BFN 3104 CORPORATE FINANCIAL STRATEGIES
INDIVIDUAL INDIVID UAL ASSIGNMENT #2 Product Life Cycle: XiaoMi Mi Dr! C"a
Law Yuying
$$%$$$&2%2 Sectio
The Prou!" Li#e Cy!$e %PLC& E'ery (roduct i t"e )ar*et +oe, t"rou+" a ,e-uece of ,ta+e, *o. a, t"e Product Life Cycle /PLC01 fro) t"e e+ii+ of lauc"i+ t"e e. (roduct3 it +oe, t"rou+" ,ta+e, of Itroductio to Gro.t"1 Maturity ad t"e la,tly Declie!
Prou!" 'i(!u((e) S*ar"+hone , -iao.i .i4 XiaoMi i, a (ri'ate S)art("oe )aufacturer t"at4, a,ed i C"ia! T"e (ri'ate co)(ay offer, ,ur(ri,i+ly affordale "i+"5ed -uality Adroid de'ice,1 ad t"i, co)(ay4, re(utatio ,*yroc*eted due to it, lo. co,t S)art("oe, u,ie,, )odel ,trate+y! XiaoMi4, fla+,"i( (roduct,1 Mi ,erie, "a, a o'erall life5cycle ,(ai+ $6 to 2 )ot", efore a e.er u(dated 'er,io i, relea,ed e7t! T"e curret )odel1 Mi .a, relea,ed Au+u,t1 28$ ad i, eteri+ t"eir $%t" )ot" of Product Life Cycle!
1/ In"rou!"ion S"age Lauc"i+ a e. (roduct to )ar*et i, filled .it" ucertaitie, ad ri,*,! 9e of t"e )ai c"alle+e, for e. ,)art("oe, o.aday, i, to +et attetio fro) t"e )ar*et! Geerally1 t"e (roduct4, de)ad "a, to e for)ed duri+ it, de'elo()et ,ta+e! T"e (roduct de'elo()et ,ta+e u,ually ta*e, ito accout t"e (roduct4, iitial (re,ece ad it, co)(etiti'e ,u,titute, i t"e )ar*et! Muc" re,earc" i, eeded de(edi+ o t"e (roduct4, co)(le7ity ad to tar+et ."ic" co,u)er +rou(,! T"erefore1 t"i, ,ta+e of t"e cycle icur, t"e )o,t co,t for a co)(ay t"at i, relea,i+ a e. (roduct to t"e )ar*et! Ne.ly lauc"ed (roduct, are u,ually (riced 'ery "i+" to reco'er t"e "ea'ily icurred co,t fro) (roduct re,earc" ad )ar*eti+! I C"ia1 ."ere t"e ty(e, of Adroid de'ice, i t"e )ar*et are ,o 'a,t .it" little differetiatio i ,oft.are or "ard.are1 co,u)er reco+itio ca e difficult .it" little )ar*eti+ ad (ro)otio! Mar*eti+ ad ad'erti,i+ co,t, ca e 'ery "i+" to +ai co,u)er reco+itio1 ad oly )ultiatioal co)(aie, li*e Sa),u+ ad A((le ca
afford to for* out eor)ou, a)out of )oey o rad ad (roduct )ar*eti+ ad ad'erti,i+! Uli*e t"o,e +iat, ,)art("oe, co)(aie,1 ."at XiaoMi did to create a.aree,, for it, (roduct, .a, li,te to ."at S)art("oe, u,er, ,ay! XiaoMi ,et u( t"eir o. MIUI )oile ("oe foru) ad let, u,er, to decide t"e cu,to)iatio,;additioal feature, t"at .ill +o ito t"e e7t (roduct relea,e! 9e of t"e tec"i-ue, XiaoMi doe, i, to "a'e t"eir e)(loyee, +o t"rou+" t"eir olie foru)1 MIUI foru) ad idetify (otetial re-uire)et, ,u++e,ted ad 'oted y t"eir u,er, for t"e e7t relea,e! T"rou+" t"i, (roce,,1 XiaoMi ac"ie'e, t.o *ey eefit,:
eio1 al,o a, *o. a, t"e eio a, .ell1 furt"er icrea,i+ t"e (roduct a.aree,, ad attracti+ loyal u,er,! /Saria1 28$%0 XiaoMi out,)arted t"e traditioal )ar*eti+ )et"od, y u,i+ t"e (o.er of cro.d ,ourci+ ad olie co))uitie, ad e'e e7clu,i'ely ,elli+ t"eir (roduct, t"rou+" t"eir olie .e,ite1 .it"out ay fla+,"i( ,tore, or relyi+ o %rd (arty retailer,4 ,er'ice,1 t"ey eded u( ,a'i+ a "u+e (ortio of co,t o di,triutio et.or* ad ,ale, c"ael! T"i, tric* of a'oidi+ iter)ediarie, "el(, XiaoMi to uild )ore loyal ad "ealt"y relatio,"i(, .it" it, u,er, ad create retur cu,to)er,! More i)(ortatly1 t"i, dedicated e5co))erce (latfor) +i'e, XiaoMi a etter cotrol o'er t"e ti)i+ of )ar*et etry ad e7it of eac" of t"eir (roduct,!
/ Grow"h S"age A ,ucce,,ful lauc"i+ of a (roduct .ill lead it to +o t"rou+" t"e ,ecod ,ta+e of PLC1 Gro.t"! T"e )ai c"aracteri,tic of a (roduct i it, +ro.t" ,ta+e i, t"e icrea,i+ ri,e i it, ,ale, cur'e duri+ t"e e+ii+ of Sta+e 2!
day,! T"i, )ea, t"e )aor (layer, i t"e ,)art("oe idu,trie, /A((le ad Sa),u+0 u,ually relea,e a e. 'er,io of t"eir ,)art("oe ,erie, i le,, t"a a year! T"e,e )aor (layer, u,ually c"ar+ed a "i+"er (rice for t"eir ("oe, ecau,e of t"eir ,"ort (roduct life cycle! XiaoMi (roduct, ted to re)ai o ,"el'e, for $652 )ot",1 duri+ ."ic" t"ey +o t"rou+" t"ree of four (rice cut,! /Tec"Cruc"1 28$B0 XiaoMi1 already "a'i+ t"e trade)ar* of ,elli+ cutt"roat (rice, of -uality ,)art("oe,3 t"ey are al,o ifa)ou, for "a'i+ fla," ,ale, for t"eir (roduct,! Duri+ t"e,e fla," ,ale,3 XiaoMi relea,e, oly li)ited -uatity of t"e ("oe for ,ale i a e'e lo.er (rice olie1 creati+ a "u+e olie u! T"a*, to t"e la. of De)ad ad Su((ly ad cu,to)er,4 *ia,ue,, /co)(etiti'e ad )ateriali,tic ature01 co,u)er, are )ore ea+er to +et t"eir "ad, o t"e XiaoMi ("oe! U,i+ t"i, ,trate+y1 XiaoMi i, ale to ,ell off t"e Mi .it"i a fe. )iute, of +oi+ o ,ale1 t"e ,a)e .it" all t"e (re'iou, )odel, of t"eir ,)art("oe,! XiaoMi i, ,ee to "a'e oe of t"e fa,te,t +ro.t" rate, of ay tec" co)(ay t"i, decade! /?=@1 28$0
3/ .a"uri"y S"age A, t"e (roduct life cycle ,tart, to )ature1 XiaoMi i, ,till ale to *ee( it, (rice, real lo. ecau,e of lo+er ,"elf life of t"eir de'ice,1 u,ually $6 to 2 )ot",! XiaoMi i, ale to ,ell t"eir ("oe, ,o c"ea( /u,t a little "i+"er t"a t"e total co,t of all it, co)(oet,0
t"a*, to t"e decrea,i+ co,t of t"e co)(oet,! =y *ee(i+ t"e (rice of t"eir ("oe, t"e ,a)e o'er t"e life cycle1 t"eir (rofit cotiuou,ly icrea,e ."ile co,t of (roduci+ it dro( a, )uc" a, &8F i t"e ,(a of 2 )ot",! Co)(ari+ .it" A((le1 ."o (rofited t"e "i+"e,t at t"e itroductio of eac" e. )odel3 "a'e to *ee( co)i+ u( .it" e.er )odel, e'ery fe. )ot", to *ee( t"o,e (rofit )ar+i, u(! XiaoMi oly "a, t.o fla+,"i(, (roduct o ,ale ad lar+e 'olu)e, of ,ale, o'er t"e ,a)e (roduct o'er t"e cou(le of year, "el(, XiaoMi to (rofit t"rou+" ecoo)ie, of ,cale /due to "i+"er de)ad0 ad lo.er co,t, /reductio of co)(oet co,t, .it" ti)e0! T"e XiaoMi Mi1 relea,ed la,t Au+u,t i C"ia1 recei'ed )aor a((ro'al, fro) it, "u+e co,u)er a,e ad .a, ,old out i t"eir olie .e,ite .it"i )iute,! /Siddi-ui1 28$B0
At Maturity1 ,ale, +ro.t" (ea*ed ad ,tart to le'el, off .it" co)(etitio, a((eari+ .it" ,i)ilar (roduct,! T"e (ri)ary oecti'e at Maturity ,ta+e i, to defed )ar*et ,"are ."ile )a7i)ii+ (rofit! I t"e ,)art("oe idu,try1 +iat co)(aie, u,ually relea,e e"aced 'er,io, of t"e )odel or offer iceti'e, ad attracti'e (ac*a+e, to ecoura+e ad )aitai co,u)er (referece1 di,triutio of t"e (roduct are al,o u,ually )ore cocetrated due to co)(aie, )il*i+ all it, (rofit ."ile t"e (roduct la,t till t"e ed of cycle!
>"ile t"e ,ucce,, of XiaoMi "ad ee (ri)arily i C"ia1 u,t la,t year it
e7(aded ito ot"er coutrie, ad (ro'ed t"at it, u,ie,, )odel .or*, i a differet coutry too! T"e Mi1 ."o i, relea,ed i Au+u,t 28$ i C"ia1 i, co,idered a old )odel ."e it ,tarted it, ,ale, i Idia u,t t"i,
coutrie, differ y )ay )ot",1 XiaoMi al,o u,e, t"i, tactic to oo,t ,ale, ad )a7i)ie (rofit! =y rac"i+ out to ot"er coutrie, )ay )ot", later1 t"e (roduct4, ,ale, ca e ,ee to icrea,e i t"o,e (articular re+io, ."ile t"e ,ale, cur'e i C"ia already reac"e, it, (ea* ad le'el, off! I ot"er .ord,1 XiaoMi al,o )a*e, (rofit y e7(adi+ t"e Mi lauc"e, i differet re+io, i differet ti)e, to ,tay rele'at i t"e tec" )ar*et! /=loo)er+1 28$0 XiaoMi fa'orite ,ale, +i))ic* duri+ t"e Gro.t" (eriod are fla," ,ale, ut e'etually1 t"ere .ill e a (oit ."ere t"e de)ad +ro.t" ,tart, to declie a, (art of t"e PLC1 at t"i, (oit1 t"e ,u((ly .ill e ,ufficiet to )eet t"e declii+ de)ad,1 ad XiaoMi fially di,cotiue t"e fla," ,ale, ad o(e t"eir door, to cu,to)er, .it" o re,trictio, i (urc"a,i+ t"eir (roduct,!
4/ 'e!$ine S"age E'etually1 t"e )ar*et for a (roduct lie .ill ,tart to declie! T"i, i, due to t"e )a7i)u) ,aturatio of t"e )ar*et1 or co,u)er4, (referece "a, ,.itc"ed to a e.er differet (roduct! 9ce ,ale, e+i to decrea,e1 t"e co)(ay "a, ,e'eral o(tio,: $! e7te,io ,trate+ie, are e)(loyed to *ee( t"e (roduct i t"e )aturity ,ta+e ,uc" a, relea,i+ e. u,e, or e"aced 'er,io of t"e (roduct1 2! t"e co)(ay ca c"oo,e to di,cotiue t"e (roduct lie ad +et ready to ,et a e. (roduct de'elo()et ,ta+e i )otio1 %! "ar'e,ti+ t"e (roduct ad reduci+ co,t1 offeri+ it to a differet tar+et )ar*et! I t"e ,)art("oe, idu,try1 co)(aie, u,ually .ill ,to( i'e,ti+ i t"e (roduct lie ad atte)(t to li-uidati+;,ell off t"eir re)aii+ i'etory y offeri+ +eerou, (ro)otio, ad creati+ " y(e o'er t"e ,oo5to5e relea,ed e. )odel! I XiaoMi4, ca,e1 t"ey are already creati+ olie u .it" t"e e.e,t )odel1 MiB t"at i, e7(ected to lauc" i t"e la,t -uarter of t"i, year ."ile ,elli+ off t"eir curret )odel, i t"eir .e,ite! /XiaoMi
BCG .a"ri
T"e =CG )atri7 )et"od i, a,ed o t"e PLC t"eory to aalye t"e )ar*et ,"are ad +ro.t" of t"e co)(ay! Accordi+ to t"e =CG Matri71 t"ere are four differet cate+orie, for a (roduct or u,ie,, uit: Ca," co.,1 Do+1 Hue,tio Mar*1 or Star! =y (laci+ t"e (roduct/,0 i -ue,tio ito t"e Matri71 fir), ca deter)ie ."ic" (roduct to (rioritie it, i'e,t)et o ad )a*e accurate deci,io, a,ed o t"e relati'e )ar*et ,"are ad +ro.t" rate of a (roduct lie! /=uter1 !a0 A (roduct lie u,ually ,tart, fro) Hue,tio Mar* i t"e =CG )atri73 t"e c"aracteri,tic, of a Hue,tio Mar* u,ually are "i+" (otetial +ro.t" .it" lo. )ar*et ,"are! T"i, i, e-ui'alet to t"e itroductio ,ta+e of XiaoMi Mi a, it "a, t"e (otetial of "i+" +ro.t"! Product, i t"e Hue,tio Mar* cate+ory "a'e lo. retur, due to lo. )ar*et ,"are ecau,e t"ey co,u)e +reat a)out, of ca," due to ece,,ary "ea'y i'e,t)et i t"i, ,ta+e ,uc" a, )ar*eti+ ad ad'erti,i+! Product, t"at recei'e ,ufficiet i'e,t)et ad ,ucce,,fully do)iate t"e real )ar*et .ill tur ito a Star! Product, i Star +eerate lar+e re'eue ecau,e of t"eir "i+" +ro.t" ad "i+" )ar*et ,"are! =ut ecau,e t"e )ar*et i, +ro.i+ ,o fa,t t"ey eed )ore i'e,t)et
to )aitai t"e lar+e )ar*et ,"are! T"i, corre,(od, to t"e +ro.t" ,ta+e of t"e Product Life Cycle! A, t"e XiaoMi Mi ,ale +ro.t" i, ra(idly icrea,i+1 XiaoMi eeded to re,toc* fre-uetly i order to ,u((ort t"e furt"er +ro.t" of de)ad duri+ t"e olie fla," ,ale,! Star .ill eco)e a Ca," Co. ."e it, idu,try )ature,1 Ca," Co., eed little to o i'e,t)et, ecau,e t"eir ,ale, +ro.t" "a, (ea*ed! Product, i t"i, cate+ory "a'e "i+" )ar*et ,"are .it" ,lo. +ro.t"! Ca," +eerated ca e u,ed to i'e,t i ot"er ,ectio, of t"e fir)! @eac"i+ $% )ot", ,ice Au+u,t 28$ ito t"e PLC1 t"e XiaoMi Mi i, )il*i+ out t"e Ca," Co. t"rou+" ecoo)ie, of ,cale a, )uc" a, (o,,ile util it tur, ito a Do+ at t"e ed of t"e cycle! >"e a (roduct lie "a, o )ore roo) for +ro.t" ad "a, .ea* )ar*et ,"are i a )ature idu,try1 it tur, ito Do+! T"ey do ot (roduce or co,u)e )uc" ca,"1 ad i, e-ui'alet to t"e Declie, ,ta+e i PLC! >it" declii+ ,ale, ad do.tur i t"e )ar*et ,"are1 fir), u,ually di,cotiue t"e ,ale, of t"e (roduct or ,ell off t"e re)aii+ i'etory ad i'e,t o t"e e7t (rofitale t"i+! >"e XiaoMi Mi reac"e, t"i, ,ta+e1 t"ey u,ually are (re(ared to relea,e t"e e7t 'er,io of t"e Mi ("oe, ,erie,!
Con!$u(ion T"e t"eory uderlyi+ t"e =CG )atri7 u,ually corre,(od, to t"e Product Life Cycle1 ."ic" ,tate, t"e (roduct lie, +oe, t"rou+" life5cycle ("a,e, of itroductio1 +ro.t"1 )aturity ad declie! T"e,e ("a,e, t"e ca cate+oried ati cloc*.i,e i t"e =CG )atri7 -uadrat, ."ere $! Hue,tio Mar* Itroductio3 2! Star Gro.t"3 %! Ca," Co., Maturity3 ad ! Do+ Declie! T"e PLC t"eory i, )aily a((lied i t"e (roduct )ar*eti+ ,trate+y ."ile =CG )atri7 "el(, fir), to deter)ie t"e allocatio of ca," ad re,ource, to ."ic" (roduct lie!
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