Selling Directly, Globally

Dells 3 Golden Rules

Eschewing inventory Always listen to the customer Never sell indirectly

Eschewing inventory
Minimized costs and better customer service. Same for suppliers (valuechain.dell.com). Major suppliers located near Dell.

Always listen to the customer

By selling directly, Dell came close to the customers and understood their needs. Understanding customer needs results in less need for massive amount of inventory.

Never sell indirectly

Dell was the single point of contact. The big savings are passed to customers.

Billing system
Cash

conversion of negative 44 days

Website (4 phases)
Phase Phase Phase

1: Be present and establish link with customers (1994). 2: Customers can configure and order their computers directly (1996).

3: Online 24 hour technical support, order status information and software download. (1998).
Phase

4: E-Support Direct. Unique support for each system (1999). DellConnect Online Access Tool (2006.) (80% of the consumers and 50% of the small businesses were first time buyers.)

Social factors
People in China Perfer to see the product before they buy
This happens trough vendors and not by Internet or phone.

Cash is the perfered form off payment. Widespread belief that internet activity is monitored by the government. Difficult to find experienced direct sales people.

Political factors
If goods arent manufactured in China itself, they cannot be sold directly in china. When dealing with the government:
A lot of bureaucracy and red tape (Prolonged decision makeing) One-sided and non-negotiable

Competitive factors
The Chinese government prefers national PC vendors. Lenovo
Government-backed and one off the most recognized brands in China. Adopting Direct sales

HP HP
Expanding sales coverage trough multiple sales channels Increasing outlets that sell HP from 300 to 2000. (2003-2007)

Competitive factors
Dell
New in the marked, had to earn the trust off the buyers. No retail infrastructure. Direct sales / phone sales not preferred. Only 123 million internet users (1,333,550,000)

Economical factors
For a big part off the population buying a PC constitutes a major investment.
2-3 months salary. More expensive not to use Direct sales model

China, worlds second largest PC market

In 2002, China overtook Japan. In 2006, the freight of PCs grew with 21% - rest of the world 10%. The production of PCs grew from 7,5 mill. units in 2001 to 80,8 mill. in 2005 Chinas economi has grown drastically in the last two decades The difference between rich and poor, urban and village people has become bigger.

Consumer patterns
Dell

concentrated on selling in the big cities. The price of a PC was almost as high as two months of savings. The problem with the Direct Model is that the Chinese people wants to feel and see this expensive product. In 2006 there were 45 mill. credit cards in use but the majority of the Chinese still withdraw the money in the ATMs. People are afraid of buying online, because the government is keeping the internet under surveillance.

Infrastructure still under development

The

infrastructure is a problem, because they cannot send packets to all areas in the country. transport options are troublesome and expensive.

Other

Close to the market

Public consumers

Selling directly
Private people buying from retail stores Private 50% online in 2-3 years

Prices and costs Delivery, reliability and service

Will have to sell indirectly Affects the 3 Golden Rules