Dell Computer Corporation, with annual revenues of $8.7 billion, is the world's leading direct sales computer systems company as well as one of the largest computer systems manufacturers. Since its launch in Japan in 1993, Dell Computer KK (Dell Japan) has grown rapidly to become the No. 8 computer systems company in the Japanese market. In 1996, Dell Japan received the prestigious Nikkei Customer Satisfaction Award. You'll find Dell on the Web at http://www.dell.com/, and Dell Japan at http://www. dell.co.jp/.

Chip Saunders recently joined Dell Japan as its newest president after a successful 25-year career at Motorola. Most recently, Saunders was corporate vice president and general manager, US/Canada Division, of Motorola's Radio Products Group, Land Mobile Products Sector. Prior to that, he served in Tokyo as corporate vice president and general manager of the Land Mobile Products Division of Nippon Motorola Ltd.

Computing Japan spoke with president Saunders in January.

You worked for 25 years for Motorola, which is known as a pretty conservative place compared to upstarts like Dell. What are some of the biggest differences you've found in the way the two companies approach business?

Chip Saunders: I got myself in trouble the last time I answered this question [laughs]. I had Motorola guys calling me, and....

First of all, Dell has a very cooperative atmosphere; everybody knows what has to be done, and just pitches in to do it. It's very, very, very quick to change here. We can make major decisions, and major changes, within hours or minutes [because] we don't have a lot of bureaucracy to deal with. And that's typical of Dell worldwide. We have a young, aggressive, extremely bright organization. In Japan, we've brought in people who don't carry the cultural baggage into the workplace, so to speak, that maybe those a generation or two ahead of them might. People come here so they can exercise their skills, pursue their career goals, and meet new challenges. They know that they can move very, very rapidly. I'm probably the oldest guy in the joint. We don't have a lot of very senior people. What we do have are very sharp people who just want to get a lot of satisfaction out of the work that they do, and to have an opportunity to grow very quickly.

How does Dell see itself? Are you are hardware company?

Saunders: We're a solutions company.

Certainly a large part of what we do is provide hardware. We pretty much, in terms of PCs, cover the gamut from notebooks through to high-end servers. But we also offer systems integration with our Dell Plus offering; I would consider us a solutions company.

Your strategy hinges on a direct sales model. Are there any unique challenges in Japan for implementing that system? Do you see differences in the Japanese consumer?

Saunders: Yes. Japanese business is built on face-to-face relationships, which is a very expensive way of doing business. There is nothing wrong with that, other than the fact that it is expensive. But we have chosen to try and take the cost out of the distribution of our product. We do have, in our enterprise business, the ability to handle those kinds of face-to-face relationships. But we run counter to the culture here a little bit in that we do a lot of ear-to-ear, or phone sales. And now, we are doing a tremendous amount of Internet business as well.

There are many naysayers; some members of the local press wonder how in the world Dell could ever be successful with this direct model. But I think that more and more consumers are starting to understand the value proposition that we present -- the best technology at the best available price.

Not everybody is going to be our customer; we recognize the fact that our model may preclude some people from being our customers here in Japan. But, that's just they way it is.

Dell reportedly averages $3 million per day on Internet purchases. How much of that is here in Japan?

Saunders: We don't break out [those sales figures] by country; Internet sales are aggregated in the US. Suffice it to say we are doing very well on the Internet; lately, we have been averaging about 50,000 visits to our website a week. And since we introduced our order tracking page, there has been a huge number of visits to that part of the website where customers can actually track their orders, and find out where we are in the process.

Serving corporate customers is a big part of your strategy in the US. How large is your corporate sales force here in Japan?

Saunders: What we don't want to do is disaggregate our business in terms of how we present it to the public. We do have a large corporate accounts team, primarily face-to-face selling. And we support those field guys with our back office, or inside, salespeople.

And as we move down the food chain, so to speak, into smaller accounts, we have people who also make visits. We support their efforts with phone people. Then we have phone sales; the advertising we do is targeted to making the phones ring. And then we have the Internet sales.

But to break out how our selling resources [are focused], or at which market segments -- we don't release that information.

How does the SOHO (small office/home office) segment in Japan compare with the States?

Saunders: Obviously the US market is substantially bigger and more developed than the Japanese market. But, you know, there are a lot of power users down below the enterprise level, in medium and small businesses. Those have been good segments for us.

In 1994, when Computing Japan interviewed then-president Katsumi Iizuka, Dell Japan was using third parties for customer support. Are you still dealing with third-party service companies?

Saunders: Yes, we have a couple of third-party retainers for service now. We find this is still a very valuable way to service customers. We offer next-day service in most cases, but in some of the mission-critical situations a customer can choose to purchase even four-hour response time. Our third-party retainers are set up to handle that.

After a couple years of strong growth, the Japanese PC market slowed down considerably in 1997. What do you foresee for the rest of the decade?

Saunders: Calendar year 1997 was a very nice growth year for Dell in Japan. If you go back to the third quarter -- let's just take IDC's data, for example -- Dell Japan's growth was, I think, 29%. [For comparison,] Compaq was only at 10%, NEC had lost 21%, and Apple was down 50%. We outdistanced our nearest competitor nearly three-to-one in terms of growth.

We are continuing those types of growth trends, and we are very bullish on calendar year 1998. We think that we'll have another very good year.

In terms of what the market will do, though, that's difficult to say. Everybody I ask who is exposed to this market has a different point of view. I've heard everything from "flat" to... about the most aggressive forecast is 15% growth. My own guess is somewhere in the 5% to 10% growth range for the Japanese market. But it makes no difference what the market does, we still expect to have a very good year.

Dell Japan did quite a bit of television advertising in late 1996. Are you doing any TV advertising today?

Saunders: No, we don't think that television advertising has really paid off. Although, in the latter part of this coming year, we will probably do some brand awareness advertising. We haven't fully determined what form that will take yet.

Just what are you doing in terms of your brand strategy?

Saunders: Well, we haven't really focused as much on brand awareness as we have on exposing Dell's technology and Dell's value to our targeted markets. That is where our real focus has been, in terms of when we choose to deploy our advertising dollars.

We want to attract people who are looking to buy computers. Our basic strategy is not necessarily to chase first-time computer users, because a first-time user is probably not as technology sensitive, and is much more price conscious than an experienced user. Much of our market is targeted towards people who know computing, who understand the value of a Dell machine, and who understand the relationship between the technology and the cost. That is basically our market.

[There is] a technology curve, from when technology is introduced to its decline. Our market is basically the first two stages of that technology curve [draws a curve on the whiteboard].

Over time, there are three phases: introduction of the technology, maturation of the technology, and the decline of the technology. Dell wants to be in the game from here [indicates mid-introduction to mid-maturity]. This is the attractive time to be involved with a technology.

Many of our competitors are at this segment [indicating mid-maturity to decline]. But once you get to this point, this is where you get the down-and-dirty price competition; dealers have got inventory that they are trying to move, and those kinds of things, so unfortunately you can't make any money. When we get to this point here [indicating mid-maturity], we want to come back and start the process again. Late-maturity is not Dell's market.

Late-maturity, by the way, happens to be the segment most first-time users are involved in. Basically, they are price conscious; they don't really understand all the technology, but want the best price. But there's no money here, no profit. That's not our market.

Dell Japan started out in '93 with a staff of 25, and by summer of '94 had gone up to 100 people. How big is your staff now in Japan?

Saunders: We're pushing almost 350 people, and we'll probably add a substantial number again this year. The biggest problem that we have is finding good people: people that want to work in this kind of environment, who are bright, quick, have a lot of desire, and are enthusiastic. One of the biggest barriers to our growth is how fast we can staff the organization.

Many foreign firms face that problem. New graduates in Japan are extremely sensitive to what kinds of companies they work for; they don't want to have to tell their parents and friends they've taken a job with some foreign company no one in Japan has even heard of. What unique ways do you have for successfully finding and keeping employees here in Japan?

Saunders: I don't know if I want to tell you that or not [laughs]. The fact of the matter is, we have an outstanding work force. They are fairly young, and they are enthusiastic about what they do. There are a number of ways that we recruit and hire people here at Dell. We use, in some rare cases, executive recruiting. And we do local kinds of recruiting, through local agencies. Plus we have an employee referral program, where if an employee refers an individual, and they join Dell, we give a monetary reward to that employee.

We participate in job fairs; I think the most recent one we did was in conjunction with Sony and Microsoft, and we got a number of outstanding candidates. We do some newspaper advertising, occasionally. And you'd be surprised how many applicants we get just off our website.

Who are your toughest competitors in Japan today, and how do you differentiate yourself?

Saunders: Everybody is a tough competitor. I mean, we don't particularly take one company and say, "Wow, that's our competitor." When you're in a market like this, you are competing against everybody. Obviously, Gateway 2000 is a major competitor, but we compete against NEC, Fujitsu, IBM -- all of them, every day. Our goal is to be number one. We understand that's a long journey. When you've got a 2.5% market share, and the top three companies here in Japan probably share some 70% of the market --there is a lot of room for opportunity.

We do know who's in front of us in the market share charts, though. We'll take it one rung at a time; we'll go from number eight to number seven, to number six, and so on.

What do you see as the future for Dell, say, 20 years from now?

Saunders: [laughs] I don't know. I hope they're doing well, because I'll be retired, or dead. To be honest with you, I can't see 20 years out. Technology moves so fast that it probably won't be anywhere near what we think. I'd say Dell will still be in the game, and will be a leader in some way, in terms of distributed intelligence. But what form that would take... I can't even begin to tell you. I do believe that we are just now at the very beginning of a new age. Some people call it the information age; some call it the new economy. Whatever the name, we are just at the very beginning of a new age. Maybe you could compare it to the Renaissance, or the Industrial Revolution. But, 20 years from now, whatever it is, it's going to be slick.

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