Why are Xiaomi phones so cheap ?
We know about entrepreneurs like Jack Ma, Mark Zuckerberg and Steve Jobs of most. However, there isn’t as much said about Lei Jun, the founder of Xiaomi, a company that has been making steady progress, and disrupting its competitors’ products since its inception in 2010.
A company started just a decade ago and has now become the world's largest smartphone maker. So what's behind the growth of his China's massive tech company?
Xiaomi is the world's 4th largest smartphone top selling company and India's top 7 smartphone brands and one of Chinese top players but it's breadth is much more than that. It is present in 74 markets around the globe with nearly 15,000 employees and more than 300 million people are using it's products or services.
As Xiaomi becomes a threat for Apple but equally ideal friends to companies like Google and Microsoft. As Xiaomi smartphones run a version of Google Android operating system and the Chinese Tech company is also partnering with Microsoft to collaborate on artificial intelligence .
It's a very less known fact that in the founding partners of the Brand, one company was Qualcomm. And Qualcomm is world famous for its super powerful mobile processors. So as most Smartphone Brands including MI uses Qualcomm processors in their smartphones and Xiaomi being a partner company with Qualcomm gets the same processor at cheaper prices than those of other brands, is able to keep its production cost much lower than them.
The company makes up about 72% of its revenue from China and 28% from the rest of the world. Xiaomi generates most of its revenues from smartphones but it's also expanded into other products like music and videos streaming too. The Beijing Based company wants its smartphones to be just the start of the entire device ecosystem it produces for its users which may explain why it is sometimes referred to as the Apple of China.
When the company was first started Xiaomi only sold their products online to reduce its overhead cost. It avoids spending money on advertising and relies on real loyal customers to spread the product. Xiaomi's working principle was simple, offering high quality devices for lower prices than competitors and fortunately worked and Xiaomi became China's number one smartphone company in 2014.
π But the successful lives no longer fall down several spots to number 5 in 2016 in China. New low cost smartphone making companies have arrived in China. So changing its strategy, Xiaomi makes its product online and opens its retail store in numerous cities around the world reaching to its underneath customers. Xiaomi yet to enter the markets of the United States and planning to engage very soon. It's not only a smartphone market, Xiaomi also makes accessories like Smart Watches, Headphones, Speakers, VR-headset, Pillows, Air Purifiers, Rice-Cookers, Kitchen, Luggage, Hats and many more . On top of selling online contents, entertainment and financial services Xiaomi just go on and on. Samsung goes with popular artist Duos Karni Western and Bruno Mars to pump up their new product meanwhile Xiaomi has their own company's CEO LEI JUN as Marketer.
Why are Xiaomi phones so cheap with a good hardware?
Online only sales : Xiaomi is one among the first brands to start selling Phones online only, making it cheaper ( while offline Source like Retailers ask for 1000 to 1500 of Profit for each phone).
No to Advertisement : If you see other brands like Oppo , Vivo or Huawei .They spend nearly 100- 200 crore for advertising and branding ,while Xiaomi has no advertisement or Brand ambassadors. This reduces the cost of each phone by 10–20%.They promote products via blogs or social networks.
Reducing Warehouse and Logistic cost : Xiaomi sells smartphones via Flash sale. which means it only produces and ships a limited number of smartphone's ,which makes less money needed to store shipped products. Flash Sales require a limited stock of products. This helps to avoid the storage and maintenance cost of the inventory.
Xiaomi, just like its founder, is an underdog that is quickly catching up – and for very good reasons indeed.
With his ambitious, with his continuous devotion yet grounded business philosophies, there’s no doubt that we’ll definitely be seeing him and his brand more in the future.
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