Dell’s most important FSA is their direct selling. Other FSAs are their behavior with the customer and their high level of inventory. These FSAs can be summarized with the 3 golden rules of Dell: ‘never sell indirect’, ‘disdain inventory’ and ‘always listen to the customer’. The macro-level requirements for the direct sales model to be successful in Dell’s case are the customers’ behavior in the 1980s. The customers became very sophisticated and experienced technology users.
They often knew exactly what they wanted and did not need intense personal selling. Next to that, mass customization was becoming viable as components became standard modules. The major advantages of the direct model, compared with the traditional strategy in the computer business are: firstly, closeness to the end users. This helped Dell better understand its users’ needs, forecast demand more accurately and build long-term relationships with end users. Secondly, they implemented the elimination of distributors.
This helped to reduce selling costs and inventory costs through both accurate forecasting and integration with components suppliers. 2. In 1995 Dell’s representative office in China had the responsibility of coordinating the relationship with their distributors. However, there was a vicious cycle of bounded reliability involved. Dell didn’t have the intention of keeping a long-term relationship with the distributors. At the same time, these distributors did not want to invest much in developing the market because they assumed that Dell would soon switch to its famous direct model.
Dell’s initial failure should be blamed to the representative office in China because they made wrong decisions on the sales plan, the promotion strategies and most importantly on the relationship with their distributors. 3. According to Arnold’s seven guidelines Dell made the following mistakes: * Dell chose the wrong distributors. * Dell didn’t manage their distributors as long-term partners. * Dell probably didn’t provide enough or the wrong resources.
We don’t know anything about Dell’s selection method of the distributors, security of shared access to the distributors’ critical market and financial intelligence and the linking between the distributors. 4. Dell’s direct model was successful in the late 1990’s because significant growth of the Chinese PC market. Dell targeted the corporate market, because retail buyers accounted for only 10 per cent of total sales because a PC was just too expensive for a Chinese family. Other reasons for targeting the corporate markets are that these firms didn’t need much service and a lot of Chinese people didn’t use credit cards.
Within the corporate market Dell choose to aim at mid-sized to large companies. However, Dell also wanted to sell to the individuals too and Dell hired salespeople to reach these customers. Dell used their FSA (direct selling) the right way in China and this made them the top company in sales of servers and commercial computers. Although, Dell created a ‘dual system’ in order to continue selling PCs and provide technical support through a network of authorized distributors. 5. Dell has to create capabilities to reach the retail customer in China. Because it didn’t so, Dell felt behind on its competitors.
Dell should be more ‘on the street’, either through kiosks and shops or retailers and distributors. This means that Dell should move away from its traditional reliance on the direct sales model and create a new sales model. So, Dell should improve their original FSA of direct selling and create a new FSA, probably still including direct selling but the new FSA should mean that (more) retail customers can be reached. 8. Monday, September 24th 2007| Dell Signs China Distribution Deal with Gome Dell said on Monday it would sell its latest range of personal computers through China’s largest electronics retailer, Gome Group.
The tie-up with GOME Electrical Appliances Holding Ltd follows similar moves by Dell, the world’s second-largest personal computer maker, to expand beyond its direct-sales model to increase global market share. Beijing-based Gome will start retailing Dell products next month in 50 of its stores. Gome had 654 outlets in all at the end of June. For Dell this is a great opportunity to extend connections with Chinese customers we may not have reached in the past,said Michael Tatelman, vice president of marketing and sales for Dell’s global business. | Source: http://www. techpowerup. com/40505/Dell-Signs-China-Distribution-Deal-with-Gome. html