Lei Jun’s “Millet Empire” International Expansion
Issue Time:2018-06-14
Xiaomi formally published the deposit receipts prospectus.
 
The prospectus revealed the data of Xiaomi's international business - from January to March 2018, the income of other countries and regions was 12.4 billion yuan, accounting for 36.24% of the income.
 
This is a huge number, and the number has a growing momentum. In fact, in 2016, Xiaomi's business income in other countries and regions was only 9.1 billion yuan, accounting for only 13.38% of the revenue ratio in the current year; by 2017, this category of revenue had reached 32.081 billion yuan, accounting for 27.99% of total revenue. Now, Xiaomi’s income in other countries and regions has exceeded one-third of its income.
 
In this era of globalization, "going out" has always been the wish of many Chinese brands. Millet's globalization may become a good idea for Chinese brands, Chinese companies going to sea and cross-border e-commerce companies to establish international brands.
 
Finding the cake with the greatest potential for growth
 
"Value for money" is everyone's first impression of Xiaomi when he first started. This "cost-effective" path is particularly effective in emerging market areas that are similar to the Chinese consumer market 5 or 6 years ago.
 
Among them, millet India's report card is the most dazzling.
 
According to the Xiaomi Group prospectus, as of December 31, 2017, the total assets of Xiaomi India Science and Technology was 5.857 billion yuan and its net assets were 635,000 million yuan; in 2017, Xiaomi India Technology's operating income was 20.48234 billion yuan, and its net profit was 5.4145 billion yuan. It is worth noting that, in 2107, Xiaomi's international business income was 320.81 billion yuan a month, which is in contrast with the revenue of Xiaomi India Technology. Xiaomi India's importance to Xiaomi's international business can be imagined.
 
In addition, according to IDC statistics, Xiaomi mobile phone in the first quarter of 2018 in the Indian smart phone market share of 30.39%, ranking first in the Indian market.
 
By continuing to develop in the emerging markets and occupying a large enough market share in the local market, Xiaomi can feel more comfortable to invest in the market.
 
In fact, Xiaomi began to force overseas business in 2014. Currently, the development mode of overseas business is divided into two types: The first one, which is assembled in the local area, will be sold directly in the local area after the assembly is completed. The second is to adopt the model of direct export products in other overseas regions such as Western Europe and Eastern Europe. The Indian market takes the first model.
 
In mature markets in Europe and the United States, the penetration of smartphones is already high enough. According to statistics, in 2017, the penetration rate of mobile phones in China was 64.5%, penetration in other countries and regions was 83.1%, and the penetration rate in emerging markets was only 37.7%. It is a basic strategy for Xiaomi International to invest heavily in capital to capture an emerging market with greater growth potential.
 
From the perspective of the prospectus and the data, Xiaomi actually did so. In the prospectus, Xiaomi said that the current rapid development of Xiaomi's overseas business is mainly in India, Southeast Asia, Eastern Europe and other emerging markets. Currently, Xiaomi ranks among the top five smartphone brands in the following 15 countries: India, Chianti, Ukraine, China, Egypt, Greece, Israel, Qatatar, Russia, Indonesia, Singapore, Poland, Bulgaria, Czech Republic, and Kazakhstan. Steinstein. The above markets are mainly based on the export of emerging markets (especially emerging markets for export e-commerce).
 
Efficiency is the advantage
 
Of course, it is not just millet that aims at emerging markets. In fact, international mobile phone brands including Apple and Samsung are all eyeing emerging markets. How did Xiaomi get out of the road in emerging markets?
 
Prior to this, Lei Jun had announced the resolution passed by Xiaomi's board of directors through discussion - "Mi Xiao promised that the company's net profit margin on Xiaomi's mobile phone hardware will never exceed 5%."
 
There is no doubt that Xiaomi's “price-performance ratio” has become a key issue in emerging markets.
 
At the fourth World Internet Conference at the end of last year, Xiao Jun, the founder, chairman, and CEO of Xiaomi, used the Indian market as an example to explain the internationalization of Xiaomi. In his view, e-commerce and efficiency have greatly helped Xiaomi quickly open up the situation.
 
“Millet has promoted the development of e-commerce in India as a whole, because millet mobile phones are internet mobile phones. Without e-commerce efficiency, it is impossible to achieve both high-quality products and honest and kind prices at the same time.” Lei Jun believes, It is the charm of e-commerce that allows traditional manufacturers to sell two thousand mobile phones can sell less than one thousand, which is technology to promote changes in people's lives.
 
In addition, Lei Jun also affirmed the power of e-commerce for Xiaomi's international expansion. He pointed out that when Xiaomi entered India, he relied on three e-commerce platforms, Flipcard, Amazon and Xiaomi.com to conduct business and quickly made decisive progress in India.
 
In fact, whether it is the big brands going to the sea or the Chinese companies going overseas through e-commerce channels, "cost-effectiveness" is still the key to counterbalance with international brands.
 
He Ding, a cross-border e-commerce trader who has been cultivating the cross-border e-commerce industry for 10 years, and He Ding, the founder of Qian'an Technology Co., Ltd., also expressed to Yibang Power that brand companies such as Anker, which are using e-commerce channels to go to the sea, are near. Two years are also focused on the layout of audio products, such as headphones and speakers, then it faces competitors such as BOSS, JBL, Sony, these internationally renowned audio brands, this time it must be half the price to fight against the same configuration of these international famous brand.
 
Of course, while using the channels to increase efficiency, Xiaomi also continuously expands its MIUI-based Internet realization method to overseas markets to increase profit sources and reduce cost pressures. The Xiaomi Group prospectus shows that Xiaomi has begun to cultivate the ability to realize Internet services in India, Indonesia, Russia and other parts of the world. For example, in India, Indonesia, and Russia, in March 2018, Xiaomi Music APP, Xiaomi Browser APP, and Xiaomi Video APP were included in the music categories, browser categories, and video categories of Xiaomi mobile phones. Ranked first, second, and second.
 
Lei Jun also believes that using India as a model, this experience can be copied to the Indonesian market. According to Lei Jun, in the past year, Xiaomi has invested in nearly 10 Internet companies in India and Indonesia. On February 10, 2017, Xiaomi also announced that Xiaomi’s mobile phone has already been produced in Indonesia. The annual production of the foundry is approximately 1 million units. Since 2017, Xiaomi’s mobile phone sales in Indonesia will achieve 100% localization.
 
Looking at the globalized layout of millet, we can see that in the process of speeding up the development of international business, Xiaomi’s main strategy is “2 new and 1 heavy”:
 
First, we must find investment in emerging markets with sufficient growth potential.
 
Second, through the new model of “Internet mobile phone”, it will increase efficiency and reduce costs, so that products will have extremely high cost performance to attract local users;
 
Third, when the market has great potential and is suitable for localized production, it will continue to invest capital in local production.
 
However, it may be one of the best ideas for Chinese brands going to sea and cross-border e-commerce to build a global brand.
 
More emphasis on offline high-end market strategy
 
However, the rapid growth in emerging markets does not mean that Xiaomi completely ignored the developed countries' markets.
 
Unlike the emerging markets, the European and American developed countries have a more complete retail base. In emerging markets such as India and Indonesia, because the level of offline retail development is not as good as in Europe, consumers can easily buy products that cannot be bought offline through e-commerce shopping.
 
However, in the European and American markets, e-commerce is only one of the buying channels. If the seller wants to give the consumer a good experience, offline layout thinking is indispensable. This is one of the logics of Xiaomi's layout in the European and American markets.
 
In fact, Xiaomi adopted a combination of online and offline play when entering the markets of various countries in Western Europe.
 
In November 2017, Xiaomi Company announced that it officially entered Spain. This is the first time Xiaomi has entered the Western European market. On line, Xiaomi's Spanish business will cooperate with Ingram Micro and Ali's AliExpress to carry out product marketing, distribution and other support services. In addition to Xiaomi’s own e-commerce platform sales, AliExpress will also set up an official store for the first time to formally sell Xiaomi’s products. Businesses such as Amazon, Carrefour, MediaMarkt, and Phone House also provide online or offline purchase channels for Xiaomi's various products.
 
In addition, on the day of the announcement of the entry into the Spanish market, Xiaomi also announced that the two Xiaomi authorized stores were also opened simultaneously in the Xanadú and La Vaguada shopping centers in Madrid, Spain.
 
On May 22 of this year, Xiaomi held a press conference in Paris to announce its entry into the French market. Its French first mill authorized store in Paris and the official French millet online store opened on the same day. Among them, Xiaomi’s authorized store is located on Sbastopol Avenue in the first district of Paris.
 
On May 25 this year, Xiaomi officially entered the Italian market. At the same time, Xiaomi officially opened its first authorized store in Italy. Xiaomi’s senior vice president Wang Xiang stated that Xiaomi’s first store in Italy opened in the famous shopping center II Centro in Milan, an international fashion capital. This is the largest Italian shopping mall in Europe.
 
While entering the above three markets, Xiaomi has opened its authorized stores, which clearly highlights Xiaomi’s concern about the offline market in Western Europe. Wang Xiang, Xiaomi’s senior vice president in charge of the globalization strategy, said that Xiaomi also plans to build millet stores in the UK, Germany, and the Netherlands.
 
At the same time, Xiaomi is also approaching the European and American markets through its partners. In May this year, Xiaomi officially announced the establishment of a global strategic alliance with Li Ka-shing's company, Changjiang Heji Industrial Group. Allegedly, Li Ka-shing's Cheung Kong Hutchison Group will sell millet equipment in its 17,700 stores, and will sell millet phones to stores in Austria, Denmark, Hong Kong, Ireland, Italy, Sweden and the United Kingdom.
 
In such markets where developed countries are clustered in Western Europe, brands and experiences are still one of the main concerns of consumers. Therefore, when entering these markets, Xiaomi adopted the "online + offline" linkage to enhance the brand effect. Only through the initial investment to build brand effect, can we have a long-term high-end market.
 
From the perspective of Spain's performance, this online and offline fusion model that pays more attention to the brand effect is worth trying. According to the market report of Canalys, in the first quarter, Xiaomi’s mobile phone market share in Spain reached 14.1%, which surpassed Apple’s iPhone and entered the top three.
 
avoid risk
 
However, in the global expansion process, companies cannot focus solely on growth and influence, but also pay attention to risks.
 
In the Xiaomi prospectus, Xiaomi clearly stated that Xiaomi’s international expansion has increased the company’s operating costs and may expose Xiaomi to various risks, such as market competition risks, intellectual property protection risks, distribution logistics risks, risks of overseas laws and regulations. Wait.
 
Xiaomi pointed out that in the process of international expansion, compliance with laws and regulations related to new markets (such as import and export, anti-corruption, taxation, foreign exchange control, data privacy, environment, labor, and anti-competitiveness) will lead to the conduct of business in foreign jurisdictions. Increased costs. Although Xiaomi has implemented policies and procedures to comply with laws and regulations, employees, contractors or agents may violate relevant laws and regulations. In certain circumstances, compliance with the laws and regulations of a country may violate the laws and regulations of another country. Violation of these laws and regulations may have a significant adverse effect on Xiaomi’s brand, international growth, and business.
 
Of course, the laws and regulations in various markets are not just such large brand enterprises as Xiaomi. For companies that want to enter the overseas market via the Internet, they need to conduct risk management and management of their policies to make the business more durable.
 
With more in-depth understanding of e-commerce and cross-border e-commerce overseas, policies and regulations for Internet companies entering local or cross-border e-commerce have also become increasingly sophisticated. Including Europe's VAT (Value-Added Tax) policy, Australia's GST (Australian Goods and Services Tax) and other policies, and the deepening of intellectual property rights concerns for products sold on e-commerce, it is impossible for companies to find loopholes to avoid these "defects". of.
 
As entrepreneurs, what is more needed on the road to globalization is to prevent and circumvent these risks, and to lay out as carefully as Xiaomi.

Article Source: Electronics World

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