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What are two factors critical to success in entering the Chinese market

Every foreign giant in China has a complete and upswing story. There may be two to three decades of twists and turns between entering China and integrating into China, or only a layer of window paper.

Dell has just passed its 33rd birthday on May 3. The founder, Michael Dell, was a third-year university student 33 years ago. He started with $1,000 in the dormitory of the University of Texas and created a brand new P.C. sales model. Over the past 33 years, Dell has made-ups and downs and has done a total of $1 trillion in business. However, the journey of 33 years has not been easy.

Dell, which has succeeded in direct sales, was selected by the U.S. "Business Weekly" as the world's top 100 giants of the year more than 20 years ago and ranked first, leaving IBM, H.P., and Microsoft behind.

In 1995, Dell brought the direct sales model to China and soon became the leader in the Chinese P.C. market.

However, as the P.C. industry chain matures and competition intensifies, direct selling is no longer a panacea. After 2005, Dell stepped down from the plain selling altar, and its performance declined. Then, in 2007, Michael Dell, who retired behind the scenes, returned and personally led Dell's transformation.

By 2010, Dell began to transform to services and software and gradually jumped out of the limitations of hardware products. Then, in 2013, to achieve a more thorough transformation, Dell was privatized, leaving the public eye and the supervision of Wall Street.

In 2017, Dell's 33rd anniversary, 22nd anniversary of entering China, 10th anniversary of Michael Dell's comeback, 4 years of Dell's privatization, and 3 years of Dell's entry into the 4.0 stage in China... The destiny of any company is in keeping with the pulse of the times. As a result, industry trends and national policies are closely linked.

Two years ago, shortly after Dell started the China 4.0 stage, I had an in-depth face-to-face exchange with Dr. Huang Chenhong. This year, Dell China 4.0 has been deepened for more than two years. Therefore, I understand that I have the opportunity to sit opposite Dr. Huang Chenhong again and summarize the 22-year history of Dell's entry into China.

Foreign companies have gone through different stages in China. Whether they can achieve real success in the Chinese market is closely related to their headquarters strategy, Chinese policy, and your attitude to work locally. In Huang Chenhong's view, some foreign companies complain about China's policy barriers and complain that foreign headquarters do not understand or support it. In fact, it is American companies that come to China to develop. Still, any multinational company that goes to any market will encounter various problems. Mindset is the key.

Foreign companies entering China and truly integrating into China are just a window paper on their mentality and understanding.

1. From doing business to integrating into the industrial ecology

In 1995, Dell introduced the direct selling model to China, which also started the 1.0 phase of Dell China. As an I.T. giant from the United States, Dell entered China shortly after IBM, H.P., and Intel.

At that time, Dell's direct sales model was still in a period of rapid growth in the world. Dell's entrepreneurial success is due to model innovation, not technology. The core of Dell is to minimize the cost of intermediate links. The first was direct mail, and then direct sales, telephone sales, and online sales. In addition, zero inventory can be achieved through direct sales.

"Looking at it today, isn't this just Internet thinking?" Huang Chenhong said.

Here, I know how to say a few more words. When starting a business, Dell's way of thinking is now a kind of Internet thinking, which is to improve efficiency through all links. From direct mail to telephone sales to online sales, Dell once became the largest e-commerce platform. This energy continues, and even now, sales on Dell's e-commerce platform are still considerable. Among the top ten global e-commerce platforms evaluated by foreign media in 2016, Alibaba ranked first with a market share of 26.6%. Amazon in the United States ranked second with a share of 13%. Interestingly, in this top ten list, there are three private label companies: Apple is sixth with 1.4% market share, Xiaomi is eighth with 1% market share, and Dell is ninth with 0.9% market share...

Regarding Dell's direct sales model, it is not the focus of this article. However, I can't help but say a few more words because I have been paying attention to the development of the I.T. industry for many years. I remember the impact of Dell's direct sales in the global and Chinese markets that year.

The topic returns to the Dell China 1.0 stage. From 1995 to 2000, Dell's main thing in China was selling its products to the Chinese market. Therefore, the construction of Dell China is also mainly focused on sales. For example, the China Customer Center (CCC) was established in Xiamen in 1998, and the Shanghai Customer Exhibition Center was established in 1999.

Like most foreign companies, the first step to entering China is to "do business."

Since 2000, Dell China has entered the 2.0 stage. "It not only regards China as a market but also as a global manufacturing center. Therefore, Dell needs localization here, including local procurement, local production, local design, and local sales." Huang Chenhong said.

In 1998 and 2006, Dell's two factories in China landed successively. The production capacity was limited to the Chinese market and began to sell to North Asia, including Japan. In 2003, Dell China Design Center (CDC) settled in Shanghai. Design talents from China began to contribute ideas to this global P.C. manufacturer.

During this period, with the maturity of the global P.C. industry and excessive competition, the development of Dell's direct sales model encountered a bottleneck. Understand and remember very clearly. At that time, the discussion about Dell's stepping down from the direct selling platform was very lively. Dell's transformation was not positive. It was not until the performance continued to decline that it had to start cooperating with its channel partners and embark on a two-legged model of "direct sales + distribution."

2007 was the tail of Dell China's 2.0 phase and the beginning of the 3.0 phase. That year, in the face of the decline of the company's direct sales business, Michael Dell, who had retired for some time, came back and personally presided over Dell's transformation and started to expand offline channels with all his strength.

Dell's first retail partner in China was Gome, the largest home appliance chain company at the time. Starting from Gome, Dell's partners in China have gradually increased. In addition to production and design, Dell's upstream and downstream are centered on more and more different types of partners. As a result, industry synergy and driving effects have begun to appear.

In the Dell China 3.0 phase that started in 2007, Huang Chenhong summed it up with "covering." With the direct sales + retail model, Dell's sales in the Chinese market have also begun to sink, covering tier 3-6 cities. Of course, the sinking of channels was something that all P.C. companies were doing at the time. Chinese manufacturers such as Lenovo and international giants such as H.P. and Dell have also learned the most effective marketing methods in towns and villages: painting walls and pulling banners. , Big speakers.

Because it is considering long-term development, Dell's coverage has been advancing. So far, Dell has covered more than 2,200 county-level cities in China, with a coverage rate of 97%, and already has 12,000 stores across the country.

The Chinese market is highly complex and diversified. "Such a coverage rate is rarely achieved by companies." Huang Chenhong is immensely proud. But, of course, continued coverage of market channels has enabled Dell PCs to enjoy dividends in recent years, and their market share has continued to rise.

If 2007 is the beginning of Dell's channel transformation, 2010 is the beginning of Dell's positioning transformation.

In April 2010, Dell announced that I.T. has entered the "Virtual Era" and launched standardized open solutions, including intelligent data management solutions and cloud infrastructure solutions, to assist enterprise customers of all sizes in building genuine, high-performance Excellent. Cost-effective cloud computing infrastructure-knowing how to explain it in a more straightforward language means that Dell has transformed from a company that only sells P.C.s and servers to a vendor that sells solutions and I.T. services.

This transformation is an excellent challenge for Dell. Dell, which started with hardware, needs to build its capabilities in software and services from scratch. So we saw that in the next two or three years, Dell launched a large-scale acquisition. Through acquisition and integration, we can basically provide end-to-end I.T. solutions for enterprise customers.

In fact, the transformation that Dell faces after 2010 is a problem encountered by almost all traditional I.T. companies. In the conventional I.T. industry chain, there are chips, software, hardware products, and channels. This is a mature industry chain. The changes come from two aspects: First, the hardware products are too ripe, the competition has become fierce, and the profits are getting thinner and thinner. The second is the impact of the Internet and mobile Internet. Waves of innovative companies have emerged, and many traditional I.T. companies are also chaotically at the transition point of the era.

The pain of transformation is also accompanied by Dell. Every quarter's earnings report has to face the torture of Wall Street. So Dell made a move that shocked the industry in 2013: Michael Dell himself teamed up with the private equity company Silver Lake to buy back shares of Dell from public shareholders, completed the privatization transformation, and became one of the world's most prominent startups. One.

This time, privatization, from the perspective of understanding, on the one hand, is to make the transformation more thorough, not to be shackled under the "supervision" of shareholders; on the other hand, the change is equivalent to reengineering, and Dell needs to reactivate the vitality of the startup company.

Dell China 3.0 was from 2007 to 2014. In this process, Dell has undergone two major transformations. These two transformations make Dell need more partners to cooperate in China. Understand and remember that Dell's annual partner conference was more and more people every year in those few years. Dell's development is inseparable from its partners, and partners have also grown from the cooperation with Dell.

In 2014, Dell China entered the 4.0 stage. At this time, Dell's transformation was basically completed, and various businesses began to stabilize. However, for the Chinese market, it is necessary to accelerate localization and integrate into the local ecosystem.

In fact, around 2014, all foreign companies in China were facing new choices. On the one hand, Chinese customers are a little worried about purchasing products from foreign companies because of information security. The second is the rapid rise of Chinese enterprises and their advancement to the upper reaches of the industrial chain. As far as foreign companies are concerned, they have passed the "investment for the market" stage and need to be thoroughly localized and genuinely integrated into China's industrial ecology, instead of being a foreign company full of coldness. Intel, Microsoft, Qualcomm, Hewlett-Packard, and other companies are all large-scale joint ventures and cooperate with local Chinese companies to reposition their "identities."

Dell is equally generous and sincere.

During Michael Dell's visit to China in 2015, he announced Dell's "In China, for China" brand new development strategy in China 4.0: Dell will invest US$125 billion in the Chinese market in the next 5 years and is expected to contribute to China's imports and exports. About 175 billion U.S. dollars, and directly or indirectly supporting 1 million job opportunities, demonstrates Dell's long-term commitment to the Chinese market. In fact, from these figures, we can see the close relationship between Dell and China's industrial ecology. Relation.

"From the current implementation, the $125 billion investment will definitely be exceeded." The progress of Dell's China 4.0 strategy has exceeded Huang Chenhong's expectations. In addition, Dell has also signed a memorandum of cooperation with China Electronics Information Industry Group Co., Ltd. (CEC) and established the "Artificial Intelligence and Advanced Computing Joint Laboratory" with the Institute of Automation of the Chinese Academy of Sciences. These cooperations have enabled Dell to gain more recognition from Chinese customers.

2. "In China for China" is not a compromise but a development

"In China, for China," translated into English is "In China, For China." Therefore, if an American company says "in China, for China" in the Chinese media, it is considered "politically correct." However, it will be somewhat sensitive if an American company wants to say "In China, For China" in American mainstream media.

"In China, for China" is the strategic slogan of Dell China 4.0. As the leader of Dell China, Huang Chenhong was worried that this strategy could not be spread in the United States. "Will the company headquarters send out this press release?"

Fortunately, the headquarters did not have any questions. Instead, they spread the message "In China, For China" to the mainstream media in the United States. "Michael Dell knows China very well and supports our strategic implementation in China."

In Huang Chenhong's view, no matter which country he was born in, every company that wants to grow more giant faces the problem of internationalization. An American company's development in China is the same as a Chinese company's development in the United States. It must adapt to local policies, trends, and industrial competition. "So what we have to do in China is to fully integrate into Chinese society, and the Chinese I.T. ecosystem has been following the government's policies and directions."

China opened four special zones early on. Dell chose Xiamen as its production base, which supported the development of the particular zone and enabled Dell to start localization. Today, 73% of Dell's global products are manufactured in China. When Shanghai was developing Pudong, Dell established an international service center in Shanghai; when the country wanted to revitalize the Northeast, Dell showed a global command center in Dalian; when the country was developing the west, Dell launched a second manufacturing center in Chengdu. Now that the government is developing the "One Belt One Road," Dell is still keeping up with the pace and becoming one of the earliest users of the Rong-Europe Railway, the aorta of the "One Belt and One Road."

In fact, this step by step is not in exchange for the government's trust, but to truly benefit from each other. While supporting the policy, Dell has also achieved its own rapid growth.

Why does Dell headquarters support Dell China so much? Huang Chenhong believes that China is not only a vast market, but the competitiveness of Chinese companies is also extreme, which is very helpful to the shaping of Dell's own competitiveness.

"In the past, foreign companies competed in the Chinese market. In recent years, we have seen changes in Chinese I.T. companies. Their creativity and competitiveness have been greatly improved, and their growth is speedy. As a result, the Chinese market is the most competitive." The first is Huawei, P.C. Lenovo is the first, and companies like Xiaomi have also appeared in China. In Huang Chenhong's view, these are all spurs on Dell.

"If it can stand in the competition in China, it will definitely be of great help to the company's global business. On the contrary, if it is out of the competition in China, sooner or later, the global market will not be able to hold it. I think this is the most important mentality. Variety."

Huang Chenhong has never felt that keeping up with policies in China by foreign companies is a compromise on the market. "Many foreign companies have complaints of one kind or another. Your requirements and restrictions are actually normal. The culture is different, the social environment is different, and the customer habits are different. It is better to put down your body and truly integrate into the industrial ecology instead of complaining. Go in."

Compared with other foreign companies, Dell is a relatively significant investment in China. In the past two years, the global wind has been turning to India or other countries. Whether it is American giants or Chinese giants, they have begun to increase investment in these countries. India today was a bit like the Chinese market twenty years ago. However, in Huang Chenhong's view, the Chinese market has unique competitive advantages, and Dell's focus is still in China. He gave four reasons:

  1. The productivity of Chinese employees is the highest, and the organization and discipline of Chinese employees are the strongest.
  2. China's industrial chain is the most complete, and upstream and downstream partners can be found, so the industrial environment is the best and has the lowest overall cost.
  3. The Chinese market will continue to grow. Only the success of the Chinese market is the success of the global market. Of course, if you want to invest in the Chinese market, it will contribute to the local economy and employment. Therefore, we are willing and confident to continue to increase investment in China.
  4. We have been cultivating in China for many years, and we understand and support each other with local governments. But, unfortunately, this kind of cooperation system will take a long time to be replicated in other places.

Tags: Foreign companies in China