Mediocrity threatens a once maverick Dell

Dell has been called the "ultimate retailer", a fitting tribute for a brand that not only revolutionised the computer industry but also demonstrated that ecommerce could be viable, if not extremely profitable. Its pioneering direct to end- user business model -- building personal computers to a customer's specifications only after an order is received -- helped turn this 1980s start-up into a US$3.3 billion corporation and founder Michael Dell into a Fortune 100 luminary. The last quarter of 2004 underlined the sheer momentum Dell enjoys. It was its best-ever operating quarter on the back of strong global growth in its new servers and storage systems business. At this growth rate, rivals HP and Gateway have been left fighting for second place against a category killer that's all of 21 this year. Clearly, Dell is in a sweet spot. But its push into new categories -- servers, printers, imaging equipment as well as television sets -- and its bid for a bigger share of the Asian markets in order to grow from its current annual revenue of $49 billion to $80 billion in the next three to four years will expose Dell to a new set of competitive challenges. Not least, limited credit card use in markets in China and India and Asia's general lack of comfort in buying PCs online means Dell's business model might need further explaining in this part of the world. The other issue is that Dell's after-sales service, offering trouble-shooting help by phone, limits opportunities in tapping the first-time buyer or enterprises. Indeed, a source points to this factor as a reason why Dell has yet to crack the enterprise market in China despite offering good equipment at a great price. "Dell's business model is very successful but one size doesn't fit all in Asia," says the source. But these could be no more than growing pains in Asia. John Woodward, Leo Burnett's regional planning director, believes a bigger worry lies in a local version of Dell emerging to pile on new cost pressure. "Some would say Dell is the biggest force for commoditisation; Dell doesn't have the things that Apple, for instance, has like design, the software, which makes it much more desirable than a standard box PC," says Woodward.