【正确答案】Dell Cracks China
It's a wet morning in old Shanghai, and salesman Peter Chan is selling hard. He is computers and the unique benefits of Dell's direct-selling model. His customer. Xiao Jianyi, deputy general manager of China Pacific Insurance, a fast-growing state-owned insurance company.
China Pacific, a potentially big account, is in the process of computerizing its entire billing system. It already has about 400 desktops and about 70 servers, mainly from IBM and Hewlett-Packard. But Xiao needs more hardware. Much more.
Chan explains that direct selling not only eliminates middlemen but also means that Dell can build China Pacific's computers to the firm's exact requirements, from the hardware on the outside to the software on the inside. By the time Chan finishes with a description of Dell's convenient after-sales service, Xiao says that the Dell guys are even more aggressive than people from other computer companies.
Dell is well on its day to becoming a major player in China.
Last year, Michael Dell opened the fourth Dell PC factory in the world in Xiamen, a city halfway between Hong Kong and Shanghai on China's southeastern coast. The point of Dell's push into China seems obvious: China is becoming too big a PC market for Dell, or anyone, to ignore.
China is already the fifth-largest PC market behind the U. S., Japan, Germany, and Britain. But if PC shipments in China continue to grow at an average annual rate of 30%—as they have over the past three years—China's PC market will surpass Japan's in only five years. Not even the Asian crisis has slowed down this growth. While Asian markets like South Korea saw a 46% decline in PC shipments in 1997-1998, for example, PC shipments to China jumped 48 %.
Though the competition is intense, Dell is confident it has a strategy that will pay off. First, it has decided not to target retail buyers, who account for only about 10% of Dell's China sales. That way Dell avoids going head to head against local market leaders like Legend.
The company thinks it can make big inroads by selling directly to corporations. Established American PC makers in China—Hewlett-Packard, IBM, and Compaq—depend largely on resellers. By cutting out the middleman, Dell believes it can sell computers at lower prices than its competitors can, and thus steal market share. Already the gambit seems to be working: at the end of last year, Dell's market share tripled to 1.2%, while Compaq's fell from 3.5% to 2.7%.
The outlook wasn't always so rosy. When Dell set up its first Asian factory in Malaysia in 1996, there were serious doubts as to whether its direct-selling model would work. Skeptics fretted that Asia's low Internet penetration and the value Asians put on personal relationships with distributors would punish the Dell model. But in practice Dell has managed to increase sales during one of Asia's worst economic crises. That has silenced most of the critics.
In fact, the direct-selling model has almost certainly been a boon, not a barrier, to Dell's plans. "With low priced PCs reducing traditional profit margins, the direct-order model is gaining popularity across Asia." Says Archana Gidwani, an analyst with the Gartner Group in Singapore. She figures that starting in 1998, direct sellers like Dell saw shipments in Asia jump 15%, while Hewlett-Packard, IBM, Compaq, and other PC makers that go through resellers saw shipments decline 3 %. And she expects 40% of Asia's PC shipments to be ordered directly this year, up from roughly 30% last year. "Dell," she concludes, " is changing the way computers are being sold in Asia."
Though Dell started shipping computers in China only last August, it has already risen to become the country's eighth largest PC maker; quarter-on-quarter sales are growing 50% on average, admittedly from a very low base. Dell will not say if its operations there are profitable yet.
Dell is winning over the chief information officers of state-owned companies in the American way with speeds convenience, and service. "We don't have to change the formula. It will work in the U. S., China, India, or even in space."
At the heart of that "formula" is the simple principle that the customer knows best.