Dell case

Case comprehension

Dell Computer Corporation was founded in 1984 by Michel Dell, as a result of a growing demand for his pre-formatted hard-disks and upgraded IBM-compatibles.

Within a year, Dell introduces its first own-design computer system and in 1989, the company introduces its first laptop. The first laptop introduced did not live up to the Dell standards, and was therefore taken off the market again.

Dell had to solve the problem of balancing the production of laptops, desktops and servers. On the laptop market, which Dell was committed to re-enter due to its growing customer base, there were a number of technological problems. Dell had hired John Medica, lead developer of Apple computer’s Powerbook line, and according to him, only one of the laptops being developed would be able to compete on the market. However, it would take some time before it was fully developed, so Dell had to reject their customer’s demand for laptops. In doing so, Dell made the customers understand that it would not take forever. Dell’s way to approach the fact that the company was not able to fulfil the customers wishes, was through honesty. The question was whether this strategy was an advantage for Dell or not.

The brand “Dell? which serves various consumer segments, is efficiently delivering attributes such as good quality computers along with operative support services. Dell takes position in direct communication with customers and delivers build-to-order computers. The value created by using the direct model to sell customized products and by providing on-site service ranked Dell between market leaders IMB, Compaq, HP. It represents good performance machines at a reasonable price as well as unique and distinctive “Direct Model? while targeting corporate, medium and small sized businesses and home office consumers.

The advantage of a strong brand, investment in R&D and direct communication with the customers could successfully lead the company into the laptop market. However, the laptop market differs from the desktop market in a number of ways. For Dell the main problem will be the manufacturing process. When producing laptops, most parts will be delivered by suppliers and Dell just ads the last parts. This limits the degree of customization possible and since one of Dell’s most important distinguishing features is computer customization, the company risks not att...

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... company’s desire to experiment without being afraid of taking risks that could bring failure as well. The IT industry is ever changing, and being innovative is a must if a company wishes to be successful.

?Weaknesses

- The need to form market share in the laptop market from nothing.

- Reentering the market causes further production costs (investments in new technology, new specialized employees, restructure assembly line and etc.).

- Lower degree of customization that is possible for laptops and this in turn limits Dell’s ability to produce customized laptops which is its main feature of success.

?Opportunities

- Company’s expansion to new market.

- New potential customers and the need to redeem lost customers in terms of laptop production keeping in mind previous failure.

- Possibility to take advantage in delivering products faster and providing service in competitively effective manner.

?Threats

- Facing already well operating and widely spread competitors.

- Other companies are adopting Dell’s direct model - Dell is losing its uniqueness.

- The threat of rejection to buy Dell’s portables, because some former customers are prejudging Dell as producing low-quality laptops.