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Ratan Tata Buys Into Xiaomi

April 27, 2015 - Written By David Steele

Xiaomi has risen to become one of the largest global smartphone manufacturers in a relatively small space of time. The business, which is privately owned, was valued at $45 billion in December after a funding around and today, I bring you the news that Ratan Tata, the chairman of the holding company of the Tata conglomerate, has acquired a stake in Xiaomi Technology. This deal has important ramifications for Xiaomi especially in the Indian market, which is current Xiaomi’s third largest market. Ratan Tata was the chairman of Tata Sons for more than twenty years and has a track record of investing in startup businesses, such as online retailer, Snapdeal: and as strange as it seems, in many respects, Xiaomi remains a startup business! Lei Jun, Xiaomi’s founder and Chief Executive Officer, said this on the matter: “Mr. Tata is one of the most well-respected business leaders in the world. An investment by him is an affirmation of the strategy we have undertaken in India so far. We are looking forward to bringing more products into India.”

Xiaomi operates in a different way to many of the more established smartphone market players. The business prices smartphones with a very slim margin over the cost of materials, but typically markets and sells a device for eighteen months, which is longer than many competitors. They consider their hardware sales to simply be a means of selling on their Internet and of course software, in the words of Hugo Barra, “…we are an Internet and a software company much more than … a hardware company.” Xiaomi does not own its own physical stores but instead uses an online store and relies on social networking and customer support to advertise its products. They employ hunger marketing to good effect, managing a small stock of devices and releasing into the market as tranches to keep customers interested and the device accessible but not plentiful. By carefully managing stock, Xiaomi also keeps costs down and these savings are passed on to consumers. The business considers customer feedback and responds quickly to positive ideas; as such, Xiaomi’s devices are in a constant state of evolution with frequent software updates arriving.

This investment follows an aggressive build up of Xiaomi into the Indian market last summer. Global analysts believe that the Indian market has massive scope for smartphone sales growth as currently, only around one in ten consumers own and use a smartphone. This week, Xiaomi has hosted its first global launch for a product outside of China and elected to use the Indian capital, New Delhi, for the Xiaomi Mi 4i, a model that supports six Indian languages and costs 12,999 rupees. We’ve seen considerable interest in the Indian smartphone market and a number of businesses have started investing heavily into promotion and marketing budgets: cricket teams and Bollywood stars have been seen sporting the latest high tech gadgets.