Alibaba Group Holding Ltd (NYSE:BABA)-backed Chinese low-budget smartphone maker Meizu Technology Corp. will cut down 5% of the 4,000 jobs this year, amidst industry slowdown and intense competition from other budget-smartphone makers.
According to the CEO, Bai Youngxiang, 200 employees would lose their jobs following the implementation of a new policy which edges-out the 10% of bottom ranked employees. The company will also curtail the number of hires to less than 10% in 2016, according to a spokesman for the company.
Hiring policy change
Alibaba Group Holding Ltd (NYSE:BABA)-backed smartphone maker has apparently revised its hiring policies following the success of a similar program at the General Electric Company (NYSE:GE) under Chairman Jack Welch.
Called the ’20-70-10’ vitality model, it allows companies to rout out the lowest 10% of performers at a corporation.
Lack of market growth
Apart from a shift in hiring strategy, Meizu is also repositioning itself since the smartphone market demand and growth are on a sharp decline. According to analyst firm, IDC’s survey, the Chinese market growth for the smartphone has declined to ‘low single-digits.’
It was just last year that Alibaba Group Holding Ltd (NYSE:BABA) had bought a minority stake in Meizu with $590 million investment. The move was seen by industry insiders as tactic to add users to Alibaba’s native mobile operating system, ‘YunOS.’
Meizu is currently under immense pressure as it faces stiff competition from other domestic ‘low-priced’ smartphone makers, OnePlus as well as Oppo.
A shrinking market for low-priced smartphones too is bearing down on Meizu’s competitiveness. According to analyst Jeff Pu at Yuanta Securities Co’s, Alibaba Group Holding Ltd (NYSE:BABA) backing had helped Meizu to cut-down on its prices. However, now as the competition bears down on hardware profitability as well, Meizu has to shift strategies. Job cuts and sustained hiring are first steps in this direction, which Meizu hopes will help to become profitable in the long term, even after the low-end smartphone segment cools down.
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