Dell's Direct Sales Model

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Case 11.1: The direct sales model or a ‘dual system’ model: Dell’s distribution strategy in China.
1. What are Dell’s FSAs? What are the macro-level requirements for the direct sales model to be successful? What are the major advantages of the direct model, compared with the tradi tional channel strategy in the computer business?
Dell’s main FSA is its well designed and integrated supply chain based on its direct sales model. Dell successfully controls its own distribution, bypassing conventional distribution channels and selling directly to consumers. By bypassing the retailers, Dell could sell PCs at lower prices, and because of its direct contact with it customers they are also able to better understand customers’ needs and
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But the next void appears when the Chinese government started to introduce new laws to govern domestic economic activities, including insurance industries. This resulted in a huge threshold for AIG to start in China. Only by good relationship building with local and central government s it was possible to start building a business in China.
A third void is the low rate of acceptance of certain insurances. Many Chinese customers view life i nsurances as bringing bad luck.
The fourth logical void at that time was the lack of experienced personnel in the insurance industry. If there is a new market for insurances, it is logical that these countries do not have enough specialized personnel to cope with this emerging market. That is also the reason why the government of China decided to open this market to some extent to both foreign and domestic companies. These companies could give Chinese personnel the necessary education.

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Strategy & International Process
Assignment 5: Case 11.1 & 14.1 | 15 October 2012

5. Based on the framework developed by Khanna et al. (see Chapter 14), what types of strategies shoul d foreign insurance companies pursue? What did AIG do to cope with the institutional voids?
Khanna et al

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