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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Reaching out to Customers

Industry observers were not too pleased by the fact that corporate customers formed 60% of Dell's total customer base in China. They said that focusing on corporate clients did not allow the company to give sufficient attention to Gunaxi.

Other players (like Legend) in the market gave considerable attention to personal relationships in business dealings and as a result, they were a huge hit with individual buyers. Apart from the social aspect of doing business in China, Dell also had to deal with corruption in the country. In addition, it had to contend with hostility (due to political and nationalistic concerns) of many of the Chinese people it dealt with. For an average Chinese, buying a PC was a crucial decision, taken only after careful evaluation of all options and after considering suggestions from family members. Not surprising, considering the fact that the cost of a PC was equal to two year's (average individual) savings in China...

Looking Ahead

According to an IDC report, Dell was the only foreign player that had consistently gained market share in China.

Although overall computer shipments to China had decreased in 2001 (by 48% in first quarter, 28% in second quarter and 13% in third quarter), Dell had continued to grow at a steady pace. By the beginning of 2002, Dell had emerged as the number one international player in China, leaving behind players like Compaq and IBM. Dell grew faster than Legend during this period; its profits were soaring while Legend's were declining. Dell's gross margins were reportedly 50% higher than those of Legend. In 2001, its net profit margin was 17.6% while Legend's was 13.9%. Legend was trying to compete with Dell by Dell grew faster than Legend during this period; its profits were soaring while Legend's were declining. Dell's gross margins were reportedly 50% higher than those of Legend...


Exhibit I: Dell's Competitors in China
Exhibit II: Benefits of the Dell Direct Model
Exhibit III: Products and Services Offered by Dell
Exhibit IV: Dell - Financial Highlights (1999 - 2003)


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