Selling Directly, Globally

Dell’s 3 Golden Rules•Eschewing inventory

•Always listen to the customer•Always listen to the customer

•Never sell indirectly

Eschewing inventoryEschewing inventoryEschewing inventoryEschewing inventory

•Minimized costs and better customer service.

•Same for suppliers (valuechain.dell.com). Major suppliers located near Dell.

Always listen to the customerAlways listen to the customerAlways listen to the customerAlways listen to the customer

•By selling directly, Dell came close to the customers and understood their needs.

•Understanding customer needs results in less need for massive amount of inventory.

Never sell indirectlyNever sell indirectlyNever sell indirectlyNever sell indirectly

•Dell was the single point of contact.

•The big savings are passed to customers.

Billing systemBilling systemBilling systemBilling system

•Cash conversion of negative 44 days

Website (4 phases)Website (4 phases)Website (4 phases)Website (4 phases)

•Phase 1: Be present and establish link with customers (1994).

•Phase 2: Customers can configure and order their computers directly (1996).

•Phase 3: Online 24 hour technical support, order status information and software download. (1998).

•Phase 4: E-Support Direct. Unique support for each system (1999). DellConnect – Online Access Tool (2006.)

(80% of the consumers and 50% of the small businesses were first time buyers.)

Social factorsSocial factorsSocial factorsSocial factors

•People in China Perfer to see the product before they buy•This happens trough vendors and not by Internet or phone.

•Cash is the perfered form off payment.

•Widespread belief that internet activity is monitored by the •Widespread belief that internet activity is monitored by the government.

•Difficult to find experienced direct sales people.

Political factorsPolitical factorsPolitical factorsPolitical factors

•If goods aren’t manufactured in China itself, they cannot be sold directly in china.

•When dealing with the government:

•A lot of bureaucracy and red tape (Prolonged decision makeing)•A lot of bureaucracy and red tape (Prolonged decision makeing)

•One-sided and non-negotiable

Competitive factorsCompetitive factorsCompetitive factorsCompetitive factors

•The Chinese government prefers national PC vendors.

•Lenovo

•Government-backed and one off the most recognized brands in China.

•Adopting ”Direct sales”

HP •HP

•Expanding sales coverage trough multiple sales channels

•Increasing outlets that sell HP from 300 to 2000. (2003-2007)

Competitive factorsCompetitive factorsCompetitive factorsCompetitive factors

•Dell•New in the marked, had to earn the trust off the buyers.

•No retail infrastructure.

•Direct sales / phone sales not preferred.

•”Only” 123 million internet users (1,333,550,000)

Economical factorsEconomical factorsEconomical factorsEconomical factors

•For a big part off the population buying a PC constitutes a major investment.

•2-3 months salary.

•More expensive not to use ”Direct sales model”

China, worlds second largest PC market

•In 2002, China overtook Japan.

•In 2006, the freight of PC’s grew with 21% - rest of the world 10%.

•The production of PC’s grew from 7,5 mill. units in 2001 to •The production of PC’s grew from 7,5 mill. units in 2001 to 80,8 mill. in 2005

•Chinas economi has grown drastically in the last two decades

•The difference between rich and poor, urban and village people has become bigger.

Consumer patternsConsumer patternsConsumer patternsConsumer patterns

•Dell concentrated on selling in the big cities.

•The price of a PC was almost as high as two months of savings.

•The problem with the “Direct Model” is that the Chinese people wants to feel and see this “expensive” product.

•In 2006 there were 45 mill. credit cards in use – but the •In 2006 there were 45 mill. credit cards in use – but the majority of the Chinese still withdraw the money in the ATM’s.

•People are afraid of buying online, because the government is keeping the internet under surveillance.

Infrastructure still under developmentInfrastructure still under developmentInfrastructure still under developmentInfrastructure still under development

•The infrastructure is a problem, because they cannot send packets to all areas in the country.

•Other transport options are troublesome and expensive.

•Close to the market

•Public consumers

•Selling directly

•Private people buying from retail stores

•Private 50% online in 2-3 years

•Prices and costs

•Delivery, reliability and service

•Will have to sell indirectly

•Affects the 3 Golden Rules