Xiaomi in India- The strategy behind its success

Xiaomi is the newest company to enter the highly competitive mobile device market in India. But does the staggering response on its Flipkart sale and a positive view by Indians indicate a conclusive future for the company in India? Or will the high demand and less supply prove to be redundant for the company?
 
Xiaomi is rather unknown among the Indian folks, but just to bring in to light, the company is one of the best smartphone vendors in China and is the most favored among the Chinese. Most of us may also not know that Xiaomi is the largest Smartphone vendor in China, selling well above Samsung and is the 5th largest vendor in the world! A company this huge and unknown? Well the company wanted to keep it that way…until now! With the accomplishments mentioned and many other accolades under its belt, Xiaomi has decided to go global. Xiaomi is finally ready to enter the highly diverse and competitive Indian market, which is the second largest market in the world! A market like this, sounds very appetizing to any company, hence even Xiaomi has decided to have a piece, or rather a large bite of the market.
Talking about the company:
The $10 billion dollar worth Chinese electronics company Xiaomi (pronounced SHAO-mee) came into existence in the year 2010. Started by Lei Jun, the company’s current CEO, and headquartered in Beijing, the company commenced operations on August 6, 2010. A person who searches for the meaning of the word Xiaomi may find the result very amusing and confusing. Xiaomi means “little rice”, this is very hard to relate to a company that manufactures electronic devices. But Lie Jun has related the meaning to the company’s philosophy that- like a single grain of rice, the company concentrates on the little things that matter and the bigger picture just falls into place. The company also has a unique style of adding the abbreviation ‘Mi’ before the name of each of its device. However there is a significance which again highlights the company’s values. ‘Mi’ stands for Mobile Internet but the company also calls it mission impossible due to the challenges faced which almost seem impossible to overcome at a time, but later are achieved by the company. With so much thought put just for naming their devices, a crude picture can be drawn of their products.
The company not only manufactures mobiles but also has a wide array of products like a smart TV line(Mi TV), WIFI Routers(Mi WIFI), Set-top-box(Mi Box), Cloud Storage service(Mi Cloud), messenger service(Mi Talk) and  external battery products(Mi Power Bank). It also has its own custom made user interface called MIUI using android as a base. MIUI proves to be a strong USP for the company and has played a significant role in the success of the company over the years.
 
How does Xiaomi sell its devices like hot cakes?
The secret is “selling high end devices at the lowest possible price”. In theory it sounds elementary, but this strategy is extremely difficult to actualize. Every company wants to follow this method, but in reality, it just turns out to be perplexing for the company. So the more important question is how did Xiaomi manage to do this unachievable task?  If it sold the products at a low price, how did the company earn profit? According to Xiaomi they sell their devices at an almost bill-of-material price, i.e., the cost of the product is almost equal to the cost of buying raw materials, manufacturing and packaging the product. This sounds too good to be true, but in reality that’s the fact. To get a bit technical, their first device to be launched in India, Mi3, has the following specifications:
-1080 x 1920 pixels, 5.0 inches (~441 ppi pixel density)
-16/64 GB, 2 GB RAM
-13 MP primary camera with autofocus and led flash, 2 MP front facing camera
-Android OS, v4.3 (Jelly Bean), upgradable to v4.4.2 (Kit Kat)
-QUALCOMM Snapdragon 800 chipset with a quad core processor clockable up to 2.3 GHz.
These specifications are possessed by almost all the high end phones of last year and wouldn’t even amuse a tech geek. But the big distinction comes between those other devices and Mi3 is in the pricing. In India, Mi3 was launched on Flipkart for Rs.13, 999. The price is similar to that of Moto G which comes nowhere close to Mi 3 in specs comparison. Frankly speaking, Mi3 can knock Moto G out of the park with its great pricing and features. A device with specifications similar to the Nexus 5 and price similar to Moto G is bound to get some attention. Thus when it came on sale on Flipkart for the first time, Flipkart crashed due to excess of traffic and started showing a 503 error (which stands for excess of traffic on the site). When the device came back for sale, Xiaomi sold 15000 devices in less than 2 seconds!!
 
Almost every company adds “sugar, spice and everything nice” into their product and its marketing, but what is that “Chemical X’ that helps propel Xiaomi ahead of the rest. To put it bluntly, Xiaomi does not employ just one strategy but many. Firstly, the Company uses the strategy of selling a device for a longer period. Xiaomi sells a particular device for a period of 18 months compared to 6-12 months used by Samsung. This allows the company to earn profit from the fall in cost of the components over time. Another source of revenue for the company is by selling phone related accessories, themes and its own apps. A crucial step used by the company for cost reduction is that the company did away with the conventional modes of selling and advertising. Astonishingly, the company does not have even one physical store, rather the selling operation is  performed through online shopping portals and from the company’s site directly. An innovative advertising strategy used by the company is through social networking sites, flash selling and through its own satisfied customers. Utmost importance is given to the company’s loyal fan base that proves to be an effective mode of advertising for the company.
 
All these strategies seem to work pretty effectively for the company as its sales numbers and profit are all in favor of the strategy.
 
Xiaomi has performed admirably and given many big companies in China, Hong Kong and Taiwan a run for their money. One might consider the company a miser, but professionals consider their strategies as smart, innovative and state-of-the-art. They have made the best use of the trending sites and technology to work in favor of the company.
The X factor: Hugo Barra
An article by Dan Seifert quotes “Yesterday, Google lost one of its top android executives to a relatively unknown Chinese cell phone manufacture” (Aug 29, 2013-The Verge). This event occurred last year when Hugo Barra, Vice President and spokesperson of the Android team under Google announced that he was leaving Google and joining Xiaomi as the Vice President of International Operations, Xiaomi. Hugo Barra expressed his impressions on how the Chinese economy was full of opportunities for tech companies like Xiaomi, hinting his decision for the move. As per his work in Xiaomi, according to Xiaomi’s co-founder and president, Bin Lin “It is entirely Barra’s job to figure out which region we should enter next and how”. This clearly states Hugo Barra’s job description and how important a person he is for Xiaomi. With his immense experience at Google he certainly is a valuable asset for the company and may take the company to great heights.  Barra after entering Xiaomi released the new Redmi and Mi3 devices in Singapore expanding the market of Xiaomi with a strategy of selling high performance devices at an economical price. Hugo Barra also hinted of plans to expand the business to countries like India, Brazil, Mexico and few other countries indicating that he was already well settled in the company and performing his work in full swing. Ultimately with Hugo Barra joining Xiaomi, global expansion of Xiaomi was imminent.
Another X factor? Yes, MIUI
MIUI, the ultimate customizable operating system that can cater to all your needs! This was the idea kept in mind while designing MIUI. The interface, similar to iOS in appearance but similar to android OS in functioning, offers the user the best of everything with a highly customizable OS, a bundle of apps to make your work easier and loads of themes and options to make your device feel truly your own. It is the ‘go-to’ OS for users who want a pleasant experience on their phone.
 
MIUI has been present since the outset of the company and has matured and developed overtime into a snappy, stable OS with a lot of support from developers. The best part about the interface is that the OS is absolutely free and is available for a wide variety of android devices other than Xiaomi devices provided by the company itself. This factor has really contributed to MIUI’s success and is one of the most extensively used operating systems on android devices. Although it’s not that well-known in India, it still might become successful due to its various features and simplicity in operation which is preferred by Indians.
Future in the Indian Market
Finally, the most important discussion of all, how is Xiaomi going to fare in the Indian market?
 
With a promising response on Flipkart the company has started its journey in India on a high note and will hope to continue the same streak. But the strategies which were successful in the Chinese market might not guarantee a sure shot success in India. Not everyone in India socializes over the internet nor does everyone have access to online shopping portals, which are the two key elements in Xiaomi’s selling and marketing strategy. With a strong competitor like Micromax which is preferred by locals after Samsung, Xiaomi will face some stiff competition in order to establish itself among the big guns. Last but not the least, an issue that Xiaomi is already facing is the lack of supply. Indians are showing an overfull demand which in a way is good for the company, but in the long run, shortage might affect the image of the company.
With new Chinese electronics companies like Oppo, Oneplus and others entering the market, Xiaomi will have to set itself apart in order to impress its customers and change the perspective of Indians towards Chinese products. So far, the Indians have received the company well with the Mi3 handsets selling out in just a matter of seconds. If this continues we may see a repetition of Xiaomi’s success in India too. But will that happen…only time can tell !

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Xiaomi in India- The strategy behind its success

by srajan shrivastava time to read: 9 min
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