MarketLine Blog

Xiaomi, not the Apple of China

2014 was an important year for Xiaomi, it saw the company become the world’s most valuable technology start-up, triple its phone sales, become the world’s fourth largest smartphone seller, more than doubling its revenue, and saw it expand to a number of new markets including India, the world’s third largest smartphone market. What makes the company’s performance all the more remarkable is that it has achieved this in less than five years of existence, and without a presence in any Western markets.

A number of factors have contributed to this success, including CEO and company founder Lei Jun who has fostered a cult like following of Xiaomi, drawing parallels with late Apple founder Steve Jobs.

Additionally, realizing the company needed further expertise in order to successfully implement its international expansion plans, the company hired former Vice President of Google Android Hugo Barra as the company’s Vice President of Global Business.

Barra’s experience has helped Xiaomi’s launch in India become a success, patent dispute notwithstanding, and has allowed the company to export its hugely successful business model to foreign markets.

Often criticized as an Apple clone, Xiaomi is closer to Amazon in terms of its business strategy, with the company insisting it is a software company first, a hardware company second, seeing its handsets as a portal to its online web and retail services.

Its resultant obsessive pursuit to get as many devices into as many hands as possible in order to increase the exposure of its e-commerce ecosystem to users has seen Xiaomi become China’s third largest e-commerce company. This strategy has also resulted in the company’s high-end phones being priced at a fraction of the cost of its rivals to entice customers, selling for little more than cost.

Xiaomi’s performance becomes all the more remarkable when the fact its phones are sold entirely online is taken into consideration. The company has generated a formidable degree of online presence and brand awareness through its forums and social media activities.

Utilizing this presence, the company crowd-sources the development of its phones by asking its customers for feedback on possible improvements, which are then implemented in its weekly builds, essentially achieving what many companies take a year to do in a just a week.

Releasing its phones in weekly batches has created a scarcity value and ensured the level of demand remains high. When combined with its unique approach to product development, Xiaomi’s phones become incrementally better as the year progresses until the company releases its next generation of phones each year, with the January 2015 announcement of two new phablets, the Mi Note and Mi Note Pro released in direct competition with the iPhone 6 Plus, marking the company’s most recent generation of smartphones.

Xiaomi has managed to successfully export its business model to India, selling one million phones in just five months almost entirely online. Apart from issues over privacy concerns, which Xiaomi addressed by announcing plans for a data center in India, and legal issues in relation to patent disputes with Ericsson, Xiaomi has every reason to be satisfied with its entry into the country.

With no immediate plans to enter the West, Xiaomi has instead chosen to establish itself in developing markets and Asia. Its activities thus far, particularly in India, suggest the company is able to rapidly respond to issues or concerns, and it is this flexibility which will stand the company in good stead as it looks to increase its sales from 61m smartphones sold in 2014 to 100m in 2015.

If the company manages its expansion plans as well as it has in India, then there is every chance that when Xiaomi decides to enter the West it will cause leading incumbents such as Apple, Samsung and HTC to look over their shoulders.

For more information, check out our Xiaomi case study.

Leave a comment

*Required fields. We will not publish your email address