The group’s suppliers are still mainly foreign companies. However, as these companies continue to shift their manufacturing facilities to China, an ever larger share of the company’s purchasing contracts is denominated in Chinese Yuan (RMB) and now exceeds 50%. The largest supplier accounted for 29% of the group’s purchases in the nine months ended December 31, 2000.2
The corresponding percentage for the five largest suppliers was 62%. The bulk of revenues is generated with Toshiba notebook computers and printers from Epson, Canon, and Hewlett Packard. More recently, the group has expanded its business to cover networking products from Cisco and a range of mobile phone and PDA brand-name products.
In contrast, the group’s customer base is much more broadly distributed with the five largest
customers accounting for less than 20% of total turnover. In total, the group has contractual
relationships with 3,000 “core” resellers plus an additional 2,000 minor channels. Resellers mainly
consist of retailers; however, smaller system integrators are also among the group’s customers.
In the distribution business, the company is currently the largest player with a market share of
10%. Its main competitor is Ying Mai, a joint venture with U.S. company Ingram Micro, which is
aggressively moving into the China market (see Exhibit 3 for a brief description of major competitors
in the distribution business). Digital China estimates that Ying Mai currently lags Digital China’s
revenues by about two billion RMB. Ying Mai has also implemented an ERP system as well as a B2B
e-commerce platform for ordering products. Liu Shengrui, the group’s Chief Logistics Officer, says:
They [Ying Mai] have their own channels in China. We are competitors as well as partners. We often exchange experiences in this area. … We surely are facing some competition. …
On December 11, 2001, China has formally been accepted as a member of the World Trade Organization. Wholly foreign-owned distributors will be allowed after three years of China’s WTO accession. However, China’s WTO entry will not only increase competition for Digital China, but also eliminate tariffs on imported products within the same period of time, including IT products, which should make Digital China’s offerings more competitive relative to domestic products.