In the past ten years, foreign expansion has become a major part of the business community. Many companies are seeking to expand globally in an attempt to maximize profits. This research paper will explore the foreign expansion of the Dell Computer Corporation. We will explore the ways in which this relatively young company has expanded overseas. We will examine the history of the company, the industry and the ways in which the company has expanded.
History of Dell
Dell Computer Corporation was founded by Michael Dell in 1984 and was incorporated in 1987 and has grown substantially in recent years. ("Dell Computer Corporation (NASD) - Business Description") The growth of the company has been unprecedented in lieu of the relatively young age of the corporation. ("Dell Computer Corporation (NASD) - Business Description") The headquarters for the corporation is located in Austin, Texas Dell's products include laptops, desktops and networking equipment. Additionally the company provides services such as support and consulting for companies.
Dell operates around the world through wholly owned subsidiaries and foreign sales made up 35% of Dell's revenues in 2001. ("Dell Computer Corporation (NASD) - Business Description")
According to the company's official site it practices a direct model of management. The standards of this model are,
Single Point Accountability- Dell aims to keep their customers happy through direct access to services and products.
Build to order-providing customers with systems of that are built to suit their needs.
Most Efficient Path to the Customer-building relationships with customers
Standards-Based Technology- giving customers high quality services and products.
Low Cost Leader-reducing costs through the creation of an efficient supply chain.("Dell Direct Model")
Dell's direct model has been studied thoroughly because of how efficient it is and how popular the company is with consumers. Not only are their computers dependable but the company is also known for friendly expedient service and the ability to help customers. This type of dependability is a prime example of why the company has been able to expand so quickly and so efficiently.
Dell is part of the computer hardware industry. The industry provides products such as PC's and mainframe computers. ("Computer Hardware Industry and Profile")
Most often companies that a part of this industry serve a wide range of customers including corporations and individuals. The leaders in this industry include IBM, Hewlett Packard and Cisco. Most of the top 10 firms in this industry compete on an international level. ("Computer Hardware Industry and Profile")
Though the computer hardware industry was once booming, in recent years the industry has experienced a decrease in profits. Most of this is due to the downturn in the economy and a decrease in consumer confidence and spending.
The decrease in profits is also due to a decreased need of consumers to upgrade. The technology that computers provide is not growing at the rate that it once was which means that consumers can continue to use older computers to meet their needs.
Our global strategy is to be the premier provider of products and services, including those that customers require to build their information-technology and Internet infrastructures. With manufacturing facilities and sales offices throughout North America, Europe, Asia and South America, we are close to our customers wherever they are. And we use our outstanding products, services and direct relationships to meet the unique needs of those customers, one at a time." (Company Overview)
The strategy quoted above has allowed Dell to expand in an unprecedented way.
The most adventurous of these expansions came in August of 1998 when the company expanded into China. ("Dell Claims Major Inroads in Chinese Market") China, which is the world's largest market, is known to be a tough market environment for foreign investment. Dell ignored the skeptics and embraced the challenge of conducted business in the Chinese Market. ("Dell Claims Major Inroads in Chinese Market") By the second quarter of 1999 the company reported that China sales had increased by 561% and that the company was among the top ten in the Chinese PC market. ("Dell Claims Major Inroads in Chinese Market") By the end of 1999 the company was building a manufacturing facility in the city of Xiamen and planned to build a second facility their by 2000. ("Dell Claims Major Inroads in Chinese Market")
The facility in Xiamen employs 200 people and is approximately 135,000 square feet. ("Dell Launches Award-Winning Pentium III; Dimension Desktop PCs in China; Global Expansion Continues with Chinese Consumer Effort")
Prior to entering the market the company spent millions on research and development. Dell made sure that there computer systems and other services that the company provides were efficient enough to enter the new market. The company had to investigate the culture of China so that they could best meet the needs of the Chinese consumers. The company thoroughly researched the ways in which individuals and companies in China would use the computers and services so that they could be tailor made to meet specific needs, this is a practice that the company is famous for and is the primary reason why the company is successful on an international level.
A major aspect of Dell's international expansion has been the Internet. Dell.com is worlds leading site for computer hardware. The popularity and Prowess of the company on the internet has allowed it to expand the firms' facilities into international markets. In many cases the company already has the attention of the market because of the internet. The building of facilities in these markets allows the company to deliver the product or service in a faster more efficient manner.
Over the past five years Dell has expanded into Europe, Africa and the Middle East. In these regions the company's shipments have risen 24% and the company has the second largest market share. Dell also enjoyed an increase in revenues of 11% in the second quarter of 2001. Dell also operates in Germany, Italy, Canada and Latin America. In Germany and Italy the company reports an increase in revenue of 20"%. In Brazil sales increased 80%.
In the future Dell plans to expand globally and create new products that will better satisfy the needs of customers. Additionally the company is looking to diversification as a way to increase profits and maintain the competitive advantage. The primary source of this diversification will be integrated business solutions.
As stated earlier many of the firms in the computer hardware industry compete on a global scale. One firm that does not is Gateway. Gateway was founded in 1985 and has a strategy that is in some ways similar to Dell's. (About Us) Gateway sells PC's through the internet and over the phone. The company also has Gateway stores called Gateway Country.
Comparatively Gateway only employs about 12,000 people while Dell employs over 36,000. (About Us) The corporations were founded around the same time but Dell has expanded in ways that Gateway has not. Gateway has assembly plants and retail stores in Virginia, California, Missouri and South Dakota. (About Us)
Like Dell, Gateway sells built to order PC's which are made to the specifications of customers. However, Gateway lags behind Dell in the dependability of the machines that it creates and in customer satisfaction. In addition Gateway's profits have been on a downward spiral and the company has been forced to lay off hundreds of employees. While at the same time Dell has experienced an increase in profits, due in large part to the international expansion of the corporation. The success of the Dell Corporation during uncertain economic times can also be contributed to the company's ability the wage price wars that competitors can't fight. Dells price wars are particularly difficult for Gateway because Dell's direct system is so fast and efficient and their computers have a…