Dell vs Lenovo
Dell’s direct sales model has restricted the company’s growth in China even as domestic competitors such as Lenovo have raced ahead making the most of China’s still rapidly growing PC market. According to data from industry body IDC, Dell had a market share of 9 % of the total PC shipments in China in the second quarter of 2010, narrowly beating out rival HP for the first time. But both foreign manufacturers lagged market leader Lenovo by a big margin. Lenovo had cornered nearly 29% of PC shipments in China in the same period. PC makers in China benefitted from the government’s economic stimulus policies as Beijing offered subsidies to encourage consumption amongst its population. As detailed in the case Dell’s direct sales model was a misfit in China where customers relied on touching and trying out products before buying them. In the US., Dell has done well by providing consumers with a way to avoid the hassles of driving to the mall. But Chinese consumers have a favourable attitude towards shopping and many view PCs as a crucial purchase. As the market for PCs in China’s large cities gets saturated, incremental sales will increasingly come from Tier 3 & 4 cities in the country. It is even more imperative for Dell to create a strong physical presence in China now as consumers in smaller Chinese cities where internet penetration is lower will be even less accepting of Dell’s direct sales model than their big city counterparts. As an acknowledgement of the reality in the Chinese market, Dell tied up with Chinese retailer Gome in 2007 to sell its PCs through Gome’s network of stores. This is the first time Dell has overstepped it direct-sales model. Gome, the largest electronics retailer in China has over 1000 stores in 200 Chinese cities. But reducing its reliance on direct sales hasn’t solved all of Dell's China problems. One challenge that Dell faces is its choice of partner. Gome may be the biggest Chinese electronics chain, but the...
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