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


Launching the Miui Interface

Having founded the company, Jun, Lin, and the other co-founders started working on Google's Android operating system (OS) to make the OS more compatible and user friendly. This led to the launch of the MIUI (pronounced Me You I) interface.

The MIUI OS resembled the iOS and Android but replaced the traditional Android app drawer with side-scrolling home screens full of apps. It had very iOS-like menus, toggles, and icons. The MIUI OS also drove users to Xiaomi's device security, cloud messaging, and backup features. ...

Entering the Hardware Segment

Jun and Lin had planned to launch their smartphones after a year of starting, i.e. from 2011. However, neither of them was satisfied with MIUI’s performance on other companies’ hardware and so they decided to launch their own smartphones earlier. Subsequently, Xiaomi roped in Zhou Guangping, who was known for the ‘Ming’ line of phones developed by Motorola...

An Unconventional Business Model

According to Jun, Xiaomi was modeled after two companies – Tongrentang, a 340-year-old traditional Chinese medicine company, and Hai Di Lao, a hot pot chain. From these companies, Jun learnt not to produce a low quality product just to reduce costs, and the significance of customer service...

International Expansion

In 2013, Lin hired Barra, former VP at Google, as VP for Xiaomi Global, to plot the roadmap for the company's overseas expansion. In February 2014, Xiaomi kicked off its global expansion plan by foraying into Singapore. Experts stated that the launch marked the culmination of efforts to adapt products offered by Xiaomi for an English-speaking audience while building the Xiaomi brand on a global scale. Commenting on the Singapore launch, Barra said bringing Xiaomi into a new market was “like building a new company essentially." ...


Some analysts were of the view that the company generated a buzz by creating artificial shortages for its mobile phones. Xiaomi, however, said that it was not deliberately constraining supply to stimulate demand. Commenting on the company's strategy of selling fewer smartphones, Huang Jiangji, vice president and co-founder of Xiaomi, said, "There's a saying here: Don't be greedy. Greed can kill a hardware company...

The Success

Some industry experts opined that Xiaomi's pricing strategy of offering a good phone at a price lower than that of its competitors in an area where the consumers were price sensitive had led to its instant success in China’s smartphone market. Another significant factor that led to Xiaomi's success in the rapidly intensifying Chinese smartphone market was the relationship it had with its customers...


One of the most pressing challenges facing Xiaomi was the issue of piracy in China. Since there was a huge demand for Xiaomi smartphones, some counterfeiters and pirates had swooped in to capitalize on the trend and to sell low-quality products disguised as the Xiaomi brand. This led to Xiaomi's reputation being tarnished and customers complaining about poor experiences with the products. Lin was working with the Chinese government to crack down on the piracy issue...

Looking Ahead

In June 2014, Xiaomi teamed up with Taiwan-based Web portal PChome Online Inc., to build the former's overseas e-commerce platform. PChome was allotted 10,000 units of the RedMi Note budget handset. Lin intended to form similar e-commerce partnerships in a bid to accelerate its expansion in countries such as Singapore, Malaysia, Indonesia, India, the Philippines, Thailand, Russia, Brazil, and Mexico...


Exhibit I: Top Ten Smartphones in the World

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