Xiaomi, the Chinese smartphone maker, looks determined to shake the electronics market in the future. The Chinese company is aggressive as it is stepping out of China and looking to spread across the world with its products. The robust attitude of Xiaomi’s president and co-founder Lei Jun indicates that company is gearing up with its operational efficiencies to provide stiff competition to some top companies like Microsoft (MSFT, Financial), Apple (AAPL, Financial) and Amazon (AMZN).
The Business Model
Though the words of the president might look ambitious, but the way the company is moving ahead might force top companies to have a look at Xiaomi. The company’s director had stated -- "Xiaomi looks a bit like Apple but is really more like Amazon with some elements of Google."
The usage of smartphones is increasing daily. Studies have revealed the rapid growth in the smartphone market in future. The analysts are expecting smartphone sales to reach 750 million units from now to 2018. These statistics are the indication that many new companies like Xiaomi will have great opportunities to hold a competitive edge in the market in the future.
Having seen the growing smartphone market, many companies are working hard to innovate and deliver good services to win customers for their products. Xiaomi has a different strategy in the market which makes it special. Its smartphones are different as compared to ones with high-end specifications. The add-on to its strategy is its price. Xiaomi provides high-spec smartphones in mid-range price brand. This strategy is seeing an increase in customer diversion towards Xiaomi’s smartphones. With this, the company is expecting revenues from services also and not just from sales.
A look at competitors
Nokia's Lumia, with its low pricing and good features, saw good sales of up to 7.4 million in the second quarter. Nokia has been acquired by Microsoft. Now the question arises how Microsoft will use Nokia for its improvement in the smartphone market.
However, Nokia saw a decline in sales of its smartphones worldwide. In China, sales fell by 57% to 232 million euros, while sales in North America dropped 4% to 123 million euros. The biggest flaw in the operations can be attributed to Microsoft's lack of apps in its app store, as well as expensive apps. Android has a competitive advantage with free apps and a good app store.
Shifting focus to Xiaomi, with high specs and low and mid range smartphones, there is no doubt that it has an advantage. Xiaomi has an advantage in China as it is its home market while on the other hand, Nokia is expected to suffer weakness in China even after the acquisition by Microsoft.
On the other hand, Google’s Android is getting stronger with its user friendly apps and low cost. Android operates on many leading mobile phone brands such as Samsung, Sony and HTC. Also, according to the latest studies, Android's market is expected to increase more in future.
In China, the Android platform is gaining more traction while other platforms are suffering. In China, Xiaomi is in a good position and is seeing better sales than Apple. If Xiaomi continues to work well, Samsung, Sony and HTC might face tough competition.
Moving on to Apple, the company is gaining and enjoying handsome revenues in the U.S. But the company is declining in other parts of the world. Having enjoyed handsome profit margins in the past, Apple is suffering due to high cost of the iPhone in the emerging markets.
Since China is among world’s largest smartphone markets, Apple has great opportunities in China, but the company reported disheartening results from China. Seeing this, Apple released its low priced iPhone 5C.
Conclusion
After being successful in China, Xiaomi is looking to excel worldwide and the presence of an experienced ex-Google executive should help in this regard. The company is already worth more than what Microsoft is paying for Nokia’s devices business with an estimated market cap of $10 billion, and so, Xiaomi is not a pushover by any means in the smartphone space.
