Dilly 'Dell'ing Around

The good news: Austin-based Dell Computer

Corp (Dell) has reported a record shipment of two million PCs as sales worldwide. The

company has been galloping ahead and is currently #2 in the global market.

The bad news: Dell's Indian subsidiary has

been tottering and so far failed to make an impact in the local market and is a distant

ninth.

A little success there, a little failure

here sums up Dell's performance in the global and local market. Internationally, Dell's

Direct Access Model (DAM), a direct marketing approach, has been the driving force behind

its juggernaut in the computer market. Thanks to DAM, Dell has been able to offer

low-priced made-to-order products in the market. The company has effectively leveraged its

direct marketing model to bypass the retail channel and share the retail margins with the

customers. This approach has helped it to penetrate difficult markets like USA and Europe

and gain marketshare at the cost of established players. Today, players like Compaq, IBM,

HP and others, earlier skeptical about DAM, have accepted the success of a direct

marketing approach and are rethinking their conventional retail channel selling approach.

So what's wrong in the domestic market? How

can an 'innovative' world leader falter badly in the Indian market?

'Time' is the culprit, according to John

Legere, President, Dell, Asia-Pacific. Says he, "We made an entry in the Asia-Pacific

region only in 1993, yet according to an IDC Q2 1998 report, Dell ranks seventh in the

region and ninth in India. We are encouraged by our performance and our progress is in

line with our plans for India." Given time, it will replicate its worldwide success

in the domestic market seems to be the underlying message.

An analysis of the company's Indian

operations would suggest that 'misutilization of time' rather than time is the culprit for

the poor performance. It is a known fact that Dell was among the earliest MNC brands in

the country and tied up with an aggressive marketer-Pertech Computers. The company has

failed to build up on its early entry advantage and frittered away precious time without

gaining any marketshare. Though the company refuses to give figures on its marketshare in

the country, as per the DQ Top 20, the company does not figure in any of the top lists of

desktop, notebook or server vendors.

Moreover, it is ironical that even as Dell

is forcing other players to rethink on their conventional marketing strategies worldwide,

it has preferred the same conventional marketing strategies for the local market. In

India, it sells computers through the conventional approach-distributors, resellers and

retailer chain.

Here's the first link behind the poor

performance of Dell in India. Unlike its international success, which is attributed to the

excellent supply chain logistics than any other factor, it has not been able to set up an

efficient 'back-end' strategy in place. Given this fact, the company cannot leverage its

marketing strategies of low pricing and customization. Forget low pricing, the company's

products are priced higher than domestic manufacturers and the gray market operators. For

example, the entry-level PII computer is priced at around Rs78,000 and the Celeron model

for the same configuration is priced around Rs68,000. Compare this with high-end system

prices from Indian manufacturers, which range from Rs40,000 to Rs50,000. The company

cannot compete with these players in a country known for its value-for-money outlook.

Though price competitiveness relative to the domestic manufacturers is a common constraint

for all the MNC brands, these players, however, have had a better success rate than Dell,

thanks to higher visibility, better reseller network and better brand image. Remember the

recent high-decibel price war in the low-end PC segment? HCL, Compaq, Digital and HP were

all there and Dell was conspicuous by its absence. Ironically, Dell's global marketing

plan has revolved around the price plank.

Poor marketing and a concomitant lack of

reach are the second weak link in the company's strategy. Unlike other players, Dell so

far has preferred to be a component supplier rather than an active marketing company.

Rather than play hardball in the market, Dell has preferred others to sell its products.

First it was the unsuccessful marriage with Pertech Computers, and then came agreements

with distributors like DCM DataSystems (which broke off at the beginning of the year), VM

Enterprises and others. Not big names with a great market reach that could help Dell

cruise smoothly. Distributors, too, feel that the company has failed to display the

necessary marketing thrust compared to other MNCs. According to them, this raises doubt

whether the company is serious about the Indian market or not.

Direct marketing?



Where does this leave the company? The company cannot succeed by the conventional

marketing approach. Introducing DAM and pumping in investments to build efficient supply

chain logistics without volumes is a big risk for a late starter like Dell. To take the

gamble or not is the big question for the company. Moreover, assuming that Dell decides to

plunge headlong in the Indian market, it has to decide which market niche it plans to

attack: premium, value for money or low-priced segment. The first is dominated by MNCs and

high-end Indian companies, the second is occupied by low-end MNCs, Indian companies and

high-end gray operators and the last segment is being catered to by low-end Indian

companies and gray operators. Marketing theories suggest that any segment usually has a

leader or two and other players with low marketshare. The same is the case with the Indian

computer market. Compaq, IBM and HP occupy the premium segment, HCL and Zenith dominate

the second rung and other domestic and gray market players have a stranglehold on the last

rung. In such a scenario, where can Dell squeeze its product? Which segment Dell plans to

concentrate on will decide its whole marketing strategy.

The thinktanks at Austin have some serious

homework cut out for them regarding the Indian market. They have to realize that since the

company is a late entrant in the market, it would be foolhardy to attempt conventional

marketing theories. The company needs to focus on DAM and build up the necessary

infrastructure to facilitate the smooth functioning of the model. If innovation is to be

the name of the game, investment on infrastructure and increasing marketing thrust will

decide whether or not the company is serious about the Indian market. Also, serious

rethinking needs to be done on whether a simple question from the press to the Indian

operation's CEO needs to be answered by him or directed to the Asia-Pacific office,

Singapore, and redirected to a Delhi-based communication agency. If a customer is to get a

similar 'delayed' response, then it's Mayday time for the world's #2 PC maker as far as

its local aspirations are concerned.