(Chinese Version)

Editor’s Note:

The domestic market for cell phones within China is slowing down, and phone manufacturers have begun to cast their gaze to the second wave overseas. These manufacturers have an overseas strategy that highlights their inherent nature—one might say their genes—while providing the variety of choice possible within the local cultural environment

The domestic market for cell phones within China is slowing down, and phone manufacturers have begun to cast their gaze to the second wave overseas. These manufacturers have an overseas strategy that highlights their inherent nature—one might say their genes—while providing the variety of choice possible within the local cultural environment. This article seeks to review and draw conclusions from the overseas strategies and experiences of cell phone manufacturers, looking to learn both from what they share in common and from where they differ. This summary can hopefully serve as an inspiration for other companies.

Commonalities: Channels influence the choice between foreign markets

When a company decides to expand globally, where should it make its first stop? Japan and Korea? Europe and the United States? Southeast Asia or Africa? Each manufacturer has its own set of considerations. Aside from merely considering development trends in the foreign country over the next few years, there is another dimension that needs to be factored in. In particular, the manufacturer must consider the openness of the cell phone market in that country: to what extent do service providers exert control over communication channels in the country, and how will e-commerce grow there? In Korea, cell phone service providers control more than 90% of the market, and open-channel manufacturers like Xiaomi, Meizu, Gionee, and OPPO don’t dare to enter this market casually, even though they have full confidence in their products. On the other hand, ZTE and Huawei are able to easily enter the Korean market. In countries with more open market environments, such as India, Nepal, and Bangladesh, brands such as Xiaomi are showing their true mettle. This sort of decision-making reflects the very nature of the distribution channels of each manufacturer.

For example, companies like ZTE, Huawei, Kupai, and Lenovo are service provider channels—they have the service provider channel gene. Companies like Gionee, OPPO, and VIVO have the social network channel gene. Xiaomi, Rongyao, Dashen, Meizu, and others of that kind have the e-commerce channel gene. Even though Huawei also acts as a channel for social networking, Gionee also acts as a channel for e-commerce, and Xiaomi also acts as a service provider, the primary channel and essential nature of each of these companies is quite obvious. And when each of these companies expands into the international market, they will each expand in a way that is in accordance with their essential natures, choosing countries and areas for expansion that best suit their own development.

Differences: Three types of company; two and a half benchmarks for international expansion

Huawei, Gionee, and Xiaomi can be seen as three representatives of their respective types, or perhaps one should rather say two and a half. Xiaomi only counts for a half, since its attempts come rather late and its model is not stereotypical.

Huawei: Breaking through via the service provider channel

In the domestic market, the top mobile phone manufacturers in China (ZTE, Huawei, CoolPad, and Lenovo) are typical representatives of the service provider channel. Taken together, the operations of these manufacturers account for more than 80% of the domestic market of service providers. In particular, Huawei and ZTE, as manufacturers of telecommunications equipment, work very closely alongside service providers. On the foreign market, they are adopting the same operating strategy. Huawei has been on the international market for 18 years, beginning overseas business by offering telecommunications equipment to service providers. Being a service provider channel has ultimately become one of Huawei’s unique advantages.

Prior to 2012, Huawei had mainly adopted the OEM model, in the pursuit of “partnership, customization, and value.” Even though this stage did not help the brand to grow, or even to make much profit, it did help the company form good relationships with service provider, laying a solid foundation for the brand’s next transformation. After 2012, Huawei cell phones have found their own voice on the international market.

Who can learn from Huawei’s experiences? Equipment manufacturers like ZTE and other cell phone companies that focus on service provider channels.

Gionee: Breaking through via the social networking channel

On the domestic market, Gionee has its unique social channel system, not relying on the traditional national and provincial-level business representatives, but choosing rather to enter into exclusive partnerships with companies that share the same business goals and relentless drive forward. A promotion team of more than 30,000 people is also one of its core competencies. The advantage of this is that its ability to control the channel is rather high. Although getting there isn’t easy, once done it becomes difficult to imitate. The challenge is that the maintenance of the channel system relies on good products.

Beginning in 2010, Gionee carried out an overseas market layout, at first adopting a model focusing both on independent branding + ODM before switching to a complete branding model in 2014. It has already opened business in more than 40 countries and areas, with overseas sales accounting for nearly 60% of its overall business. Currently, companies are entering the overseas market in countries where they have a relatively small amount of control over service providers, such as the Indian market at the center of the Southeast Asian market and the Nigerian market at the core of the African market, and they are employing channel models that are fundamentally similar to those they use domestically. When forming alliances with foreign companies, Gionee is searching for partners with consistent values, a proactive attitude, and relentless drive toward the future with whom to form a stable partnership to mutual benefit and with long-term version, without too much consideration for short-term losses. This is one of the most important factors that has led to Gionee’s success in overseas market. Gionee has implemented a global synchronization strategy for its products, ensuring the same product and quality standards for the domestic and overseas markets, using hard products to solidify the channel system.

Who can learn from Gionee’s experiences? Domestic companies with similar channel structures, like OPPO, VIVO, DOOV, and others.

Xiaomi: Breaking through via e-commerce

Xiaomi’s domestic model is pretty clear, using e-commerce as its primary channel. Initially, it mainly used its own official network to sell through online bidding. It gradually combined online and offline functions, turning to online bidding and assuming the functions of advertising and promotion functions while increasing prices through off-line distributors. In 2014, Xiaomi began to explore the overseas market, getting a bit of a late start, adopting the same strategies that it employed domestically.

Who can use Xiaomi’s experiences as a reference? Companies like Rongyao, Coolpad, Meizu, and Moto. But since several companies are taking their first steps overseas in India at roughly the same time, we can’t really say any companies can really learn from another, but rather can explore the possibilities together.

Case study: the various strategic choices in entering the Indian market

India’s cell phone market has a relatively high degree of openness, but smart phones currently account for a relatively small amount of the market, about 30%. It is estimated that within three years, India will become the second largest market worldwide for smart phones, so domestic mobile phone manufacturers are turning one after the other toward this emerging market. For Gionee, a market like this has some very obvious advantages, but Huawei on the other hand will need to make some different tactical choices. So in this market, some tactics will be able to be maintained, while others will need to change to become more adaptable.

Huawei mobile devices are definitely not early entrants to the Indian market, having long searched for a suitable way to position itself. After its entrance in 2011, it chose a social channel retailing approach. On product pricing, because many Indian users care most about low prices, Huawei had no choice but to cut prices in India, even for such products as the P6. Following Honor’s entrance, Huawei once again brought out the e-commerce model in the Indian market, with flagship products Honor 6 and Honor 4X attracting a lot of attention on the Indian market.

Gionee has taken to the Indian market like a fish in water. Product sales for Gionee mobile phones have already surpassed 4 million units, surpassing the total sales of all other Chinese phone manufacturers in the Indian market combined. In 2014, Gionee was 6th on the list of top sellers of mobile phones in the Indian market, a feat accomplished in only 2 years. Its success stems from four points:

1. A persistently forward looking work ethic;

2. A social channel system with a promotion team of 7,000 people;

3. Products that adhere to the same standards worldwide;

4. Localized marketing, such as replacing Nokia to become the main sponsor of KKR, the champion team of the Indian Premiere League (IPL). More than 85% of India’s population is concerned about cricket, and Gionee’s voice will drown out all competition here in the future.

In 2015, Gionee’s objective is to become number 3 in sales in the Indian market and to improve its production base in India. The recently released S7 will become an important starting point in the battle for the Indian market. According to the 18 year old China Communications Research’s research data for the Chinese market, Gionee’s S7 has had the fastest growing sales of any domestically produced mobile phone. The future is in India, where the S7 is expected to become a top-selling model.

Xiaomi’s sales model for the Indian market initially copied its sales model within China, starting from bidding via the e-commerce channel. Because Indian policies do not allow foreign companies to establish their own e-commerce platform, Xiaomi decided to collaborate with the local e-commerce company Flipkart, with exclusive sales. Xiaomi subsequently entered into partnerships with two more e-commerce platforms, Amazon and Snapdeal. At the same time, it actively developed offline channels, uniting with Airtel to establish several physical shops, and deciding to sell Xiaomi phones in select outlets of The Mobile Store. Only time will tell whether these marketing tactics will prove effective.

From studying the strategy and performance of Huawei, Gionee, and Xiaomi’s overseas market expansion, and from the case study of their experiences on the Indian market, we can see that each mobile phone manufacturer exploring the potential of overseas markets will choose methods that are most suitable to its own channels and strengths. If early overseas expansion models encounter obstacles, these companies will make the necessary adjustments. As the company grows, the manufacturer’s channel system will also evolve. As an example, Huawei implemented social channel distribution, trying out the e-commerce model. Gionee explored e-commerce channels, establishing an approach of offering the same price both online and off, turning toward O2O. The cooperation between Xiaomi’s expanded social channels with service providers is another obvious trend. Out of the entire channel system, O2O sales are the future direction of growth, but there is a need to balance limited resources in order to carry out a timely expansion and transformation.

(The article is published and edited with authorization from the author @Chen Shu, please note source and hyperlink when reproduce.)

Translated by Jennifer Smith (Senior Translator at ECHO), working for TMTpost.