Financial Analysis of Xiaomi Corporation Based on the Harvard Analytical Framework

Abstract

In the context of the accelerated transformation of the global technology industry, the hard technology field represented by smartphones, Internet of Things and smart cars is undergoing a profound business model transformation. Traditional financial analysis methods are difficult to effectively evaluate the ecological synergy value and strategic transformation effect of technology enterprises due to their excessive reliance on historical data and static indicators. The Harvard Analytical Framework provides a systematic methodology for analyzing the complex business models of technology companies by integrating four dimensions: strategy, accounting, finance, and outlook. As a typical representative of the “hardware Internet ecological chain” business model, Xiaomi’s unique triangular strategy and rapidly iterative business structure provide an ideal sample for research. This study uses the Harvard analytical framework to analyze Xiaomi in depth, which is not only helpful to improve the theoretical system of financial analysis of technology enterprises, but also provides an important reference for investor decision-making, enterprise management optimization and industrial policy formulation, which has significant theoretical value and practical significance.

The study found that Xiaomi has formed a unique triangular model of “hardware drainage-ecological synergy-Internet monetization” at the strategic level, and built competitive barriers through 719 million user traffic. However, this model faces multiple challenges, such as the slow process of high-end smartphones, the strong dependence on IoT business policies, and the impact of automotive business security incidents. According to the financial analysis, the company had accounting problems such as an excessively high R&D capitalization rate (62% for automobile R&D) and a conservative revenue recognition policy (24-month apportionment of Internet revenue), and the adjusted net profit decreased by 31.7% from 6.1 billion yuan to 4.165 billion yuan.

The study further revealed that Xiaomi’s ecological synergies have initially emerged, with 40% of SU7 owners repurchasing Xiaomi home appliances, but the cash flow pressure is significant (operating cash flow -4.4 billion yuan). In the future, companies need to balance short-term financial performance with long-term strategic investments, and optimize asset efficiency while maintaining technological innovation. It is recommended to improve cash flow through asset-light operation and dynamic inventory management, and break through the bottleneck of high-end through the “dual-track pricing” strategy, so as to finally achieve the sustainable development of ecological closed-loop.