Dell

1. Why has the direct model worked for FELL in the US?

Direct model worked in US because of the market readiness for electronic commerce – the customers were willing to buy without seeing the product first. Unlike Chinese customers, the US customers could afford the investment and have a bank account and credit cards.

The size of the market and the potential in US was big. There were good resources like good sales force capable of applying the direct sales model. The PC industry was dominated by vendors selling through indirect channels.

In addition, selling directly Dell was able to understand the needs of customers and to answer more effective to those needs. Quality and price are priority for every customer and Dell could manage to provide them easily because of the savings from inventory and retailers. The benefits of the direct model were reduced cost and increased attention to customer experience and satisfaction.

2. What are the limitations of the direct model for China? Is the business-to-customer model suitable for electronic commerce? What are the limitations and potentials for China at the date of the case study?

Dell faced difficulties and limitations for the direct model mostly because of the market difference in China. The main limitation was the customers’ income and the products’ price. The customers were not ready to pay high price for a product, without seeing it. Few of the average customers had bank accounts. Another limitation for Dell was by government’s side. The government was much eager to support national PC vendors than foreign vendors. Also finding a appropriate staff was another problem for Dell. Direct sales was a new profession for China and there were lack of experienced direct sale people. Dell invested much more in China than in US in order to deal with those limitations. The operating costs were higher in China than US or Europe, where most of the sales were placed on-line or through the telephone. But...