MI Homes is set up in the Franchise Model
Hoskote is a rural town in Karnataka with less than 60000 inhabitants who mostly depend on agriculture for livelihood. It was low on priority for phone makers, but now it is not so for Xiaomi. Xiaomi’s market share in India has exceeded that of Samsung by 2.4 percentage points within just 3 years of entering the market and it seeks to increase its sales by reaching out to remote areas in India. For growth in India, Xiaomi has taken 3 approaches to supply their products: MI homes, electronic retail chains, and MI preferred partners. Of these three approaches, MI homes are proven to be the best because it has adopted the franchise model for growth and expansion. It is similar to the Apple store franchise where the store is owned by the franchise partner but is operated by the company.
Amid rumors that Samsung is unhappy with two major retail chains for promoting Xiaomi, a Samsung industry executive without wanting to be named said, “Samsung is trying to sort out the issue with the two retailers ahead of the festive season.”
Samsung’s Drawback: Not Choosing the Franchise Model
Samsung recently boycotted more than 200 retailers who entered into an agreement with Xiaomi as preferred partners. For the first time, Samsung has stopped supplying their handsets to these retailers for preferring another brand. Several retailers are approaching Competition Commission of India (CCI) to take legal action against Samsung. A Xiaomi executive said, “Xiaomi is helping the affected retailers with advice and additional business support. This is a good opportunity for Xiaomi to get retailers’ confidence, now that it is betting big on brick-and-mortar retailers to grow in India,” A retail chain CEO said that Xiaomi will support them by changing its business strategy to launching their new phones offline first.
Boycotting retailers is never a healthy strategy for competing. Samsung’s dependency on retailers proved to be a major drawback. Samsung had built a great brand and people trusted its name for the quality of its products. It had the largest market share in India until Xiaomi overtook.
Choosing the right channels of supply for sales and services can help your firm compete with better-priced products and even better-quality products. If Samsung had adopted the franchising strategy to set up stores that sell Samsung phones, it would not have been threatened by Xiaomi’s entry into the market. Much like an Apple-franchise store, people who went to a Samsung store would not find a Xiaomi alternative, So Samsung would not have felt the need to boycott retailers.
Choosing the right strategies for competition will help business succeed without any conflict with the rules and regulations set by CCI. At Sparkleminds we can help you compete in the market without any legal obligations and more importantly, we will help you win.
