Dell (DELL) says that its revenue in China grew 26% last year. To try to keep that up, the company is introducing a new, entry-level model for a price as low as $336. (Perhaps Dell is offering rebates as well.)
The new PC is aimed at getting more share in China, and Dell even says it may move the product to other markets.
But, there would seem to be two weaknesses to the strategy. One is that it is hard to imagine that there is a big profit to be had on a $336 machine, even if it is made in China. Going "down market" is probably not the solution to Dell’s revenue growth and earnings problems.
The second issue is the Dell may not be in a position to undercut local PC companies Lenovo and Acer. It is likely that they can match any price Dell offers with similar products and they have the advantage of competing inside their home markets.
Perhaps Dell should market a product that is the most expensive PC in China. It might have snob appeal for the Chinese wealthy and middle class and it would certainly have a good profit yield-per-unit.
Douglas A. McIntyre
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