XiaoMi
The report was conducted to analyze from marketing strategies perspective why Axiom has made such a big success In smart phone business since It was founded In 201, and to make some recommendations for Its further success. The methods used in the report include external analysis, internal analysis and analysis of strategic outputs.
In addition, a survey which can be found in Appendix part was conducted in a focus group to help on the analysis.
The results from the analysis tell that Axiom has attracted a large number of very loyal customers by very accurate segment target positioning, establish very concise brand Image with very user friendly II system, high performance hardware and very efficient on-line selling channel. On the other hand, more and more powerful bargaining power from Its suppliers, heavy dependency on single marketing channel and difficulties In establishing technical differentiation are the major threat or weaknesses Axiom is facing. Axiom has become a very successful smart phone producer and seller.
It created a honeymoon in the market and now is the paradigm many market players try to copy. Therefore, to overcome its weaknesses and tackle the threats and to gain sustainable development of business, in the report, the following recommends have been discussed: 0 Enhancing Internal Control to Minimize the Risk of Customer Personal Data Leakage 0 Forming Alliance with Local Retail Operators/Distributors 0 Well Diversified Product Lines C] Business development In oversea market 2.
Company Overview Axiom is a Chinese mobile phone company founded by Lei Junk in 2010.
MI phone was the first Smartened Axiom Tech developed and launched to market in September 2011. The company also developed MIMI, a custom firmware for mobile phones, based on Android system.
Axiom sells most smartness online, in limited quantities and by batch to batch. Pursuant to the founder of Naomi, Lei Junk, the company is focusing on long-term moneymaking potential among Mi owners who watch, shop and surf on their handsets, In other words, they focus on the future Internet business, not MI sales . The company Is currently valuated at over STUDIOS billion and has over 3,000 employees . Just for fans” Is the slogan of Slalom as every step of the way Is led by Axiom’s hardcore fans . Slalom constantly refine and enhance what makes the best user experience possible .
Our action learning project wall Touts on Slalom phones – a null quality Ana performance Narrow evolves. 3. Strategic Analysis – Internal Analysis 3. 1 Determinants of Strategic Options Strategic Strengths: 3. 1.
1 Innovative Target Customers Instead of focusing on the mass smartened customers, Axiom choose to target on those users that are fanatical about mobile devices, tend to be opinion leaders and like to suggest to their friends.
Like Axiom’s co-founder and president, Bin Line said “Those users like the software, they like the experience, they like how they get onto he internet and browse the web, how they download the Pass… “6 With good hardware and software, as well as customer-focused services, Axiom has successfully built up a group of loyal fans.
Axiom provides a platform to interact with these loyal fans every week, embraced their user feedbacks and upgrade their systems, handset and software accordingly. Such interaction successfully brought Axiom more fans and built “word of mouth” through those loyal early adopters.
With zero advertising cost, these loyal fans helped to advertise for Axiom for free. 3. 1. 2 Innovative Supply Chain Strategy Axiom is famous for its innovative supply chain strategy, which is “zero inventory cost, e-commerce, and zero marketing cost”.
By collecting customer order first and manufacturing the corresponding number of handsets accordingly, Axiom is able to meet the zero-inventory-cost need. Also, instead of working with operators and distributors, Axiom use its official website as the main sales channel for all its products.
This zero-cost sales channel enables Axiom to sell high-end smartness at a relatively affordable price. Also, Axiom use the “hungry marketing” strategy, by limiting the supply of Axiom andantes to attract more attention, and seek to work up a fever for a product that becomes contagious. There is no other way to purchase Axiom handsets except its online website, which resulted in more people rushing to Join the line-up because they are afraid of failing to get one.
Strategic Weaknesses and Constraints: 3. 1. Supplier Bargaining Power Since Axiom is still a small scale company as compared to those large players in the current smartened market, it is difficult for Axiom to bargain with those large suppliers for a lower price. Also, since Axiom use the same suppliers and Memos with hose large smartened players like Samsung and Apple, the raw materials and delivery time will normally be arranged after those large players’ schedule, resulting in lack of product materials or delivery delay.
With current increasing heat of Axiom smartened, can the company still be able to meet its future market demand? . 1. 4 “Hungry Marketing” Strategy some meal also craterlike Axiom Xi’s “angry marketing” strategy, saying Tanat Slalom use this strategy to deliberately limit supply in order to spur high anticipation and widespread hype from potential customers. Also, this marketing strategy is easy to be imitated. No matter the company is deliberately to do this strategy or not, in the long run, some customers may be disgusted with such strategy and turn to other similar smartened providers with more supply. 3.
Performance Analysis 0 Market Share China Domestic Smartened Market Share 2012 & 2013 2012 2013 O sales Total shipments of MI 2/AS/AAA were over 10 million units. That makes Axiom can realize volume economy. The selling price of Axiom smartened was more stable in the product life cycle. This also helps Axiom to make a lot of money. But star product MI 3 was delayed because of lacking Qualm’s platform. Achieve the volume economy also means Axiom will have more barging power when facing the upstream component factory.
According to the public announcement from Axiom, they will hit MM in 2014 and MM in 2015. 1.
More shipment will bring more profit due to the following reasons: a. Bigger volume will improve the brand reorganization of Axiom, which will improve the bargain power in front of operators like Apple and get the subsidy from operators. B. Bigger volume will support Axiom has the stronger position in front of suppliers, lower price, better payment terms and higher priority.
C. More income room the accessory sales, which has the much higher margin than mobile phone. D. As the Internet company, more users of MILD means more traffics through Axiom, it is the most important to in the trend of TOT 2.
However, the aggressive extension will also take Axiom in the big challenges.
E. First challenge is the production capability, they are using out sourcing Memos to do the production. In 2013, the capacity was KICK per week, if they want to reach MM in 2014 and MM in 201 5, the capacity will be requested from KICK to KICK per week in 2014 and MM per week in 2015. F. Second challenge is the components supply. Due to the market demand changes dynamically, and the lead time from components suppliers is beyond the demand changes.
It will request Axiom from the “O” stock to Udder setup. Cost will De Increased Owe to ten Udder preparation. G. Tater-sales service is still the sword hanging on head of Axiom. If Axioms could not solve this problem in a good way, the shipment increase will be a disaster for Axiom.
Another risk is in their small R team for mobile phone design. Usually, one project needs around 20-30 engineers taking 6 months.
Currently, Axiom has around 200 engineers focus on mobile phone design, and assuming the single project could sales MM, Axiom’s capacity is MM to MM per year, and this forecast will allow little failure for each project. I. The last is the legal problem.
As Mr.. LEI Junk said, to reach the target in 2014 and 201 5, they must extend the biz to out of China. It will request Axiom to be ready in the IP indemnification from the IP holders like Qualm, Ericson, Monika..
. But their competitors have done that with huge payment. Leno acquired Motto using 2. B IIS$ to bypass the IP barrier; Hawaii and ZIT used their own IP with big money to get the cross license from main IP holders; Accolade signed the GAP with Ericson and Qualm with huge payment. Considering no protocol stack related IP in 26, 36 and 46, Axiom needs to pay a significant number if they want to sell the phone out of China. 4.
Strategic Analysis – External Analysis 4. 1 Market Analysis Over the previous years, smartened shipment in China has almost quadrupled, making the country the world’s largest smartened market. Research firm DC predicts demand in the domestic China market to reach 422 million units in 2014, a 22. % increase from 2013, with 278 million units sold by China-based smartened vendors. The continued expansion by international vendors will push up their sales to almost 144 million units, accounting for nearly 4% growth from 2013. But the growth rate in the Chinese market is expected to slow, to about 10% beyond 2015.
Even China has nearly 1 billion mobile phone users and only 40% of them are currently using smartness, the remaining hundreds of millions of people who errantly use traditional feature phones are unlike to switch to smart phones quite quickly, mainly due to the additional costs of phone and month bills.
Still, the sheer size of the Chinese market means replacement demand from current smartened users alone is too great to ignore. Cost structure For high-end smart phones, the material costs are still much lower than the retail price. For ‘phone as with average sales price of USED 650-700, the component cost hovers around Just 200 USED, explaining the product’s high margin for Apple. For lower-end modules, the vendors will use cheaper materials, so can reduce the impotent cost down to around 40 to 80 USED.
Furthermore, the size of purchase contract also weighs on the vendor’s bargaining power with upstream component suppliers, Ana ten game Tabors ten players Walt large-scale shipments Entry barrier 0 For lower-end modules: the barrier is quite low, considering that there are plenty of Memos, component suppliers and engineering agencies.
0 For higher-end modules: based on the current market landscape, it is hard for new comers to challenge the global dominance of leading players’ that enjoys high technology sophistication and brand awareness.
Key success factors of smartened vendors in China
- Brand recognition Foreign brands such as Apple have the strongest brand awareness among Chinese consumers, followed by leading domestic ones like Leno, Hawaii, Maize and Axiom. High level of user stickiness can help product promotion and increase sales volume.
- Technology innovation, both for hardware and software Apple is the best among peers in terms of delivering innovative upgrades on its seamlessly-attached software and hardware. Now Samsung and Axiom are also investing heavily on developing their own features based on the open-sourced Android system.
- Distribution network in the country These years the distribution channels are increased lean to the carriers’ offering bundled with monthly plan, especially for some domestic vendors.
Hawaii and Leno attributed around 40% of their domestic shipment to the carriers’ sales channel.
- Supply chain management Similar to PC’s, smart phones require numerous key components from LCD panel, CAP], JPG, camera to AND chips; in addition, nowadays most vendors outsource their production to Memos. Therefore, the successful management of entire supply Hahn becomes a crucial factor for the mass production.
2 Environmental Analysis 4. 2.
1 Government/Economic Trends Pursuant to the “12th Five-Year Plan” endorsed by the National People’s Congress on 14 March 2011, a nation’s course has been set for the years of 2011 – 201 5, which aims at developing seven priority industries. “New IT” is one of the seven priority industries which involves broadband networks, internet security infrastructure and network convergence . On 12 October 2007, the Central Government cancelled and adjusted the administration approval items, which cancelled the prior approval acquirement of smartened.
In this regard, new smartness bearing each own brand can be sold publicly once it has obtained the “Network Access License”. In the long run, the Plan also emphasizes on the “Resources Sharing” in terms of internet Understructures wanly Nell Deescalate ten excellent online shopping business through smartened. 36/46 Internet advancement Ana Nevertheless, it is also note-worthy that the enforcement of internet security regulations, counterfeits and infringing products must be relied on the public awareness and self-discipline, which are yet to be improved in China.
4. 2 Technology/limitation Trends The major development on smartened technology includes much higher performance in terms of speed and memory capacity at lower costs which would be a big plus to smartened industry. Apparently, it is a global trend that smartness are expected to be continuously innovating through multiple fanciful applications which could appeal for the rapid-changing customers’ tastes. Establishing and promoting smartened provider’s own e-platform for upgrading, communicating and global online purchasing tailor made for users would be certain relevant moves in this regard.
To be aligned with such consistently upgrading technology, R&D and management team of smartened providers should be one of the core business strategies for smartened industry. Therefore, it is beneficial for smartened providers to view itself as a high-end, open-platform smart phone, catering to the younger crowd, white-collar workers and those whose are keen on upgrading their phones .
However, the integration of online and offline channels are still essential for smartened customers, which may restrict the penetration of smartened providers which solely adopts the online e-commerce. 2. 3 Customer Trends The trend of demographic expansion provides a broader base for smartened industry development in China. Following this trend, people look for a fast and effective sales model which takes advantage of e-commerce, low-cost and fast service . More importantly, it is an obvious trend that smartened users are expecting for the feasibility for them to design their very own smartness’ operating systems. Hence, the customers are urging for more features to their smartness in addition to almost all the functions found on a smartened , I.
. Customization. In eight of the foregoing, we could foresee that one of the key success factors of smartened providers is to define its specific and clear market positioning by way of making users fully participated in the creation of their operating system and smartness, valued their ideas and contributions at the lower prices. 4. 2.
4 Ecological Trend – Being Green By 2017, it is estimated that 400 million green cell phones, or those made with at least 50% recycled content, will be shipped for sale worldwide .
The ecological protection trend requires companies to meet standards set by LU Environment, which measures environmentally sensitive materials, manufacturing and operation, health and environment, packaging and provides customers with the channel to return smartness upon end of its useful life and to take part in environmentally safe disposal or recycling, which are crucial for eliminating toxic substances in a landfill.
Hollowing tens trend, smartness provokers are pleased to offer CEO-Trendy smartness with toxic-free retardants, extended warranty period and coverage to customers and provide a common e-platform for downloading applications, music, died, digital graphics, online games which could help reduce wastage of packaging materials and logistic transportation. 4. 3 Customer Analysis In this section, we use information from public research reports and results of our qualitative research, a survey.
However, we will not demonstrate the detailed percentage and statistics in the following paper since the sample size is not large enough to bring us accurate conclusion.
Customer Segmentation “Just for fans” is the slogan of Axiom. The company gained popularity by identifying a niche group of smartened “power-users” or so-called “cellophane super fans”. These nonusers are constantly tweaking their phones for richer features and the newest experience. Axiom phones are tailored for this particular group of consumers.
From the very beginning of set-up of the company, Axiom focuses on the group of people who are young, high educated and who care about products’ functionality and price efficiency. Most of the Axiom customers are from 16 to 28 years old who have college or above education background.
They are within the humble or medium income levels, and they spend lot of spare time on playing games, listening music and interacting with friends on social medias via their smartness. However, there is a group of people who is attracted by Apple or Samsung products but cannot afford to buy one.
Axiom’s ambition is to fill this gap by offering devices with affordable price. Our survey tells the true that Axiom’s customers pay much more attention to products’ functionality, price and appearance, and most of them are sales persons or companies’ clerks. They’re like Apple Bonbons and they’re a big part of what Journalists have dubbed the “cult of Axiom”.
They’re energetic, they have an active online community and they show up in the thousands for high-profile media events. Motivations
In our survey group, when we asked the users why did they switch to buy their first Axiom, some people told us that because Axiom could meet their requirements for high processing speed on games or other online activities while the company provides a platform like Apple does, and some of the people were attracted by its distribution and promotion pattern or Just influenced by their peers. The early adopters were those price sensitive persons while the followers were not as sensitive as them. Other phones are Just phones, but a Axiom phone is very human-friendly,” said one of our interviewees, 31 . L preferred not to use Apple because I didn’t want my phone to be a luxury product, it’s Just a phone,” said another interviewees.
Many analyzers supposed that most Axiom users would switch to use other high-end smartness when they are getting rich. However, we found that more than 60% of the users have bought or are willing to buy their second Axiom smartened while only 10% have expressed desire to quit Axiom and switch to use premium device like powerful MILD system and its APS.
As compared with the ‘tune, MILD is much more user friendly and opened for feedbacks and criticisms, furthermore, most of the APS or Axiom are free for downloading. However, the major reason for those who want to change their Axiom is stability of the device and the system. Unmet Needs 2 key issues become main reasons leading to customers’ satisfaction.
0 Production volume Production volume is the bottleneck of business expansion during the beginning stage of the company. Potential customers were unhappy when they cannot successfully register to buy.
Moreover, the “Hungry Marketing” mode adopted by Axiom in some cases produced scalpers in cities then lifted products’ unit price. Quality of productions and integration between devices According to most of the users, hardware and software used by Axiom are not as stable as high-end brands, and connections between devices are not as integrated and friendly as Apple’s products. As we put before, these are also the main drivers for customers to quit Axiom. 4.
4 Competitor Analysis There are many players in smart phone arena.
