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Xiaomi SWOT Analysis / Matrix
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SWOT analysis is a vital strategic planning tool that can be used by Xiaomi managers to do a situational analysis of the organization . It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Xiaomi is facing in its current business environment.
The Xiaomi is one of the leading companies in its industry. Xiaomi maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Xiaomi to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The main purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Xiaomi strengths, and eradicate its weaknesses.
Step by Step Guide to Xiaomi SWOT Analysis
Strengths of Xiaomi – Internal Strategic Factors
As one of the leading organizations in its industry, Xiaomi has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Xiaomi are –
- Successful track record of developing new products – product innovation.
- Highly successful at Go To Market strategies for its products.
- Strong Free Cash Flow – Xiaomi has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Highly skilled workforce through successful training and learning programs. Xiaomi is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- Strong Brand Portfolio – Over the years Xiaomi has invested in building a strong brand portfolio. The SWOT analysis of Xiaomi just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
Weakness of Xiaomi – Internal Strategic Factors
Weakness are the areas where Xiaomi can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
- Limited success outside core business – Even though Xiaomi is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Xiaomi is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Xiaomi
Opportunities for Xiaomi – External Strategic Factors
- The market development will lead to dilution of competitor’s advantage and enable Xiaomi to increase its competitiveness compare to the other competitors.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Xiaomi to increase its profitability.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Xiaomi to capture new customers and increase its market share.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Xiaomi to drive home its advantage in new technology and gain market share in the new product category.
- New trends in the consumer behavior can open up new market for the Xiaomi . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- The new technology provides an opportunity to Xiaomi to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Government green drive also opens an opportunity for procurement of Xiaomi products by the state as well as federal government contractors.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Xiaomi. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Threats Xiaomi Facing - External Strategic Factors
- Imitation of the counterfeit and low quality product is also a threat to Xiaomi’s product especially in the emerging markets and low income markets.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
- Liability laws in different countries are different and Xiaomi may be exposed to various liability claims given change in policies in those markets.
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
Limitations of SWOT Analysis for Xiaomi
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Xiaomi
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Xiaomi
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Xiaomi managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Xiaomi
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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