competitive environment. The smartphone manufacturing
industry has become one of the most competitive industry of the world too. Therefore, the
fundamental way to take a competitive advantage and survive in this competition is the
maintenance of profit margin at an appreciable level keeping the customer base growing.
Xiaomi has taken only four years to become one of the largest smartphone manufacturing
company. This study is going to explore the reasons behind this huge success of Xiaomi and
their competitive strategy.

Xiaomi founded by ex-CEO Lei Jun of Kingsoft. The core

competitive strategy followed by Xiaomi is Best cost strategy. The ultimate goal of the bestcost strategy is to keep costs and prices lower than other providers of similar products with
comparable quality and features.

Company Profile:
Xiaomi was founded in April 2010 by ex- Kingsoft CEO Lei Jun, as a software company
creating a new custom ROM based on Googles Android. Their aim was to provide additional
functionality that Android had yet to offer and an easy to use user interface.
In 2011 Xiaomi announced the Mi One phone. Xiaomi was now not only making its own
software, but its own hardware too. The Mi One was a top spec phone with a great price way
ahead of its time, this has remained Xiaomis philosophy from day one.
In 2012 Xiaomi shipped a total of 7.2m smartphones and in 2013 Xiaomi shipped a total of
18.7m smartphones and even shipped more than Apple in one quarter. In the first quarter of 2014
Xiaomi had already shipped over 11m smartphones, more than they sold in the entirety of 2012
and just over half the 2013 sales numbers. Demand continues to increase due to the high
specification hardware of their devices and the price they sell their products at international
markets such as Hong Kong, Taiwan and Singapore where Xiaomi are also officially available
have seen similar demand to China. This continued expansion out of China also prompted the
high-profile hire of Hugo Barra (ex-Google android executive) whose job it is to discover new
markets.
In April 2015 Xiaomi announced it would make its Mi devices available through two of India's
major e-commerce sites and through offline retailers for the first time. On 23 April 2015, Xiaomi
CEO Lei Jun and VP Hugo Barra came together to announce a new telephone named Mi 4i in
India, the first phone to be launched in India before any other country. Mi Band was launched in
the same event. On 30 June 2015, Xiaomi announced it expansion into Brazil with the launch of
locally manufactured Redmi 2 and the first time the company sells a smartphone outside Asia.

Competitive strategies:
According to Thompson and A.J. Strickland in Strategic Management there are five competitive
strategies you should consider:
A low-cost leader strategy: striving to be the overall low-cost provider of a product or
service that appeal to a broad range of customers.
A broad differentiation strategy: seeking to differentiate the companys product
offerings from rivals in ways that will appeal to a broad range of buyers
A best-cost provider strategy: giving customers more value for the money by
emphasizing both low cost and upscale difference, the goal being to keep costs and prices
lower than those of other providers of comparable quality and features (a couple of
examples are the Honda and Toyota car companies with customer satisfaction ratings that
rival those of much more expensive cars).
A focused, or market-niche, strategy based on lower cost: concentrating on a narrow
buyer segment and outcompeting rivals on the basis of lower cost .
A focused, or market-niche, strategy based on differentiation: offering niche members
a product or service customized to their tastes and requirements

Best-cost Strategy:
Some organizations compete based on offering either low prices or some unique features. Some
organizations want both to be effective in their strategy. Firms that offer products or services in
low prices and also offer substantial differentiation are said to be following a best-cost strategy.
This strategy is quite difficult to execute as creating some unique features and then
communicating the usefulness of these features generally raises the costs of doing business.
Product development and advertising are expensive. However, organizations that are able to
manage and implement an effective best-cost strategy attain success beyond the ordinary. A bestcost strategy can let the organization to adopt a business model with very low fixed costs and
overhead in comparison to the costs its competitors are incurring.

Why Best-cost Strategy:

Best cost strategy is like castle moat that protect your business from the competition.
It is competitive advantages that help you defend your position.
One of the most well-known competitive advantages people talk about is low cost with
good quality.
If you can be cheaper with same features than other companies, then you can win.
Only low cost gets success in the short term. But it wont get you very far.

Competitive Strategy of Xiaomi:

Xiaomis key strategy is to produce good quality handsets at a lower price range (Best cost
strategy), which has been helping them to stay firmly on the mobile map so far.
Apple iPhone, Samsung or Sony smartphones prices cannot be compared with Xiaomi
smartphones. We can easily see most Xiaomi products have pretty affordable price tags. Well,
Xiaomi phones may be cheap, at least much cheaper than Apples or Samsungs machines, but
they are not cheap at all in terms of specifications. Xiaomi seems to be quite ambitious when
wanting to compete with others not only on price but also on specs. However, somehow they
made it. Their smartphones usually have high quality screens and reasonable batteries. Besides,
the company has developed their own OS called MIUI based on Android, then the products can
sport both new interesting features found on an Android machine and special ones made for
Xiaomi devices only.
We cannot deny that Xiaomi design often reminds us of Apple at first. Nevertheless, as time
passes by, the phones look more beautiful, premium and special in their own way.

Assessing Competitive Advantages of Xiaomi:

Xiaomi achieving a favorable or superior business position, which means achieving competitive
advantage because of their high quality smartphones at a reasonable price.
In the present time Xiaomi brand is definitely no stranger outside of Chinese borders. Founded in
2011 by local entrepreneur Lei Jun, Xiaomi is not just another smartphone brand. According to
IDC (International Data Corporation) in October 2014 Xiaomi was the third largest smartphone
maker in the world, following Samsung and Apple and followed by Lenovo and LG. Xiaomi
became the largest smartphone vendor in China in 2014, having overtaken Samsung, according
to an IDC report.

Comparison between Xiaomi Mi5 & Samsung Galaxy S7:

Feature

Xiaomi Mi5

Samsung Galaxy S7

Technology

GSM / CDMA / HSPA / EVDO /

LTE
2016, February
Released 2016, April
129 g / 139 g
Corning Gorilla Glass 4 back
panel
Dual SIM (Nano-SIM, dual
stand-by)

GSM / HSPA / LTE

Announced
Available
Weight
Build
SIM

Display Type
Size
Resolution
Multitouch
Protection
OS
Chipset
CPU
GPU
Memory
Camera Primary

Camera Secondary
Alert types
Loudspeaker
Bluetooth
Battery
Fast Charging
Price in Bangladesh

2016, February
Released 2016, March
152 g
Corning Gorilla Glass 4 back
panel
Single SIM (Nano-SIM) or
Dual SIM (Nano-SIM, dual
stand-by)
Super AMOLED capacitive
touchscreen, 16M colors
5.1 inches (~72.1% screen-tobody ratio)
1440 x 2560 pixels
Yes
Corning Gorilla Glass 4
Android OS, v6.0
Qualcomm MSM8996
Snapdragon 820
Octa-core
Adreno 530
32/64 GB, 4 GB RAM

IPS LCD capacitive touchscreen,

16M colors
5.15 inches (~73.1% screen-tobody ratio)
1080 x 1920 pixels
Yes
Corning Gorilla Glass 4
Android OS, v6.0 (Marshmallow)
Qualcomm MSM8996
Snapdragon 820
Quad-core
Adreno 530
128 GB, 4 GB RAM Pro
edition
16 MP, f/2.0, phase detection
12 MP, f/1.7, 26mm, phase
autofocus, OIS (4-axis), dualdetection autofocus, OIS, LED
LED (dual tone) flash
flash
4 Mp
5 MP
Vibration; MP3, WAV ringtones
Vibration; MP3, WAV
ringtones
Yes
Yes
Yes
Yes
Non-removable Li-Po 3000 mAh
Non-removable Li-Po 3000
battery
mAh battery
83% in 30 min
60% in 30 min
39,500 tk
69,000 tk

Samsung Galaxy S7 is better than Xiaomi Mi5 in very few features. But price difference is so
much between Xiaomi Mi5 & Samsung Galaxy S7. So according to the price & features Xiaomi
Mi5 is better than Samsung Galaxy S7.

Recommendation:
Xiaomi are not available in the vast market of UK and US where, Apple and Samsung are
playing leading roles in the smartphone markets. So they should improve their
distribution channel.
Should improve their advertising system. Because they are making very few
advertisement.
Bangladesh is not a very small market place for smartphone. Almost every people of our
country using smartphone. So they should directly come to our country.

Conclusion:
Xiaomi is a big name in the Chinese and international smartphone industry. Their new product
usually draws much peoples attention thanks to its good price and specifications. Despite still
being young on the market, Xiaomi is able to be listed in consumers top options. Good job,
Xiaomi! Hope that they will develop more in the future.