Dell and the Indian PC market

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. Thus this way dell started moving on and on once it started.

PC’s industry in India:

In Indian market is slow in growth compare to other countries market. But slowly and gradually as internet era came in India it boomed this industry also. The internet pushed up technology awareness in India and filled a mushroom home and small office market for the PCs. Thus this way once internet entered the market it gradually developed a scope for PC makers in Indian economy.

The second important thing which increased a market for PC industry was the falling prices of the multinational companies. Which attracted more and more consumers? As we already know that Indian market is very price sensitive. As when the PC was been launched in 1984, it cost well over $4450 and in late 1980’s the price was around $2220 , while the price was around $1100 and now at present the multinational companies cost only %761 for PC’s. Thus this high fall was due to high competition from multinational companies. Even this fall in price made Indian people to get use to PC’s and made Indian consumer aware about this high technology product.

Thus even this kind of fall in price increased the market for international player in Indian market. But on the other side it thrown out domestic player from the market.

(http://findarticles.com/p/articles/mi_m0EKF/is_2_47/ai_69493922/)

PC’s industry 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.

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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.

(http://www.chinatoday.com/it/it.htm)

Dell’s launch in India:

Dell is a US based company who sells desktop computers and laptop. It is a big name in foreign market. But it entered Indian bit late. As already many payers were already ruling Indian market like: HP, COMPAC, SONY, TOSHIBA and etc. so dell was bit late compare to these already established brands.

Still when dell entered Indian market it came with a big campaign online as well as word of mouth also spreaded a big brand among the customers of India. It started competing the well established brands in Indian market.

Thus it has been a big challenge for dell to capture the Indian 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 Indian market.

(http://www.lexmark.com/vgn/images/portal/Mfg_Dell_CaseStudy.pdf)

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 there 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

Thus slowly and gradually by these effective strategies dell become India’s NO1 PC selling company.

(http://www.authorstream.com/Presentation/akriipm-128530-dell-education-ppt-powerpoint/)

Porter’s five stage model for dell in India:

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(Google images)

Rivalry among existing firms in the industry:

Out of the five competitive forces the rivalry among existing firm in the industry is the biggest threat to dell. As dell challenges the other industry like: ACER, COMPAC, HP, and etc by providing direct service to the customers, price cut and staying up to date with the modern technology. Thus in India the rivalry among existing firm is HIGH. As people has a great trust in dell. But it might increase as existing competitors are trying to copy its business model and its strategy. As dell when came to India for the first time customer purchased computers from internet which was although a different experience for them. Even the companies direct business model consist five of tenets,” beginning with the customers and ending with the customers. Thus due to this it can come out of this high rivalry in market.

Bargaining power of buyers:

The dell business model is design in such a way that it starts with customers and end on customer. Even it is the first one to start a customized PC’s which is all depended on the choice of customers. Thus the bargaining power of buyer is VERY HIGH.

Bargaining Power of Suppliers:

Dell is the first one to offer “computer system on a next day, on site product service” to the consumers. Thus it also had a high switching cost. Which created a HIGH bargaining power of suppliers?

Threat of entry of new competitors:

Although for computer companies it is not easy for any new competitor to enter the market. Thus for the dell the entry for new competitor is MODERATE. Even in Indian market the computer industry is already overloaded. Thus there is less scope for new company to survive in this high competitive market.

Threats of substitute products or services

Dell although believes in standard based technology. This gives the opportunity to decide in the item of preference. Although in the product category dell faces a high threat while if we talk about services there is not much of threat as the services dell provide cannot be competed by any one so easily.

Porter’s five stage model for dell in china:

C:UsersSmartDesktopketporter.gif

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.

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.

(http://www.quickmba.com/strategy/porter.shtml)

Reasons for success of dell in India are:

The main reason for the success of dell in India is its unique approach for Indian market, which was the customized product. Although there were many existing players for computers in Indian market but they were selling directly there product. They were not focusing much on the demand or the preference of consumers.

The main success reason for dell was its business model that is: – sell directly to end customers instead of intermediate distributors, resellers.

Thus the supply chain also played a vital role in the success of dell business model.

The after sales service also attracted many customers in India. As compare to dell other companies did not provided such a good after sales services.

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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 India 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 dell in a broad Indian 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 Indian market with other competitors by low cost leadership and on consumer’s side by following the differentiation strategy.

(http://www1.ap.dell.com/content/topics/global.aspx/corp/careers/workingatdell/businessmodel?c=in&l=en)

(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.

(http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/Dell%27s%20Problems%20in%20China.htm)