By Simon Mansfield

Katsumi Iizuka is a graduate of Meiji University. He worked in the consumer electronics industry for several years in Japan, Hong Kong, Korea, and the US before joining Dell Computer Corporation in 1987 as Director of the Far East Product Marketing Group.

In 1988, he opened Dell's Japan liaison office in Tokyo, and in 1989 founded Dell Far East Corporation and became its Managing Director. Mr. Iizuka founded the Dell Computer South East Asia Regional Office in Taipei in 1990 and began to procure parts for portable PCs in 1991. He is currently President of Dell Computer KK, the Japanese subsidiary of Dell Computer Corporation and Japan's first direct marketing PC company.

It's been over a year since you entered the Japanese market with your company's low-cost personal computers. How has business been so far?

Business has been extremely successful, with a very strong response from consumers--both individual and corporate. We achieved our first-year sales target seven months early. Our profitability was excellent in the fourth quarter of 1993, and the trend co ntinued through the first quarter of 1994, when we had record revenues and profits. We expect to see the same good trend throughout 1994.

Dell Japan seems to have been remarkably successful in its first year. What factors do you feel were responsible for your success?

We have focused on high-performance and top-quality products in the Japan market. Our Japanese customers are very happy with the performance of our products, and with the high quality of support and service that they receive directly from us. We are tryi ng to demonstrate what real customer satisfaction means to Japanese customers.

Many of our Japanese customers feel that Dell is bringing a new type of business here to Japan. Most of our competitors are bringing in low-cost, low-performance PCs from offshore. But the nature of the Japanese customer is to care about performance and quality. The Dell OptiPlex and OmniPlex are recognized as the best performance DOS/V machines in Japan.

I understand that currently your PCs are being shipped in from Ireland. Are reports of a plant to be located somewhere in Asia correct?

We have opened a systems integration center in Kawasaki where we customize the systems flown in from Ireland. However, so far we haven't made a final decision on building a plant in Asia.

Getting good staff is difficult for many foreign companies-- especially ones that are growing quickly. What has been the situation at Dell?

We started 1993 with a staff of only 25, and eighteen months later this has grown to more than 100 employees. The response from job applicants has been very interesting. Most of them already knew about Dell and were very excited about working with us in launching a new business concept in Japan.

What do you consider to have been the two biggest changes in the Japanese PC market in the past two years?

First, Windows 3.15 and DOS/V These have truly opened up the market for IBM-compatible vendors.
Second, the challenge we at Dell have made to the traditional PC distribution system in Japan. Already DEC, Epson, NEC, IBM, and Canon have started direct sales, and I think that many more companies will start doing this by the end of 1994.
But the biggest challenge we have made to the distribution system is not selling, I think. Rather, it is providing direct service support by phone to corporate customers.

That's an interesting point. Bell is generally perceived as a direct selling operation. I understand, though, that some 50% of your sales are through traditional channels to corporate clients. Am I correct?

This only partly describes the situation, because the way we actually sell to corporate clients is very different than the method of the traditional computer maker, who often visits the customer every couple of days and has many support staff permanently onsite.

What we do is initially meet with the customer face-to-face. We then do most of the communication by phone. This makes it a lot more efficient for us and for the customer--once they realize that they are still getting a reliable product and quality servi ce--as 90% of the time the technical problems can be solved by phone.

Are corporate customers being receptive to this departure from tradition?

For foreign companies, and for Japanese companies that have overseas operations, buying a PC by phone or fax is not a strange thing to do. They know what they want, and they don't need us to convince them.

But how do you deal with major problems that can't be handled over the phone?

For major problems, we have contracted two third-party maintenance companies--Tech Engineering Company (a Toshiba subsidiary) and PFU (a Fujitsu subsidiary). Between them, these two companies have over 200 service centers across Japan and some 2,500 tech nicians.

Dell Japan reportedly sold 22,000 PGs last year. What were the main methods that you used to sell these computers, and what has been the relative success of each method?

Direct response marketing is working in Japan. Direct sales account for 75% of our sales. Both telemarketing and direct commercial sales are doing very well.
A direct relationship with the customer is the key. That allows us to hear directly from the customers about what they want and need. Customers like it because they are able to get a good-performance product for a competitive price.

Several user surveys by major Japanese computer magazines, such as DOS/v Fan, reported in 1993 that Dell had a higher overall satisfaction rating than Compaq. Why do you think this was happening?

Simple... our product performance is superior for both specs and benchmarks. This goes for most of our DOS/V machines. Plus our service and price are unbeatable.

Are you competing for the same market?

Well, for many individual customers, Compaq is perceived as a low-cost PC maker. At Dell, on the other hand, we have sold only our high-performance systems in Japan, equipped with top quality Japanese monitors and mechanical keyboards. But more important , our high-end "Performance Series" PCs are cheaper than the Prolinea. In fact, over 60% of our sales are for 66-MHz systems, because so many DOS/V customers are power users. Dell has signed a sales distribution agreement with PFU --why would a Fuj itsu PC distributor go with a high-flying rival like Dell? Today PC market is an open market, and customers want to choose the brand name they like. So if a PFU customer wants to buy a Dell computer, they can now buy it directly from PFU. While for Dell, PFU is treated as a regular systems integrator, with the te chnical support contract negotiated earlier as a separate item. What has been the impact of Fujitsu joining the DOSN camp?

I think this will expedite the DOSN push by giving it credibility. But while this might be good for DOS/V, for Fuiitsu, having three PC architectures could be a problem.

According to a recent press report, Dell will soon begin selling NEC computers. Why have you decided upon a tie-up with NEC at this time?

I have no comment on this.

PC prices are still high in Japan--how much further can they be expected to fall? Will Dell lead the push by lowering its prices?

We don't really need to lower our prices as we're already one of the cheapest among the major PC makers.

Is the expectation of lower prices in the future impacting your sales today? In other words, are customers postponing their purchases waiting for lower prices?

For Dell this isn't a problem, as PC prices have crossed the psychological buying threshold. Customers shouldn't expect to see any further big falls-- from now on it will be incremental cuts only.

Do you think Japan is starting to become a more typical PC market like the US, where there are many clone makers and a huge variety of products at very competitive prices?

Yes and no. On the one hand, I think a lot of the cheap clone makers springing up in Japan are just cashing in on DOS/V. It is true, however, that this--along with the emergence of direct selling--is making Japan more like the world's other big PC markets.

What new things will Dell be doing for the rest of 1994 to help bring this about?

Last year, we started with the foundations. For 1994, we are targeting each market segment. We will be offering highperformance multimedia systems, including Pentium, to PC hobbyists; low-cost word processing-type systems for the low-end consumer market; and a variety of value-added office packs and high-performance systems for the business market.