Title – In order to duplicate its American success in China, does Dell need more than a Direct Business Model?.
2. Background
Dell, the world’s second largest PC manufacturer, with 14 years of direct sales experience(Chi 2011:860). Dell Corporation has become the whole world leading computer system direct distributor. In direct business model, Dell is manufactured using the theory of production delays. This is mainly reflected in the zero inventory and order production of these two aspects, the use of direct business model manufacturing delay brings many benefits, such as reducing the risk of poor sales, and respond quickly to customer requirements. Manufacturing delays emphasize produced according to customer requirements, so you can produce better meet our customers’ products in order to achieve the purpose of promoting sales, while reducing inventory of finished goods, and reduce risk.
Dell this model in the United States achieved considerable success, but Dell’s manufacturing delay in China has encountered difficulties. Dell has said consistently adhere to direct sale. However, the Chinese people for many years is unlikely to change consumption habits formed. In China’s economically backward areas, consumers can not send orders directly to Dell, Dell only way to take the distribution, however, because Dell has always insisted direct sale, and there is no channel to establish a good working relationship with distributors. This leads Dell in the development of economically backward regions are not.
Therefore, based on the particularity of the Chinese market, Dell’s direct business model must be improved in itself, in order to achieve the American success. I personally think that Dell’s supply chain management is very good, I am very interested to explore how to design a direct business model with Chinese characteristics.
3. Preliminary Review of the Literature
The concept of Direct Business Model
The direct business model essence is a direct sale. Direct selling is not a sales channel for fixed points of sale, direct sales usually depend on the network, telephone, face-to-face way to directly communicate with customers(Ferrell 2012). However, direct sales model is not be valued by all people in the early, because this kind of mode totally different from the traditional marketing model, damage the traditional middlemen profits at the same time. Moreover, direct selling mode need to have a good supply chain management mode.
Direct selling is not all
In 2000, Dot-coms chooses the direct marketing to take the development strategy, in a personalized way to send product information. Whether the direct distributor can start to use the email to communicate with the customer to be decided by this year to the privacy argument(Heckman 2000).
Others also have the same opinion, one of issues facing the direct sales model is consumer backlash. With the development of direct sales model, more and more companies use the direct model, it also brings a series of problems. Enterprises get valid data from the consumers, it can help companies better marketing, however, consumers are worried about their privacy being compromised. This has led to consumer resistance against direct sales model(Fielding 2006). Moreover, Fielding also pointed out that accountability issues affecting the success of direct marketing(Fielding 2006).
On the one hand, the direct sale pattern has a big issue in the consumer privacy. On the other hand, studies have shown that outsourced sales staff greatly stimulate customers interested in buying products and trigger impulse shopping, and consumer’s purchase desire comes from the product advertisement, interpersonal communication, as well as sales personnel’s demonstration(Anon 2010).
This shown that although the direct sale model is very effective, but also have limitations. So I think that if the enterprise rely on a single business model cannot be successful.
Theories of the Implementation of Direct Sale Model
Direct sales model to eliminate the middlemen, without the intermediary help, a good supply chain management system is integrant. For instance, Postponement, Lean Production, Supply Chain Collaboration.
The global competitiveness of relevance and importance of production – distribution system can meet the requirements of different customers and maintain just-in-time (JIT) supply capacity with the minimum cost, the influence are increasing(Choi 2012). Postponement production is an important issue in the contemporary global operations management(Choi 2012).
Lean production is just-in-time manufacturing, eliminate the fault, eliminate all waste, and to achieve zero defect, zero inventory. Lean production combines the advantages of mass production and single production mode, makes every effort to realize many varieties in the mass production and high quality products of low cost of production. Lean production has become an integral part of American manufacturing industry(Shah 2007). Furthermore, “lean production will be the standard manufacturing mode of the 21st century” (Rinehart et al. 1997:2).
Supply chain collaboration means two or more companies in order to achieve a strategic purpose, through company agreement or joint organization to create a combo like a network. The advantages of cooperation, also known as joint competitive advantage(Cao 2011). It refers to the strategic interests to get more than competitors in the market through the supply chain partnering(Cao 2011). The benefits of collaboration and the result is not by any company can achieved alone(Cao 2011). Cooperation can expand the size of the common interests, each member to share more gain that cannot be generated by each member its own(Cao 2011).
Direct sales model means fast response customer, postponement manufacturing emphasized according to consumer demand produced. Lean principles trains employees into the whole business model, to master all of the product information, and to be able to solve the high-level questions for the customer. These production theories can support the practice of direct sales model. In addition, the credit system also affect the direct sales model, however, there is no more research in this area.
Direct sales model in China market
Direct sales model is difficult to fully exert due to China’s credit system, online payment and logistics aspects of congenital deficiency, combined with the difference of consumption idea, and for a long time distribution pattern formation of consumption habits, which makes the direct business model cannot be permeated into every city of China.
So the main purpose of this project is according different production theories to study whether to insist on a single direct sales model in China. Assume that whether the combination of distribution and direct sales model will be more better than a single direct sales model in the China market.
4. Research Question and Objectives
The underpinning Theoretical Subject of this research project is supply chain management and marketing. The overarching research question is that which strategies does Dell need to help itself to develop the direct business model in China?
The following questions which relate to the overarching research question should be mentioned:
1. What is Dell’s direct business model?
2. What are the advantages and disadvantages about this model?
3. How to use SWOT to analyze the environment of Dell in China market?
4. What is the behavior of Chinese consumers?
5. What theories should be added into Dell model?
The purpose of this project is to analyze Dell’s management and marketing model, and to prove the nature of competition in the market is to enhance the core competitiveness of enterprises, not blindly adhere to direct business model.
1. Review theories of dell’s business model.
2. To analyze the importance of distribution channels in China market.
3. To evaluate the influence of credit system to the direct sale.
4. To critically evaluate Dell’s direct business model the effect which obtains in the Chinese market.
5. To make recommendations on how to establish good strategic partners
5. Methodology and Research Methods
Both deductive and inductive approaches will be used in this study. By deductive approach, set hypothesis distribution model is more easily accepted by consumers, and then do survey sampling investigation to consumers. Collect survey data, carries out the quantitative analysis of survey data. The primary data and secondary data are provided by the companies, and secondary data also including internet, magazine. For each companies’ marketing model, inductive approach will be used.
Research philosophy
This thesis may develop under two research philosophies: positivism and interpretivism.
By positivism, result shall be concluded with observation or information from mathematical or logical measures. It is assumed that consumers are rational economic man and they always make decisions based on maximizing personal profit. With this research philosophy, a survey with multi-choice questions among consumers will be carried out and objective data will be collected.
Interpretivism, particularly the epistemology maintains the idea that the knowledge of the world shall be based on the study of the human and their experience. Under this philosophy, consumers are also regarded that their decisions are made based on their own experience and more subjectively.
Research approaches
The research approaches of this paper will be deductive as well as inductive.
A deductive analysis shall be done so that to come with logic hypotheses by learning from the theories. This process is before the survey, because through the deductive analysis, what data to collect and what questions to ask can be well addressed, through the survey, the correctness and justification of this deductive is examined as well.
While the inductive approach is used when interpreting the survey results.
Research Strategy
The principal strategy is case study. The subject Dell is examined. Through examining the business model of Dell, its success in American market, the Chinese market environment, observations can be used to conduct SWOT analysis.
Another research strategy is survey. A questionnaire will be given out to Chinese consumers. The group of 18 to 40 years old will be taken as study subject because they may be the most active one in the personal computer market.
In the questionnaire, there will be questions ask subjects to rate based on a 5 score scale and open questions as well, personal information questions will be given at the end of the survey.
Free tools for designing an online survey like Limesurvey or SurveyMonkey will be decided and used. This will help to make the survey much more efficient.
Data collection and data analysis
The draft questionnaire will be set in the beginning July, questions will be built according to the research questions.
Then to improve the questionnaire quality, a trial survey is considered to be carried out with around five participants. This trial test is to see whether the questionnaire is easy for subjects to answer, how do they perceive the survey, is it too long or whether the questions are clearly and unambiguously asked. The time the participants spend on finishing the questionnaire is also checked. After the trial test, opinions from trial test takers will be collected. Improvements will be made anywhere necessary and the time span of completing this questionnaire will be controlled under 10 to 15 minutes.
After the questionnaire is finalized, it will be given out online. The last two weeks of July will be the time for participants to complete online. Data will be collected in the last day of July.
(Data analysis)
Both quantitative and qualitative methods will be used to analyze the data.
The questions where participants give scores will be analyzed using quantitative method, whereas qualitative method will used with open questions.
With Excel or SPSS, the quantitative analyzing process will include:
Sample description, such as sample size, age distribution, education distribution.
Describing the differences using crosstabs.
Average of score of multi-choice questions.
Answers I will get for the open questions will be qualitatively examined, this is also an idea of interpretivism. Opinions of participants are supposed to be shown in those open questions so that deep insights regarding Dell in Chinese market can be formed. These insights will also be reflected in the SWOT analysis.
Assessment of the designed research
In order to ensure the quality of the measurement, following principles of forming questions will be maintained:
Easy to understand
Easy to answer
All in the same direction
Avoiding negation in the questions.
The questions asked will also be designed to target the research question of this paper.
However, there are limitations with this research plan design and also problems foreseeable in the implementation.
Even the above principles are well followed and I will try to ask questions about the core concern, still the validity of the questions cannot be known. It is possible that after I get the survey data, that I know whether it is the one that I needed.
Another problem might be that the feedback size I get is big enough, but some of the participants leave some questions unanswered especially the open ones.
The limitation of this research design also include that alternative research method and techniques are not well examined. There might be better method than the ones used in this study.
Data Gathering Activity Details of Sample Method of Data Analysis Which Research Objective This Data Informs.
questionnaire Nationality: Chinese
Age: 18-40
sample size: 150 ? Quantitative and qualitative analysis
? Using Excel/SPSS
? Summarizing open question answers ? To gain a general idea of Chinese consumers’ behaviour in PC consumption
? To see how Chinese consumers perceive the direct sale model, especially the direct selling of Dell
? To find out what kind of distribution channel is more popular with Chinese consumers
6. Ethical Considerations
If the study is just used for education test, investigation, interview, or some public behavior can be ethical review exemption, but if some data or research have the potential hazards, that need to ethical review (Millum 2010:655). However, the research involving interviews with people’s personal information, papers must be approved and follow the CU Ethical Approval Process (CU Ethics Application & Authorization System 2011).If Dell is willing to provide confidential data, I may need to get a copy of Dell’s consent to the data for research purposes.
In the interview process, it should be respect for each one of the interviewees confirmed that they are voluntary interviews. The respondents’ personal information should be protected. In the questionnaire, all participants should be anonymous, they have the right to answer or reject
Questionnaire is unnecessary. About the consumer data, I think just use the existing data from books, journals or other professional magazine.
List of References
Anon(2010) ‘Building Shopping Arousal through Direct Marketing in Retail Environment’. Journal of Promotion Management 16 (4), 445-466
Cao, M. and Zhang, Q. (2011) ‘Supply Chain Collaboration: Impact on Collaborative Advantage and Firm Performance’. Journal of Operations Management 29 (3), 163-180
Chi, D. and Hung, H. (2011) ‘Crisis Management of the Pricing Mistakes Committed by Dell’. Management Decision 49 (6), 860-873
Choi, K., Narasimhan, R., and Kim, S. W. (2012) ‘Postponement Strategy for International Transfer of Products in a Global Supply Chain: A System Dynamics Examination’. Journal of Operations Management 30 (3), 167-179
CU Ethics Application & Authorization System (2011) CU ETHICS for application & authorization of LOW, MEDIUM to HIGH and HIGH Risk Ethics Applications [online] available from < http://ethics.coventry.ac.uk/> [08 November 2011]
Ferrell, L. and Ferrell, O. C. (2012) ‘Redirecting Direct Selling: High-Touch Embraces High-Tech’. Business Horizons 55 (3), 273-281
Fielding, M. (2006) ‘Direct Marketing’. Marketing News 40 (1), 14-14
Heckman, J. (2000) ‘Direct Marketing’. Marketing News 34 (2), 18-18
Millum, J. and Menikoff, J. (2010) ‘Streamlining Ethical Review’. Annals of Internal Medicine 153 (10), 655-W.219
Rinehart, J. W., 1933- (1997) Just another Car Factory? : Lean Production and its Discontents. Ithaca, N.Y. ; London: Ithaca, N.Y. ; London : ILR Press
Shah, R. and Ward, P. T. (2007) ‘Defining and Developing Measures of Lean Production’. Journal of Operations Management 25 (4), 785-805
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