In the battle for dominance in the smartphone market experts are still focusing more on the rivalry between Apple and Samsung. While the South Korean company managed to establish secure hegemony nearly double the lead before the American giant, it seems the trend started by the end of last year to pay. Apple stabilize their sales with their new iPhone models and iPhone 6 6 Plus, for the first time passed in offering devices with screens over 4 inches. Samsung disappointed with its latest flagship Galaxy S5 and announces decrease in sales in recent quarters and warned that can detect 37% drop in annual profit for the past year. Apparently in the battle for dominance of the smartphone market include Lenovo, which after the acquisition of Motorola’s mobile unit by Google further increased its share in this segment and are now third. But, it seems, all underestimated the seemingly small manufacturer from China – Xiaomi.

Founded four years ago, the company reached the third place in smartphone shipments for the third quarter of 2014 with growth of units sold of 211% over the same period the previous year, according to the research firm IDC. Annual data of another consulting firm TrendForce show that Xiaomi ranks sixth with a market share of 5.2%. The results are impressive, given that the company sells mainly to the market in China, and in the surrounding countries of Southeast Asia such as India, Indonesia, Malaysia and Singapore. But predictions are that this year the group will be moved up one place and will “breathe in the neck” of Lenovo. With the increasing availability of smartphones in developed countries rather Xiaomi can begin to be a dangerous rival for the top three producer at the time. But what caused the company’s success?

Smartphones with high performance

This is the short answer. Previous models Xiaomi sold at prices from 150 to 300 dollars. They are characterized by a very good design and improved the company interface called MIUI. Their technical specifications closely as possible to the flagship of the largest manufacturers. In contrast, the price offered by Chinese manufacturer is much lower. Experts to the beginning of this year reporting the success of Xiaomi, but do not pay much attention because it was considered first for a local player and, second, as are cheap devices, they retreated with some of the latest models of Samsung , Apple, HTC, LG and other giants. Extremely low price naturally leads to compromise with the quality or performance of the components of smartphones.

This view, however, changed after Xiaomi showed new large model Mi Note, which is a direct competitor of the iPhone 6 Plus on Apple and Galaxy Note 4 of Samsung. Chinese smart phone is thinner than the iPhone 6 Plus with minimum 0.15 mm, is lighter, has more RAM, better camera, front and rear, as well as a slot for two SIM cards. Resolution between the two models is identical – 1080×1920, but slightly larger screen Xiaomi Mi Note reduces the pixel density per square inch negligible. CEO Lei Chinese manufacturer Tszyun not miss joked with Apple’s smartphone during their presentation. He pointed to the example of the convex hull of the iPhone’s camera 6 Plus, while Mi Note there is no such thing. Moreover, Lei pointed out that the new smartphone Xiaomi “is lighter and thinner” than the Apple – still favorite qualities that the American company likes to boast of its competitors. Use of weapons considered to be in Apple’s presentations and product positioning by Xiaomi has become the trademark of the company. Therefore, the Asian group earned the nickname Chinese Apple.

Furthermore Xiaomi announced an enhanced version Mi Note Pro, which has a screen with very high resolution.

Cheap, cheaper, Xiaomi

Shocking case are not better technical characteristics of the smartphone Xiaomi. Major manufacturers that rely on Android, always managed to earn devices with better performance than the “apple”. The surprise is the price. Mi Note ordinary model costs just $ 370, while the Pro version is 530 dollars. The starting price of the iPhone 6 without subsidy starting from $ 650, while the iPhone 6 Plus – from $ 750 and up. The difference is almost double. While Apple to put a high profit margin in their devices, competitors like Samsung, LG or Sony sold at similar or slightly lower prices. For example Galaxy Note Samsung’s 4 without a contract worth US $ 750.

How achieves lowest price?
The answer lies in the company’s business model. The price of the device to the end user not only covers the cost of production of components and the assembly. To this is added the funds earmarked for marketing, distribution, distribution network and finally a percentage profit.

Xiaomi uses several tricks with which to cut the price significantly. Moreover, without having to save money on components.
First Chinese company sells primarily online, on the model of electronic stores. Does not have its own shops and complex distribution network. All applications are online and expenses are only for processing and delivery.

The second element in the strategy of Xiaomi to lower costs to rethink the marketing strategy. Large companies make a lot of money on advertising – television, internet, billboards, events and more. Xiaomi relies heavily on social networking and promotion of devices between customers themselves.

“We do not invest in traditional marketing. We live in social networks, which are much cheaper option for us,” said Hugo Barra, vice president of Xiaomi, in an interview with the website YourStory.

The most interesting element of the business model Xiaomi to lower costs in the portfolio and historical value of their devices. On the one hand, uses Apple’s piece of workmanship scheme to provide small range smartphones. On the other, intends to retain the price of mobile phones as long as possible. That places them at a low price, which is maintained as long as possible in the market cycle. Most manufacturers put a high price and then six months gradually bring down the price. Xiaomi trying to keep for a year to a year and a half – two. During this time, the prices of the components is decreased, while that of the device remains unchanged.

The final element is that Xiaomi not be considered a manufacturer of smartphones, but rather for software startup. Ie it relies on revenue from software and software services. In fact, the company began as a developer of interface MIUI and understands that there is no way to promote it, without own device. Thus launches its first smartphone. Xiaomi’s ambition is to offer as many applications and to benefit from their sale or other software services. This component is stable item of income and Apple.

A bit of everything

So at one point it appears that Xiaomi is a combination of Amazon (the model for e-commerce), Apple (software approach and the small portfolio) and somewhat to Google. With this new approach, the company managed to sell smartphones with high performance almost twice lower prices. The question is whether it will be able to keep its business model after start coming more and more new markets. Special interest raises future strategy Xiaomi developed countries. Because this time the company relies on strong interest in high-tech and low-cost devices in developing markets such as China. But even through them Xiaomi shot among the largest manufacturers of smartphones. D.TECH NEWSxiaomiIn the battle for dominance in the smartphone market experts are still focusing more on the rivalry between Apple and Samsung. While the South Korean company managed to establish secure hegemony nearly double the lead before the American giant, it seems the trend started by the end of last...