Dell goes Chinese and strikes gold

  • Analyst Opinion - This week I was  a few days in China as Dell’s guest. Steve Felice, Dell’s top executive there, Michael Dell and a number of the top players have spent some time explaining the huge success the company currently enjoys in China - at 30% growth Dell is the fastest growing large tech vendor in China. Join me for fascinating insight from the other side of the world and why Dell’s success has to do with being Dell and nor someone else.  

    More than that though, they explained what was a massive investment in the region, which - if the trend continues - will put more of Dell’s resources into China than the company has in the U.S. The reason behind this move is that China, in a few short years, is expected to pass U.S. and EU sales combined and Dell, of course, wants to be in a position to benefit from this change.   

    What makes China different

    The Chinese market likes a lot of variety, much more than the U.S. For instance, car manufacturers launch more than 100 new cars in this region every year and if you walk into a Chinese department store you will see massive lines of products from vendors trying to provide that unique product. What appeals to Chinese buyers are relatively unique products as well as a good value. And remember, we are talking about a barter culture here.
    As it turns out, this scenario eventually worked to Dell’s advantage, because the direct model allows a buyer to basically talk to the manufacturer. Most of Dell’s business in China is direct, even if the company has tweaked the model we know a bit to fit this market.

    Shifting design from the U.S. to China

    Dell has shifted most of their consumer product design efforts to China. One of the first products that resulted from this strategy was the Dell Studio Hybrid. This product is the first to truly reflect the changed approach at Dell, because this device is not only small, but it is highly customizable allowing multiple configuration choices that even include Blu-ray optical drives and tuners. The product is designed to be skinned with a variety of colors and textures including real bamboo. This way, Dell is able to give the market the variety it demands without creating a logistics nightmare.  

    Much like people shifted design resources to the U.S. while the market was on top, this move by Dell to shift design focus to China was well-timed to drive results into this massive and rapidly growing market. This suggests that products out of Dell going forward will have even more color and finish choices than they do today, which is saying a lot given no other vendor currently provides as much color choice in shipping products outside of custom painting offered by companies that specialize in gaming boxes. 

    One of the most interesting moves in this direction was to provide the “E” series corporate laptops with color choices and Dell remains the only tier one vendor to offer such an option. This too reflects how Dell’s aggressive move into China is changing what the company offers.   

    Lesson learned

    The lesson Dell learned from this Chinese effort was to “be yourself”.  Initially, Dell tried to sell its  products to Chinese retailers, because they were convinced that the direct model wouldn’t work there.  But eventually the company came to realize that it wasn’t about the model. It was Dell’s approach to the market and once it fixed the approach problem, sales increased to a degree that several of the numbers companies Dell cited now list them as the fastest growing major technology vendor in the segment and as number three behind Lenovo and HP in this market.    
    Dell did not need to be something different. The company needed to figure out how to make its model work.

    Wrapping up

    With so many of us focused on bad news this month, it is nice to see a vendor step up with a vision on how to change its fortunes and execute to do exactly that. This is probably the most significant message to take away from this China visit. If you focus on getting the job done right and aggressively look for opportunities, you are likely to experience less stress and you will be well positioned for the unique opportunities that such a market represent. In short, Dell is showing the way to not only survive the downturn, but to set a foundation that should allow the company to ride the wave that typically happens after a market collapse.   

    This is impressive work and I am interested to ee how the other products evolve differently because of these changes.    

    Rob Enderle is one of the last Inquiry Analysts.  Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them.  Currently he provides his services to most of the major technology and media companies.