Dell's Problems in China

Sometimes, resellers customized the PCs by installing certain components and sometimes, the required software. Using the direct model, Dell provided consumers with tailor-made products and offered add-on products and services like PC upgradation, PC replacement, maintenance and technical support. Through the direct model, Dell was able to reduce inventory costs and overheads. Under Dell's direct model, PCs were built according to customer specifications after receiving the order. In contrast, other vendors needed to forecast the demand for PCs and ship the products accordingly. Dell's model called for highly complex execution, where the company needed to stack products and components to assemble the PCs at very short notice. This also called for superior manufacturing and logistics capabilities, along with information systems...

By 2000, the government established standards for locally sold PCs. One of the major domestic players in the market, Legend (later Lenovo), started expanding by building a national distribution network. Several factors influenced the growth of the computer industry in China.

With the Chinese market experiencing significant growth in the mid-1990s, Dell had to enter China in order to remain competitive in Asia and gain market share. In the initial years, Dell faced many problems as tariffs on imported components were high and the government was supporting companies which set up manufacturing bases in China...