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Text | Laughing at Shi Yunyan
Edit | Laughing at Shi Yunyan
Recently, Xiaomi once again encountered the vexatious behavior of the Indian government, requiring Xiaomi India to be an Indian executive, which is tantamount to treating foreign companies as sweatshops and cash cows.
This is not an isolated case, the Indian government's various bottomless blackmail against foreign-funded companies is not uncommon, from Coca-Cola, to Microsoft, to Xiaomi, and companies that have made great contributions to the Indian economy have not been spared.
How have these companies responded to the Indian government's uncreditworthy blackmail?
First, Xiaomi's infinite scenery in India
In 2014, when the mobile phone industry entered a mature and stable period, Xiaomi founder Lei Jun led Xiaomi to officially enter the Indian market. This move condenses Lei Jun's years of thoughtfulness behind it, and it also indicates that Xiaomi is about to set off a "millet fever" in the Indian market.
Lei Jun is a bit like the protagonist who has a system BUFF in the novel. After completing a four-year course in two years of college, he became the CEO of Kingsoft at the age of 28, and received $75 million in investment when he started Excellence.com. He has accumulated rich experience in his life and ushered in the peak of his career during the Xiaomi period.
As soon as Xiaomi was launched, it quickly occupied the domestic market, setting off a "millet fever" 15 years ago. In fact, at that time, Lei Jun had already turned his strategic vision to the world. Xiaomi is accurately positioned and reasonably priced, just grasping the wind of that era - cost performance.
This trait has been amazingly powerful in the Indian market. Compared with the domestic market, the Indian market is more powerful, Xiaomi effortlessly opened the door to India, successfully defeated many opponents, and became a giant in the Indian mobile phone market.
As early as 2014, Lei Jun had the idea of entering India. India is the most populous country in the world and has great market consumption potential. In addition, as a developing country, India's labor advantage is obvious, and low labor costs can reduce enterprise costs. Because of this, Apple has also moved its industrial chain to India in recent years.
In this way, profit margins will expand as long as the selling price remains unchanged. In order to open up the market, prices can also be appropriately reduced, but profits can still be the same as those in China.
In addition, Xiaomi's brand positioning has also contributed to its entry into India. Xiaomi is known as the "king of cost performance", but domestic consumers have higher requirements for configuration and often complain about Xiaomi. Of course, configuration is only one aspect, and price also has to be considered. It is indeed rare to get such a configuration at such a price.
Because of the high cost performance, Lei Jun has long turned his attention to Southeast Asia. There, Apple's mobile phone market share is low, there are no well-known mobile phone companies, Xiaomi sees an opportunity - based on the high-end mobile phone market, and take advantage of local manpower to play Xiaomi's price advantage.
In fact, Xiaomi's entry into India did not happen overnight. Long before the march, Lei Jun had already brewed a strategy.
As the fifth largest economy in the world and the fastest growing large economy, India has a population of more than one billion people and has huge market potential. As an emerging developing country, India's low labor costs have attracted many multinational technology companies such as Apple and Foxconn to start moving to India. In the face of such a big cake, Xiaomi sees an opportunity.
Similar to the Chinese market, India is also a hybrid online and offline market, accounting for 63% of the market. Xiaomi keenly grasped this point and created an asset-light marketing model that is online first and offline matched. With this model, Xiaomi ended Samsung's years of dominance in India.
In addition, Xiaomi pursues a localization strategy overseas. On the streets of India, you can see Xiaomi store slogans "Made in India" instead of "Made in China". This is not to cater to the local national mood, but the fact - Xiaomi has a complete localization industry chain in India, and almost every Xiaomi phone is assembled in India.
From R&D to procurement, from manufacturing to sales, Xiaomi has established a strict management system for its Indian business and formulated sales strategies according to local conditions. Because of the equal emphasis on technical strength and marketing, Xiaomi has been able to thrive in the Indian market.
Of course, it is not easy to blossom in the hot land of India.
At that time, India's network infrastructure was extremely weak, and there was no 5G signal. Opening up the market in such an environment is undoubtedly a challenge.
But Lei Jun did not back down, but took the initiative to build a large number of 5G base stations for India, making Indian communications enter the 5G era. The construction of these base stations requires huge funds, but Lei Jun has not asked the Indian government for any compensation.
This move won praise and gratitude from all walks of life in India, and Indian Prime Minister Modi even personally presented Lei Jun with the "India Global Promoter Award".
With Modi's encouragement, Lei Jun promised that Xiaomi would build factories in India to create jobs in India. This is also one of Xiaomi's magic weapons to win, by localizing production in India, not only can avoid tariff barriers, but also create a large number of jobs and win the support of the Indian government and people.
Subsequently, Xiaomi established 7 large-scale factories in India as promised, creating nearly 100,000 jobs for India and making important contributions to India's economic development.
However, just when Xiaomi occupied the Indian market, the Indian government suddenly turned its face, they saw the success of Xiaomi, but did not want to take legitimate means to compete fairly, but relied on power to find ways to attack Xiaomi and "sanctions" against Xiaomi's Indian subsidiaries.
Second, India's eyes are red and want to "sanction" Xiaomi
In 2022, Indian law enforcement froze a total of 4.8 billion yuan in Xiaomi India's accounts on the grounds that Xiaomi India illegally transferred assets abroad.
This accusation is clearly far-fetched, as sending money to the parent company is normal business practice. Under the rush of Xiaomi's legal team, the frozen funds were finally unfrozen.
Just when Xiaomi breathed a sigh of relief, in June this year, the Indian government once again "demonized", this time, the Indian government also attached conditions, requiring Xiaomi's Indian subsidiary to replace the Indian CEO and replace the Chinese manager, otherwise it is not allowed to continue to operate in India.
In the face of the Indian government's frequent "difficulties", Lei Jun finally couldn't bear it anymore and decided to fight back. He understands that India's economic development is backward, there are few state-owned enterprises, and a large number of Indians are facing employment difficulties.
If Xiaomi withdraws from India, it will cause tens of thousands of Indian employees to lose their jobs. Therefore, Lei Jun publicly expressed the possibility of withdrawing from the Indian market, which immediately caused a strong reaction in Indian society.
Indian public opinion has questioned the government, Xiaomi has created so many jobs for India, but the government still wants to expel Xiaomi, which is morally unacceptable.
Xiaomi is not the only victim
But in fact, in India, Xiaomi is not the only victim. The market and capital accumulated by many foreign-funded enterprises in India have often become the target of coveted by the Indian government.
In order to achieve the purpose of obtaining technology, formula and even controlling stake in foreign-funded companies, the Indian government has repeatedly changed laws and regulations, found reasons for fines, and even directly frozen the bank account assets of foreign companies on various charges.
As early as the 50s of the last century, Coca-Cola entered the Indian market and was loved by the Indian people. For decades, Coca-Cola has occupied an overwhelming position in India and is very profitable.
When the Indian government saw that foreign companies were making so many profits, it proposed a number of new rules that required Coca-Cola to disclose beverage recipes and limit the proportion of foreign ownership. Coca-Cola is reluctant to disclose its formulation technology and would rather withdraw from India.
In the early 90s, in order to attract foreign investment back, the Indian government canceled various regulations for Coca-Cola. Coca-Cola re-enters the Indian market. However, the good times did not last long, and the Indian government forced Coca-Cola drinks to disclose their formulas on the grounds that they contained excessive pesticides. Repeatedly unreasonably threatened, Coca-Cola suffered heavy losses.
A similar script is repeated at Microsoft. Microsoft has entered the Indian market since the 90s and has accumulated a broad user base. However, when Microsoft monopolized the Indian operating system market, the Indian government fined it up to Rs 700 crore for its exclusion of domestic operating systems.
Mobile phone manufacturers such as OPPO and vivo have also been repeatedly fined and even frozen assets in India. The Indian government often enforces the law with obvious political intentions, far-fetched reasons, and the process is not transparent. Many companies suspect that India is deliberately embarrassed.
In the face of the Indian government's bottomless and arbitrary actions, there are not many ways for foreign-funded enterprises to respond. Direct protest often leads to more severe crackdowns, and obedience causes significant damage to corporate interests.
Fourth, the Lei army counterattacked
In the face of sudden sanctions from the Indian government, most multinational companies have chosen to swallow their anger because the Indian market is too big to give up. But Xiaomi CEO Lei Jun did not choose to accept silently, but decided to fight back in a unique way.
Lei Jun noted that there is a serious employment problem in India, and foreign-funded enterprises have created a large number of jobs for India. So he ordered a massive layoff in the Indian branch, targeting only Indian employees. In just a few months, Xiaomi India laid off hundreds of Indian employees.
This move was immediately strongly condemned by Indian society, which believed that Xiaomi was maliciously retaliating. However, Lei Jun did not budge, but calmly said that the layoff was a normal business decision made by the company according to market conditions.
In fact, Xiaomi has a huge influence in India, with many mobile phone manufacturers alone opening and employing a large number of Indian workers. Although the layoffs bring short-term losses, they will not shake Xiaomi's foundation in India. Unemployment, by contrast, has hit Indian workers much harder.
It can be seen that Lei Jun did this to use Xiaomi's influence in India to put pressure on the Indian government through layoffs. The loss of jobs not only affects workers' livelihoods, but also causes social instability, which in turn costs the Indian government for its decisions.
This high-IQ counterattack worked. Under Xiaomi's leadership, other multinational companies have also taken measures to lay off employees to put pressure on India. The Indian government is troubled by this, but there is nothing it can do.
In a sense, Lei Jun is taking advantage of the weakness of India's fragile employment environment to fight back. The layoffs may be unfair, but they fully demonstrate a company's determination to defend its own rights.
Fifth, the author believes
The contest ended in a small victory for Xiaomi, but the relationship between the Indian government and multinational companies is still not optimistic.
Whatever the final outcome, it's a far-reaching game.
Of course, India is still a huge market that cannot be ignored, and government power alone cannot stop the development of foreign companies for a long time. Foreign companies need to be more informed about the difficulties of the Indian government and maintain a strong connection with the Indian people and market.
At the same time, with the help of the international community, we will jointly maintain a fair and competitive international business environment, and believe that with the development of democracy and the rule of law in India, the various unreasonable suppression faced by foreign companies will eventually come to an end.