#119 Xiaomi, dancing Samba. Or not?

Western multinationals have dominated the global economy for the longest time, but the past decade has brought some change. So-called emerging market multinationals have stepped onto the global scene. Except for a few notable exceptions, they have still gone unnoticed in core Western markets, but have had considerable success and visibility in other emerging markets. One of those companies is Chinese electronics / smartphone company Xiaomi. The company, which was only founded in 2011, has around 10,000 employees globally, and is selling tens of millions of smartphones that are considerably cheaper than their competitors’. Often, new models, which are usually produced in batches of only 200,000 to 300,000 before a new iteration is launched, sell out within minutes, if not seconds. At a valuation of $46 billion, Xiaomi’s rise to success that is built on strong customer relations, innovativeness and agility has become a symbol of national pride, particularly among the younger population in China. In the last years, Xiaomi has proven that it can be successful in other emerging markets, including India and Malaysia, but there are questions whether its success can be replicated globally. Just one year ago, in July 2015, both Forbes and Bloomberg Technology hailed Xiaomi’s big splash in Brazil. A year later, things have changed for Xiaomi in Brazil, its first emerging market outside of Asia. Xiaomi is only selling around 10,000 units per month – in a market where a total of 47 million was sold in 2015. As a result, Foxconn’s production of Xiaomi phones is on hold (all phones will be imported), key employees (mostly in marketing and social media) will be returning to Beijing headquarters, the distribution strategy will be changed, and no new phones will be launched in Brazil. Only two models, the Redmi and the Redmi Pro will be available to Brazilian consumers for now.

So, what has happened? Why didn’t Xiaomi’s recipe for success transfer into the Brazilian market? Probably, because it was too much of a recipe – a recipe that didn’t respect the idiosyncrasies of the market. In Asia, Xiaomi was able to create huge buzz before phone launches and to build strong communities with their customers. Consumers were driven to Xiaomi’s own web platform where phones quickly sold out. In Brazil, Xiaomi not only failed to create the buzz, but also ignored the fact that Brazilian customers have different shopping preferences. In addition, differences in a – constantly shifting – regulatory environment also made it impossible for Xiaomi to sell certain accessories online. After having failed with their boilerplate strategy, Xiaomi is now moving away from online flash sales via its own platform, and moving towards sales through e-commerce partners and traditional retail. These also cater to Brazilian consumers’ preferences to pay for electronics via installment plans. Of course, the challenges in the general economic environment of Brazil in the recent past didn’t help either. Nor did the competitive environment as Samsung and Motorola have a very strong grip on the market.

What remains to hope is that Xiaomi doesn’t consider the Brazilian experience just a failure that they need to forget quickly. The experiences in Brazil could be a great learning experience for Xiaomi that will help them in other markets outside of Asia. If Xiaomi is as smart as their quick success suggests, they will understand that differences still exist, and that success doesn’t come easy in foreign lands.

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