Xiaomi hopes to become a ‘local’ company in Indonesia
By Yunnie Marzuki October 3, 2017
- Business model reinforced by three pillars: hardware, internet platform, and new retail
- Incubates 100 smart hardware startups based on a five-year business plan
XIAOMI chief executive officer and founder, Lei Jun was in Jakarta recently for the opening of the company’s latest authorised Mi Store Xiaomi in Summarecon Mall Bekasi.
He then spoke at an event titled "The Xiaomi Way of Innovation" where he explains how Xiaomi grew and has come a long way through its focus on innovation.
“Indonesia is one of the most important markets for Xiaomi. This is the first time I am visiting Indonesia, and am very likely to return in the future,” he says.
Jun says Xiaomi’s current business model is reinforced by three main pillars: hardware, internet platform, and new retail.
“I call this the golden triangle. As a company, we had to have good combinations. So, we are an internet company, an e-commerce company, and a smartphone company.”
In terms of the internet platform pillar, Xiaomi's first product was MIUI, an Android-based operating system. It then developed various products and services such as Mi Finance, Mi Cloud, and more.
In the hardware pillar, Xiaomi started with a smartphone, which then evolved into a variety of products through the Mi Ecosystem strategy. Establishment of the ecosystem has been planned since 2014.
As of the second quarter of 2017, Xiaomi had shipped 23.16 million smartphones. According to IDC, during the first quarter in 2017, Xiaomi was the fifth largest smartphone manufacturer of the world.
Currently Xiaomi incubates 100 smart hardware startups based on the company’s five-year business plan.
As of June 2017, Xiaomi has invested approximately US$3.5 billion in 89 hardware companies producing a wide range of products, such as bicycles, shoes, air purifiers, weighing scales, rice cookers, umbrellas, and more.
The third part of Xiaomi's business model is new retail which aims to present a variety of Xiaomi products through offline retail while maintaining the online prices.
Xiaomi operates 189 Mi Home stores in China, and plans to have 1,000 Mi Home stores in the next three years.
Lei Jun also elaborated on the various factors that determine the price of a product. These factors are, raw materials and production costs, research and development costs, marketing and advertising costs, selling costs, distribution channels, and profit margins.
“One key to Xiaomi's success is the elimination of costs which are usually contained in the last three components,” he says.
Jun says that most of Indonesians only know Xiaomi smartphone but, in the future he wants to bring more products into Indonesia.
“Hopefully in the future, Xiaomi’s ecosystem of products can deliver a great impact on Indonesian users and producers. And after we come in, we hope to become a local company here in Indonesia,” he says.