Dell as a China Powerhouse

In a month of bad news it was nice to see a vendor focused not on containing the bad news but on creating opportunities and building revenues.
Posted October 22, 2008
By

Rob Enderle

Rob Enderle


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This week I’m in China as Dell’s guest. The reason is they want us to focus on this market where they are incredibly successful and not on the ailing US market where everyone is struggling.

Here in China, according to Dell, the company does $23B in business which, when combined with related services and goods, adds an excess of $50B to the gross national product of China and contributes to the employment of two million people. What the company is most proud of is the fact it’s growing 2.5 times the industry average here in technology, making it a true powerhouse.

Part of why it’s so successful is Dell invests heavily in the area. For instance they provided 7,000 volunteers, 20 learning centers, $9.3M and 6 tons of earthquake relief after the last disaster. You typically don’t see this kind of commitment from an offshore company but Dell, realizing it would have to compete with companies like Lenovo which are local, would have to create the impression that they are just as local and that meant a significant commitment.

The reason why this commitment was made and they want us focused on this geography is that this market is expected to blow by the US market to nearly double the US size by the end of 2015. This was a fundamental strategic move to ensure they didn’t become second-class when the US market does. And it is this same set of numbers which are driving HP and IBM’s efforts into China, and should create concerns for those following Apple, which has had a great deal of difficulty penetrating this region with PCs or phones.

Selling In China

One of the lessons from China and the Middle East is that buyers are culturally oriented to buy and barter from real people.

They find direct selling largely unsatisfying and, as a result, the Dell of China is vastly different in operation than the Dell in the US. They rolled out a program consisting of 600 partners covering 86% of the available market, 155 solution centers focused on SMB, and Dell on wheels in 100 cities, with the mission to make Dell as trustworthy as any other brand.

Their plan is to expand the solution centers to 1,200 over the next few months. This is all effectively modifying the direct model to meet the needs of what otherwise would be an indirect market that actually wants to deal directly with its vendors.

It’s interesting to note that in the Middle East and China, US brands are viewed as premium brands, which naturally make them desirable. To address this massive opportunity Dell is expanding from covering 90+ cities today to covering 1200+ cities in the 2015 timeframe.

This is a massive increase in commitment but necessary if Dell wants a shot at the top technology position in China. And with China, by default, they get the top position in Asia if the market growth numbers are accurate.

Part of what can make the difference between success and failure in any hot market is to shift product design into that market so that the offering meets the unique design and function requirements that every market enjoys.

For instance, part of what makes Toyota’s US success so pronounced was the opening of design centers in the US focused on building unique targeted cars for us. It’s an interesting side point that in China over 100 new model cars are launched every year, suggesting this market likes substantially more diversity than the US market does.


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Tags: services, IBM, SMB, Dell, HP


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