Case3_Notes - Details Mass exodus of Dell top management to...

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Details Mass exodus of Dell top management to competitor Lenovo because they wanted to change Dell’s direct model in China o “The Chinese executives wanted to change the model and bring in resellers and distributors” Lenovo is taking a diverse approach while Dell is insisting on the purity of its direct model Unit sales and Chinese revenue grew while market share slipped in 2006-7 o Successful, but didn’t beat the competition (doomed to failure) o Only top 2-3 companies survive (one for low cost) “Successful in capturing the urban market and corporate customers” (1995) o Direct sales model worked well in these markets o Reached saturation “Failed to gauge the increasing demand for computers from smaller towns and rural areas” o “Lenovo reached those markets at the right time by launching low-priced products and sprucing up their distribution networks” Dell not performing well globally o Dropped 46.4% in net income! Background: Dell makes “cost-effective PCs” (low cost strategy) Entered retail channels to cater to small businesses and individual customers o Realized “indirect distribution channels had not been very successful” o Wanted to focus on Dell’s customization (differentiation strategy) Reintroduced direct model, venturing to selling computers through the Internet o Catered to the needs of individual customers Entered the printer market at US$20 below the market rate (low cost strategy) “Through the direct model, Dell was able to reduce inventory costs and overhead” (low cost ) o “Dell provided consumers with tailor made products” (differentiation) o Required “superior manufacturing and logistics capabilities, along with information systems” This would be difficult to do in a foreign country they are just entering “Adopted a structure known as the virtual company or value web model, which focused on a few key strategic activities and outsourcing of non-strategic activities (a complex hybrid model) Used Just-in-time (JIT) production “China surpassed Japan [in 2003] to become the second-largest PC market in the world” o “Dell had to enter China in order to remain competitive in Asia and gain market share” o Dell’s third-largest market (2005)
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Case3_Notes - Details Mass exodus of Dell top management to...

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