President, DELL Greater China
2008-11-01, China International Business (CIB) www.cibmagazine.com.cn
By Mina Choi | From CIB November 2008 Print Edition
FACE TO FACE INTERVIEW
POSITION: Corporate vice-president; president, Greater China
EDUCATION: SGS Institute of Technology and Science, Indore, India (Bachelor of Science); University of Missouri, USA (Postgraduate Studies in Industrial Engineering and Management Science)
IN HIS POCKET: Blackberry, ID card, business cards, Nokia mobile phone, credit card
Computer manufacturer Dell has pioneered its global success by implementing a direct sales strategy – selling computers online, through catalogs or over the phone and delivering the machines to its customers’ doors. But this sales model proved less successful in China.
Last year, the US computer giant changed tack, teaming up with Chinese electronics retailers Gome (??), Suning (??) and Wuxing (??) to sell its computers.
Amit Midha has been with Dell for 12 years and worked in various roles in the US, Asia-Pacific and Japan before joining Dell China in 2004. As Dell’s president of Greater China, Midha oversaw this overhaul of Dell’s China business model.
CIB caught up with him in Shanghai to find out how the new strategy is faring, how China as a market compares to other countries, and how he envisages the personal computer market developing, both in China and worldwide, over the next decade.
You’ve spent four years in China. How have you found the experience so far?
China is a very dynamic place. It changes on a quarterly, [even] monthly
basis. Since I’ve been here we’ve had to adapt our sales
channels and now we have products and services specifically targeted
for China – in many ways, China is now exporting product design
to the rest of the world.
Also, the people running our operation have changed. Four years ago, most of the folks here were not from China; now 75-80% of the workforce is Chinese. Their skill sets have developed very quickly. We can now service customers and find people who can work in a global context. I think that bodes well for China as a global power. The service side is coming along very quickly. And China has also benefited from a huge number of returnees.
How big is your China operation?
We have 6,000 employees and offices in 10 locations. We have a direct presence in 500 cities, and at the end of this year we will have a presence in 1,100 cities. We have two factories in Xiamen, an international service center in Dalian and a design center in Shanghai that employs more than 600 people. We’re going to see certain products designed and founded in Shanghai. So the phases of envisioning a product, test marketing, forecasting, sustaining it — the entire life cycle management — will be carried out in Shanghai.
Where was the design center before Shanghai?
It was entirely based in Austin, Texas. There’s still a design center there, but Shanghai is the largest outside Austin. So that means we will be starting worldwide procurement in Shanghai, procuring China-based products.
How much investment has Dell made in China over the last 10 years?
We don’t disclose the actual amount of investment, but . . . we have directly and indirectly created two million jobs in China and sourced over USD 29 billion of goods from China during our 10 years here.
Where does Dell rank domestically?
We’re number two in commercial and number five in consumer. In total, we are ranked number three (behind Lenovo and Founder Technology), but we are now the fastest-growing vendor. We are pleased with our strategy and our success in the marketplace. In 10 years, demand for our products has grown 200-fold in terms of sales. For the export market, sales have grown 300-fold. Our market share is growing at 2% annually, three times the rate of other vendors.
What proportion of your China activity is manufacturing and outsourcing for the entire global Dell operation, and what proportion is for local sales?
In terms of manufacturing, 60% is for the China market and 40% is for export. The China market is growing very quickly - of course, the export market is growing, too, but the domestic market is growing faster.
Dell has changed its strategy dramatically in China, dropping its direct sales model and brokering deals with local retailers. What was the rationale behind this change?
We changed our global strategy last year. As Michael Dell said, “direct was a revolution, but not a religion.” Late last year, we introduced the channel game plan in China. Still, more than half of our products [in China] are sold direct. China is not a single, homogenous market. So rather than “either/or,” it’s a matter of “and.”
Has it worked?
Our focus is on the customer and servicing the customer, not on our competitors. Of course, we try to learn from them, but at the end of the day, we don’t copy them. Dell tries to service customers better than others.
How do Chinese consumers differ from their counterparts elsewhere?
They are very pragmatic, they like [to get their] money’s worth, and are fashion- and style-conscious, especially along the coastal areas. They’re very value-oriented, but now starting to need global requirements, such as security and data protection. As they enter the global sphere, they need global quality, value, style, and services and support.
What are the major challenges when dealing with the Chinese market?
In China, there is a big gap between the rural and coastal cities. China is a huge challenge because of its heterogeneity, and we’ve come up with an execution plan and need the discipline to follow through and then to review it often. Let’s just say that it’s easier said than done. It’s also a nimble, agile market so we do need to have a perspective and come up with the ‘roughly right plan.’
There’s been a huge problem with turnover, especially in the customer service sector. Do you have a special strategy to retain staff in this very competitive market?
Let’s just say we’re not declaring victory on that front. Dell-trained employees are in high demand. In the past we were not so successful at employee retention and we had very high desertion. We’re now in the acceptable zone.
How successful was last year’s launch of low-cost personal computers (the EC280 model is priced between RMB 2,599 and 3,999 (USD 382-588))?
It’s been very successful. Our product sales have increased 50-fold. Our product life cycle is six to nine months, so the EC280 was introduced three product cycles ago. It’s been very successful. Since the EC280, we’ve launched the Dell 500 and the Vostro 8. We knew that market existed and we are pleased to see that we were right.
How have things changed at Dell China since the company’s founder, Michael Dell, returned to the helm as CEO last year?
Everything is different. There’s more customer focus, more products. We’re a lot more agile and a lot more successful. Michael Dell has his own management style; he is process-driven, has a very good sense of the business and what’s going on around him, and is a good manager, leader and entrepreneur. For example, there was a format war between HD-DVD and Blu-ray. The analysts were divided right down the middle and Michael took a gambit and chose Blu-ray and we were successful with that gambit.
How will the current economic crisis affect your operations?
I’m sure it will have an impact on all industries. We still don’t know the impact it will have on Dell. We are asking the analysts and strategists to come up with some predictions.
What do you think will be the future of computers in the next 10 years?
I think computers and computing will become synonymous. Today, stand-alone
computers are still important, but the future will be about “cloud
computing,” (internet-based computing whereby user files and programs
are all stored on giant central servers and accessible online, rather
than on individual computers).
As people move over to cloud computing, there will be a need for increased security and privacy, and ethnical issues will arise regarding business secrets. Over time, computers will no longer hold data, but will be used to access it. Cloud computing will be the next Holy Grail.
What have you learned from your time in China?
First of all, China is a place where I can offer a lot and learn a lot. It’s been a great playground for new ideas and adventures. The market here is dynamic. One has to be open-minded, learn the customer and market requirements.
I personally find the culture very rich and am genuinely interested in the people and the culture. And I think that such interest is necessary in order to be successful here. I’ve learned to communicate effectively and empower the local communities and people.
We’ve had our share of mistakes, but we’ve learned to make
decisions quickly and adapt to the speed. So I consider myself fortunate
to be working here. . . . This current position is helping me grow in
many ways. I would love to stay longer in China, another five to 10
years. I enjoy being here.