Xiaomi:

The Indian Story

Submitted by: Group 8

-Aayushya Agarwal (0152/55)
-Bhanu Kr Paliwal (0166/55)
-Rajiv Reddy Kallam (0176/55)
-Sriram Murugudu (0186/55)
-Rakesh Kumar Mondal (0199/55)
-Sarkuna K (0209/55)
-Subham Maity (0217/55)
-Yatharth Rana (0227/55)
It was a chilly winter morning at the Indian headquarters of Xiaomi in Mumbai. Manu Kumar Jain had
just turned into office and his secretary handed him the Q3 reports for 2018-19. He didn't have to take a
glance at the numbers to realise the impending storm that was on its way. With the new government
regulations setting to take place in mid 2019, Xiaomi could no longer rely on its exclusive partnership
with online retailers. Moreover, the numbers showed that quite a few new players were making their
mark and the old nemesis, Samsung, was catching up fast. He pondered on what he’d pitch as the way
forward for the next quarter to the board of directors and to Lei Jun.

Company background and history

Lei Jun was born in China’s Hubei province in Zhaowan village in 1969. After completing his high
school education, he did his majors in Software at the Department of Computer Science at Wuhan
University. His programming skills were much better than everyone else in his class, sometimes even
better than the lecturers in his Department. In 1991, when he graduated, he was assigned a job in the
National Institute in Beijing. But the work did not motivate him enough and in 1992, he joined Kingsoft
as an engineer and became the CEO of the company within 6 years. Continuing his stint in Kingsoft till
2007 where he was successful as an entrepreneur, he did a brief stint as an angel investor and also as
a hired CEO. But he felt still unsatisfied as Kingsoft did not become the industry leader and it had
stagnated with a medium level of market share.

Following this, in December 2009, Jun decided to dip his hands on another entrepreneurial venture and
started looking for other people who shared the same dream. He gathered six people, who had held
positions formerly in Google(China), Kingsoft, Microsoft China, Motorola Research Center and
University of Beijing. Thus Xiaomi was born. The aim at that time was to create a customized OS on
top of Google’s Android. They came up with their own MIUI operating system which was content driven.
Though Jun wanted to create a smartphone, there wasn’t much scope due to the dominance of
Samsung and Apple in the Chinese market. Initially Xiaomi took the same route as Apple in planning
and designing its smartphones as well as procuring the parts from the same suppliers. But due its low
brand presence, it had very little awareness in the market. Seeing this, Jun developed MIChat where
the developers in the company presented their ideas and asked the users for their feedback. This
resulted in almost 5 lakh fans of MI even before they had launched the first smartphone.

Xiaomi released its first smartphone in September, 2011 at a price of USD 322 when the price of an
Apple smartphone with similar features was USD 806. It was clear that Jun was playing on high volume
keeping prices lower by more than half, sustaining initial losses. Many rebels accepted this new era
smartphone and it sold more than three lakh units in 34 hours. A second factor was that, in contrast to
Apple which only played on keeping its hardware costs lower, Xiaomi focused on gaining profit from
both the hardware, software and services. Operating system upgrades were made free for users and
subsequently a different smartphone called the Youth Version was launched for college students in
May, 2012. 150000 units sold out in under 10 minutes engraving the fact that a new player was rapidly
making its mark in the Chinese market. In October 2012 and 2013, Xiaomi launched MI2 and MI3
respectively, the first batch of both of which was again sold out in under 3 minutes. The interesting fact
was that there was no change in the price whereas the features like the display panel, camera, battery
were continuously upgraded.
Smartphone market in India

The smartphone market in India has been in a constant topsy turvy state and with the advent of new
local and Chinese players, the major international players have faced intense competition thus proving
it very difficult for them to retain their market shares. Until few years before, feature phones captured a
major chunk of the market but times have changed quite significantly to categorize smartphones as a
necessity now in a middle class Indian’s life rather than a luxury. The smartphone has graced modern
India, thus paving the way for new manufacturers to enter this industry including those who were
previously manufacturing feature phones.

The overall mobile market had a 9% YoY growth in 2014. Samsung had a 17% share, shrinking from
26% in Q1, while Micromax had a 14% share ​(Exhibit 1)​. Lava and Karbonn each had an equal share
of 8%, and Motorola had 5%, while other vendors commanded 36% of the market. A large chunk of
Indian users were making a transition to affordable smarter devices from feature phones. India
witnessed the highest rate of growth -- over 18% -- in smartphone sales in Asia Pacific region during
January-March 2014, outshining countries like China.

According to IDC’s Q3 2014 numbers, phone vendors in India shipped a total of 23.3 million
smartphones compared to 12.8 million units in the same period of 2013. The overall mobile phone
market increased from 19% in Q3 of 2013 to 32% in Q3 2014. Smartphones with screen sizes between
4.5 inches and 5.5 inches are seen as the sweet spot for consumer preference. However, consumers
needed larger screen sizes to enjoy media content and with the 4G rollout expected in CY2015, the
Phablets (smartphones with a screen size of 5.5 inches - 6.99 inches) segment was expected to pick
up again. The quarter was good for Micromax; its market share increased from 18% in Q2 2014 to 20%
in Q3 2014. Karbonn, which controls 8% of the smartphone market share, made 85% of their shipment
volume on handsets priced less than $100. Lava was also in the top five vendors along with Motorola.
Karan Thakkar, Senior Market Analyst at IDC India remarked,

"With positive consumer sentiments and low levels of inflation, consumers will have more money to
spend. Majority of the smartphone users change their phones within 12 to 24 months. With 44 million
units shipped in CY2013 and the current market scenario hinting at 80 million plus shipments in
CY2014, we have a big chunk of end-user market which is awaiting a refresh. To add to this, new
initiatives on the 4G front are expected to be rolled out by the vendors, which should spark up demand
in the smartphone market in CY2015."

Indians were quite aware of the different features in the handsets that different smartphone
manufacturers provided. The youth of this generation focused more on feature intensive phones while
the rural population based their choices on the cost. The industry operated in diverse cultures, catering
to multiple languages. Thus, the marketing strategy of the firms was dependent on various social
factors pertaining to these cultures.

The industry had also been radically changed by several fast paced technological innovation in the
recent years which included the likes of Dual camera, fast charging, Fingerprint scanner, etc. Most of
the competing brands had splurged on research & development to make these technologies both cost
effective & customer friendly. Research was ongoing to bring in features such as fingerprint lock and
face recognition at affordable costs. The ecological costs of manufacturing were also becoming a major
concern with the rising sales of smartphones in India. The industry was inclining towards energy
efficiency and focusing on using more renewable energy sources along with sensitive smart packaging.
The aim here was to push up use of recyclable products to 80-90%. The new handsets would be using
raw materials free of PVC and nickel and containing bio-plastic recycled metals.

Xiaomi enters India

By 2014, the Indian smartphone market had developed a visible void for a feature-heavy, low cost yet
quality driven smartphone. The market was scattered, mainly dominated by Samsung, Micromax and
Nokia. While Samsung and Micromax rode the Android wave, Nokia decided to operate with Microsoft’s
Windows UI on its smartphones. Samsung and Micromax operated with multiple smartphones across
different price ranges ​(Exhibit 2)​.
Though this variety presented the users with multiple choices and varieties to choose from, a flagship
offering was missing from the market. Samsung’s most popular offering, Samsung Galaxy X, sold 24%
of total Samsung sales. Micromax too had a very scattered share, spread across multiple popular
offerings.

At this time, the market was particularly marked with low brand loyalty and consumers attached little
offering to any particular model, mostly choosing the one that offered the features at the lowest price.
Indian smartphone players often lost out to Samsung, either due to lack of R&D or lack of model
differentiation or perception of poor quality and after sales service.

Xiaomi entered the Indian market in 2014. With Manu Kumar Jain as the Head of Operations, Xiaomi
launched its flagship phone- Xiaomi Mi 3. With Mi 3, Xiaomi planned to enter into a direct competition
with Samsung and the likes in the Rs.10K-Rs.15K price segment. With no offices, no retail partners and
no distributors, Xiaomi entered India in partnership with Flipkart- a popular e-retailer. Xiaomi used the
hunger marketing tactics with a controlled supply to market its high value smartphone. Interested
customers were asked to register for the sale, and Xiaomi made a limited stock of devices available
that were sold in great time. Said Jain, the company’s head of innovation remarked

“We realized that Indian public had an obsession for specs at cheap prices. If we could offer them a
smartphone that had a camera, battery, storage and screen better than that of popular mid-range
phones, while being in the same mid-range segment, we would hit the right sales.”

The entire promotion and advertisement campaign were run online and no celebrities or external
promotion companies were hired for the campaign. This was one of the reasons of giving out lower
prices on Mi 3. Others being cost savings achieved through the simplified supply chain. 94% of total
smartphone sales in 2014 occurred through retail channels. All the smartphone players operated
through a conventional supply chain web consisting of distributors and retailers. Samsung and Apple
operated through a network of proprietary distributors, while other players operated through general
distributors. On an average, the distributors usually claimed 10%-15% margins on the total sales.
Similarly, the retailers maintained a 15%-20% margins as their take away profits. On an average, each
smartphone was sold to the customer at 25%-30% above its manufacturing price. The retailers were
mainly categorized as one of the below 3-
 ● Proprietary company outlets
● General mobile phone stores
● Electronics retail chains

Xiaomi challenged this conventional model by entirely doing away with this complex distributor-retailer
network. Direct sale through Flipkart not only gave it the cost advantage, but also provided the unique
image to flourish in the market. Flipkart usually charged a 10% premium on the sale price at each
phone sale.

After the initial success of its first flash sale, where it sold over 46,000 pieces, Xiaomi planned to
continue its operations in India on the similar model and introduced Just-in-Time inventory in its
operations in 2015. Operating on razor thin margins ​(Exhibit 4)​, it allowed them to reduce the inventory
and reduce working capital margins. This limited availability of Xiaomi's products in batches also drove
consumer fervor and inculcated the built-up demand – almost artificially creating a customer demand.
From the operations perspective, it helped Xiaomi reduce inventory holding costs and eliminate the
surplus, with less than 80% holding inventory as compared to the other major smartphone players.
Pieces were assembled only after the order had been placed by the customer.
Xiaomi’s built its inbound logistics around strong relationships with Taiwan-based manufacturers of
various smartphone components. The firm partners with Wintek and TPK for screen technology,
Inventec and Hon Hai for assembly, and Unicorn for PCB. Taiwan Semiconductor Manufacturing
Corporation (TSMC) still supplies most of the processors to Xiaomi. Xiaomi also procures various
components from surrounding countries. For example, MOS and batteries are imported from Thailand.

Starting 2015, over 90% of smartphones that Xiaomi sold in India were assembled in India, with the
government of India charging 5% on book value of the components as import tariffs. Location of
manufacturing units in China and India was one of the main sources of value in Xiaomi’s operations as
the costs of human resources is very cheap. Moreover, with the sources of raw material being in close
proximity to the manufacturing units, imports costs and shipping charges were low. This was a huge
factor in Xiaomi being able to sustain its cost advantage.

Taking another step towards building the customer loyalty towards the Mi brand, Jain decided to depart
from traditional mobile sales conventions and sell the same phones for a much longer period than the
majority of its competitors ​(Exhibit 2)​. While Samsung and Micromax would come up with a newer
model of the popular phone in 10-12 months, Xiaomi’s Mi maintained a period of 18 months for its
flagship offering. All of these stocking operations also helped them save on R&D costs during the
period.

In a market where the consumers were flooded with TV advertisements of smartphones, celebrity
endorsements, sports sponsorships, Xiaomi entirely relied on user reviews, digital advertisements and
a strong online community for its sales. This was a game changer among the Indian audience looking
for a fresh change.
“We realized that the new consumer is far more informed. He would read reviews, watch the ratings
and ask their friends before buying. We basically wanted the word-of-mouth and reviews to advertise
for us and not the celebrities.”
Xiaomi takes the big leap

A large part of Xiaomi’s success had been due to the loyalty of their huge fan base across the regions
where they have been catering. This fan base for innovation was a one of a kind thing done for the first
time by a smartphone manufacturer which garnered a lot of positive word of mouth initially. CEO Lei
Jun remarked

“The constant live innovation and optimization that we carry out in our highly specialized facilities in
China has been largely possible due to our strong MI fan base with whom we continuously engage and
take feedbacks online. We have also been conducting several offline interactions in select cities where
we provide certain upcoming new product prototypes so that potential buyers can have a firsthand feel
of what’s new and what needs to be improved. There are many other lucky draws and competitive
events held too where the lucky winners get priority passes for the sale of the next smartphone or
certain MI accessories.”

All these measures did speed up the process for Xiaomi to roll out faster updates and also create a
more loyal, integrated tight ecosystem of customers. One MI user made sure that other members in the
family were using different products of MI, a brand loyalty that was quite unheard of. (​Exhibit 3​) ​A lot of
Xiaomi’s employees were Mi fans before they joined the firm. The management sees Xiaomi not as a
smartphone company but as a lifestyle company that lives and dies by the devotion of its fans. The
community has brought in a culture where there is a pursuit of perfection and constant refinement and
enhancing of products.

Xiaomi’s website talks about how they’re fearless in testing new ideas and pushing their own
boundaries.

“Our dedication and belief in innovation, together with the support of Mi fans, are the driving forces
behind Xiaomi’s unique products.”

It comes from the unique way that Xiaomi operates, closely analyzing the user feedback that it gets on
its smartphones and following the suggestions it likes. Every batch and release is hence incrementally
better. ​Xiaomi's obsessive and rapidly-executed focus on user feedback is not something prevalent in
the smartphone market. Suggestions get picked up by a product manager within hours. Within a few
more hours, the selected suggestions reach the engineering team. The suggestions get incorporated in
the next weekly build. A number of unique features that Xiaomi has come up with were in fact user
suggestions. Things that came out of someone's head rather than product managers.

When Xiaomi entered India in 2014, they continued the same promotional strategies to create a strong
word of mouth on social media. This was seen as a new kind of promotional buzz in India at a time
when no other smartphone manufacturer seriously thought about exploiting this avenue. They started
with their #MiIndia campaign on twitter where users where asked to register on the website to show
their enthusiasm for the new MI3 smartphone and also retweet with the same hashtag. Among them,
one lucky winner was selected to receive an MI power bank. A Facebook comment thread was also
started and few lucky winners were chosen who received priority passes for the upcoming flash sales.
These customers in turn shared their passes on different social media platforms and were invited to a
common city interaction in Mumbai. Similarly, to promote the MI band they started a #GuessTheCup
campaign on Facebook where people had to comment the cup number under which they thought the
band was kept. (Refer ​Exhibit 6 ​for social media mentions) Again some lucky winners were chosen
amongst them, who got a chance to bring the band home. Following the craze that this campaign
generated, MI introduced an hour of sale of the bands on its website exclusively. 5000 bands were sold
out in under a minute.

One of the most predominant promotional strategies in India included promotions during the IPL
season. Although MI didn’t use the TV or print media for its promotions, but during the IPL season in
2015, to rejuvenate the MI4I promotions, they asked users to retweet with #CricketWithMI. People were
asked to participate in a contest where they were asked some questions revolving around cricket and
the brand. Users were also asked to retweet the post of MI India and give a reason as to why they want
to buy the new MI4I. All these campaigns made a number of people connect with the brand and it
definitely created a cacophony in the smartphone market. Indian users who generally had very low
brand loyalty, were patient enough to wait for the flash sales of Xiaomi. People were connecting from
the urban and suburban areas and posting on Twitter & Facebook, engaging in discussions with fellow
MI users and in turn helping Xiaomi in improving their future products. A specific case was that of the
dual smartphone feature where a user could access both the WhatsApp accounts on his two different
numbers in the same smartphone. Jain said that around 90% of the fans wanted such an option and it
was due to their push that Xiaomi managed to bring this change in under 6 months. Tarun Pathak,
director of Counterpoint research said,

The flash sales were another unique strategy incorporated by the company. When smartphone
manufacturers across the world couldn’t wait to flood the market with their handsets, Xiaomi believed in
a drip sales strategy. During the MI3 launch, they introduced five weekly flash sales with only one
online partner, Flipkart, where the users had to register beforehand. This generated a huge talk about
their mobiles in the whole month on both print and online media. One of the customer remarked,

“I have been a fan of Xiaomi since the beginning and four of my family members have MI phones. The
new MI3 just looks like the MotoG5S Plus. I have gotten hold of it after four flash sales were over. But it
was worth it as I find other brands charging much just for the sake of their name. The best part of MI is
that you can connect with fellow fans in your area, talk about the pros and cons of the handset and
report it online to MI.”

Flipkart was also overwhelmed with the kind of traffic that each launch was generating. They couldn’t
anticipate the strength of the word of mouth in this case until the first flash sale happened. During the
first two sales of MI3, their website crashed and many prospective buyers immediately enquired about
the occurrence of the next sale. It was a great situation for them as well because people buying mobiles
also got introduced to the wide range of accessories available on their platform. (​See Exhibit 8, 9, 10​)

Xiaomi, historically, has always been playing on volume.. This applies not only to smartphones but in all
the markets that Xiaomi is currently operating in. In contrast to other major Chinese players like
OnePlus which increase prices each year, Xiaomi’s sole focus has been on providing value for money.
In fact, it holds a Guinness record of selling the most number of phones on a given day on a given
platform, 2112010 to be precise.
Xiaomi is the only contemporary smartphone manufacturer which rolls out major UI updates every
week. While other phones are recognised for their technology at the time of purchase, the Mi
community gets to see a “new” phone every week. On surveying users in 3 major cities of India, it was
found that a majority of them were attracted to an Mi phone because of its slick UI and continual
updates. (​Exhibit 11​). A lot of manpower and time goes into satisfying this customer need.

Historically, Xiaomi has been able to offer concessions on its phones due to its small portfolio and
longer selling time required per device. Even after new devices are released, Xiaomi continues to sell
older devices at decreased prices. The average shelf life for a product is 24 months, through which it
undergoes 4-5 price cuts. Mi2 was on sale for over 30 months. Redmi 1 was launched in September
2014, and Redmi 2 was launched 20 months later. This is a key component of being able to afford price
cuts to drive sales as the longer runway for smartphones gives the firm leverage to secure better
component deals with its suppliers. Company’s head of international expansion , Steve remarked:

“We can do these price cuts as we’ve managed to negotiate component cost decreases with suppliers
over time, which results in having bigger margin than expected, hence allowing a price cut, Also, a
majority of components in our devices are same, so in terms of procurement and sourcing, we’re on the
same contracts as previous phones but now at a lower cost. Hence, being on a small portfolio is
important as only then can we ride this cost curve.”

Moreover, Xiaomi’s policy regarding old products is just not about price cuts. They continually release
software updates and maintain spare parts, longer than other firms.

Structure and Culture: Driving the business forward

To support the growing and varied needs of a smartphone consumer requires fast paced innovation
and an entrepreneurial mindset. Last year, Lei Jun announced plans of overhauling the company's
structure and stressed on the need to have young employees in important positions. The 3 existing
verticals of the company--smartphones, Internet services and IoT were split into ten verticals. A majority
of the new departments were headed by people born in the 1980’s. A new department by the name of
“Group Organization” is responsible for hiring managers, running training programs, evaluating
performance and promotions. Hence, Xiaomi as a firm is gradually moving towards decentralizing the
company, delegating more power and responsibility to young and competent people. ​Moreover, Xiaomi
organisational structure has become flatter over the years. This has given rise to benefits such as
shorter communication and waiting time and more efficient decision making. Xiaomi’s website claims
that:

“We are incredibly flat, open, and innovative. No never-ending meetings. No lengthy processes. We
provide a friendly and collaborative environment where creativity is encouraged to flourish. Talents
beyond work? We have frequent company competitions for our employees to show their athletic
prowess in basketball, swimming, badminton and more. Our annual "Xiaomi Idol" has also uncovered
plenty of star potential.”
The company’s workplace promotes transparency and communication. Xiaomi has taken advantage of
these to help drive employees in good directions and spur innovation and job satisfaction. Every
decision that is taken at the senior management level and the rationale behind it is clearly
communicated . Employees know for a fact that higher-ups are listening. In addition to this, employees
are also made to feel “connected”. As part of the monthly innovation program, employees are
encouraged to submit their ideas to their manager. The top ideas for each team are recognised and
rewarded by the senior management. It provides a platform where ideas are not just published but
discussions actually take place. Most of these ideas eventually get incorporated in the quarterly
release. This program has seen ground-breaking ideas and Implementations crop up every month.

The company’s work culture is often compared to “Google” type quirky culture. Steve said, “I believe
that Xiaomi is ahead when it comes to establishing a culture that borrows well from Silicon Valley." He
passionately believes Xiaomi has what it takes to to conquer the world. Most of the senior engineers
whom Xiaomi has recruited in the last 2 years have worked in global roles across multiple companies,
Google, Facebook, Amazon, Microsoft, Apple being few of the big names. This rich experience brings
in solid domain knowledge backed by varied viewpoints to always come up with the best product and
technology.

Smartphone wars

In 2014, Micromax and Intex together had acquired a significant market share as they offered decent
phone features at low prices, but this point of disparity morphed into the industry point of parity when
Chinese manufacturers offered superior quality and features at the same price range making it hard for
the Indian companies to compete by undercutting their offerings. Also due to the sudden shift from 3G
to 4G, the Indian manufactures were left with huge inventory and there appeared a void and demand
for 4G phones which was immediately addressed by the Chinese makers. Post 2014 saw the entrance
and emergence of Chinese smartphone manufacturers.

Since Xiaomi entered the Indian market in 2014 through its flash sale on Flipkart, Vivo entered India
through a strategic and marketing partnership with Viacom 18. Vivo got the advertisement access to
popular television channels such as MTV, VH1, Comedy Central and Colors and the on-ground live
events and digital platforms. Its aggressive online presence and title sponsorship of the famous Indian
Premier League helped it gain traction and occupy the void being left by the incumbent brands. Vivo
and Oppo tapped the sentiments of the consumers by roping in celebrity brand ambassadors. These
celebrities were strategically chosen as they resonated with the youth, change and fashion. Vivo
choose Ranveer Singh and came out with a series of advertisements. The back to back hits of Ranveer
Singh and his gaining popularity along with the involvement of Vivo in the beloved game of cricket
helped them in sales and in customer retention of the brand.

Oppo entered the Indian market with its 13-megapixel camera, thereby catering to another untapped
need of the conscious indian consumer. This was a big attraction for the camera crazy users who were
uptill now used to terrible front facing cameras with poor selfie quality photos. They used Alia Bhatt as
their brand ambassador, who was already in the news for her role in 2 States, highway and her
infamous video with AIB.
Unlike the strategy used by Xiaomi, where they focused wholly on online sales to cut overhead costs,
Oppo and Vivo have long used the brick and mortar stores that garner more eyes in the Indian context.
They spent huge amounts on promotion to flood the markets with their products and incentivised
salespeople to promote their handsets. This helped in providing after sales service which was
predominantly missing in Xiaomi handsets. Along with these investments, the Chinese companies have
been aggressively expanding their manufacturing and assembly footprint in India, thereby achieving
economies of scale, lower lead time and avoiding import duties on certain components.

Oppo and Vivo were not just paying for Indian Premier League (IPL) advertisements and sponsoring
the Indian cricket team, but also paying a lot of money to retailers who would put up their boards; give
their products prime positioning; or sell their devices exclusively. The Chinese makers gave the
distributors volume targets as opposed to value targets given by Samsung. This further increased their
volume sales as the price conscious buyers are more in number than the value conscious buyers.

Chinese smartphone brands, Xiaomi, Vivo, Lenovo and Oppo featured in the top five brands in 2018.
Intense competition from Chinese brands has adversely impacted the performance of domestic
smartphones brands, such as Micromax, Lava and Karbonn and also snatched market share from
international providers such as Samsung, Apple, Motorola. The performance of Chinese brands
remained strong, accounting for 57% of the total smartphone market in Q1 2018, up from 53% during
Q1 2017.

Also international pressure from the US government and the trade wars with China have nudged the
Chinese companies to increase and channel their attention to the world’s 2nd largest smartphone
market. Although the overall market share of the Chinese companies is increasing in India, the pie
seems to be shared among the providers. Seeing the void in the smartphone market, two other chinese
firms, Comio and Infinix are geared up to enter the indian market.

Using the same adoption strategy as they did in China, Xiaomi has forayed into home appliances,
fitness bands, television. It launched its MI air purifier after seeing the need for pure air quality in cities
near the capital. They have also considered expanding into the white goods space and are to roll out
air-conditioners, washing machines, refrigerators,vacuum cleaners. These products will be smart
appliances, connected to the MI app, using Internet of Things. It has already entered the television
market with its product offering at 30-35% cheaper than the top three brands, by contracting with Dixon
which is the original equipment manufacturer. Low profit margin, local assembly options and the
advantage of the Make in India duty it gets from manufacturing locally are helping Xiaomi in grabbing
market share from the incumbent providers.

The road ahead

Manu wondered whether the position that Xiaomi attained in India was sustainable and long lasting?
Was it time to take the traditional marketing route and logistics/supply model that other contemporary
players were following? How should he deal with the new upcoming Chinese smartphone
manufacturers who are playing on the low cost model which started off Xiaomi’s meteoric rise. Was it
time to diversify and look at expanding other businesses or invest in the core smartphone business and
gain a stronger foothold? How could he better leverage the close knit community that they had built
over the last few years to continue being in the hearts of the Indian middle class consumer?
Exhibits:

Exhibit 1​: Market Shares of major Smartphone players (Source: Euromonitor International)

Exhibit 2 (a): ​Comparing select top selling models with Xiaomi Mi3 (2014)

Exhibit 2(b): ​Data for 2018

Exhibit 3: ​Brand loyalty

Apple Samsung Xiaomi Motorola Lenovo Others

Apple 60% 5% 6% 4% 7% 14%

Samsung 5% 43% 3% 12% 15% 25%

Xiaomi 30% 42% 90% 37% 35% 41%

Motorola 2.5% 5% 0.5% 42% 5% 8%

Lenovo 1.5% 3% 0.3% 3% 37% 2%

Others 1% 2% 0.2% 2% 1% 10%

Smartphone brand user intending to switch next to (2016) (Column has smartphone brand which user
currently owns , row has company to which user wants to switch)

Exhibit 4: ​Brief Income Statements for major smartphone players, 2016 (only smartphone divisions of
firms considered)
Exhibit 6: ​Successful social media campaign, Xiaomi
Exhibit 7: ​Brand perception and loyalty

Source: Homburg, Kuester and Krohmer 2013. Source: Mobilytics

Exhibit 8: ​Flipkart’s website traffic near the Big Billion sale

Sept: Month of big billion sale

Oct: Launch of Mi3 on Flipkart
Exhibit 9:​ Online popularity data, 2018

Exhibit 10:​ Mi3 flash sale data, 2014

Exhibit 11: ​UI feature affinity for Mi users

Endnotes:

References

● https://www.thehindubusinessline.com/info-tech/China%E2%80%99s-vivo-Mobile-set-to-enter-India/ar
ticle20923356.ece
● https://venturebeat.com/2018/09/01/chinese-smartphone-makers-are-winning-in-india-the-fastest-gro
wing-market/
● https://www.livemint.com/Technology/KsUB8dksllxzBqcUCFfySJ/How-Chinese-mobile-phones-took-o
ver-the-Indian-market.html
● https://techcrunch.com/2015/01/19/xiaomi-secret-sauce/
● https://www.kindai.ac.jp/files/rd/research-center/management-innovation/kindai-management-review/v
ol3_7.pdf
● https://www.forbes.com/sites/parmyolson/2013/10/22/how-chinas-xiaomi-does-in-a-week-what-apple-
does-in-a-year-update-devices/#979a5de331b0
● https://research-methodology.net/xiaomi-organizational-culture-innovative-but-intense/#_ftn1
● https://www.quora.com/What-is-Xiaomis-corporate-culture-How-does-it-affect-the-management-of-the
-company
● https://www.kindlingapp.com/blog/xiaomi-engaging-employees-innovation/
● https://leijunxiaomi.wordpress.com/organization-structure/
● ​https://thepassage.cc/article/412/
● https://yourstory.com/2014/12/idc-india-smartphone-market/
● https://www.tradegecko.com/blog/heres-the-secret-behind-xiaomis-disruptive-success
● https://economictimes.indiatimes.com/tech/hardware/how-chinas-handset-maker-xiaomi-came-first-in-
india/articleshow/61798368.cms