Dell Rethinks its Chinese Market Strategy

Dell came met with the harsh reality of the Chinese market. Relying on the business plan that made it so successful in the US, it intended to duplicate its systems in China. Offering online sales, Dell has always been able to offer cutting-edge technology to it customers for far less than its competitors by building each machine to the specifications of buyers. Carrying costs and overhead associated with traditional "brick and mortar" businesses were eliminated, streamlining Dell's finances.

In China Dell tripped up for the first time. In a country rapidly emerging from 3rd World status, most consumers generally want to actually see and feel the product before buying, especially for an enormously expensive "luxury" item like a computer. Remember, this is a country where the average annual income for urban Chinese is $1,000/year, and those in rural areas average around $300/year. Further, internet access is not widely available and credit cards are non-existent. China is a cash society.

Dell has addressed these issues by going brick and mortar in China, attempting to build a presence in a relationship-based culture. Further, they recently launched the EC280, a computer Dell hopes will meet demand for first-time PC buyers in China's rural areas according to the Shanghai Daily. However, priced at 2,300 Yuan or approximately $310 US, I think they're still missing the mark.

OLPC's XO laptop is a mere $100 in comparison, and is designed specifically for the relatively harsh conditions of a 3rd World rural area. It also has networking capabilities that Dell's computer will not, increasing the range of wireless internet to ridiculous distances, something that will be needed in rural China. Moreover, OLPC is working through United Nation's education programs which will likely give the company an edge over Dell, a US for profit company. With products like this on the market, I think that Dell's will be a tough sell in rural areas.

Dell's change of strategy will give it the edge it needs - in the urban areas of China. But if they intend to get any market share in rural China, they're going to have to go on a field trip to see what the market actually looks like.