Dell Spells Success in China

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Case Details:

Case Code : BSTR066
Case Length : 15 Pages
Period : 2003
Organization : Dell
Pub Date : 2003
Teaching Note :Not Available
Countries : USA, China
Industry : PC

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Going To China

The computer business in China had grown steadily (and substantially) during the 1990s. In 1990, the market generated sales of $1 billion. The industry's exports grew substantially after 1994 (Refer Table I for details), and in 1995 the industry's total production was around $5.6 billion.

The Chinese government's decision to open the country's PC market to foreign companies in the late-1990s (to earn foreign currency through exports) led to this growth. The government also worked towards furthering the growth of the PC business by promoting the use of computers and computerizing state-owned enterprises. In addition, the government lowered tariffs on the industry, thus reducing prices of PCs and fuelling growth. Many analysts believed that the growth in this market was also indirectly related to the country's one child policy and the education system. Most Chinese parents reportedly bought PCs for their children. Due to all the above factors, China's PC market, which was $1 billion (sales) in 1990, increased almost ten times by 1998...

Dell Strengthens its Position in China

Given the above background, Dell's decision to set up a manufacturing facility, the China Customer Center (CCC) in Xiamen (Fijian Province) in 1998, came as an expected move. The CCC carried out manufacturing and professional functions similar to the APCC (procuring PC parts, assembling PCs, etc).

According to Mort Topfer (Topfer), Vice Chairman, Dell, this facility would help the company move closer to Chinese customers. Topfer also observed that the CCC was 'the single largest investment in the region for Dell since the opening of our Asia Pacific Customer Center.' Dell initially focused on the corporate market, which included large and medium businesses, government institutions, multinational companies, and home and small businesses which functioned in industries like telecommunications, banking, taxation, finance, and education/research. Dell expected that half of its sales in China would be made to multinational firms and the other half to government agencies, domestic enterprises, defense organizations and telecommunications authorities...

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