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UPDATED: January 22, 2015 NO. 37 SEPTEMBER 11, 2014
Upwardly Mobile
In the wake of its astounding success at home, China's fledgling smartphone maker Xiaomi seems ready to take on the global market
By Zhou Xiaoyan

A rabid fan base is another key to Xiaomi's instant success. The company has built a loyal following through the marketing tactic of creating a sense of exclusivity around its products, much like Apple does. Most of Xiaomi's smartphone models were snapped up by fans minutes after the online product launch.

Charismatic company head Lei views Steve Jobs as his icon and Xiaomi has thus largely followed Apple's model of integrating the Internet, hardware and software.

Lei has always borne in mind the new way of doing businesses in the mobile Internet era. When it comes to improving the quality of Xiaomi phones, he wants to allow fans to feel highly involved.

"Most fans have many thoughts about what makes a perfect smartphone. Although they are not able to realize their dreams by themselves, they can provide advice to Xiaomi and Xiaomi will realize these functions after soliciting suggestions. Every fan feels like part of the process and they are willing to spread the message about Xiaomi phones to their friends," Li elaborated.

Xiaomi has skyrocketed to success by capturing the enthusiasm of young people in China for the Internet, said Boston Consulting Group. According to them, it has also been gaining ground by shunning costly retail stores and by selling online.

Ready to go abroad?

Four years after its inception, Xiaomi has gained a dominant market share in China as well as a vast cult following. On the basis of this, the company has decided to make a foray into overseas markets.

In April last year, Xiaomi started business operations in Taiwan and Hong Kong. In 2014, Xiaomi entered markets in Singapore, Malaysia, the Philippines and India. The company proudly claims its online product launches sold out in minutes in Singapore and in less than an hour in India. According to data from Canalys, 97 percent of Xiaomi's shipments in the second quarter were into the Chinese mainland. The company is now looking to expand into other markets, with Indonesia, Mexico, Russia, Thailand and Turkey in its sights for the second half of the year.

Li Wanqiang, Vice President and another founder of Xiaomi, said business models in overseas markets are mainly copied from its business model in China.

In order to make preparations for its global foray, Xiaomi hired the Hugo Barra, former Vice President of Android Product Management for Google. Barra is now responsible for the company's business outside the Great China Region.

Lydia Bi, a research analyst at Canalys, said hiring Barra means Xiaomi definitely has its eye on the international market, although the company is not yet in a position to roll out its devices on a large scale internationally.

She said issues such as gaining trust from overseas buyers, differentiating itself from existing smartphones, and navigating international intellectual property issues were challenges for the Xiaomi brand.

"It is totally feasible [for Xiaomi to globalize]," Mark Tanner, Managing Director of Shanghai-based China Skinny, a market advisory firm, told ChinAfrica magazine. "I'd say they will be especially huge in the most price-sensitive markets of Asia, Africa and Latin America, however, they will still do well in the developed markets, with the United States being the toughest market for them."

Tanner acknowledged that barriers do exist, however. "Their thorniest issue will be the negative perception around China, for both quality and, more likely, 'Big Brother' [government oversight]. The United States obviously has a lot of paranoia about Chinese products—just look at the barriers Huawei has faced there."

Experts say a lack of patents and its low-cost strategy will do harm to Xiaomi's capacity in innovation, which will also present a roadblock on its path to conquering mature smartphone markets such as the EU and the United States.

Wang Yanhui, Secretary General of CNMO.com, a website that offers information about the latest mobile phones for Chinese customers, said cost performance is the goal that Xiaomi is constantly pursuing. "But targeting the mid-range and low-end markets won't do much good for the company's future. A good smartphone company should focus on innovation, instead of perennially following others."

Li Hong, the 33-year-old project manager, said he has absolute confidence in Xiaomi's global success.

"It will only be a matter of time before it takes Samsung's market share around the world because of its low price and high performance," said Li Hong.

"However, I don't think it will deal a heavy blow to the iPhone. Most iPhone users buy iPhones because of its safer IOS system and they are already quite used to it. It is hardly likely that they will all of a sudden up and shift to Xiaomi."

Email us at: zhouxiaoyan@bjreview.com

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