Monday, October 27, 2014

Whose business strategy is better Apple (USA) or Xiaomi (China)?

SmartPhone market is saturated in US. You have the maxi,the mini, 6", 5", etc.etc. Always new technology, new colors, new rounded features. New models pop-up less than a year apart. What's wrong with this? Nothing, for the customers, but for the manufacturer more stress, more pain.
It was interesting to read this paragraph of how in the hell a 4 year old company in China competes against the Apple giant.

Of course this in not my original but from this interesting source (Well they are Harvard aren't they, they should know better):

"To sell high-quality cell phones at so low a price, Xiaomi keeps each model on the market far longer than Apple does. On average, a new version of a phone is launched every 265 days in the industry – down from 345 days in 2009. But Xiaomi doesn’t renew its product for two years. Then, rather than charge high prices to cover the high cost of state-of-the-art components, Xiaomi prices the phone just a little higher than the total cost of all its components. As component costs drop over the two-year period by more than 90%, Xiaomi maintains its original price, and pockets the difference. So essentially its profit formula is the opposite of Apple’s, which collects its highest profits with the introduction of each model and needs to come up with new model after new model to keep those margins up."

The summary of which is (again from the same source),

"When you consider how much easier it might be to profit from plummeting component prices than from continual new feature development (which sooner or later will likely overshoot the needs of most cell phone customers in any event), the disruptive potential of the model becomes clear."

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