Global Marketing Plan: Xiaomi Brazil

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Assessment Submission Form
Student Names Benjamin Butler 12735451
Shona Dunleavy 12354811
Abubakr Elsayed 11380031
Colm Egan 11306701
Sinead Feely 12535707
Group Number
Word count:
Group number 5
Assessment Title Global Marketing Plan
Module Code MKT30080
Module Title Global Marketing
Lecturer Mahabubur Rahman
Date Submitted 20/04/2015
Date Received
Grade/Mark
Declaration of Authorship
We declare that all material in this assessment is our own work except where there is clear
acknowledgement and appropriate reference to the work of others.
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Contents
....................................................................................................................................................0
Global Marketing Plan Xiaomi Brazil .......................................................................................0
Assessment Submission Form ...................................................................................................1
Xiaomi & The Product Overview..............................................................................................3
Analysis of the Brazilian Market ...............................................................................................4
Analysis of competitive environment in Brazil .........................................................................4
Analysis of The Political & Legal Environment in Brazil.........................................................5
Analysis of The Economic Environment in Brazil....................................................................7
Analysis of Cultural Environment in Brazil ..............................................................................8
Entry Strategy to Brazil ...........................................................................................................10
Marketing Mix .........................................................................................................................11
A. Product Strategy........................................................................................................11
I. Brand Architecture........................................................................................................11
I. Product ......................................................................................................................11
II. PLC – Microeconomic Approach..........................................................................12
Parallel Importing.............................................................................................................12
III. Packaging...............................................................................................................12
IV. After Service..........................................................................................................12
A. Marketing Channel....................................................................................................13
B. Promotion Strategy....................................................................................................14
C. Pricing Strategy.........................................................................................................16
Major Competitor’s pricing strategies..............................................................................17
I. Samsung pricing strategy ..........................................................................................17
II. Apples pricing strategy..........................................................................................18
III. Motorola Pricing Strategy .....................................................................................18
Conclusion ...............................................................................................................................18
Appendix..................................................................................................................................19
Bibliography ............................................................................................................................25

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Xiaomi & The Product Overview
Xiaomi is one of China’s largest consumer electronics companies who primarily manufacture
and sell smartphones. Xiaomi was founded in 2010 by serial entrepreneur Lei Jun. “Xiaomi
has the software engineering power of a Google, the design ambitions of an Apple and an
ecommerce platform and customer service focus of an Amazon”-Hugo Barra, VP of Xiaomi
International (Kumar, 2014)
Xiaomi is growing at a rapid rate. In less than five years, the company has grown from a
start-up to a global player in the smartphone market. In 2014, Xiaomi sold over 61.12 million
handsets, a 227% increase on 2013 (Mick, J. 2015). It also launched products in Taiwan,
Hong Kong, Singapore, Malaysia, Philippines, India and Indonesia. (Xiaomi, 2015). In the
last quarter in 2015 it was noted that Xiaomi sold more of its Mi4 device than Apple’s iPhone
6. (TechCrunch, 2015)
Buyers of this product are looking for fast pace high tech devices and Xiaomi is capable of
providing such products at lower prices than their competitors. Buyers of this product are cost
conscious while also seeking value for their money and expect a high quality product.
Xiaomi has a 24-months product life cycle; meaning products like the Xiaomi Mi4 will be
available to the market for about 2 years before a new product comes out to replace it. This
keeps Xiaomi products development costs low. Unlike companies like Samsung, who come
up with new devices every month or so, Xiaomi does not (Sucipto, 2014). The Mi4 was
released to the Chinese market in July of 2014 and is in the early stages of its product
lifecycle.
Coupled with Xiaomi’s renowned User Interface and hardware specifications, Xiaomi is a
strong competitor in the premium smartphone market. The Mi4 bezel is very slim making the
experience of a 5” screen much more comfortable. The back panel is glossy plastic with a
variety of styles such as trendy bamboo. Xiaomi stacks Sony CMOS cameras. The rear
camera packs an impressive 13-megapixel. The Xiaomi sports a crisp-clear Sharp 5” inch IPS
LCD capacitive touchscreen screen with 1080 x 1920 pixel density. It is equipped with glove
and wet finger technology. Xiaomi Mi4 supports the latest hardware in the market. In regards
to speed and performance the Mi4 is equipped with Qualcomm latest CPU Snapdragon 801
2.5 GHz quad-core processor, Adreno 330 GPU and 3GB Ram. All this is backed with a
powerful battery of 3080 mAh, ensuring it can last a full day.

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Analysis of the Brazilian Market
We propose that Xiaomi bring their Mi4 product to Brazil. Brazil is the 5th largest country in
the world (85,148,772 sq. km), 5th most populous country (201m people) and 8th largest
economy ($2.33trn GDP). (New world Encyclopedia, 2015) According to the Brazilian
Internet Steering Committee, around 85 percent of Brazilians whom are aged 10 or over own
mobile phones, which is estimated to be around 143 million people. Smartphones represent
76 percent of all phones in Brazil (Mari, 2014)
The country’s burgeoning middle class is becoming an increasingly avid consumer of
smartphones. Akin to buyers in China potential consumers in Brazil are looking for high
quality products coupled with competitive prices. (Accenture, 2015)
Mobile penetration is upward of 132% and growing by about 7% annually (See FIG.A3)
(Buddecom, 2015). The price of smartphones in Brazil, mainly due to the high import tariffs
which are discussed later on, is still too high for the country’s socio economic environment.
As a result of this the Brazilian smartphone black market is booming which illustrates the
need for a product with the value proposition of the MI4 (Toor, 2013).
In Brazil, the proportion of purchases made from mobiles is still minimal, but Brazil seems
set to soon become the m-commerce pioneer in South America. Vendors and technology
developers are creating and designing inventive strategies and applications to meet the
challenge. Mobile shopping in Brazil is expected to skyrocket in the near future (See FIG.A1)
(Report Linker, 2015).
Analysis of competitive environment in Brazil
Prior to 2012, Brazil’s smartphone market applied a subsidised model structure. This meant
that network operators acquired phones from manufacturers and sold them to customers at a
lower price point. Subsidisation is very profitable for carriers, as long as customers agree to
sign a contract with the given carrier for a given length of time. The initial discount is
recuperated by the carrier before the end of the contract. Customers seldom complain about
this arrangement, given that unlocked smartphones are for most part too expensive to be paid
for up front. This is particularly true in price sensitive emerging markets. Furthermore,

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Brazil’s taxation on imported smartphones can add up to as much as 70%, creating an uneven
playing field for foreign smartphone vendors unless vendors manufacture locally (Bevins &
O'Brien, 2013). In 2012, Brazil’s Federal Public Ministry (MPF) stated that “forcing
consumers to sign up for a contract when they buy a mobile device and blocking said device
is characteristic of a tie-in sale, an unlawful practice in this country” (Heim, 2012). To
illustrate how this can harm foreign competition, in 2013 the Apple iPhone 6 starts at $1080
in Brazil as opposed to $649 in the US (Chao, 2015).
In China, Xiaomi already operate in an unsubsidised market, which is usually characterised
by higher level of competition, predominantly price competition. Much of Xiaomi’s success
is due to its unique low-cost business model which they have perfected, which has lead them
to become one of the top 5 smartphone vendors in the world in 5 years of their inception
(CCS Insight, 2014).
Presently the top 5 Competitors in the smartphone Brazilian market are Samsung (38.66%),
Motorola (20.79%), LG (13.08%), Apple (11.48%) and Nokia (6.28%) [See FIG.A5].
Motorola only recently achieved 2nd
place in the market due to their affordable mid-range
device Moto G, currently top selling smartphone device in Brazil priced at $260.
In Brazil the market is dominated by two Operating systems (OS) Android and iOS with
latter former almost operating as a monopoly. In July 2014 Android OS retained more than
80% of OS market share (StatCounter, 2015) [See Fig.A.6] This works in the favour of
Xiaomi as Mi User Interface (MIUI) is Android based. This leaves Xiaomi with a majority of
the market to contend for from the get go. For Industry analysis [See FIG.A7]
Analysis of The Political & Legal Environment in Brazil
Within the BRICS emerging markets, Brazil is ranked No. 2 in terms of political risk. Most of
the political risk in Brazil originates from political interference in the economy, due to a range
of regressive measures such as taxation on investment, to monetary policy related to the foreign
exchange rate (Property Casualty 360, 2015).
Brazil, a CRT-3 (Country risk tier) country, is the largest economy in Latin America. CRT-3
Country definition- a country with developing legal environment, legal system and business
environment with developing capital markets; developing insurance regulatory structure.

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(Ambest, 2015) Brazils risk profile has improved as the insurance regulatory environment has
bettered since 2008 and economic stability has been sustained over the last decade.
The new government led by Dilma Rouseff has been successful in dispatching plans to
eliminate poverty in Brazil. The government have pursued foreign policy through seeking
deeper ties with the US and EU. The Brazilian government is a deeply nationalistic authority
and has consistently prioritized local businesses. (IHS, 2015)
Brazil ranks 120th
out of 189 countries in the Ease of Doing Business Index. (Doing business,
2015)
Although Brazil has made considerable advances in reducing trade barriers, tariff rates continue
to be high and continue to favour locally produced products.
There are three taxes that account for the bulk of import costs: Import Duty, Industrialized
Product tax and Merchandise and Service Circulation Tax. (Export.gov, 2015)
The Import duty is a federally-mandated product specific tax levied on a Cost, Insurance, and
Freight basis. In most cases, Brazilian import duty rates range from 10% to 35%. (Export.gov,
2015)
The Industrialized Product Tax is assessed at the point of sale by the manufacturer/processor
in the case of domestically produced goods, and at the point of customs clearance in the case
of imports. (Export.gov, 2015) The Brazilian Government levies the IPI rate by determining
how necessary the product may be for the Brazilian end-user. Generally, the IPI tax rate ranges
from 0% to 15%. Brazilian exports are exempt from the IPI tax. (Export.gov, 2015)
The advertisement industry in Brazil is regulated by the Consumer Defence Code (CDC),
specific laws and CONAR (The National Council for Self-Regulation in Advertising). Articles
of the Consumer Defence Code create regulations of advertisements in Brazil in order to
safeguard consumers. Article 67 of the consumer defence code, establishes the protection
against misleading or abusive advertisement. Customers have the right to claim for anything
and everything that was promised. If what was proposed was not adhered to, then consumers
have the right to revoke the purchase and receive their payment back. Misleading/ abusive
advertisements are treated as a crime according to the CDC. (Mello, 2012) not to mention the
fact that all outdoor advertisements are illegal in Sao Paolo thanks to the ‘Clean City Law’
there (Goodson, 2012).

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Products must go through a conformity assessment which follows International Organization
for Standardization (ISO) guidelines. ISO ensure that products and services are safe, reliable
and of good quality. Conformity assessment includes test and calibration laboratories, product
certification bodies, accreditation bodies, inspection and verification units, quality system
registrars, and others. (ISO, 2015)
The Brazilian Consumer Protection Code makes it a necessity that product labelling administer
the buyer with precise and easily readable information such as the product’s quality, quantity,
composition, price, and risks to the consumer’s health and safety. Imported products are
required to bear a Portuguese translation of this information. (Export.gov, 2015)
Imported smartphones, tablets, and other electronics are subject to a 16 percent tariff. Foreign
technology companies can avoid tariffs and taxes by setting up manufacturing facilities in
Brazil. Steep taxes and import tariffs have sent prices skyward in Brazil. (Export.gov, 2015)
Analysis of The Economic Environment in Brazil
Brazil’s GDP in 2015 was $2245.67 Billion, making it the 7th
largest economy in the world and
the largest in South America (Trending Economics, 2015). Brazil became a designated member
of the BRIC countries in 2001 (O’Neill, 2001), given its stature as a large emerging market
economy, thanks to their large population and potentially strong export trade among other
things. During the presidency of Luiz Inácio Lula da Silva, from 2003-2011, Brazil had made
many improvements in situating its economy in a position to experience strong growth such as
ensuring inflation has fallen, reducing public debt and stabilising the economy (O’Neill, 2007).
However, much of this progress has been impeded in recent years by da Silva’s successor,
President Dilma Rousseff. Despite her government’s prioritisation of small businesses, her
term in office has seen inflation rise and her approval rating fall in the aftermath of the large
corruption scandal involving state-owned energy company Petrobras. (Fontevecchia, 2015)
This political turmoil has had a significant effect on the Brazilian Real, which slumped to its
lowest level in 12 years in March 2015, given concerns over the lack of fiscal reforms in Brazil.
As a result its immediate growth trend is expected to be sluggish, and the start of 2015 saw the
median estimate for growth fall to 0.13% from 0.55% a month earlier (Forbes, 2015).

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Brazil also has a history of high inequality. This may have been hampering growth in the past,
as high inequality is thought to be economically inefficient as it gives people lower incentives
to save and lower motivation to work hard (Stiglitz, 2012). However, this appears to be
changing in Brazil, as over the last ten years Brazil has put measures in place to improve health
and education standards for all, thus improving the quality of life for the poor and hopefully
reducing inequality in future (The World Bank, 2004). As prominent economists such as Joseph
Stiglitz and more recently Thomas Piketty have argued persuasively (Piketty, 2014), such a
reduction in poverty should improve Brazil’s economic strength.
Given this impending reduction in poverty, and despite the negative short term conditions,
Brazil is a country which presents an attractive market for Xiaomi economically. However,
even short term there are positive points for Brazil. Last year the OECD pointed out that the
global recession was easing up and that this would have a positive impact on Brazil’s
economy moving forward, and even predicted a 5.7% level of growth for Brazil in 2015
(Global Trader, 2014).
However, the jewel in Brazil’s crown remains their long term growth predictions which are
overwhelmingly positive, and while they were the 7th
largest economy (by purchasing power
parity) in 2011, this is expected to increase to 6th
by 2030 and 4th
by 2050 (PwC, 2015), growth
predominantly built on Brazil’s large, young and increasingly well educated population.
Indeed, 2011 saw Brazil spend 19% of GDP on education, considerably more than the OECD
average of 13%. This increase in spending is reasonable given that 25% of Brazil’s population
is between ages 10 and 24, higher than both Russia and China (Population Reference Bureau,
2013). Brazil can expect this young educated population to come into its own in future
generations, and propel Brazil forward.
Analysis of Cultural Environment in Brazil
Culture is defined as shared motives, values, beliefs, identities, and interpretations or meanings
of significant events that result from common experiences of members of collectives that are
transmitted across generation.” (House et al, 2004)
Culture has a huge influence on business practises, especially when looking to expand into an
unknown market. The different business etiquettes employed by the Brazilian and Asian

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markets can be attributed to variances in cultural and historical development (Hofstede, 1984).
The Brazilian market is the 7th largest economy in the world with a population made up of a
mix of ethnicities and races, although nearly 100% of the population speak Portuguese.
When comparing the cultures of the markets in which Xiaomi currently operates, largely in the
East, to the proposed market of Brazil several cultural environmental differences arise.
- Language differences are crucial when launching products in new markets. It can cause issues
in designing marketing campaigns and product names and labels. We believe that Xiaomi may
need to rebrand the company name to ‘Mi’, this would help locals with the pronunciation of
the brand name. They will need to be extremely careful when translating and designing
marketing campaigns and brands that are suitable to the Brazilian market.
-Uncertainty avoidance can be described as the extent to which people of a given society strive
to avoid uncertainty of future events (Hofstede, 1984). The East is described as having a high
level of uncertainty avoidance particularly in China and Singapore. Brazil is said to have a low
level of uncertainty avoidance. This could affect aspects of technology, law, rules, coordination,
rituals and policies used within the organisation.
-The markets Xiaomi currently operate in have low levels of assertiveness. This is the degrees
to which individuals in an organisation are confrontational, assertive and aggressive in social
relationships. Brazil has a high level of assertiveness. The Brazilian market is very verbal and
argumentative this is direly different to the East where saying no can sometimes be seen as a
challenge and is frequently expressed non-verbally.
-When looking at the level of institutional Collectivism China has an extremely high level,
where as Brazil has a low level (Hofstede.G, 1984). Institutional Collectivism places an
emphasis on shared objectives. In organisations with a high level of institutional collectivism
there is often a strong orientation around the importance of teams and group work. There is a
low level of this in Brazil so possible local employees and partners may have a strong sense of
self-reliance and independence. Xiaomi must take this into account when entering the market
especially given that we recommend Xiaomi partner with Foxconn in Brazil.
- Cultures have different types of taboos and customs associated with them. While entering a
new market Xiaomi must ensure that they research the local customs in order to be familiar
with what is appropriate and inappropriate, this will aid them in avoiding negative publicity
and backlash. For example in Brazil it is considered ill-mannered to make appointments for
meetings any less than two weeks in advance.

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-Xiaomi’s staff organizational structure is very flat, with very little hierarchy. There exists three
levels - the founder, the department leaders and the employees (Yu-Feng.L, 2014) In Brazil a
strong hierarchical structure exists with respect to age, status, etiquette and experience. Xiaomi
must ensure that they heavily research into Brazil’s norms regarding hierarchy structure to
ensure they follow correct business practises. This hierarchical structure can be described as
paternalistic and authoritarian.
-Xiaomi must also ensure they have full knowledge of the importance placed on hand gestures
and touching as it plays a huge role in communication in Brazil. Touching is often seen between
friends and work colleagues in business situations and is viewed as the norm.
-Similar to the East, the culture in Brazil often results in organisations being very lenient of
time constraints. Meetings may start late and the beginning informalities may go on longer than
expected in the East.
Entry Strategy to Brazil
In adherence with the ‘Break-Even Shifting’ model (Hollensen, 2008) we feel that Xiaomi
should directly export to Brazil from China first. At this point sales will remain low and so
revenues would not be enough to compensate for the construction of a sales subsidiary in Brazil.
However, once sales begin to increase substantially, Xiaomi should move to a combination of
an intermediate and hierarchical entry mode. The entry mode would be intermediate in that
Xiaomi should use ‘Contract Manufacturing’, the outsourcing of manufacturing to an external
partner, (Hollensen, 2014), to subcontract manufacturing to Foxconn. Not only are Xiaomi
already in talks with Foxconn (Bloomberg News, 2014), but Foxconn have a strong presence
in Brazil (Luk, 2012), complimenting Xiaomi’s expansion nicely. Xiaomi’s expansion would
also be hierarchical in that we recommend they build a wholly owned subsidiary in Brazil,
comprising of a distribution plant to facilitate Xiaomi’s online distribution strategy. The
subsidiary should be built in Brazil’s tech hub, Rio de Janeiro. Rio has already seen the likes
of Microsoft and Cisco move in, emblematic of Brazil’s increasing relevance in the world of
technology (Watts, 2014).
Xiaomi should also be cognisant of ‘The Transaction Cost Model’. It dictates that Xiaomi
should continue to expand until ‘the cost of organizing an extra transaction within the firm will
become equal to the cost of carrying out the same transaction by means of an exchange on the

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open market. (Coase, 1937). Establishing a distributional plant in Brazil, a form of forward
integration, adheres to the ‘Internalisation’ method of achieving TCA.
Marketing Mix
A. Product Strategy
I. Brand Architecture
Considering the psychic distance between Brazil and China, Xiaomi should rebrand and
truncate their name to simply ‘Mi’. There are push factors that compel them to rebrand; For
non-native Chinese speaker ‘Mi’ is much easier to find, remember and pronounce than
Xiaomi (pronounced as Shiao-Mi) (Leswing, 2014). Furthermore it is in line with Xiaomi’s
International branding strategy (The Economist, 2014).
Given our recommendation that Xiaomi should rebrand to ‘Mi’, a corporate dominant brand
structure should initially be adopted, as only one product will be available in the market.
Moreover as a new brand in Brazil, Xiaomi do not want to confuse customers with different
names. After Xiaomi gain a foothold in the market and gain traction among people, they
should pursue a mixed brand structure. Xiaomi have several product lines, including a budget
smartphone line called Hongmi (Hong-Red). In the future when Xiaomi decide to introduce a
budget line to serve a different market segment, they should distinctly differentiate their
premium line so as not harm its value, whilst using the new line to build on Xiaomi’s gained
brand equity. Xiaomi should also rename the budget line from Hongmi to ‘Verde Mi’ as the
colors red (meaning good luck in Chinese culture) has no association in Brazilian culture and
the colour green is a Brazilian national colour.
I. Product
Tech products are generally culture-free products and so the Mi4 specification and general
design should not require adaptation. The Mi4 should be provided in 2 generic colours, black
and white. In saying that, the Mi4 back panel is replaceable and Xiaomi should provide
several Brazilian design edition back panels as optional accessories to be purchased with the
phone.

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II. PLC – Microeconomic Approach
The Mi4 is at the end of its product cycle in its home country, China, as a global device is
scheduled to be launched in April 23rd
in India (R, 2015). The product specification of Mi4
still places it in a highly competitive position to compete against existing competition in
Brazil. Therefore they should adopt a microeconomic approach [See FIG.A.8]. The Mi4
should be sold at the initial price it was released at in China and not at its current discounted
price. The production cost of Mi4 has become considerably cheaper due to the depreciation
of the cost of building components, in accordance with Moore’s Law. Along with setting up
costs, and establishing production with higher labour costs, the original price that Xiaomi
Mi4 was offered at should be sufficient to cover the extra costs.
Parallel Importing
Xiaomi need not worry about parallel importing or grey marketing. Firstly, due to Brazil’s
policy of high import taxes on technological products, Xiaomi products being imported into
Brazil cannot competitively compete with Mi4’s being produced in Brazil. Secondly, given
the network frequency of Chinese phones, they are not compatible with the network
frequency of the Brazilian network.
III. Packaging
Xiaomi product packaging reflects the frugal nature of their business model (The Economist,
2014). The packaging for Mi4 is made of good quality cardboard that would sustain
numerous falls and bumps. Engineering wise it’s very apt but design wise it does not convey
premium quality. Regarding packaging of Mi4 in Brazil, Xiaomi should continue to use the
same packaging material, as it is in line with Xiaomi’s streamlined business model. But in
addition, Xiaomi should use coating material that exemplifies premium quality. Xiaomi
should work with local designers to find the right design that in the eyes of Brazilians is
perceived as premium high quality product that can be trusted [See FIG.A9].
IV. After Service
After-sales service lags behind in Brazil. Rapid economic growth has helped create a
consumption boom. The growth of the so-called new middle class of 40 million, who having
risen from poverty, have increased demand and put pressure on infrastructure. But customer
service standards have not been able to keep up with the pace (Carrico, 2014). Xiaomi are

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very well known for their exceptional service provided in their service centre. Speaking from
personal experience, when one of our group members broke his Xiaomi phone, he made a
trip to a service centre in Beijing. They have service policy to fix your phone in 45 minutes
and he was not let down. Xiaomi should work to establish service centres in major cities in
Brazil, initially in Rio de Janeiro as previously outlined in section 1, and train their
employees to recreate the same customer service experience. This added value can be their
key differentiation among competitors.
A. Marketing Channel
As we have pointed out in the ‘entry strategy’ of Section 1, Xiaomi should initially use an
export mode but then quickly alter this to a combined hierarchical and intermediate mode.
Having done this, Xiaomi would not be using any form of export mode and so their sole channel
of distribution would be via the Foxconn factories in Brazil and the Xiaomi owned distribution
plant. We feel that this transition should be made in accordance with the ‘Break-Even Shifting’
model (Hollensen, 2008). In addition, Xiaomi should pursue many other channels of
communication with consumers, especially given that the product is Xiaomi’s first offering in
Brazil. A huge aspect of Xiaomi’s promotion strategy is through online promotions, which we
examine in detail in the Promotion Strategy section below.
In accordance with the Network Model, (Hollensen, 2014) the establishment of this distribution
centre in Brazil, and sub-contracting production to Foxconn there, should be useful for further
expansion in the surrounding area as these domestic connections can act as bridges to other
countries.
Xiaomi’s strategy of eliminating middle-men and delivering straight to customers via the
internet is known as disintermediation and can lead to channel conflict as Xiaomi will now be
competing with resellers as well as manufacturers. Those resellers that are cut-out may engage
in anti-disintermediation, through higher levels of personalised service, cost cutting or legal
action (Hollensen, 20140. We believe that, given Xiaomi’s philosophy of selling at only
slightly above cost and the anticipated demand already outlined in our market analysis in
section 2 of the report, Xiaomi’s is a value proposition that would be very hard to trump for
intermediaries in Brazil, and so should not affect Xiaomi’s sales unduly.
We do not envisage Xiaomi working with any distribution intermediaries, and so ‘Exclusive
Coverage’ would describe their market coverage best, as they distribute solely to those who

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purchase the product. This absence of intermediaries will also ensure a very short channel
length, facilitating rapid distribution to consumers. Given that Xiaomi’s products primarily fall
into the categories typical of an ‘Exclusive Distribution’ product, such as being a relatively
high-price product in a market where brand is very important, the channel width is quite narrow.
The dearth of intermediaries also ensures a highly vertically integrated channel of distribution.
B. Promotion Strategy
Xiaomi has experienced a great amount of success over the last number of years. Their strategy
to strengthening their position in their home market before expanding overseas and their
promotional strategy have contributed greatly to this success. Xiaomi do not implement
traditional advertising, they avoid selling through retail stores and focus largely on their online
market, positioning themselves as a low cost advertiser (Kaplan. V, 2015)
We recommend that Xiaomi implement an E-Commerce strategy similar to the strategy that is
implemented across other nations they operate in. This online sales strategy allows them to
save sufficient costs in marketing and distribution. E-commerce offers Xiaomi the opportunity
to sell directly to the consumer, B2C, and is a cost effective solution to traditional retail
methods.
Xiaomi should sell their devices via “flash sales” where products are available for a limited
time period. This creates a persona of exclusivity around the products and brands while giving
them a huge opportunity to promote these flash sales through social media and word of mouth.
Flash sales create great anticipation and urgency which excites consumers about their products.
“Social media is where we live. We are an internet company and that’s what we do,” (Barra.
H, 2015)
Xiaomi harnesses the power of social media by consistently interacting with their customers
on social media using their feedback to refine their future software development. We
recommend that Xiaomi continue to carry out the same social media practices in Brazil as they
have done previously in China.

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Remarkably in 2014 it was noted that Brazil was the second largest user of Facebook. Brazilian
users spent 41% more time on twitter in September 2012 then in September 2011. Brazil has
also been crowned the second largest market for YouTube (Chao. L, 2013).
As a result of these statistics we recommend that Xiaomi create a social media campaign to
raise awareness in Brazil of their impending entry into the market. We would recommend that
a Twitter, Facebook page and YouTube advertisements be created in order to promote
Xiaomi’s entrance.
WeChat is a mobile messaging application whose percentage active user increased by 1,108%
during 2013 in Brazil (Oleaga.M, 2014). We would advise Xiaomi to establish their brand on
this social media platform to avail of its broad reach. Xiaomi could look into founding a
partnership with WeChat in Brazil, exploring opportunities to sell through the mobile
application, a similar strategy to their pilot trial in China.
We propose that Xiaomi tie in their slogan “Always believe that something wonderful will
happen” into their social media campaign and that they engage with potential consumers to
share special events that have happened in their lives on their social media pages, creating
further buzz about the brand (Xiaomi, 2014).
We would advise Xiaomi to avail of mobile advertisements. A recent study has shown that 62%
of smartphone owners in Brazil receive at least one advertisement via their mobile device per
day with 50% agreeing they are okay with these ads as long as they can access free content
(Rodrigues. L, 2013). Mobile advertising as a whole in Brazil is growing at a rapid rate showing
how influential this platform is. (See FIG.A4)
The leading operating systems for Smart Phones in Brazil are Android at 80.34% of the
market share with iOS only capturing 11.48% (StatCounter, 2015). This works in the favour
of Xiaomi as Mi User Interface (MIUI) is Android.
Brazilian smartphone users have a preference for gaming applications. As Xiaomi first
established themselves as a software development company we believe they should consider
creating miniature/trial games, as they do on their online forums, offering products as prizes.

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This will create a huge amount of awareness and in turn brand advocates across the mobile
gaming community.
Xiaomi should integrate forms of comparative advertising into their promotion strategy as
Brazil is a very price sensitive market. The comparisons should focus in on the product features
as this will appeal to consumers looking for high quality products at a reasonable price [See
FIG.A10].
It is interesting to note that when entering the Indian market Xiaomi have shown a willingness
to adapt by opting to pursue an offline model and we feel this is something that they should
implement in Brazil also, given the very low brand recognition they currently have there.
However this should be pursued with reference to the political and legal environment which
we detail in section 3 of the report, as all outdoor advertisements are illegal in Sao Paolo
(Goodson, 2012). On first entering this market in 2014 Xiaomi implemented an online-only
sales strategy. This technique resulted in the selling of over 90,000 units of their Mi3 model
within a few seconds over a course of flash sales. (Rao.R, 2015) This unmet demand resulted
in Xiaomi receiving the wrong kind of media attention due to the large number of disappointed
consumers. Xiaomi made the decision to sell its devices through the largest telecom operator
in India, Bharti Airtel. This is a strategy which could be implemented in Brazil if there is a
similar uptake on their products. We would advise Xiaomi to prepare for this situation, creating
a strategy and developing relationships with possible retailers.
C. Pricing Strategy
From its birth, Xiaomi has never believed in traditional old fashioned advertising. Xiaomi
shuns the concept of retail stores and chains and decides to do all its selling online. This
inevitably leads to a significant reduction in its cost price as the price on e-commerce is
essentially just fulfilment and shipping cost. (Kumar, 2014)
Xiaomi’s pricing strategy for its MI4 should be a value based pricing strategy. Value-based
pricing is defined as a pricing strategy which sets prices primarily, but not exclusively, on the
value, perceived or estimated, to the customer rather than on the cost of the product or
historical prices. (Wikipedia, 2015).

17 | P a g e
Xiaomi will make the MI4 affordable with premium hardware, software and look as they
have done thus far in other developing economies. The reason for this is as follows. Xiaomi
will hardly have any marketing spend and they will go to the customer directly through
online channels to cut distribution and various intermediary costs. This in turn will let Xiaomi
able to pass the benefit to the customer. Typical smartphone makers like Apple or Samsung
put their products in retail stores around Brazil. This process incurs staff, real-estate and
maintenance costs.
Xiaomi will cut costs at every stage. Xiaomi will source components for the MI4 themselves
and deal with sellers with a different strategy. Xiaomi will follow ‘Moore’s Law’. Unlike
Apple or Samsung who discontinue their models after 6-8 months in the market, Xiaomi
should sell the MI4 for up to 18-20 months after launch. This means that, in accordance with
Moore’s law, the price of the individual components go down while the price of the phone
remains constant throughout. (Kumar, 2014) As mentioned previously, Xiaomi will be able
to further cut its costs by agreeing a deal with Foxconn to manufacture its products.
Another important aspect to note is that Xiaomi is a mobile internet company. Xiaomi will
not look to make money on MI4s hardware similar to Apple or Samsung but by selling apps,
games and special Android themes and Internet services on top of its custom MIUI.
The Brazilian government has also taken steps to push consumers toward domestic products.
In April, the country lifted federal taxes for all smartphones manufactured in Brazil, after
implementing similar policies for domestically produced tablets and computers. (Toor, 2013)
But the smartphone exemption only applies to devices priced below 1,500 Real ($660 USD),
meaning Brazilians may still need to look overseas for higher-end Apple or Samsung products.
This is exactly what Xiaomi will exploit. (Toor, 2013)
Major Competitor’s pricing strategies
I. Samsung pricing strategy
Samsung uses both a value based and skimming price strategy in Brazil. They offer a
premium product for a premium price. Samsung initially sets a high value with high price in
the start before competitors catch up. Samsung discontinue their models after 8-12 months in
the market. (Marketing91, 2015)

18 | P a g e
II. Apples pricing strategy
Apple price their premium products at premium prices. Apple’s cheapest products are usually
priced in the mid-range, but they ensure a high-quality user experience with their features.
The hardware and user interface are designed to provide a lot of value for the price, which
keeps profits high. Apple sells fewer phones that it would if it was cheaper as profit is what
it’s all about for Apple, not volume. (Nielson, 2014) In 2015 the worldwide average selling
price for an Apple iPhone will be about $649.
III. Motorola Pricing Strategy
Motorola will be key competitor for Xiaomi as they recently launched its first low-cost
device in Brazil. This is part of its strategy to beat its main competitors in what is Motorola’s
second largest market. Motorola found that the most essential thing in terms of buying a
smartphone in Brazil is that it has an affordable price as most mobile users in Brazil can't
afford a $500 smartphone. (Mari, 2013)
Conclusion
Xiaomi is a rapidly expanding smart phone company which has had great success in
developing markets in a short space of time since its inception 5 years ago. Xiaomi’s success
has been rooted in its low cost model and high specification products which have flourished
in developing economies.
Brazil presents a valuable opportunity for Xiaomi. With its large population and rising middle
class it offers Xiaomi the perfect platform to build on its already impressive
accomplishments. The smartphone market in Brazil is growing at an exponential rate and
smartphone buyers are crying out for a low cost product as can be seen from the thriving
smartphone black market in Brazil. (See.FIG.A2)
Brazil’s efforts to eliminate poverty coupled with their seismic long term economic forecast
are quickly rendering Brazil a global power in smartphone retailing. Our recommended
strategies would enable Xiaomi to obtain a strong foothold in the prosperous smartphone
market in Brazil and potentially act as a springboard to the wider South American market.

19 | P a g e
Appendix
FIG.A1
FIG.A2
FIG.A3

25 | P a g e
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