Word: dell
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...every irresistible force, there's an immovable object. Dell may be about to bump up against his: Beijing-based Legend Computer. Legend is the runaway PC leader in China, a country that represents one of the planet's last great I.T. sales opportunities. Despite relatively low penetration rates, China's $10 billion computer market is already the third largest in the world; within a few years it is expected to move past Japan and become second only to the U.S. For computer companies, success on the mainland is becoming increasingly crucial as markets in developed countries reach saturation. Last year...
...Dell Computer is to buck the trend and continue to record its accustomed average annual revenue growth of 33%, it must in the future wrest market share away from Legend. That won't be easy. About one out of every three PCs sold on the mainland carries the Legend brand. "Legend has such a dominating presence in China, across all [market] segments," says Rajnish Arora, a server analyst for tech-consultancy IDC. "They aren't going to give it up easily." Kirk Yang, a Credit Suisse First Boston analyst, says, "Legend has a great brand name in China...
...They're learning now. When the company expanded its sales network in 1998, many observers thought Dell wouldn't make much headway because its business model was wrong for China. Unlike conventional PC companies, Dell makes machines to order and ships them directly to the customer. There are no retailers or middlemen involved; Dell asks its customers to pick and choose the computer configurations they want from a menu and then to complete the sale via the Internet or telephone...
...formula keeps Dell's prices low and works like Miracle-Gro in the West. But in China, relatively few people use the Internet and fewer still have credit cards, hindering e-commerce. Transportation networks are unreliable, complicating Dell's direct-to-doorstep delivery service. Critics also said the Chinese wouldn't buy machines without test-driving them first. "We're talking about people spending the equivalent of two months' salary on a computer," says Theodore Teo, an industry analyst at Nomura International. "They want to take the whole family to look at it in the showroom...
...however, Dell has muted the naysayers by tweaking its strategy where necessary. In Beijing, for example, the company's delivery drivers carry wireless debit-card machines so customers can pay when their computers arrive, a system that solves the credit-card problem. Today, Dell offers next-day delivery from its factory in Xiamen to 400 cities and towns. And Dell's China market share has grown from near zero in 1998 to 4.4%. That may not sound impressive, but Dell has eclipsed Compaq and is pressing IBM for the top foreign-brand position. In the lucrative segment for corporate server...