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Regardless of when the top-line numbers fully recover, however, the global trade landscape will still look dramatically
different as companies shift their focus from fighting the pandemic to winning the post-COVID-19 future. As it destabilizes
economies, intensifies geopolitical frictions, and exposes the risks of current global manufacturing and supply networks, the
pandemic is also likely to redraw the map of world trade.
To visualize these shifts, take a look at two maps depicting major trade corridors. One shows the actual change in trade
volumes from 2015 through 2019; the other projects changes from 2019 through 2023 under BCG baseline economic
scenario. (see Slide 5 & 6)
Companies will be compelled to revise their mix of products and the design of their global supply chains—and governments
their trade and economic policies—to adapt to these and other shifts. This will be particularly true in segments such as medical
equipment, biopharmaceutical products, semiconductors, and consumer electronics, which are particularly exposed to
geopolitical and macroeconomic pressures.
Globally, median enterprise value to earnings before interest, taxes, depreciation, and amortization deal multiples increased
to 14 times from 13 times in 2019, underpinned by fast-growing industries, such as technology, telecommunications, digital
media and pharmaceuticals.
Bain identified an increase in the share of scope deals aimed at helping companies expand into fast-growing markets or gain
new, mostly tech and digital, capabilities. This trend continued in 2020, with scope deals further increasing volume share to
56% of all deals more than $1 billion, compared with 41% in 2015. Technology, consumer products and healthcare stand out
with the highest share of scope deals. The need for new critical capabilities was at the heart of many recent scope deals.
Retail: The Covid-19 pandemic hastened the shift to e-commerce, increasing the importance of M&A in the retail industry.
The retail M&A practitioners Bain surveyed expect M&A to contribute almost 60% to top-line growth over the next three
years compared to around 35% over the past three years, one of the highest jumps among all industries surveyed. Activity will
intensify for both scale and scope deals. Markets are looking for scale, growth and digital performance.
Technology: Technology M&A roared back from an almost standstill in the second quarter of 2020 to hit record activity in
deal volumes and value in the second half of the year. Tech M&A continued to trend toward more growth- and capability-
oriented scope deals, representing 81% of industry deals in 2020, far more than other industries. Most significant is the rising
interest of nontechnology investors in the tech space, which now account for nearly three-quarters of deals in the technology
sector, up from about 60% a decade ago.
Media: Bain’s new research shows that there will only be a few winners once the dust settles in this land grab moment. Our
data shows that streaming grew quickly in the first half of 2020, but that consumer demand caps at three to four
subscriptions. The report also digs into the unique nuances of integrating media companies, especially virtually, given the
criticality of creative talent in the industry.
(Source: Bain & Company’s Global M&A Report 2021.)
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M&A in different industries
Telecommunications: Following a steep drop the previous year, telecommunications deal value grew by about 50% in 2020.
The industry also witnessed a changing deal mix. Despite fears that further industry consolidation would be quashed by
regulators, scale M&A rebounded. Meanwhile, infrastructure M&A, a type of deal that’s unique to telecommunications,
continued apace as companies sought to monetize infrastructure assets that command three to four times the valuation
multiples of the integrated telecom operators themselves.
Banking: The banking industry is primed for an upswing in M&A activity. Valuations are dropping in banking, with average
price-to-book value decreasing by 35% globally in 2020. Even after gradual consolidation, banking remains a fragmented
industry across all key markets, with the top five banks accounting for only 30% of total deposits in the US, 40% in the UK, and
38% in China. Unlike many other industries, regulators are creating conditions and frameworks that favor consolidation. For
example, the European Central Bank recently published guidelines for consolidation in the banking sector.
Insurance: Insurers are streamlining their businesses to redefine themselves with a narrower focus and stronger core.
Divesting of noncore businesses represented about 70% of insurance deals valued at more than $1 billion over the past five
years. Buyers are taking advantage of these divestitures to strengthen their market position and step into near adjacencies.
In 2014, Xiaomi was the largest smartphone company in China. Today, Xiaomi is one of the top five smartphone vendors in
the world. The smartphone commodities of Xiaomi include different series such as Mi Series, Mi Note Series, Mi Max Series,
Mi Mix Series, Mi NoteBook Series, Redmi Series, Blackshark, and Pocophone. Besides, the company also offers laptops,
mobile apps, mobile accessories, wearables, home appliances and smart-home devices.
In 2018, Xiaomi launched Mi Credit in India for easy accessibility of personal loans. The company also offers various value-
added-internet-services like 'Mi Music', 'Mi Video' and 'Mi Game’.
From 2019, Xiaomi even started selling accessories such as caps, bags, glasses, backpacks and also lunchboxes, pillows,
cups, filters, umbrellas and screwdrivers.
Xiaomi smartphones achieved terrific growth, increasing from a sales volume of 300,000 handsets in 2011 to sales of 70.8
million in 2015, an increase of over 200 times. This made Xiaomi the fifth-largest smartphone company in the world, after
Samsung Group, Apple Inc., Huawei Technologies Co. Ltd., and Lenovo Group Ltd. Due to the popularity of the smartphone,
the number of users of Xiaomi’s firmware operating system, Mi User Interface (MIUI), also increased to an astonishing
figure of 170 million, spread over 156 countries around the world.
Xiaomi box and Xiaomi TV also served as important ports to attract new users. This was facilitated by high-performance
hardware configuration, a smooth operating system, and much original film and TV content. Xiaomi released its routers to
create a cross-platform data centre, which enabled users to get data and information from different devices, whenever and
wherever they needed.
In addition to providing access to the Internet, MIUI offered Internet-based services, such as intelligent call notification, free
Wi-Fi, unknown number identification, and an application store. MIUI also offered comprehensive Internet-based services
such as Xiaomi Lifestyle, which offered retail products and discounts at restaurants, theatres, and other venues; Xiaomi
Entertainment, which provided mainly games and films, plus some TV content; and comprehensive financial services for
loan financing. All these features had enough potential to generate more income sources for Xiaomi. In 2015, the revenues
from Xiaomi Internet services reached CN¥3.82 billion (US$564 million), which was a 150 per cent increase compared to
the previous year.
By early 2016, Xiaomi had invested in 55 smart hardware companies, including Huami (wearable technology such as the Mi
Band), Qingmi Technology Co. Ltd. (hardware interface devices such as patch boards and cables), Ninebot Inc. (personal
transportation devices), Lanmi Technology (Bluetooth devices such as headphones), Zimi Corporation (power banks), Zhimi
Technology (air purifiers and fans), and Yunmi Technology (water purifiers). By mid-2016, Xiaomi had already made cumulative
shipments of 24 million Mi Band units, making Huami the second-largest smart wearable devices company in the world. As a
result of the popularity of the Mi Band, Huami raised ¥237.3 million (US$35 million) in its Series B round of financing; Huami
was seeking to start a new round of financing with a valuation of ¥6.8 billion (US$1 billion).
Samsung’s core ability lay in its smartphone vertical industry chain. The company’s key techniques for manufacturing
computer chips, random-access memory (RAM) data storage, screens, and other components gave Samsung advantages in
product development, production, quality, and price. Samsung launched phones of numerous kinds and levels. Phones with
different hardware and at different price points were produced around the globe and heavily promoted with celebrities,
sportspersons, and non-commercial advertisements. The phones were sold internationally through many channels (through
agents and direct to consumers, who could customize their phones). After earning additional profits and establishing its
production cycle, Samsung continuously reduced the prices of its old phones to stay in the market and developed new
models to replace the old ones.
In contrast, Apple used the strategy of single-product explosions, launching only two or three new phones each year.
Apple’s general headquarters was situated in the United States. It focused on design and development of its products,
purchased raw materials and components from more than 500 enterprises in 31 different countries, and completed the
assembly process in Foxconn, China. The products were then delivered by air transport to various distribution centres
around the world. After new products were released at a convention, Apple’s iPhones were sold through individual retail
traders, mass retail traders, operators, and Apple stores. The relatively high price of iPhones and their consistent popularity
around the world brought tremendous profits for Apple.
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Xiaomi: Internationalization Practices
Internationalization as Both a Dream and a Goal
Although China was becoming the world’s most influential smartphone market, the Chinese market was becoming
saturated. China had been in a period of high-speed development of smartphones since 2010. Smartphone shipments grew
by 100 per cent each year for the next three years, but in 2013, the smartphone market began to decline dramatically. At the
end of 2015, the number of phone users in China had reached 1.32 billion, about 95 per cent of China’s population. There
was almost no room left for the market to grow. With the need for phone replacements decreasing, the development of
smartphones entered a passive state. The phone business had already completed its regeneration and upgraded at an
accelerated speed; the transformation from functional phone to smartphone was basically completed. In the future, the
development of the smartphone business could only rely on upgrades or regeneration of smartphones.
As a result of a gradually saturated market, the battle among Chinese smartphone brands was becoming more and more
fierce. Many of the vendors who lacked brand popularity, innovative power, core patents, and government allowances were
eliminated from the market. Companies like Leshi Internet Information and Technology Corp. (LeEco), Meizu Technology
Co. Ltd., Coolpad, and Lenovo, followed Xiaomi by offering similar products at the same price, quality, and functionality.
They came out with good phones at attractive prices, which, in turn, slowly weakened Xiaomi’s competitive power.
Xiaomi had captured as much of the market as it could. Xiaomi’s total phone shipments in 2015 did not achieve the
company’s target; only 70.8 million Xiaomi phones were sold in that year. That was an increase of 22.8 per cent from 2014,
but the year-on-year growth rate in 2014 was 227 per cent. In addition, Xiaomi’s relatively low average price and extremely
low profit margin had already put Xiaomi in a critical situation. According to a survey completed by International Data
Corporation (IDC), the average selling price of a Xiaomi phone in China was US$141 in 2015, while the average selling price
of phones produced by Huawei, OPPO Electronics Corp., and Vivo Communication Technology Ltd. was US$213, US$231,
and US$208 respectively. Considering that the market situation for Xiaomi was alarming and its profit insufficient to
support the corporation itself, Lei intended to enter the international market rapidly to accelerate Xiaomi’s development
and accomplish his dream of internationalization.
In order to enter the overseas markets, Xiaomi initially formed an international management team. In addition to Xiaomi’s
eight founders, Xiaomi welcomed seven team members with senior work experience in well-known international
companies such as Google, Tencent, and Qualcomm. The team had four foreigners and six people from China, returning
from overseas work
Senior Managers
Shou Zi Chew Chief financial officer
Xiang Wang Senior vice-president, supply chain and intellectual property
Hugo Barra Vice-president, global division
Tong Chen Vice-president, content investment and operation
Mu Tang Ecological chain product development and Xiaomi explore lab
Jain Manu Xiaomi India
Donovan Sung International product development
In 2014, Xiaomi started to sell its phones and smart hardware in Singapore, Malaysia, Indonesia, Thailand, the Philippines,
and India. First, Xiaomi launched its official website in these countries and partnered with local e-commerce platforms. For
example, Xiaomi initially signed up exclusively with Flipkart, which was the biggest e-commerce platform in India, and then
established strategic relationships with two major e-commerce platforms, Amazon.com, Inc. and Snapdeal. Second, Xiaomi
established an overseas service team and outsourced after-sales services to local companies. For instance, after-sales
service in India was outsourced to GadgetWood eServices Pvt. Ltd. Third, after considering the underdeveloped logistics
and payment systems, Xiaomi reached an agreement with electronic commercial platform Lazada Group to sell Xiaomi
phones in the Philippines, Indonesia, and Malaysia. Lazada built a giant warehouse for Xiaomi in those countries and
established internal transportation teams to deliver Xiaomi phones to the consumers the very next day. The popularity of
credit cards in Southeast Asia was comparatively low, so Lazada allowed its consumers to use electronic bank payments,
cash on delivery, and other modes of payment. Moreover, Lazada provided customer services in the local language.
However, there was fierce competition in the smartphone business in China. It was not long before Xiaomi encountered
opposition from its allies and partner companies. Their products, slogans, and release conventions all attacked Xiaomi. Some
engaged in Pengci marketing that targeted Xiaomi; some companies outright claimed that their products were better than
Xiaomi’s. As Xiaomi lost ground, it was further subjected to queries, insults, and slander. Even the accomplished and powerful
chair of Gree Electric, Dong Mingzhu, joined the melee.
Xiaomi’s overseas market encountered troubles, and the Xiaomi brand suffered a trust crisis. Taiwan fined Xiaomi for misleading
consumers with incorrect sales figures, and the company was sued for product patent deficiency in India. These problems left Lei
feeling dejected. How could Xiaomi meet the challenge of increasing its sales in the international markets?
Other challenges: Product Patent Deficiency, Unsatisfactory Sales, Dependency on India Factories (99% of Xiaomi phones,
almost 100% of smartphone chargers, USB cables and batteries are produced in India)
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