Dell In China: A Strategic Rethinking

The case study chosen for this analysis focuses on Dell's ever-changing presence in the China market. Dell has significantly enhanced its presence in the country. In addition to two manufacturing operations in China, Dell has an Enterprise Command Center in Xiamen that provides customers with mission-critical enterprise services, and a global design center in Shanghai. Dell's unique, customer-focused direct model has earned it significant, rapidly growing business from customers of all types, ranging from large corporations, government agencies and education institutions, to small and medium businesses, to home-computing users. There is no mistake that Dell's direct-to-consumer business model has worked well in China, and as a result is putting pressure on Legend (Lenovo) Computers, China's leading domestic computer maker. The pressure from Dell especially, along with HP and IBM, has meant that Lenovo's domestic market share has stayed flat over 2003 at 27 percent. Combined together, the three US brands have about 15 percent market share in China, a figure which is likely to grow.

Dell, however, says it will maintain its "made to order" strategy and will not go into the distribution business. Thus, it could have an advantage over Legend in the mid and high-end markets. Dell is aiming at companies and government sectors as the main purchasers of its products with consumers taking a second place.

Performance over 2003 suggests that Dell has been successful in adapting its

manufacturing and distribution model to China, and Chinese consumers are comfortable buying from Dell over the Internet. This runs counter to the general wisdom that Chinese consumers must feel and touch a product before they buy. It also suggests that computers and software are, to a large extent, commodities. Dell also shares its efficient manufacturing and supply-chain management expertise with local suppliers and customers to help them become more competitive in the global marketplace. However, Dell remains squeamish to break away from their direct-sales strategy. Yet if the company hopes to dominate in Asia, they may be forced to go outside their comfort zone.

Case in point in regards to going outside their comfort zone includes a large mistake Dell made in the Chinese market in 2003, when they rejected a plan to sell computers online in China. Dell worried that most Chinese consumers were too poor to become big web shoppers. They changed their strategic focus, and in 2004,