Saturday, August 16, 2014

Xiaomi is better than Samsung: Overtakes it in China



Lei Jun, CEO of Xiaomi

*How it has overtaken Samsung and Apple in China
*How it reduces overhead cost
*Careful strategy it uses that entrepreneurs should note


Xiaomi has overtaken Samsung and is now China's top smart phone seller and in China's large mobile market, where international powerhouses have most times been unable to gain traction due to local competitors, theres a brand new name in town and that has caused the spotlight to shine on this four year old company.
"Xiaomi Tech" or "little rice" is a private Chinese electronics company. Located in China's mainland, it started operations in June 6th 2010, it has gone on to become one of China's biggest electronics company. The CEO of Xiaomi is Lei Jun, China's 23rd richest man.

The first Xiaomi product, a smart phone called the  Mi1 was announced in August 2011. By October 2013, Xiaomi was the fifth most-used smart phone brand in China and by July 2014 it had sold 57.36 million phones and still counting. Xiaomis ever growing success has a lot to do with the strategies and policies of the company and its chairman. Xiaomi showed its classic understanding of demand and supply in India as customers who were eager to purchase a Mi 3 hand set got the scare of their lives. A batch of 15,000 phones was made available for sale on Flipkart and was gone in 2 seconds. A lot of users claimed that it was so fast that they couldn't even see the phone enter their shopping cart when they clicked on it it just immediately went out of stock. When the Mi 3 first went on sale last October, the first batch of 100,000 units were sold out in less than two minutes. Impressive?? This 15,000 sellout is a new record though, it beats the former 5-seconds record set some weeks before. The hand set is highly sought-after for its impressive flagship specs, combined with the unbelievably affordable price tag of about $240.

Releasing only a limited quantity of phones each week is one of Xiaomi's strategic business plans and it works for them in three ways. Firstly it keeps costs down as the company keeps a small inventory. Secondly it lets Xiaomi gain extra profit as the phones parts get cheaper. Lastly they don't have unsold products on shelves that tie down capital. Pretty smart. How Xiaomi sells its products is another innovative and intuitive strategy that Lei Jun uses. "Xiaomi employs a strategy that is very unlike other smart phone makers such as Samsung and Apple"  Xiaomi
CEO said. "The company prices the phone almost at bill-of-material prices". But to profit from the narrow margin, Xiaomi has to sell a model for up to 18 months instead of the short 6 months used by Samsung and the likes.

To further reduce its overhead costs, Xiaomi doesn't own any physical walk in store and instead sells its products from its own online store. It also doesn't do traditional advertising, it relies on social networking as well as word of mouth to help advertise its products and also sells on Tmall.com, one of China's largest online retail sites. Its very competitive price and strategic hiring of human personnel has helped Xiaomi grow locally and internationally. While the company sells its phones almost at cost price, most of its revenue comes from sales of applications, games, and android themes.
For its impressive brand and growing popularity, the firm has been tagged the Apple of the East by the Chinese media. And this does not only relate to the company but also the founder. After reading a book about Steve Jobs in college, Lei Jun has taken the Apple visionary as a role model both literally and figuratively and has gone for that Steve Jobs image, including wearing jeans, dark shirts and even sneakers. And not forgetting his Jobs' style of announcing Xiaomi's products. He has been categorized as a counterfeit Jobs in many circles but this copy cat nature has nothing on his business intelligence. In April 2014, Xiaomi purchased mi.com for a record $3.6 million. This made Mi.com the most expensive domain name ever bought in China as said by a senior executive of Xiaomi. Mi.com replaced xiaomi.com as the company's official website domain. Xiaomi knows that its image and brand needs to constantly evolve for the company to remain relevant prompting the move.

Hugo Barra, Googles former top Android executive joined Xiaomi last year and has used his knowledge of the industry to help Xiaomi get new partnership contracts with carriers and expand into other markets. Lei Jun is really a genius as it is believed he poached Hugo off google, a strategic hiring move that has yielded huge benefits. Lei Jun is a manager with outstanding skills and is one of the major reasons for Xiaomi's dominance and steady growth. A classic model for entrepreneurs to follow.

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