Xiaomi: A Winning Formula Harvard Case Solution & Analysis

Question 1

What factors underlie Xiaomi’s success in the Chinese market?

Xiaomi has become one of the biggest Smartphone companies and the analysts often dub it as China’s Apple. The company had a rapid rise in the year 2014 out of nowhere and it knocked Samsung off the top spot in the Chinese Smartphone market. It is now the number three Smartphone vendor around the globe. There are a number of factors, which underlie the success of Xiaomi. 95% of its sales come from China and it is the number one player in the Chinese market.

It sells smart phones at less than half the cost of Apple and Samsung’s smartphones as shown in appendix 1 in excel spreadsheet. The company charges razor thin margins, which are only 3% on its phones. The sales and marketing functions of the company are another important factor. The online channels model worked well for the company. Moreover, the company has kept its costs low with word of mouth marketing and limited marketing expenditure.

The senior managers at Xiaomi are strategic about the product development and it takes huge input from its customers in developing new products. In addition, the company provided outstanding service and customer care to its users through its weekly MIUI updates, technical support and customer service centers. The profit and pricing formula was simple and prices were just slightly above the cost of manufacturing.In addition, the company generated 6% of the incremental software sales and this profit margin was growing.

The production team of Xiaomi had taken advantage of the significant drops in the component prices of the company and this explained the long products cycles of the company. Moreover, it introduced new models every 18 to 24 months.  Lastly, Xiaomi had a long history of brining top talent together from premiere technology firms. The role of community manager in handling local operations and its relentless culture are all contributors in the long-standing success of Xiaomi.

Xiaomi A Winning Formula Harvard Case Solution & Analysis

Question 2

How easily can Xiaomi expect to replicate its success in other Asian markets? How about markets further away?

The low cost model coupled with high quality and high technology smartphones has proved to be successful for Xiaomi in China so far. However, it would not be easy for the company to replicate the same model in other Asian countries such as India, Malaysia, China, Indonesia etc. This is because of the cultural, regulatory, economic, and other differences. For instance, when the company formed partnerships with the mobile phones retailers Eraphone and OkeShop in Indonesia, then it could not generate a market share of greater than 5%.

This was because Xiaomi was new to these markets and the company had to struggle to ramp up supply in these markets. Moreover, the new customers in these markets were constantly shown online flash sales model of Xiaomi and they felt frustrated. The company also entered the Indian market in July 2014 but again it faced legal challenges following a complaint from Ericsson that the devices of Xiaomi infringed on its intellectual property.................

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