New wave emerges on the global scene

Technology-savvy Chinese companies are now targeting Western rivals on the global stage. Howard Yu, professor of strategic management and innovation at IMD Business School in Lausanne, Switzerland, has called it a "new wave".

Although traditionally Chinese firms have become globally competitive after being highly successful in the vast consumer market here, this "new wave" competes by using creative digital technology to closely interact with consumers in selected overseas markets.

"These companies are fundamentally different," Yu said. "Whereas the more traditional Chinese manufacturing firms go global by building up scale in China first and slowly creating distribution across the world, these new digital-based companies have to go global from day one."

Traditional methods of globalization are represented by companies such as telecommunications giant Huawei Technologies Co Ltd and white-goods maker Haier Group, both of which have become global leaders.

But getting there took them decades. And this method of internationalization is not new, as Japanese and South Korean firms such as Honda Motor Co Ltd, Toyota Motor Corp and Kia Kia Motor Corp have all gone through this process before.

Key to this strategy is manufacturing strength rooted in their home countries, which provides major support in international markets for their products.

But the "new wave" of Chinese companies - represented by the smartphone maker Xiaomi Inc, Internet firm Tencent Holdings Ltd and e-commerce trader Alibaba Group Holding Ltd - are not manufacturing-based, so they had to succeed in global waters by using the wisdom of the crowd. This gives them an international mindset from day one, said Yu.

For example, five-year-old startup Xiaomi became the world's third-largest smartphone distributor with a revenue of $12 billion in 2014.

Such speed in growth and internationalization would have been unimaginable for more traditional companies that take much longer to build domestic strength to begin with.

At the end of last year, Xiaomi became the world's most valuable technology startup after receiving $1.1 billion from investors, boosting its valuation to more than $46 billion.

Xiaomi does not have a strong manufacturing base because it outsources all assembly to Taiwan and does not own any factories, Yu noted. It also does not have a large team of software engineers because users are at the heart of its product development.

Operating system

Xiaomi phones come with a MIUI operating system, which is an Android interface that allows hundreds of thousands of advanced users to customize it and invent new features.

While Apple releases a new iOS every 18 months, Xiaomi launches a new version of MIUI every week. Its fan base has translated the original version into 24 different languages for markets outside China, Yu said.

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