Xiaomi Porters Five Forces and BCG Matrix Analysis 2018

By: Prudence K Magezi

Abstract

Xiaomi has not been performing well since 2016, falling from top position in the Chinese smartphone market in 2015 to number 5 in 2017. Things are however beginning to look up for Xiaomi. The company’s market share picked up in the first quarter of 2018, rising to 13% from 8% in 2017. Using Porters five forces and BCG matrix or growth share analysis, this report looks at how the five competitive forces – buyer power, supplier power, threat of entry, threat of substitutes and rivalry between existing smartphone firms have shaped the structure of the Chinese smartphone industry. The report also uses the BCG/growth share matrix to look at some “cash” generators and “star” product categories Xiaomi can further invest in as well as possible “dogs” the company should divest as a way of rebranding and repositioning itself after a tumultuous 2016 and 2017 period.

Analyse Xiaomi in China's smartphone industry using Porters five forces and BCG matrix 2018

See Xiaomi Pestle and Swot 2017.
See Huawei Porters five forces 2018.

2.0 Xiaomi Porters Five Forces

2.1 Bargaining power of buyers

The bargaining power of the buyer is very high due to the stiff competition in China’s smart phone market. With the all major players including competing in the Chinese smartphone market, the smartphone market of China is so saturated that buyers have got lots of choice both from the low end and high end of the market which has resulted in sluggish growth in the Chinese smartphone market. While Xiaomi has managed to increase sales in 2018 because of its affordable prices putting it ahead of Apple which is now in fifth, its focus on low end low margin phones means its profits are extremely lower than Apple which still controls 80% of the premium end of the smartphone market in China (Dunn 2017).

2.2 Bargaining power of suppliers

The bargaining power of Xiaomi’s suppliers is high due to the technical nature of the components that go into smartphone making. The company has created partnerships with suppliers like Qualcomm which has given further credibility to its supply chain guaranteeing a continued supply of high quality products but this only makes such suppliers powerful (Elementum News 2018).

2.3 Threat of substitutes

Substitutes are referred to as products that offer similar benefits to the industry’s product. In this case, threats of substitutes can include landlines, satellite phones, pay phones and fax machines which are of late considered old fashioned in comparison to smart phones. The threat of substitutes for smart phones is very low which is an advantage for companies like Xiaomi as more people are relying on smart phones abandoning the use of old technology.