The reasons behind Xiaomi’s success in China and beyond

If you Google “Xiaomi success” you’ll find dozens of stories about why this Chinese startup is considered so triumphant in a market dominated by older brands who spend so much on marketing and advertising.

Here’s a LinkedIn piece on why the company is so successful.

As the world’s second largest economy, China continues to attract top multinationals from around the world who seek to establish a presence and expand their global footprint. But recent market dynamics have begun to change as the roaring Chinese economy slows and consumers begin to mature.

Homegrown businesses have been quick to respond with equally ambitious aspirations; and a few have been on their way to become national or even global leaders. In the BCG Local Dynamos report released by the Boston Consulting Group, Xiaomi’s success was especially prominent against that of international players Apple and Samsung, selling more than 61 million smartphones at about half the price in 2014.

Today, the four-year old company has over 8,000 employees spread across China, Malaysia and Singapore, with plans to expand into India, Indonesia, the Philippines and Brazil.

The Xiaomi brand is definitely no stranger outside of Chinese borders. Founded in 2011 by local entrepreneur Lei Jun, Xiaomi is not just another smartphone brand. To the Chinese, Xiaomi is the epitome of a realised startup dream – it is a symbol of national pride and individualism to the young Chinese consumer, representing the hope and belief in ideas and innovation and a journey towards success.

Xiaomi owes its pricing advantage to its mortar-only go-to-market strategy, forgoing expensive retail outlets and overheads. Traditional, old school advertising is also nowhere to be found in Xiaomi’s marketing mix. Instead, Xiaomi engages customers on a personal-level by being present on all of China’s top social networks and forums (Weibo, WeChat, Xiaomi Forum, Baidu Tieba and Xiaomi Mall). Who stands to gain from these well-thought cost savings? The end-user, of course!

 Despite being a relatively low-cost product, the company puts in effort to solicit customer feedback and ideas to continuously improve their products. This enthusiastic customer community, known as MiFans, is invited to participate and engage with the brand via online gamification. Winners are rewarded with tickets to ‘live’ fan gatherings where Xiaomi employees and managers are present to meet-and-greet.

Xiaomi’s innovation does not stop at providing a personalised service and building a personable brand image. If you take look at Xiaomi’s production process, it is no less agile than its software, MIUI.

Xiaomi manufactures in small batches and reiterates its products all the time, akin to renowned ‘just-in-time' production techniques first made popular by Toyota’s Lean Manufacturing principles. It keeps its inventories small and maintains a flexible procurement cycle with its network of suppliers.

At the forefront of data analytics, Xiaomi makes predictions about following week’s demand with the past week’s sales data and interpretations from its social media activities. Resources placed into production are adjusted and optimised accordingly.

It is not uncommon to see each batch of 200,000 to 300,000 Xiaomi handsets sell out in a matter of minutes! This agile methodology allows Xiaomi to fulfill community-generated ideas fast; and when community members know they are heard they are continuously motivated to engage with the brand actively.

Xiaomi’s inception comes at a perfect timing where locals feel increasingly threatened by rich western nations who are perceived as making attempts to overpower. Taking an open and participative approach and allowing customers to play a part in their success story, Xiaomi instantly wins over the hearts of customers not just in China, but all over the world.

Xiaomi is but one among many other Chinese companies who made BCG’s list last year for its outstanding efforts in being a domestic driving force for the industry it plays in. Does this go to say that China is simply being over-protectionist and FDI-unfriendly?

 According to the World Investment Report, China came in second for volumes of FDI realised across the world in 2014. The United Nations Conference on Trade and Development (UNCTAD) further mentioned that FDI in China was a rising trend that would ensue. This goes to show that China remains an attractive market for multinationals to invest and set foot into.

How should organisations bridge this gap then? While foreign multinationals are looking for help to enter Chinese markets and lower-tier cities; Chinese firms on the other hand are seeking assistance to expand abroad. Instead of encouraging competition, there takes a shift in mindset to recognise this potential for joint-venturing.

The fate of multinationals and Chinese companies are tightly-bound – if both parties can take a step back to establish common grounds to for cooperation and future growth, then there is certainly room for additional optimism about the global economic outlook.