A few days ago, Xiaomi was named the world’s most valuable tech start-up after it received $1.1billion in funding that put the valuation of the company at $45billion (surpassing Uber that is valued at $40 billion). It followed that achievement by announcing that it had grown by 135% in revenues in 2014, clocking pre-tax sales of 74.3 billion yuan ($11.97 billion). Last year, it sold 61 million phones and that makes it the third largest smartphone maker behind Samsung and Apple.

What is amazing is that Xiaomi was founded just four and a half years ago and launched its first smartphone in August, 2011. To become the largest smartphone manufacturer in China and the third largest in the world in less than three and a half years is pretty astounding. Even we Indians were not immune to its charm – Xiaomi sold one million smartphones in India in less than five months. Of course, the brand has hit a bit of a road block in India due to an injunction passed by the Delhi High Court in response to a complaint filed by Ericsson.

So what is the secret of Xiaomi’s success in such a short period of time?

Product
Xiaomi phones are cheap (mid-range), much cheaper than those of Apple and Samsung. However, the key is the quality of their phones – they have high-end specifications (including a good case, a good screen and a good battery). The Xiaomi Mi3 handset that has a NVidia Tegra 4 chip, a 13-megapixel Sony camera and 2-gigabit RAM sells for $327 in China compared to Apple’s iPhone 5S that retails for $866 (without a service plan) and the Samsung’s 32GB Galaxy Note 3 that retails for $884.

Xiaomi has also built its own Android-based operating system called MIUI; this has allowed Xiaomi to add new, exciting features that are not found on standard Android devices as well as a large number of customization options.

Price
Xiaomi has followed the Amazon pricing model of covering the cost of production of its smartphones and making money from selling content and apps. Also, Xiaomi sells its models for up to 18 months unlike Samsung that uses a short 6 months. This allows Xiaomi to profit from the fall in the costs of components that occurs over time.

Costs
Xiaomi ruthlessly tries to keep costs down. Till recently, it did not own a single physical store and sold exclusively from its own online store. It also spends virtually nothing on traditional advertising, relying more on social networking and its own consumers to help advertise its products. It also does not have its own production unit – it uses Foxconn and Inventec to manufacture its products.

Place
Xiaomi has primarily focused its attention to its home market – China. Now that it has become the leader in China, it has started a cautious expansion into other markets. Towards this, the company has hired Hugo Barra, formerly of Google, to handle its international operations. To avoid a direct confrontation with Apple and Google, Xiaomi is likely to focus on markets of South East Asia and BRIC countries before it makes a foray into North America and Europe.

Promotion
Xiaomi has been pretty smart when it comes to promotion. To start with, it pioneered flash style sales; this means selling limited quantities during limited periods. This strategy has paid off since it created anticipation and urgency. This led to the units being sold quickly and talked about over China’s strong social media.

Xiaomi has also been quite innovative on social media by not only communicating its messages and announcements but by actively engaging with its customers. Engineers are routinely encouraged to speak directly to consumers and use gathered feedback to refine software.

Overtime, due to its great use of social media, Xiaomi has built a huge and dedicated fan base.

Chairman and CEO as the Company Face
Xiaomi’s Chairman and CEO, Lei Jun, is now a well-known face in China and has got extensive coverage in media. He is an unabashed Steve Jobs fan and has tried to cultivate a Steve Jobs image. He wears jeans, dark shirts and has aped Jobs as far as product announcements are concerned. Due to this, many people have named him ‘counterfeit Jobs.’

Xiaomi has ambitious expansion plans and is also planning to introduce a number of new products including TVs. I don’t know if its fantastic run will continue in the long run. What is, however, undeniable is the breath-taking speed with which the company has grown into a major technology giant; its rise must be giving sleepless nights to executives at Apple, Samsung and other technology companies.

Source: Wikipedia; China Marketing; Time; BBC.

Visual courtesy : https://www.flickr.com/photos/121483302@N02/