DELL in CHINA

1. Executive Summary
Dell is one of the most popular organization who is specialized in making desktops, laptops and wide
range of other computer hardware’s all over the globe to satisfy growing demands of people in field of
IT. Dell entered into Indian market in mid of 1993 by via export and after two years successful operations
in India, Dell entered into Chinas market in beginning of 1995 through exports and in 1998 Dell installed
its manufacturing plants too in China due to favorable production environment in China at lower cost. We
will discuss this in details below. Dell continually achieved phenomenal records in sales and profit
growth, eventually making it the most successful company ever in the PC industry, surpassing
$25 billion in 2000.
Dell captured customer market and compete other competitors in same field over the China my
the mode of production of products at lowest cost and offering customized options to its
customers. All the strategies which dell focused and we will discuss in this project are all
showing that how Dell was giving its maximum focus on customers’ needs according to the
need of time and technology at lowest cost and optional customization options. Dell’s direct
relationship with the customer allows it to tailor its offerings to customer needs, offer add-on
products and services, and use the Internet to offer a variety of customer services. In addition,
Dell’s PCs are built to customers’ specifications upon receipt of an order, giving Dell additional
advantages over indirect PC vendors who must try to forecast demand and ship products based
on those forecasts. Dell relies on outside partners for services such as system integration,
installation, on-site repairs and consulting. Partners include Wang, Unisys, IBM and BancTec. On
other hand Dell’s focus on the corporate and government institutional customers somehow
affected its ability to form relationships with educational institutions which was the negative
point in the favor of Dell in China because students are there top list customers.
Dell Computer's award-winning customer service, industry-leading growth and consistently
strong financial performance differentiate the company from competitors. Customers are
getting more and more educated about computers. Second-time buyers would most likely avail
of Dell’s custom-built computers because as their knowledge grows, so do their need to
experiment or use some additional computer features. . Low-cost leadership strategy is no
longer an issue to Dell therefore it is important for Dell to stand out from the rest and have to
always keep up with technological advancements to be able to compete.
INTRODUCTION

2. Dell was founded in 1983 by Michael Dell, an 18 year old college freshman from Texas who
started out upgrading hard drives for IBM compatibles on nights and weekends.
Within a year, his service business had grown to an incredible $6 million from performing
computer upgrades for local area businesses and he dropped out of school to concentrate on
the business. When Dell changed its strategy and started offering custom built-to-order
machines, the business exploded, with $70 million in sales by the end of 1985. Evolving into an
assembler company, Dell was able to exploit certain events occurring in the industry and swiftly
adapted to meet market conditions.
Five years later, total sales had grown to an unbelievable $500 million and Dell became
nationally known as a supplier of state-of-the art desktop and portable computers. Dell
continually achieved phenomenal records in sales and profit growth, eventually making it the
most successful company ever in the PC industry, surpassing $25 billion in 2000. As one of the
world's premier providers of computer products and services, Dell was the US market leader in
its core products, the desktop and laptop markets by 2001.
In 2001, Dell Computer became the world’s largest personal computer vendor, continuing to
gain market share and post profits in an industry struggling with slumping sales and billions of
dollars in losses. Dell sells 90% of its PCs directly to the final customer, largely bypassing there
seller channel that accounts for most of the world’s PC sales. This direct customer relationship
is the key to Dell’s business model, and provides distinct advantages over the indirect sales
model. Dell’s direct relationship with the customer allows it to tailor its offerings to customer
needs, offer add-on products and services, and use the Internet to offer a variety of customer
services. In addition, Dell’s PCs are built to customers’ specifications upon receipt of an order,
giving Dell additional advantages over indirect PC vendors who must try to forecast demand
and ship products based on those forecasts. Dell’s direct sales and build-to-order model has
achieved superior performance in the PC industry in terms of inventory turnover, reduced
overhead, cash conversion, and return on investment.
Dell’s business model is simple in concept, but very complex in execution. Building PCs to order
means that Dell must have parts and components on hand to build a wide array of possible
configurations with little advance notice. In order to fill orders quickly, Dell must have excellent
manufacturing and logistics capabilities supported by information systems that enable it to
substitute information for inventory.
The demands of Dell’s model have led it to adopt a new organizational structure.It is marked by
a focus on a few key strategic activities, and extensive outsourcing of non-strategic activities.
Dell works closely with external partners to produce its PC products and to offer its customers

3. an array of additional products and services that add value and allow Dell to capture a larger
share of the customer’s IT spending.
To manufacture its products, Dell coordinates a global production network that spans the
Americas, Europe and Asia, combining in-house final assembly with heavy reliance on outside
suppliers and contract manufacturers. Manufacturing of printed circuit board assemblies
(PCBAs), subassemblies (box builds), and some final products (mainly notebook PCs) is handled
by contract manufacturers or original design manufacturers such as SCI, Solectron, Celestica,
Hon Hai, Quanta and Arima. Like other PC makers, Dell relies on outside suppliers for
components and peripherals such as disk drives, CD-ROM drives, semiconductors, add-on cards,
monitors, keyboards, mice and speakers. Its PCs can be bundled with standard software such as
Microsoft Office or with specialized software requested by corporate customers.
Dell relies on outside partners for services such as system integration, installation, on-site
repairs and consulting. Partners include Wang, Unisys, IBM and BancTec. It also works with
resellers who support Dell hardware and receive referral fees for recommending Dell to
customers.
History
 Dell competes in the PC industry, selling enterprise systems, desktop computers and
notebook computers.
 Founded in 1983
 World’s largest computer vendor
 Revenues of $41 billion in 2004
 Operates in 13 Asia Pacific markets with sales of $4.3B in 2004
 Entered China in 1995 via export
 Started focusing on China in 1998
 Operates in in 1998 established a local manufacturing and distribution operation
 In 2004, Dell PCs captured 7% share in China.
 Dell’s Mission and Vision
Mission Statement:
 “Dell’s Mission is to be the most successful computer company in the world at delivering
the best customer experience in the markets we serve.”
Vision Statement:

4. “It’s the way we do business. It's the way we interact with the community. It's the way we
interpret the world around us-- our customers’ needs, the future of technology, and the
global business climate.”
Products and Services
Products
Following is the product range of Dell International;
OptiPlex (office desktop computer systems)
Vostro (office/small business desktop and notebook systems)
n Series (desktop and notebook computers shipped with Linux or FreeDOS
installed)
Latitude (business-focused notebooks)
Precision (workstation systems and high-performance notebooks),[34]
PowerEdge (business servers)
PowerVault (direct-attach and network-attached storage)
PowerConnect (network switches)
Dell/EMC (storage area networks)
EqualLogic (enterprise class iSCSI SANs)
Dell's Home Office/Consumer class emphasizes value, performance, and expandability.
These brands include:
Inspiron (budget desktop and notebook computers)
Studio (mainstream desktop and laptop computers)
XPS (high-end desktop and notebook computers)
Studio XPS (high-end design-focus of XPS systems and extreme multimedia
capability)
Alienware (high-performance gaming systems)
Adamo (high-end luxury laptop)
Dell's Peripherals class includes USB key drives, LCD televisions, and printers; Dell
monitors includes LCD TVs, plasma TVs and projectors for HDTV and monitors; Dell
Ultra Sharp is further a high-end brand of monitors.
Dell also helps you harness the transformative power of today’s latest technologies,
simplifying the entire life cycle of every initiative, from assessment and planning to
implementation and support.
Systems Management
Data Storage & Management
Servers

5. Virtualization
SERVICES
Dell service and support brands include;
Dell On Call (extended domestic support services),
Dell Support Center (extended support services abroad),
Dell Business Support (a commercial service-contract that provides an industry-certified
technician with a lower call-volume than in normal queues),
Dell Ever dream Desktop Management ("Software as a Service" remote-desktop
management), and
Your Tech Team (a support-queue available to home users who purchased their systems
either through Dell's website or through Dell phone-centers).
Dell’s Service Partners
Rather than do everything itself, Dell has made extensive use of business partners to help serve
its customers, especially as it has moved into producing servers and targeting the small and
medium business market. Three functions - systems integration, service and repair, and
consulting - all have to be located very close to the customer, as they involve direct contact
with the customer. Dell partners with companies that can deliver these services globally - or at
least regionally.
System integration: Dell partners for procurements with integrators like Electronic Data
Systems (EDS) who will install Dell servers and link them up with end user devices.
Service and repair: Dell also partners with firms like IBM, Unisys, Wang for field service
and repair. While 90% of service incidents are handled by telephone in Dell’s call
centers, about 10% involve field calls, which Dell has outsourced to these partners. Their
field service units are tied to Dell electronically, and get the orders for field service
within an hour or two of a call coming in to Dell.
Consulting: Dell partners with Arthur Andersen and Gen 3 in the U.S. to provide
consulting services to companies that seek to emulate Dell’s success with the direct
model and Internet-based IT.
MARKETING STRATEGIES
When Dell was first launched in India, Dell’s advertising campaign was titled – “Take Your
Own Path”.

6. The campaign targeted Indian SMBs (Small Medium Business’s) with a new range of laptops.
DELL KIOSKS
Starting in 2002, Dell opened kiosk locations in shopping malls across United States,
Australia, Canada, Singapore and Hong Kong in order to give personal service to customers
who preferred this method of shopping to using the Internet or the telephone-system despite
the added expense
GREEN INITIATIVE
Dell became the first company in the information technology industry to establish a
product-recycling goal (in 2004) and completed the implementation of its global consumer
recycling-program in 2006.
INTELLIGENT CLASSROOM
Dell has been a leader for years and has had several different versions of the “Intelligent
Classroom”.
Typical technology used in an Intelligent Classroom would include a projector, computer,
sound, student response systems, video distribution, and IP TV.
All of these products would have one goal, and that is to improve the learning experience
for the students.
PRACTICE FUSION
Dell might not be the first firm that leaps to mind when you
think "high-tech medical practices" but maybe it should
be: the company has introduced an all-in-one system for
making digital medical records cheap and easy for
doctors, called Practice Fusion.
GREENEST BRAND
Samsung and Toshiba may be the most
sustainable brands for consumer laptop and PC buyers,
but Dell wins out with the IT crowd according to a new
study from Green Factor.
Marketing intelligence firm Strategic Oxygen
surveyed over 3,500 CIOs, IT managers, and CXOs in 11
countries.

7. OTHER MARKETING STRATEGIES
Dell advertisements have appeared in several types of media including television, the Internet,
magazines, catalogs and newspapers.
Some of Dell Inc's marketing strategies include lowering prices at all times of the year, offering
free bonus products (such as Dell printers), and offering free shipping in order to encourage
more sales and to stave off.
To maintain its low prices, Dell continues to accept most purchases of its products via the
Internet and through the telephone network.
Dell has been focusing on m-commerce and social media strategies to reach customers and
potential customers with marketing offers.
Dell reportedly earned $1 million in revenue from transmitting messages about sales and
discounts to its Twitter followers.
TWITTER REALLY WORKS
Dell started tweeting about two years ago, when the
system was pretty new.
So given what they say are $6.5 million in Twitter-
driven sales, the company's yearly return from
Tweets is around $3.25 million.
Dell also notes that its follower list has risen 23% in
three months alone.
DELL MINI 5 ANDROID SLATES
It's very light and comfortable to use, the screen is
responsive, and Dell's icon interface makes for intuitive
presentation of Android.
Dell In China

8. Dell is one of the world’s most successful company. After entering in huge number of
global markets, Dell decided to enter Indians market in 1993 and after the struggle of
two years analysis of China, Dell entered into china in 1995 via export. In 1998 , Dell
established its local manufacturing and distributional operations in China and up to year
2004, Dell was able to capture 7% to 9% market shares in China.
To discuss the Dell in China and its marketing strategy in china, let’s start our
discussion from different sorts of SWOT and PEST analysis;
SWOT ANALYSIS
Strengths
Dell's Direct Model approach of enables the company to offer direct relationships with
customers such as corporate and institutional customers. Their strategic method also provides
other forms of products and services such as internet and telephone purchasing, customized
computer systems; phone and online technical support and next-day, on-site product service.
This extensive range of products and services is definitely one of Dell’s strengths.
Dell Computer's award-winning customer service, industry-leading growth and consistently
strong financial performance differentiate the company from competitors for the following
reasons:
Price for Performance – Dell boasts a very efficient procurement, manufacturing and
distribution process allowing it to offer customers powerful systems at competitive prices.
Customization - Each Dell system is built to order to meet each customer’s specifications.
Reliability, Service and Support – Dell’s direct customer allows it to provide top-notch
customer service before and after the sale.
Latest Technology – Dell is able to introduce the latest relevant technology compared to
companies using the indirect distribution channels. Dell turns over inventory for an average of
every six days, keeping inventory costs low.
The company's application of the Internet to other parts of the business --including
procurement, customer support and relationship management -- is growing at a rate of 30
percent. The company's Web site received at least 25 million visits at more than 50 country-
specific sites.
Weaknesses

9. Dell’s biggest weakness is attracting the college student segment of the market. Dell’s sales
revenue from educational institutions such as colleges only accounts for a measly 5% of the
total. Dell’s focus on the corporate and government institutional customers somehow affected
its ability to form relationships with educational institutions. Since many students purchase
their PCs through their schools, Dell is obviously not popular among the college market yet.
For home users, Dell’s direct method and customization approach posed problems. For one,
customers cannot go to retailers because Dell does not use distribution channels. Customers
just can’t buy Dell as simply as other brands because each product is custom-built according to
their specifications and this might take days to finish.
Significant Issues and Problems
Dell’s most significant issue is the continuation and expansion of its direct model
selling method and the application of this particular method, in which it excels, in foreign
markets. The opportunities and threats portion of this case analysis discusses these
factors in detail. Dell faces a number of problems as it seeks entrance into the Chinese
market, most notably government regulations on manufacturing, consumer access to its
online selling system upon which Dell relies, and nationalized competitors. To
successfully enter and compete in this market, Dell must make concessions to the
Chinese government, most notably in location of production facilities, and tailor their
direct selling method for a culturally different consumer audience.
Domestically, Dell also seeks growth in its online direct selling method, but faces
increased competition from “copy-cats”, IBM and Compaq. Both retailers are learning
from Dell and are implementing Dell’s direct model in their own venues. If Dell wishes
to see 50% of revenues come from online sales, it must realize it is losing this
competitive advantage because now competitors can duplicate portions of it. Dell must
find ways to significantly improve or differentiate its direct model further if it wishes to
maintain a competitive advantage in direct online sales domestically.
Opportunities
Personal computers are becoming a necessity now more than ever. Customers are getting more
and more educated about computers. Second-time buyers would most likely avail of Dell’s
custom-built computers because as their knowledge grows, so do their need to experiment or
use some additional computer features.
Demand for laptops is also growing. As a matter of fact, demand for laptop has overtaken the
demand for desktops. This is another opportunity for Dell to grow in other segments.
The internet also provides Dell with greater opportunities since all they have to do now is to
visit Dell’s website to place their order or to get information. Since Dell does not have retail
stores, the online stores would surely make up for its absence. It is also more convenient for
customers to shop online than to actually drive and do purchase at a physical store.
Threats

10. In a volatile market such as personal computers, threats abound. Computers change in a
constant sometime daily basis. New software, new hardware and computer accessories are
introduced at a lightning speed. It is essential for Dell therefore to be always on the lookout for
new things or introduce new computer systems.
The threat to become outmoded is a pulsating reality in a computer business. Not only that,
companies must produce products that are high in quality but low in price. This is one challenge
that Dell contends with.
One of the biggest external threats to Dell is that price difference among brands is getting
smaller. Dell’s Direct Model attracts customers because it saves cost. Since other companies are
able to offer computers at low costs, this could threaten Dell’s price-conscious growing
customer base. With almost identical prices, price difference is no longer an issue for a
customer. They might choose other brands instead of waiting for Dell’s customized computers.
The growth rate of the computer industry is also slowing down. Today, Dell has the biggest
share of the market. If the demand slows down, the competition will become stiffer in the
process. Dell has to work doubly hard to differentiate itself from its substitutes to be able to
continue holding a significant market share.
Technological advancement is a double-edge sword. It is an opportunity but at the same time a
threat. Low-cost leadership strategy is no longer an issue to computer companies therefore it is
important for computer companies to stand out from the rest.
Technology dictates that the most up-to-date and fastest products are always the most
popular. Dell has to always keep up with technological advancements to be able to compete.
Current Status of Dell organization:
Dell has performed extremely well since its inception in 1984. At the time of this
case, in 2000, Dell realized $25 billion in gross revenue and $1.86 billion in net income.
One can appreciate the magnitude of its continual growth through the fact Dell had a
four-year average (1997-2000) growth rate of 63.76%. With a current ratio of 1.48, Dell
maintains enough liquidity to repay its current liabilities. Dell’s equities are growth
stocks; Dell has never paid a dividend to shareholders. Its strong returns have prompted
investors to trust and invest in the company regularly over the years, and therefore Dell
has not had to utilize long-term debt as a primary capital- financing tool. Dell has
rewarded its investors with a stable stock, with a split history of 3-to-2 in April 1992, 2-

11. to-1 in October 1995, 2-to-1 in December 1996, 2-to-1 in July 1997, 2-to-1 in March
1998, 2-to-1 in September 1998, and most recently 2-to-1 in March 1999. Dell’s return
on equity, a measure of shareholder’s return on investment, was 0.52 in 2000.
Dell’s ample cash supply prevents the company from having to incur any shortterm
debt, of which it had none in 2000. Dell’s debt ratio, an indication of Dell’s ability to sell assets if
necessary to cover its creditor’s risk, was only 0.04 in 2000, as it had only
$508 million in long-term debt compared to over $11 billion in total assets. Dell’s debtto-
equity ratio, an indication as to the extent the firm has financially leveraged itself, was
0.14 in 2000.
Current Status of Dell in Chinas Market:
Here we will discuss five important forces of competitors to discuss current actual status of Dell
in Chinas market;
 Threat of new entrants in Market of China is High
 Bargaining power of suppliers in Chinas market is Low
 The value of threat of substitution products for customers is Moderate
 Rivalry among competiting Firms is Intense
Now lets evaluate the Dell in china by using Portals model of different forces which effects
the operations and functions of any organization.
Porter’s Five Forces

12. Threat of New Entrants ( High):
Foreign and local competitors
IBM, Compaq and HP also entered into market.
Less government policy barriers (China joined WTO in 2002)
Potential barriers include:
Access to distribution channels
Scale economies (Local production plants)
Bargaining Power of Suppliers (Low):
Most competitors are vertically integrated that’s why the there is low bargaining power
opportunities for Dell with suppliers.
External Analysis:
Bargaining Power of Customers (MODERATE):
Few buyers purchase a large portion of industry output
State-owned companies, MNCs and educational institutions
Sales account for a large portion of Dell’s sales revenues 50% from government, education,
telecoms, power and finance.
Brand reputation and product differentiation can mitigate
Substitutes (Low):
Competitive Rivalry (Intense):
High profit potential due to industry growth
Main buyers are institutions with more resources than individuals
Price pressure from local competitors
High fixed costs of production capacity
High strategic stakes (focus on market share)
Aggressive competitive response
Lenovo adopting Dell’s direct sales model in China
Lenovo’s joint venture with IBM to increase its share
Lenovo’s brand campaign to improve recognition
Competitors Analysis:
Future objectives:
Build market share rapidly over its competitors.
Current strategy:
Cost leadership (Lenovo, Founder, Tongfang)
Differentiation (HP, IBM & Compaq)
Focused on consumer market
Lenovo positioning itself to challenge in high-end
Competitors

13. Critical investigation and analysis of Dell in Chinas market
Key Strengths:
Chinese competitors: market knowledge and low cost advantage.
American competitors: technology and brand recognition.
Key Weaknesses:
Chinese competitors: brand recognition
American competitors: higher costs
High-end Customers
– State-owned companies
– MNCs
– Government
– Educational institutions
– Large Corporate Accounts (1,500+ employees in Telecoms, Power and Finance)
Individual Consumers
Behavior:
– Consumer market is price sensitive
– Prefer a trial use of PCs before purchase
– Internet purchases were uncommon but internet users increasing
– Best way to reach is through retailing (Kiosks)
– Value product quality, especially high-end customers
– Brand loyal
Key Resources
Key tangible resources:
– World Wide market leadership & financial resources ($8B in China)
– Direct sales system and customer service
– Local production plant in China
– Alliance with Oracle
– Manufacturing (“Build-to-order) and low inventory” strategy
– “Just-in-time” model (6 days vs. 40 days of supply)
– Portfolio of award-winning products
Key intangible resources:
– Strong brand
– Reputation (“Dell experience” of high-quality products, support and service)
– Innovative in its technology, business practices and customer service

14. – Core Competencies
– Ability to simplify PCs and the supply chain since their beginning
– Ability to understand customer needs and deliver innovative technology and services
– Ability to use technology to simultaneously improve customer experience and contain
costs
– Ability to operate a direct business model
– Value Chain Analysis
Primary activities of value:
Operations:
Manufacturing processes contain costs well
Outbound logistics:
Direct sales model
Service:
High responsiveness to customer needs
Technological development:
Innovative web site and IT infrastructure
Firm infrastructure:
Visionary founder and management team
Recommendation
After the analysis of Dell organization, its current status and present running business
strategies in China and all over the globe, we suggest following strategic
recommendations to Dell in order to boost up its market position in order to rise up its
market shares, productivity and profitability;
Dell should have to continue business level strategy of differentiation which was on the
basis of product quality, build-to-own capability and direct sales method
 Continue to innovate and outpace the Lenovo-IBM partnership is one of the most
important recommendation.
 Build brand recognition in China as Lenovo’s doing worldwide
 Grow direct ordering via the internet (increasing Chinese web usage)

15.  Challenge Lenovo in other important Asian markets while increasing product quality and
services in China
 Prepare for wireless/mobility trend and strengthen notebook offering
 Eventually broaden reach to penetrate low-end and rural areas
– Develop the infrastructure to service, support and sell (different than urban areas)
– Requires a low-cost, differentiated product line (e.g. AMD, no Windows OS)
– Learn the Chinese market to overcome “foreignness” and local rivals
– Explore alternative sales channels (besides direct) to reach small cities