The Companys External Environment: Dell in China - Essay Example

The economy in China is presently on an upswing as the country is registering double-digit production growth. The country's economy is also expected to overtake Japan and become the world's largest PC manufacturer in the next three years. With this rise in production, the country's revenue will expand together with individuals buying power. One of the social changes happening in China is the role of computing and computing equipment in the social system. The case mentioned that top-level managers are becoming more and more technologically adept as they are becoming internet savvy.

The country is still immature in terms of technology. This is one of the most important considerations for Dell as it also wants to employ its direct-model strategy in China through the utilization of internet technology. The patronage of the internet is hampered by the government's regulation which is speculated by the people to be against them. The case did not stipulate details on the legal and environmental issues in China. Industry Environment: SWOT Analysis The major strength of Dell, Inc.

is its utilization of a business model which enables it to reap various benefits which are not enjoyed by its competitors. The direct business cut a significant amount of cost in the company's supply chain by eliminating the less value-adding activities in the value chain. Inventories were kept low and technological breakthroughs are delivered to the customer within a week as opposed to previous two months. The direct business model also enabled the company to market directly to the customer, thereby offering more customized products.

Another strength of Dell is its cost leadership strategy. As the company can produce computers with the least possible cost, the company is also able to charge lower prices to customers relative to its competitors. Because of the aforementioned strengths, the company has made a name in the computer industry and secured a significant portion of the global market share enjoying strong brand equity. Acquisition of financing is relatively easier as the company's stock has a higher market value.

However, the company also suffers from weaknesses. One of its major weaknesses of Dell is its lack of proprietary technology in its production activities. Some experts refer to Dell as a computer maker and not a computer manufacturer. Another weakness is Dell's high dependence on its suppliers. As Dell purchases, semi-assembled inputs in its production, bargaining power is tilted among suppliers. Dell's dependency on suppliers also exposes it to risks faced by them. The major opportunity that Dell has to take advantage of in the Chinese computer market is the projected increase in demand for computing equipment.

Experts forecast that the country's share in the Asian region will expand to 50% in 2002. China is a large market and Dell has to focus on serving this country if it wants to sustain its position in the global computer industry. Another opportunity in China is the rapid growth in the country's GDP. With the expansion in production, Dell expects that major companies will take advantage of the upswing in the economy. Industry analyst also expects that China can take over Japan in PC production. Dell is threatened by the possible reluctance of the Chinese in choosing the direct model approach used by the company.

As the Chinese are new to this kind of business model, Dell is exposed to the risk of failing. Hesitance in using internet technology and credit card purchases over the world is currently unaccepted. Another threat in the Chinese computing industry is the more intense rivalry posted by the entry of more competitors. As more and more companies are realizing the gains in operating in China, they relentlessly expand and establish a presence as well. Large companies present in the market are IBM, HP, and Compaq.