Xiaomi Case Study

INTRODUCTION

        Xiaomi is a China company that established at 2010 where their aim is to create an all aspect user experience for their users in the mobile internet industry. As at July 2014, the company has a net value of 10 billion US Dollar and has over about 3000 employee wholes over the world. Due to its fast development, they have becoming one of the leading tech firms in China. (Meredithhan, 2014) Xiaomi was founded by an entrepreneur named Jun Lei, who previously work at Kingsoft as part of the founding team in 1992, Mr. Lei then become the CEO of the company in 1998. In 1999, he stepped down to be the Vice Chairman at Kingsoft after completing their Initial Public Offering (IPO), while he founded Xiaomi at 6th April 2010. Xiaomi has one founder and seven co-founder which are all Chinese. In July 2011, he returned to Kingsoft and become their Chairman of the board and the Chairman and CEO of Xiaomi due to his passion to rekindle his entrepreneurial spark. (Xiaomi, 2016)

They have three mission statement which are to produce a premier product, have the lowest prices in market and to have more than just hardware. In order to produce premier product, they do not only meet the market’s standard, they are to exceed them. By having the lowest price for the premium items that usually would not exist. Smartphones are only starting flourish that starts their journey. (Caio & Aldo, 2015) Their vision is to 100 million sales of handset by the year of 2015 and also to begin exporting their handset to Brazil, Russia, India, Turkey and Mexico in 2015. (James, et al., 2015)

Xiaomi produces various range of product including hardware, software and internet service which include smartphones, tablets, laptop, power bank, personal transport and etc. (Community Mi Global, 2017) Xiaomi is famous in their cost-leadership, most of their products has a lower price as compare to the market. This is so because they are able to get a lower quotation from their supplier, most of the component in their devices are the same, therefore they can purchase large quantity of amount in their components and then cut down their overheads. By purchasing so many components, they have the bargaining power to bargain the price. The second reason is they are able to have a long average selling time per device and have a combination of small portfolio. What Xiaomi does is that they are still selling their old products, even if the new phone has launched they will not only focus on the new product, they will also focus on the old products. They further explain that a new device that display on shelf for about 18-24 months will go through three to four times of price slashing over the time but not slashing it in a short period of time. (Russell, 2015)

FINANCIAL PERFORMANCE

        Xiaomi is a company where their sales is growing rapidly over the past four years, therefore their revenue and profit grow simultaneously. From 2013, the revenue of the company was USD4.3 billion and net profit of USD56.15 million (Reuters, 2014) resulting from a total sale of 18.7 million units (Steven, 2014). In the following year, the company made a huge jump to 61 million unit which made a total revenue of USD11.3 billion (Jason, 2015). Unfortunately, the company does not reveal the profit of the year, but according to a document presented to the bank and consulted by the Wall Street Journal, they forecasted that the profit of the company will increase 75% which is about USD98.26 million from 2013 to 2014. (Robert, 2014).