PC Manufacturing

Dell in India

Case Contents

  1. Introduction
  2. Manufacturing – The first Dell ‘Made in India’ desktop
  3. Dell’s Market Share in India
  4. The Indian consumer and Local competition in India
  5. DELL – Key Facts about the company
  6. Dell – Company Overview
  7. Dell – Business Segment Information
  8. Dell Products and Services
  9. Dell’s new retail strategy and Direct-only model
  10. Dell’s New Marketing Strategy in India
  11. Dell’s New Advertising Campaign for SMBs
  12. Testimonial Advertising instead of Transactional
  13. Dell’s CSR, Green Initiatives in India
  14. Questions for discussion
  15. Bibliography

     

Sample Page

“India is a great place to be in. It is growing faster than China for us.”
“We’re in 180 countries and I don’t track all of them because that can make you a bit dizzy. But I do follow our top 10 markets. India is in the top 10. In fact, it’s the fastest growing market of our top 10, ahead of everybody, including China. There are plenty of opportunities in India and we couldn’t be more excited.”
–Michael Dell in 2010

‘‘We’re very strong in the large enterprise segment, but over the next three years, we’ll also focus on consumers and small and medium (Indian PC market growing faster than China: Michael Dell news, 2010) businesses. That’s where we see a big part of the next billion dollars in India coming from.”
– Sameer Garde, India country manager in 2010

Introduction

Dell’s presence in India is no surprise. India is one of the most important emerging markets in the world. For years, selling PCs in Asia largely meant China . However, PC makers have recognized the importance of the giant Indian market , its booming economy and annual growth at more than 9%.

Dell started in India about seven or eight years back by opening a customer contact center at Bangalore in 2001. In 2003, the second contact center opened at Hyderabad. The company operates its services from four centers based at Bangalore, Hyderabad, Chandigarh and Gurgaon. Dell started in Bangalore providing customer support to English speaking countries and later also began providing technical support, procurement of financial back office and Knowledge process outsourcing. After the U.S., Dell India is the second biggest center with 23,000 employees. The strategic importance of India to Dell is evident from the fact that India was one among three locations (the other two being US and UK) where Dell’s Latitude E series and Precision notebooks were launched. In India, Dell already has a 23,000-strong workforce in about 10 years of operations and business from India is closing in on the $1 billion mark. Dell has nearly 13 per cent share of the Indian market.

Case Updates/Snippets

  • Dell’s channel strategy is to make technology more available to small and medium businesses (SMBs). Dell’s channel partners contribute 22% to its total revenue globally. Out of 10 million SMB customers across the globe, Dell caters to 12,000 SMB customers in India. As per estimates, SMB market in India has over 7 to 13 million customers. Among the BRIC countries and U.S., India is ranked second for the number of SMBs.
  • Stiff competion between Dell and HP in the Indian PC market: According to IDC, since 2005, HP has held the number one position in the Indian PC market every quarter (for the past six years). However, in the second quarter (April-June, 2010), Dell replaced HP for the first time with a 15.2 percent share. HP followed at 14.3 percent and Acer at 11.5 percent, though HP still led in the desktop segment. Dell was helped by strong marketing and its channel partners base while HP was disrupted by its move from a national distribution model to a network of regional distributors.
  • PC Market in India:In 2009, 75 lakh PCs were sold. In 2010, the expected PC sales are 90 lakh. For the first six months ended June 2010, sales totaled about 45 lakh. [Note: 10 lakh=1 million, PCs include desktops and notebooks.]
  • Premium Phone Support service: In July 2012, Dell announced Premium Phone Support service. The 24×7 phone, chat, and e-mail support service is for its consumer line of products. The service is unique as it caters to both hardware and software.
  • Channel Initiatives in India:Since the beginning of 2013, Dell has taken initiatives like launching the Dell’s Engineer’s Club (train channel partners), Enterprise Master Tool (to close deals faster) and the Partner Advisory Council (to augment sales). These initiatives are launched to support its channel partners in India. Dell has more than 2,000 partners in its Global Commercial Channel (GCC) partner program in India.

Lenovo in India

Lenovo, the world’s fourth-largest PC maker, has long dominated the Chinese market, the world’s second-largest. Lenovo had its worst year in FY 2009 globally and India was no different. Will Lenovo be able to successfully replicate its China business model in India?

     

Case Contents

  1. Introduction – Restructuring at Lenovo
  2. The Indian Challenge
  3. Rationalizing Operations in India
  4. About Lenovo – Background note, Business and Strategic Facts
  5. Lenovo – Top Leadership Team, Key people
  6. Lenovo: Quick Facts
  7. Reorganization Strategy and the Boxer analogy
  8. Lenovo’s Indian focus
  9. Lenovo’s ‘half moon’ strategy for its emerging markets business
  10. Lenovo’s three core competitive strengths
  11. A unique dual business model
  12. Lean cost structure
  13. History of innovation
  14. Marketing Strategy
  15. Global Marketing Hub – India-based multicultural marketing communications team
  16. Product positioning – Leveraging icons in the Indian Market
  17. Five-Year Financial Summary
  18. Bibliography
  19. Figure 1 – Lenovo – Sales Analysis by Geography
  20. Table 1 – India Client PC Market: Vendor Rankings and Market Shares
  21. Table 2 – India Client PC Market – 4Q 2007, 4Q 2008
  22. Exhibit 1 – Market share in the overall PC market
  23. Exhibit 2 – Celebrity Endorsement by PC Brands in India
  24. Exhibit 3 – Lenovo’s corporate values

Sample Page

“We have restructured our global business and have divided markets into the emerging and developed market categories. Our thrust remains on the emerging market because of the tremendous potential, and we will bring in the best practices from China to these markets. India remains on the top of the pack in our emerging markets business.”- Amar Babu, Lenovo India MD.

“It’s possible to double our share in Indian market in 3-4 years.” – Yang Yuanqing, CEO, Lenovo in July 2009.

“The company’s (Lenovo’s) market share has been on the decline in India for over a year. In the quarter ended Dec. 31, it ranked fifth behind Hewlett-Packard, Dell, Acer, and a local vendor HCL Infosystems.”- Diptarup Chakraborti, principal research analyst at Gartner.

1. Introduction – Restructuring at Lenovo

In January 2006, Lenovo the world’s fourth-largest PC maker restructured its global operations from four regions (Americas, Europe, Asia-Pacific and China) to five . India was a major part of Lenovo’s strategy and it was listed as a separate region to be managed. India had just 7.5 million PCs compared with China’s 40 million. This presented a huge opportunity for Lenovo and it wanted to double its market share in three to four years. The company was expected to find natural success in India as the Indian market was similar in nature to the Chinese market. In China, Lenovo had built a reputation as market leader. Lenovo’s market share in China was over 30% in the Chinese domestic market. According to data compiled by Bloomberg, China accounted for 48% of the company’s revenue for the first half of 2009. However in India, Lenovo was lagging behind competitors like Dell, HP (Hewlett-Packard) and local brands like HCL (Hindustan Computers Limited). Lenovo had a 7.3 per cent share in the Indian PC market.

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Case Updates/Snippets

Lenovo India – Retail expansion with LES Lite stores – lower cost stores in tier 3-5 cities

Lenovo India has customized LES Lite stores for the Indian market. These Lite stores are smaller versions of Lenovo’s exclusive stores and have lower costs and also lower break-even points as compared to bigger metro stores. The strategy with Lite stores is to expand into India’s key tier 3-5 cities/towns and are around 150-250 square feet in size. Lenovo launched its Lite stores in Bihar, India in October, 2010 and by April it had around 200 stores. In July 2011, Lenovo India inaugurated its 400th LES Lite store. The company has plans to open 1000 stores by March 2012.

Lenovo leads in India with single largest deal worldwide (Dec quarter 2011)

Lenovo will supply the Tamil Nadu (South Indian State) government with lakhs of laptops. In all, Tamil Nadu state government plans to give away 68 lakh laptops to students in 5 years. Other competitors of Lenovo in India like Acer and HCL are also in line to supply the laptops.

In Q1, 2012, Lenovo India became the No. 1 PC vendor in India.

India PC market shipments for Q1 2012

Business Segments in India

Lenovo has five segments in its enterprise business (known as REL – short for relationship), in India. They are very large enterprises (VLE) (20% share), large enterprises (LE) (10-12% share), government (15% share), education (15% share) and global (30-35%).

Bulk orders and Distribution in India

In 2012, Lenovo’s bulk order from the government of Tamil Nadu for one million laptops and bulk orders from large companies, propelled it as the market leader in India. In India, Lenovo has five national distributors for PCs and around 40 state-specific regional distributors and 6,000 retailers for tablets and smartphones.

HP’s business strategy in a challenging marketplace

Business Strategy – India – November 2008

How is HP dealing with a challenging economy?

Leading tech companies (including Intel and Cisco) believe that given the constraints of the economy today and the likely global recession, customer spending on technology will decline rapidly impacting both consumer and corporate purchases. Declining sales figures in October and November (2008) reflected on this fact. Hewlett Packard (HP) on the other hand has delivered a contrastingly optimistic forecast and expects significant growth with respect to the negative outlook for the coming quarter. How is it able to do so? A look at some components of HP’s business strategy:

HP and its Business Strategy

Wide Variety

H.P. offers a wide variety of products to consumer and corporate customers which means that strength in some businesses can offset weakness in others.

Repeat/Recurring Sales and Long-term deals

HP’s stable revenues come from a large amount of recurring sales – about 40 percent (65 percent of its profits) from long-term deals.

Declining sales of major printer and PC products

At HP, printers are often sold at a loss. Fewer printers sold imply higher HP profits. On the other hand, PC losses have a marginal effect on H.P.’s overall profits.

What the CEO and Analysts say?

Mark Hurd, Chairman and CEO of HP remarked that HP’s ability to execute in a challenging marketplace helps it to differentiate against its competitors and therefore it is able to increase its market share and earnings. Other analysts opine that HP is a really well-run company perticularly from a cost perspective.

Cutting costs and layoffs

The company was aggressively cutting costs and even began laying off workers (around twenty-five thousand) before the declining economy had its effect on the tech industry.

HP is optimistic, but will it be able to match its 5 percent (approx.) growth in recent quarters. Given the economic gloom, at least it has done well competitively and probably will emerge from the current economic environment as an even stronger force.

Related Articles

Hewlett-Packard’s retail channel advantage over Dell

February 21, 2008 – Business Management Article

HP’s retail channel strategy is working

Hewlett-Packard (HP), the world’s largest personal-computer maker (based in the Palo Alto, California), beat Dell in PC sales for the sixth straight quarter and posted a fiscal first-quarter profit (February, 2008). The results which topped analysts’ estimates on orders for PCs, servers and storage show that HP’s retail channel strategy (to rely on a network of retailers) is working. The option to view and touch the machines before buying is helping HP win customers. Furthermore, HP’s PCs and notebooks are sold in about 110,000 stores; 10 times as many stores as Dell. Dell has its PCs selling in more than 10,000 stores. Even in terms of desktop and notebook models offered through retailers, HP offers twice as many as Dell does. Shoppers, therefore have more choice. Last year, Dell discarded its much renowned direct-sales strategy and began forging partnerships with retailers in an attempt to win back shoppers.

Dell’s unique ‘direct build-to-order’ sales model?

Dell had been following its unique ‘direct build-to-order’ sales model for more than 20 years. Dell’s customers could plan their own configuration and place orders directly with the company via the phone or its Web site. Over the years, Dell’s supply chain efficiencies and direct sales gave it a competitive advantage. In 2006 however, Dell faced several problems. Many customers complained about long delays in supplies. Increasing discontent of customers led to a slowdown in sales. Consequently, Dell lost its market leadership to Hewlett-Packard Co. (HP). Dell will have to bear additional costs with its foray into retail distribution thereby minimizing its cost advantage. Besides, profit margins of Dell will drop further since it will have to offer incentives to compete with HP in retail stores. Read full-text of this case study on Dell’s Supply Chain Management Strategy.

Strong order book lifts profit at Hewlett-Packard

HP’s first-quarter net income increased 38 percent to $2.13 billion from $1.55 billion. Chief executive Mark Hurd who succeeded Carly Fiorina in April 2005 has topped his profit forecasts in each quarter since taking over. This only underscores the huge challenge Michael Dell has in turning around Dell.

First-quarter sales increased 13 percent to $28.5 billion. PCs account for about a third of Hewlett-Packard’s sales and it benefited from a decline in the cost of parts for PCs (memory prices fell by almost 45 percent last quarter). Even concerns about reduced U.S. spending were partly offset as Hewlett-Packard gets more than two-thirds of its revenue from fastest-growing economies outside the U.S. Countries like Brazil, Russia, India and China account for approximately 9 percent of the HP’s sales.

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keywords: Computers, Dell, HP, PC Manufacturing, Retailing

Dell’s Supply Chain Management Strategy

     

Case Study Contents

  1. Introduction
  2. Dell – Company Overview
  3. Dell Products and Services
  4. Dell – Key Facts – Key Employees, Top Competitors, Revenues, Manufacturing Facilities
  5. Dell Timeline
  6. Dell – Business Segment Information
  7. Dell’s Evolving Supply Chain Strategy
  8. Typical Working of Dell’s Supply Chain
  9. Five key strategies in Dell’s successful Direct Model
  10. A supply chain with old technology is of little value
  11. Restructuring at Dell
  12. New Distribution Channels – Direct Model and Retail Strategy
  13. Integrating the Supply Chain
  14. Related Reading
  15. View sample pages of this case study

Case Study Abstract

The focus of this case study is the supply chain management practices of Dell. Dell has been following its unique ‘direct build-to-order’ sales model for more than 20 years. Customers can plan their own configuration and place orders directly with the company via the phone or its Web site. Over the years, Dell’s supply chain efficiencies and direct sales gave it a competitive advantage.

Can Dell regain its market leader position from HP?

In 2006 however, Dell faced several problems. Many customers complained about long delays in supplies. Recall of Sony battery cells in its laptops brought undesirable media hype to the company. Increasing discontent of customers led to a slowdown in sales. Consequently, Dell lost its market leadership to Hewlett-Packard Co. (HP). Industry analysts felt that, with Dell’s competitors also improving their supply chains and matching Dell’s direct model, the company had been losing its competitive edge. Dell will have to bear additional costs with its foray into retail distribution thereby minimizing its cost advantage. Besides, profit margins of Dell will drop further since it will have to offer incentives to compete with HP in retail stores. Though Dell spruced up its product design and range but Apple is clearly far ahead of it. Many experts feel that such new initiatives will only distract Dell from its supply chain operations.

This case study covers the following issues:

  • Examine and analyze Dell’s Direct model, its basic working, success and future challenges
  • Typical Working of Dell’s Supply Chain and future supply chain challenges
  • Highlights Dell’s evolving Supply Chain practices and strategy and steps being taken by it to recapture its lost market leader position
Case Study Keywords: Dell, Direct model, Supply Chain Management, Supply Chain Strategies, Build-to-order model, Inventory optimization, PC Manufacturing, Retail Distribution Channel, HP, Notebook computers, Desktop personal computers, Competitive Business Strategies, Sustaining competitive advantage, Michael Dell, Distribution Strategy, Supply Chain Case Study

Case Snippets/Update
US and Worldwide market share of top PC makers in Q1 2009
Dell’s market share in U.S. and Worldwide (in Q1 2009) compared to other top PC makers

  • In year 2010, PC sales are expected to rise 12.6 percent, according to research firm Gartner.

Lenovo Globalization Strategy

Lenovo Globalization Strategy

Slow and steady no longer wins the race. Globalization teaches Lenovo to embrace risk and leave a lumbering legacy behind.To go global Lenovo, the leading PC manufacturer in china took various steps like:

Lenovo – globalization plans

  • Lenovo is sponsoring the 2008 Olympic Games
  • Lenovo acquired IBM’s PC unit
  • Lenovo changed its corporate name from Legend to Lenovo

Keywords

Lenovo Legend Group Globalization Plans Global Branding Brand Consolidation Business Diversification IBM’s PC Unit Acquisition Globalization Challenges Cultural Clashes

Lenovo Facts

Lenovo founded in 1984
Lenovo was originally called Legend Beijing
Lenovo was by Chuanzhi along with ten colleagues at the Computer Technology Institute of the Chinese Academy of Sciences (CAS)

Lenovo controls 25 % of the Asian computer market, largely due to its ability to sell computers cheaply and China’s high tariffs on imports. Lenovo paid 1.25 billion United States dollars to IBM, of which $650M were paid in cash and $600M were in Lenovo stock.

Lenovo manufacturing
Lenovo has manufactured 4.5 million PCs including laptops and desktops

Lenovo Diversification
Lenovo has also diversified into other business areas including handheld devices and IT.

Lenovo Revenues
51.5% – corporate segment
33.5% – consumer segment
8.8% – handheld devices
3.8% – contract manufacturing and
2.4% – IT services