How Does Mi Control its Prices

Xiaomi founder Lei Jun tells Nandagopal Rajan how the company managed to achieve immense success in India with a team of just 300 people.

As you enter the large Xiaomi office floor in a swanky Bangalore business park, there is a small conference room by the name iKeva. Named after the startup’s first office in India, this room has a capacity of four people, the entire staff strength of Xiaomi in India when it started out a little over two years back. Now, the company has 300 employees but has managed to lock horns with long-time market leader Samsung for the top slot when it comes to smartphone market share.

While India has grown to like Xiaomi’s phones, it is the pricing that is still the USP for this company. But how does the company achieve that price tag, which at times seems too good to be true? Ask Xiaomi founder and CEO Lei Jun and he says the company tries to achieve the highest quality product and hopes to price products at cost, “pretty much zero-percent profit”. “We are able to achieve up to half the cost of some of the products when compared to our competitors. We have very little advertising or promoters and hence we are returning the cost back to consumers,” he explains how Xioami manages to be “reasonably priced”. Lei Jun says this way over six to seven years, consumers tend to trust you more.

The Xiaomi CEO says when he launched in India in 2015 April, he had expected them to take three to five years to become No 1. “Actually, it took us just two years and one quarter,” he exults, adding how this means the Indian consumers could resonate with the Xiaomi brand, the Xiaomi products, and values. He attributes this to three elements: “One, high-quality products; two, our honest and affordable pricing; and three, our very strong local team.”

For him, the local angle that the team lead by Manu Jain brings in is very important. “Since the day we entered the market, my instruction has been that we have to become a local Indian company.” His executive team, Lei Jun says, spends a lot of time thinking about the India market. “Internally, in HQ we have prioritized India as our number one market,” he says, adding how from an R&D perspective they always consider the needs of Indian users. He cites the example of how they design phones keeping the hotter Indian temperatures in mind. “From supply and production also, India has been a priority for the company. Even on this trip I have brought over 20 top executives from different departments to help the India team to continue to grow in the next few quarters.”

Also, success in India, after China, means Xiaomi is a proven business model in the largest markets and can hence succeed elsewhere too. Lei Jun is confident that Xiaomi is likely to enter Fortune 500 by next year, just seven years since it started. “Actually, we are still a very innovative startup, with just 16,000 employees. We are talking about such scale with so few people — (in India Xiaomi has just 300 employees). Some of our competition in India has 100,000 people on their rolls.”

Source: https://indianexpress.com/article/technology/mobile-tabs/xiaomi-founder-lei-jun-explains-how-the-company-achieves-its-competitive-pricing-india-4945920/