Xiaomi: Reinventing the Smartphone Business Model in China

Xiaomi: Reinventing the Smartphone Business Model in China
Case Code: BSTR461
Case Length: 20 Pages
Period: 2011 - 2013
Pub Date: 2014
Teaching Note: Not Available
Price: Rs.500
Organization: Xiaomi Inc.
Industry: Smartphones
Countries: Global
Themes: Innovation,Globalization
Xiaomi: Reinventing the Smartphone Business Model in China
Abstract Case Intro 1 Case Intro 2 Excerpts


For the first quarter ended April 30, 2014, Beijing-based Chinese electronics company, Xiaomi Inc. (Xiaomi) (pronounced 'Shao Me'), stood as the third largest company in China's smartphone market with a market share of 10 percent. According to market research firm, Canalys, Xiaomi beat Apple Inc. (Apple) in the lucrative Chinese smartphone market by selling more smartphones during the quarter.

Founded in April 2010 by Lei Jun (Jun), a serial entrepreneur and investor, in association with his friend Bin Lin (Lin), a former Google and Microsoft executive, Xiaomi was known to produce cheap smartphones with a nice build quality.

Xiaomi followed a unique business model where it sold its smartphones at low prices and later took advantage of the revenue streams generated by selling its software such as apps, cloud computing, and games. The company sold its smartphones at US$ 200 or US$ 300 whereas smartphones developed by Samsung Electronics Ltd. (Samsung) and Apple cost at least US$ 600. The company sold its smartphones online in flash sales at razor thin margins. Since there were no retailers and distribution channels involved, it could afford to sell its high-tech smartphones at lower prices.

The company followed an Internet-first strategy – in addition to selling its smartphones online, it communicated with its customers through social media channels. The company reportedly spent no money on traditional advertising. Since its inception, the company had believed in fostering an open, honest, and transparent relationship with its customers. Xiaomi's customers, known as Mi Fans, were regularly informed about the suppliers the company worked with and how it built its products to what it was developing....

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