Can you even imagine a world without mobile phones? You can’t right. But if you go back to a couple of decades ago you wouldn’t have imagined that one day you will be using such advanced mobile phones. It is unbelievable how much mobile phones have changed people’s lives. Today it is a compulsory gadget that almost everyone owns. There is no doubt in saying that smartphones have changed the way people viewed the world. They have been very instrumental in changing the lifestyles of people. Just imagine the things you could do with the cell phones that were used fifteen years ago and compare them with the smartphones that are available today. The difference is worlds apart. The kind of things that you can do with the smartphones that are available today is unimaginable. People can literally do anything they want using their smartphones in the current world.
The current generation of smartphones is made with a lot of features that the previous generations didn’t have. The addition of 4G technology to smartphones has opened new possibilities for tech companies. You have the ability to download various types of tasks. There are all kinds of applications that allow you to complete different tasks. You can place an order and get all kinds of products delivered to your home. One can even order food and book tickets to your favorite destinations. The best part is that you can access all types of information using your smartphone. But there is no denying that smartphones are quite expensive. The more advanced the phone than the more expensive it is. However, there is one company that is determined to change that and its Xiaomi. This company aims to provide smartphones at affordable prices. This article will explain the business of Xiaomi.
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What is Xiaomi?
If you are a smartphone user then you must be familiar with Xiaomi or you could even be using one of the phones manufactured by Xiaomi. For those who don’t know what it is Xiaomi is a multinational company that manufactures electronic devices whose country of origin is China. Most of the companies that manufacture smartphones today are fairly old companies. Companies like Apple and Nokia have been around for decades. But this is not the case with Xiaomi. Xiaomi is a fairly new company. In fact, this company was founded only a decade ago. You can say that it is still a startup. This company was founded on April 6, 2010. It was founded by Lei Jun along with six other members. The other notable member among the members is Zhou Gaungping who was the senior director of Motorola in Beijing. Lei Jun is the current CEO of Xiaomi.
Qualcomm was one of the companies that invested in the company during the first round of funding of Xiaomi. So no wonder it uses Qualcomm Snapdragon processors in all of its smartphones. All the smartphones manufactured by this company are done under the name of Mi. This is the most common reason that most people do not recognize the company Xiaomi as it uses the last two alphabets in the company’s name to market their products. It announced the launch of its first smartphone in 2011 which has MIUI firmware and Android operating system. But this smartphone was only available to the people in Asian markets. In 2013 the company announced that it will also launch a Smart TV by then the company has already sold nearly 19 million smartphones. Xiaomi is the third-largest smartphone manufacturer in as of today.
Let’s look at the business model of this company.
Business model of Xiaomi
Within a short period of time, Xiaomi has emerged as one of the global players when it comes to smartphone manufacturing companies. This is mostly because of the strategies they followed and the products they have built. Let’s look at the key aspects that constitute their business model. This will give you an idea of how the company became so successful.
Making the latest technology available to everyone at affordable prices
This is the biggest reason why Xiaomi is where it is today. As mentioned earlier smartphones were very costly. You had to spend a decent amount of money to get the latest smartphone with all the cool features. But what many people don’t know that manufacturing them is not too costly. In fact, it is very less compared to the price for which they are sold during their release. The high price tags are due to the reason that most smartphones lose their value after a few months of their release. This is because new smartphones will be available in the market and these will have advanced features compared to the previous ones. So many units of the previous models go unsold. In order to minimize their loss on those phones, companies sell them for higher rates. Due to this, not all people could afford the latest smartphones.
Xiaomi was smart enough to understand that by making the phones available for affordable prices will increase the sales of their products. This is because people would love to buy a good smartphone that has the desired features for affordable prices. By doing this it can sell more and more units. This will allow them to sell the maximum number of devices that they have manufactured. But in order to do this, they have to cut down their profit margins compared to other manufacturers. This is not a big deal as the company will have to bear a minimum loss on the units that are unsold. This strategy seems to have worked for Xiaomi as it is selling more and more devices every year.
High quality
Chinese companies have a bad reputation when it comes to the quality of the products that they manufacture. You will often see people advising others not to buy Chinese electronics as they are of very bad quality. This has been the perception of people around the world. But Xiaomi has made sure that it hasn’t left any stone unturned to prove this wrong when it comes to them. The best thing Xiaomi did is not compromise on the quality of their products by cutting costs on hardware or software. They have always built products that were really good for their price range. So the customers are not only going to ger smartphones for cheap but they will be getting a smartphone that lasts long.
Low price
The prices of the products are the biggest reasons for the popularity of Xiaomi. Keeping the prices of their products low has helped Xiaomi to get famous. This has ensured that the company was able to reach its target customers who are students and people who have freshly joined the workforce. These are the young generation who cannot afford costly devices. So Xiaomi is the best option they can find as it provides them with electronic gadgets for the prices they like. This has helped Xiaomi not only reach a wider audience but also penetrate into new markets.
Brand Awareness
As mentioned earlier the company is currently the world’s third-largest mobile manufacturer. By this, you can understand the extent of its reach. The company’s clever marketing strategies and low prices have helped it to be the favorite smartphone company of many people. Not only that but there also lots of other people who recognize Xiaomi due to this even if they don’t use the smartphone currently. Since the brand is so popular it will be easier for them to sell its new products. A person who wants to get a new smartphone to replace their old phone will more than likely buy a Xiaomi phone if they are on a budget.
A large number of applications
Xiaomi like most of the smartphones today use Android in their products. This allows users to get access to a large number of applications through Google PlayStore. Not only that but Xiaomi has its own app store where you can find a number of interesting applications. Apart from this, smartphones come with many in-built applications that very useful.
How does Xiaomi make Money?
If you think that Xiaomi makes all of its money by selling smartphones then you are completely wrong. There are a couple of other ways in which it earns money let’s go through them one by one.
Smartphone business
The majority of the money earned by Xiaomi comes from selling smartphones. This shouldn’t surprise you as most people know it as a smartphone manufacturing company. Nearly 65% of the total revenue generated by Xiaomi is through its smartphones. The great thing about this is that this revenue is increasing every year. This has increased by 41% between the years 2017 and 2018. Not only that but it has sold nearly 119 million smartphones in 2018.
Xiaomi’s IoT and other products
There are several other products that Xiaomi sell apart from smartphones. All of these products make up 25% of its revenue. You already know some of these other products like earphones, laptops, and smart TVs. But there are also some other products that people don’t know that Xiaomi sells. These products are vacuum cleaners, cameras, electric scooters, rearview mirrors, and cameras.
Xiaomi’s applications
All the applications that are built-in devices constitute the remaining 10% of its revenue. This also includes advertisements as well as other services.
Conclusion
This is the business model of Xiaomi. Xiaomi is successful because it has understood what the people want and delivered it. If you are interested to know about the business models of other companies then check out other articles at Zeen. Learn about other business models like the business model of Walmart.
