Xiaomi’s Keys to Success—and its Weaknesses

A case study about Chinese smartphone manufacturer Xiaomi by CKGSB Professor of Strategy Teng Bingsheng was recently published in Korean journal, Dong-A Business Review. The following is a translated summary of the original Korean article.

Focus, Ultimate, Speed, Word of Mouth…The Growth Power of Xiaomi Is Its Philosophy of the Internet

In his case study, Professor Teng takes an in-depth look at Xiaomi, which has grown into a giant smartphone company, with 31.6 billion yuan in annual sales since its founding in April 2010. He also examines how it came into being, the secret of its success and the issues that Xiaomi should pay attention to.

Xiaomi founder Lei Jun at a recent product launch

Lei Jun, Xiaomi’s founder, has compared himself to Sisyphus from ancient Greek mythology, the man who rolled a huge boulder up a hill. The ‘Philosophy of the Internet’ is a key theme of Lei Jun’s success story after the boulder story.

Four main reasons for Xiaomi’s growth are as follows:

• Less is More. Lei Jun put the concept of ‘The Beauty of Simplicity’ into the company’s smartphone products. Xiaomi has launched only one or two models a year to concentrate on achieving the best quality of its products. This gap between different product developments has resulted in the best output.
• Ultimate. ‘Ultimate’ means doing something that you are best at and reaching perfection that others have never attained. Even when Xiaomi products have already been in the market for about half a year or more, it is still hard to find other cellphones with the same, or better, specifications.
• Fast Speed. Xiaomi’s speed can be described as ‘fast response, fast replacement and fast correction.’ They deploy a beta version, collect user opinions and modify the model to reflect the feedback.
• Word of Mouth. The word of Mifen, Xiaomi’s fan club, has gone around the world and has translated into more than 20 languages. Xiaomi provides a user experience that satisfies consumers by surpassing their expectations.

Xiaomi’s products are successfully promoted through social marketing, which is a key reason for their popularity. However, some threating factors exist:

• Intensified market competition: Competitors such as Lenovo and Huawei are using Xiaomi’s fandom model as a benchmark of their own.
• Lack of core competitiveness: There are always risks of losing fans in the mobile market, where switching costs are relatively low and loyalty can easily be transferred to another brand.
• Supply chain problem: Xiaomi does not have control over its supply chain due to cost effectiveness.
• Disadvantages of “hunger marketing”: Customers might lose their patience and move on to other company’s product

Not content with its current lot, Xiaomi’s future strategy has been to turn towards overseas markets and to build a smart ecosystem. If customers experience a synergy with Xiaomi’s various smart products, the power of Xiaomi’s networking could expand further.

To read the original Korean article in Dong-A Business Review, please click here.