Selling PCs over the Net and the telephone has been Dell's trump card ever since Michael Dell adopted the direct sales model in 1984. This model helped Dell become the No. 1 PC seller in the world. However, this strategy has not paid off in China, the biggest market for Dell in Asia after Japan, so far. In spite of operating in the market for the last eight years, the company has struggled to garner a substantial market share. Currently, Dell is at the fourth position in China, behind the likes of HP whom it leads in other markets especially in the US. Added to this, the government-backed PC makers like Lenovo are giving Dell a run for its money by selling aggressively in small towns and cities in China.
Back home, the Round Rock Texas-based company has not had a great Q3. It fell short of its targeted revenue of $14.1 bn-14.5 bn and reported total revenues of $13.9 bn. While the revenues are still high, this has not sent the right signals to investors. In fact, in the last one year, its stock price nosedived by 22%.
Dell has focused on large business and government customers in major cities of China, but ignored the emerging demand in smaller cities, where Dell doesn't sell as effectively as its rivals. According to technology market researcher IDC, Dell's market share in Asia-excluding Japan-dropped by a full point to 7.8% in 2005. Dell's phone and Internet selling has relatively decreased because only a few customers use credit cards to transact and those who do aren't accustomed to buying over the phone or the Internet. Further, HP is investing in R&D while Lenovo plans to re-enter the retail notebook market with ThinkPad of IBM, whose PC division it acquired last year, giving Dell more things to worry about.
|
