The key for success in direct selling model is able to establish strong and consistent relationships with suppliers and customers. At this point, Dell would need information and knowledge about the suppliers and customers at China. There are two ways to create this information and knowledge: one is by Joint ventures or alliances, the other is to employ knowledgeable Chinese management team to provide this. Also customer trust Is very important. This could be achieved by creating brand awareness. While computers and the Internet became commodity In developed countries such as
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USA, and ELK, there were countries that were lacking of state-of-art Information technology structures which enabled the wider usage of computers and the Internet. But globalization of business forces increased usage of computers and the Internet even in these countries which enabled them to develop their information technology structures. Since Dell was planning to enter developing countries with the same direct strategy via internet, they need to be careful about this totally new concept for China.
Because Chinese people are not familiar with computers and the internet very such, the only mistake or unsatisfied sale to a customer would create a bad reputation among Chinese people. Dell should try to postpone its internet sales for a while for China until they start to widely use computers. Therefore, Dell should need to redefine Its customer base for China from Home and small businesses to large corporate accounts. Case Notes:l . Exhibit 1: Dell is not doing well at worldwide PC sales. Because while Dell’s market share is very close to Compass market share in the US, it is 5% below of Compass’s market share worldwide.
This could be because of Dell’s fears when exploiting its direct sales strategy to global markets. Also since customer and supplier relations are very crucial for being successful in direct selling, Dell should have used Joint ventures and alliances to sell transnational borders. Because local knowledge is very important. 2. According to cross-border scalability of a business model, Dell is at the right top of the figure. This means there Is high need for local Infrastructure and local adaptation. Since Dell needs to have strong relations with suppliers and customers, It s essential to locally adapt to the potential markets. Lobar expansion. Dell had a strong establishment in the domestic market and when time to go global, it was a better idea to acquire local startups or imitators. 4. Exhibit 1 1: The other companies had small increase of their market shares however Dell’s market share was increased 3 times. This is a obvious evidence of Dell’s fast recognition among Chinese PDP industry within 1 year. Case Questions:l . How aggressive should Dell be in entering the China market? Dell should wait for its direct selling strategy through internet.
Legend already has a reputation on the Chinese market and this means a lot for potential Chinese computer buyers. Since Dell need local infrastructure and local adaptation for its selling strategy, it would take time for Chinese to get used to it. It should acquire local knowledge to leverage its expansion. It is very risky to be very aggressive in Chinese market because customers are the key factor for success. Getting their heart share means getting their mind shares which direct the sales. Because of these reasons, Dell should make acquisitions slowly.
It is very important to get customer trust. Therefore, brand awareness could be created. Because Compact and HP began to copy their direct selling. They should be in a hurry and aggressive. How much can you afford to spend? They have 1. 4 billion net income, and Chinese market is expected to grow 25 billion in three years. There is a big potential. 2. To what extent should Dell clone vs.. Alter its U. S. Strategy as it develops an entry strategy for China? US strategy is direct selling via internet. The direct selling method worked very well for US and also for Europe.