China PC Vendors Winning Distribution Fight, Finds IDC

FRAMINGHAM, Mass., March 23, 1998 — IDC Asia/Pacific, in one of the first extensive studies of PC distributor/vendor relationships in China, has examined China's 50 largest first-tier PC distributors and their satisfaction with the vendors that supply PCs. Preliminary results indicate PC distributors are successfully pushing local brands. This potentially could be worrisome news to international PC vendors, as many are looking to China for continued growth, particularly while the economic crisis brews in the rest of Asia.

Hewlett-Packard and Legend Managing the Channel

In the IDC study, Hewlett-Packard outperformed competitors in terms of overall distributor satisfaction. "Hewlett-Packard's deliberate approach to channel management in China has been successful," said Karim Davezac, director for IDC's China Group. "In the past two years, HP has made significant investmentsin the channel and it seems to be paying off." Although HP had the highest overall ranking, the local player, Legend Group, was most favored by distributors for their effective product distribution, scoring above Hewlett-Packard.

Legend's extensive distribution networks have been very successful in bringing Legend to the international playing field. Legend's distribution group started by selling many PC brands other than its own. Now, with its own solid PC product line, the Legend distribution network can push its own product lines in the channel. According to Davezac, this creates an important competitive advantage for Legend. "Legend has a very effective distribution network which can effectively push Legend products. If this trend continues to other local brands, and international players do not effectively address channel needs, China's local players could quickly seize market share from the multinational companies (MNCs). For PC vendors, the next three quarters are crucial, and will define who owns the PC distribution channel in China in the near term."

China's PC Vendors Missing the Mark on Channel Satisfaction

IDC's study examined distributor satisfaction among 25 different categories, such as vendor pricing, sales/marketing support, technical support, and product distribution. Interestingly, those criteria which were rated by distributors as "most important" to their success were the same criteria distributors felt the "least satisfied" with, in terms of PC vendor performance. Identifying, not guessing at distributor needs is critical for PC vendors to be successful in China. Davezac said, "Managing distributor satisfaction in the channel is key. Those who manage this well will succeed, and those who don't are effectively taking themselves out of the race. Clearly, vendors are not allocating resources to those areas where distributors most need assistance."

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