Page 159 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

A Piece of the Action: Strategies for Entering the GCC Market 143

foreign firm to reach GCC consumers soon after an agreement is
arrived at. As IKEA’s experience with Al-Futtaim illustrates, the
established operational capabilities provided by the local conglom-
erate can be a key source of competitive advantage.
Sometimes, a multinational will enter a distributorship
agreement not merely because of regulatory barriers or to limit risk
exposure, but because its business model is inappropriate for the
GCC markets it seeks to enter. Dell, the e-commerce giant that
operates in the Middle East through authorized sellers and service
agents, provides an example.

Dell in the GCC: Adapting the Business Model
When Michael Dell started building personal computers in his dorm
room at the University of Texas at Austin in 1984, he believed that by
selling customized computers directly to buyers, he could better cater
to their needs. Two decades later, he still continues to realize his vision
of selling directly to consumers, this time as the head of the Fortune
500 behemoth Dell Computer. Efficient supply chain management,
robust electronic commerce Web sites, and a religious dedication to
passing on cost savings to customers form the heart of Dell’s
sell-direct strategy in North America and Europe. In the GCC states,
however, where technological and social barriers have slowed e-com-
merce development, Dell has been forced to adapt its business model.
Relative to North America and Europe, the GCC is at an early
stage of its development of electronic commerce. A lack of wide-
spread credit card use, a mistrust of e-commerce stemming from the
many stories of online fraud, less convenient postal services, and
social preferences for shopping at brick-and-mortar stores have
slowed the transition to online purchasing. Not surprisingly, few
retailers and distribution companies in the GCC have transformed
their business models to accommodate the demands of e-commerce,
contributing to the slow transition from the supply side.
To work around this obstacle until the online retailing model
evolves into a viable option in the GCC economies, Dell has entered
into product distribution and service agreements with local part-
ners in the region. Specifically, these “Dell Partners” sell personal
computers, and can provide warranty support and other after-sales
services as well as round-the-clock enterprise service support after