Businessweek Prognosticates, Dvorak Preens

The Silicon Hutong Suite, Intercontinental Hotel, Singapore

John C. Dvorak writes a brilliant column skewering the recent Tech Future cover story in Business Week. You should read it yourself so I won’t spoil it, but one point he makes sticks out in the otherwise very good article for a bit of correction:

“[Business Week’s editors] seem absolutely stunned that, for example, companies like Dell don’t have much market share in China itself. This is somehow a shock, part of a global change that needs a special report. The fact is, buying a Dell, or any American-branded computer for that matter, in China would be like a Virginia pig farmer buying bacon from Argentina.”

While this reads nicely and provokes a chuckle, the analogy is not apt. It’s more like Argentine pig farmers buying Virginia bacon. Computers made by local PC companies, whether mom-and-pop do-it-yourself shops or even Lenovo, continue to lag their international competitors in features and quality. That difference alone is may not have been enough in the past – locals wanted a cheap computer, period.

But as Chinese begin to bring more knowledge to the purchase of a computer, many are opting to spend more for quality and features as a fight against early obsolescence. When you make a few hundred dollars a month, and you can spend a few hundred dollars more to make your computer usable for another year or 18 months, you are getting a good deal, and a growing number of Chinese understand that. In addition, the WTO and local production are helping companies like HP become more competitive in the local market by leveraging their global size to deliver economies of scale.

The evidence? Look at Lenovo’s financial results, and while they don’t break out numbers, look at the reporting of HP and IBM. Lenovo is losing ground in its own market, and HP and IBM are building steam. Dell’s recent abandonment of the consumer desktop in China has more to do with the company’s own execution than a general trend.

The locals’ home court advantage is slipping. Both Dvorak and BusinessWeek missed that.


About David Wolf

An adviser to corporations and organizations on strategy, communications, and public affairs, David Wolf has been working and living in Beijing since 1995, and now divides his time between China and California. He also serves as a policy and industry analyst focused on innovative and creative industries, a futurist, and an amateur historian.
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