The formation of the Dell Company
In 1984, 18 year old Michael Dell, a student at the University of Texas, Austin set up a PC’s limited as a part time business in his dorm room to sell IBM compatible computers built from stock components. In 1985 the company moved up the value chain and started assemble dell branded PC’s, then in 1989 a company issued its IPO. And in 1992 fortune 500 included dell computers among the best companies of world. Along with setting up its manufacturing facility at different countries dell also focused on changes according to the consumer’s choice. Thus this way dell also entered the Indian as well as china market. And then this way dell started moving on and on once it started. (Strategic management by: Ireland.hosikosson.hitt, page: 411)
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RESEARCH QUESTIONS AND HYPOTHESIS:
A foremost statistical mechanism for decision making is the hypothesis test. The concept of hypothesis testing lies at the heart of inferential statistics, and the use of statistics to “prove” or “disprove” claim hinges on it. With hypothesis testing” business researcher are able to structure problem in such a way that they can use statistical evidence to test various theories about the business phenomena. Business application of statistical hypothesis testing run the gamut from determining whether a production line process is out of control to providing conclusive evidence that a new management leadership approach is significantly more effective than an old one. [Ken, B. Business statistic,page no:290]
“Hypothesis is an assertion made by the researcher that relates the researcher to the set of facts that are investigated by the researcher through certain test.”
[Null Hypothesis and Alternative Hypothesis: Statistic Solution, Inc, 9th July 2009]
The main concentration of the research is based on how dell can grab the Chinese PC market. The hypothesis of the research is Dell computers have failed in the Chinese market, because of the lack of knowledge of consumer demand and the marketing environment over there. The researcher will try to find out the answer of the question such as why has the Dell computers failed to attract the Chinese PC market? So now how can they overcome this problem? It is also very important to find out answer to these question if Dell again want to create a space in the Chinese market what all changes is required to be done, what kind of strategy it has to follow now.
DESK RESEARCH/LITERATURE REVIEW:
Whenever any information is to be collected there are two ways though which the relevant data could be collected. Which are: primary data sources and secondary data sources.
Primary sources: They are data freshly for a specific purpose or for a specific research project.
Secondary sources: They are data that were collected for another purpose and already exist somewhere. [Kotler, Marketing management, page no:87]
To collect and gather the information the researcher had reviewed some of the secondary sources which are mentioned below.
Also we know that in desk research the most commonly used data are the secondary data of collecting information. It involves processing data that has already been collected by another party for some other use. With this form, researchers will consult previous studies and findings such as reports, press articles and previous market research projects in order to come to a conclusion. [What Is Secondary Research?: B2B International,2009]
The secondary sources suggest that dell computers has tried hard in the recent past to target the Chinese market and capture its PC segment as it has done in other countries. But after overall analysis I found that they got failure and there are several reasons for it. They haven’t tried to know what the people want and what people expect from their company. They have delivered the computers which even their domestic player’s were giving the customers. Because of this reason the company could not achieve their targeted sales in china and failed in the Chinese market.
ANALYSIS AND EVALUATION:
PC’s Market in China:
China is a fast developing nation with high and speedy growth. Its economy is also very fast developing. As and when inter was been introduced it spreaded all over the nation. China Ecommerce on internet is also expanding rapidly, by spending 60% in the first half of the year. China internet users spend around 256.1 billion in the first six month of the year, up 58.2 percent from the same period of 2007. Thus this usage kept on increasing. Which shows that people or the customers for PC has been kept on increasing. But as we all know that china is very developing country. As and when any new technology comes, they are very self sufficient to copy it and manufacture on their own. Thus although many multinational players entered china’s market but they were not been able to get success in front of the domestic players. (www.chinatoday.com)
As the china’s domestic players are very efficient to manufacture the same technology at a cheaper rate. This created a problem for the multinational companies to compete in front of them. Due to which it become difficult for the multinational companies to survive in china market and compete with its domestic players. Although there are many multinational companies in china but still they are facing many problem there during this time. (www.chinatoday.com)
Dell’s launch in China:
Dell is a US based company who sells desktop computers and laptop. It is a big name in foreign market. But it entered china market bit late. As already many payers were already ruling chinese market like: HP, COMPAC, SONY, TOSHIBA and etc. so dell was bit late compare to these already established brands. Even the major market was ruled by the domestic players also.
Still when dell entered china market it came with a big campaign online as well as word of mouth also spreaded a big brand among the customers of china. It started competing the well established brands in chinese market.
Thus it has been a big challenge for dell to capture the chinese market. As it was already flooded with high competition and very advance technology. Thus it was very important for dell to create a different image in comparison to others so that it can survive in chinese market.
The main thing on which dell focused was:
Disdain the inventory holding
Never sell directly to the customers
Always take feedback from the customers and work according to their requirement.
This three thing made dell different from others in every case. As it focused on not selling what he has but sell what according to what is the requirement of the customers.
The current marketing strategy of dells is as follow:
Competitive price in market
Customized product for customers
Telephonic customization also available
Good after sales service also available.
Offer free shipping
All type of advertisement
Purchase via internet or telephone is also available
Porter’s five Force model for Dell in China:
Rivalry among existing firms in the industry:
In china also there are many existing firm which are into the same product. So there is also HIGH rivalry among them. As there the consumers are more relied on the domestic suppliers.
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Bargaining power of buyers:
The dell in china also came out with customized product. So the bargaining power of the consumer over there was also high compare. As the business model for dell was such design that it starts with consumers and end on consumers.
Bargaining Power of Suppliers:
The bargaining power of suppliers in china was also high. Although the country is flooded with high technology. Any new technology which is been invented can be available in china. But the dell technology and hardware were been very original. Thus it created a HIGH bargaining power for suppliers.
Threat of entry of new competitors:
In china there is a big threat for competitors. As when there is new technology of business enters the market domestic players plays a vital role. Duplicity is a big problem for the multinational companies. As the domestic players copy a new technology so fast that it becomes a threat for the multinational companies.
Threats of substitute products or services
The substitute on the case of product and services is also high in china. As the Chinese people are famous for providing the same product at a cheaper rate. So the cost leadership for the dell over there is very difficult.
Once the company comes to know about their competitors, it must also ascertain their strategies, objectives, strength and weakness. So here also Dell already came to knew that there is heavy competition in Chinese market.
A group of firm following the same strategy in a given target market is caller a strategic group. So here in dell case also there is the same problem. Whenever dell came with any new strategy it was been duplicated by the domestic players of china.
Once the company has already found out about the competition and their strategy in that targeted market then the next step is to find out what is their objective. So dell found that the domestic competitor’s objective in Chinese market was to give all facility what an international company could provide.
Strength and weakness:
A company needs to gather the information about the competitor’s strength and weakness. So that even the company could increase their strength and decrease their weakness. As in case of china dell had a strength of customized computers which was even the domestic player were providing. But on the other hand it has a weakness of not knowing the customers behavior and their choice. [Philip Kotler, marketing management, pg. 234-235]
The next problem is they have never tried to understand what the demand of the Chinese market in computer segment. They should pursue the market research to understand what the consumer wants. Different consumer wants different things. If they continue to supply the products which were already been provided by the domestic players, ultimately they are going to get failed.
As consumer response is the ultimate test of whether a marketing strategy will succeed or not. Thus knowledge about the consumers should be incorporated into each and every aspect of a successful marketing plan.
[Solomon M. R., 2002, Consumer Behaviour: Buying, pg 6]
Dell focused on a cost leadership strategy for its product as well as differentiation strategy for its services which helped him to target on a broad market segment.
As in case of china the target market was already broad because of internet awareness among the consumer. So this already created place for the computer industry in the consumers mind. Thus there was already scope for any computer company in the Chinese market.
Even the dell was first one to come with its customized services which made consumer to think about what all they want from their computer.
Thus consumer started thinking about their need. And even the consumer with fewer budgets could also now purchase their computer by customizing it with fewer features.
Thus dells did not only sold its product but also focused on selling value.
Thus dell competed in chinese market with other competitors by low cost leadership and on consumer’s side by following the differentiation strategy. (www1.ap.dell.com) (www.dell.com) (Strategic management by: Ireland.hosikosson.hitt: page no:133)
Reasons for Failure of dell in china:
In 2005 it was noted that dell failed in china. As the projected sales target was not been achieved by them.
Due to this even the Food Piau Phang (Phang) president of dell for china was been retired.
In 2005-2006 the sales of dell in china slipped from 8.2percent to 7.5 percent. In the two sequential quarters.
According to analysis it was found that the market share of dell which is an international gain dropped due to its weak sales power in small cities of china and the SME market and angry competition.
The reason for lowering dell share was fierce competition from LENOVO and HP in the middle as well as lower end of the market.
Dell entered the chiness market in 1995 and was very much successful in starting to capture its urban as well as corporate customers. But slowly it started declining.
The company was also able to implement its direct selling model successful. But slowly the urban market got saturated in the year 2004. Which becomes the reason for not achieving the targeted sales for the company.
While on the other hand when dell was focusing on urban market players like LENOVO and HP captured the rural market. Which also contribute a lot in the market sales. Thus the scope for dell in rural market also declined.
Thus at last I want to conclude that dell which was an US based company entered Chinese market with its effective business model that was direct selling. Dell was not been able to achieve its success in china with its same business model. As in china dell did not concentrated on the rural market, which created a place for its competitors to enter. Even another most important factor was the china’s domestic players. And dell was not been able to compete with the china’s domestic player in price factor. Even the customization did not helped dell to achieve its targeted sales. Thus at last dell failed in china.
This way we can see that the same company with the same business model cannot succeed in every economy. The competition of the country also plays a major role in it. Even the market of every country and its consumer’s preference and mind sets are also different. So while entering into new market company should go for a proper analysis of the country and its consumers.
To sum up, I would like to say though dell has been seen recent failures but this should also not disappoint them. On the contrary they should more emphasis on the variety of alternative to get success in the Chinese market. As they are still a big giant in their own field. They are still the giant of their field. They should work on their marketing and new strategy. They should also try to more and more understand the thinking and the behavioral pattern of the china market if they want a space in that market.