Since its founding in 2010, the Chinese communications technology company Xiaomi has established itself as a true competitor among both global incumbents like Apple and Samsung and local niche players like Huawei. Through CEO Lei Jun's careful creation of strong, favorable, and unique associations for the company, Xiaomi is an excellent example of a challenger within a highly competitive market. 

Xiaomi is known for its strategy of selling high-end smartphones at an attractive cost. Products are often marked 30-50% cheaper than Apple and Samsung. The low prices are driven by the company’s penchant for austere design, efficient manufacturing, and willingness to accept a low margin. While this business model runs contrary to many other Chinese companies, it has helped Xiaomi build good equity among its target segment: the middle-class in China. This group wants a smartphone but often can’t afford one and are attracted to Xiaomi products because they provide “good value for the money.” Another competitive advantage for Xiaomi has been its ability to earn the loyalty of its customers, dubbed “Mi-fans.” Executives see customer engagement as a key driver of favorable brand perception, and thus provide numerous points of interaction with the company’s fan base. For example, Xiaomi frequently interacts with customers through social media and relies on user feedback to innovate. Some of these “VIP” customers receive gifts to acknowledge their contributions to the company. Finally, the company hosts day-long festivals to roll out special marketing campaigns and showcase new products. Fans wait in long lines to attend and enjoy the comradery of interacting with one another and with the company. All of these factors combined have made the Xiaomi brand a true friend in the eyes of its customers.....

Questions:

1. What assets and competencies are central to Xiaomi’s success as a challenger? 

2. What is Xiaomi’s greatest vulnerability that could be exploited by global incumbents or local niche players?