Michael Dell began his company, Dell Computer, by selling IBM Personal Computers in
1984. A year later they shifted to selling the Dell branded computers. Having faced stiff competition from IBM, Compaq, Hewlett-Packard, Apple, Gateway, eMachines, and
Toshiba, for over a decade running, Dell strategically adopted Internet and e-commerce in
2000, which according to Kraemer and Dedrick, “Aimed at improving its own efficiency, enhancing customer satisfaction, and reaching new product markets;” though remained glued to its vision of hardware production. Prior to this bold initiative, it had made unsuccessful foray into retail PC channel; to only come back to its direct vendor roots.
After fully incorporating Internet, the business developed its
…show more content…
It further ensures Dell Computers produces according to customer specification, as they have the opportunity to configure products online. “A Dell PC is designed to minimize human touches in production, suppliers are selected to ensure high product quality, suppliers are physically integrated into production, and the entire order fulfillment process is managed by a sophisticated combination of internal and external information systems;” Kraemer et al
(2000). This is the way Dell makes itself visible, not middlemen, in the sight of consumers.
The model, in the nutshell means innovative combination of customer focus, supplier partnership, mass customization, or just-in-time; using information and IT to accomplish higher level efficiency and effectiveness throughout the entire value system.
The direct business model has given Dell an unprecedented competitive edge over its rivals.
While it turns its inventory over 60 times a year, the competitors could do so only at about
12 to 15 times. To become the leader in the industry, the model helped it grow at minimized costs. It spent only 1.6% of its revenues on R&D as against 4-7% for IBM, HP,
…show more content…
Further more Dell has physically integrated with suppliers (Phillips, Nokia, Samsung) and business partners (Gen
3, Unisys, Wang, Banctec) to hold little or no inventory on its own, and in turn creates personnel efficiencies for them. Indeed the model presents the strengths of win-win relationship with customers, coordination of the value web, and emphasizing the company 's capacity of providing e-commerce solutions to consumers. Despite these overwhelming strengths, Dell is constrained by language, communication protocols, power supply, power cords, financial practices, preferences for national computer companies, and government regulation, which are nation-prone industry hurdles. In addition, the firm is fundamentally unable to research the market, a problem associated with its model. It fails to identify good local competitors: Toshiba in Japan, Olivetti in Europe. It could not understand either how attached consumers are to local brands or profoundly entrenched distribution channels.
Consequently Dell cannot reach out to new corporations and government consumers.
In spite of the inherent limitation the direct model is the engine propelling Dell
1. How and why did the personal computer industry come to have such low average profitability?
floundered in its attempts to become the next big thing in mainstream America. Apple eventually bought the company in 1996 for $429 million. Which have Jobs a major share in the company of Apple.
In the future our firm could offer, the facility to make computers to consumers tastes, needs and budget. This is what the Gate Way Computer Company, which was very successful. Our firm can offer an after sales service. This would encourage consumers to come back to us. E.g. AOL offered a service where, if consumers had any problems, they could just ring them up and they would sort it out with no additional costs.
Historically the personal computer (PC) industry has sold its products at reasonably high prices yet garnered only small profit margins. One reason for this is the high competition in the PC industry which led to competitive pricing among producers. Analyzing the competitive environment of the PC industry, it is evident that there is very little barrier to entry in this market. PC's have very low physical uniqueness and are made of standard components that require very little expertise to assemble.
Dell's strengths were oriented around listening to the customers, responding to the customers, and delivering what the customer wanted. The direct relationship was first through telephone calls, then through face-to-face interactions, and now through the internet. It has enabled them to benefit from real-time input from real customers regarding products and future products they would like to see developed. The company also doesn't use reseller or retail channels because every computer is built-to-order, which allows less inventory. The direct model allows them to take the pulse of whatever market and provide the right technology for the right customers.
Speaking about the business model of Dell, it has ability to remain on the higher end of the scale for a particular time period. Dell has business model, which primarily focuses on direct selling line of attack. It in a straight line supplies the PCs to the regulars. It does not believe in intermediary, retailers for the business practices. Undeniably, this gives them an edge to serve customer well. Nevertheless, it understood the importance of retailers and start offering products on the premises of retailers, such as Wal-Mart, Sam’s Club and so on. Next, Dell administration is certain of the exclusive business of PCs. As time goes on, however, observing the
The direct-sales PC pioneer is struggling to maintain customers' loyalty in the face of fierce price competition .
In early 1976 Wozniak and Jobs finish work on a preassembled computer circuit board. It has no Product keyboard, case, sound or graphics. They call it the Apple I. They form the Apple Computer Company on April Fool's Day and sold the Apple I board for $666.66 at the Home brew Computer Club in Palo Alto, California.
Dell Inc. has realized that the most efficient path to the customer is through a direct relationship, with no intermediaries to add confusion and cost. With the power of their direct model and their team of talented people, they are able to provide to their customers high-quality, relevant technology, customized systems, superior service and support, and products and services that are easy to buy and use. HISTORICAL REPORT Dell Inc, was founded as “PC’s Limited” in 1984 by Michael Dell, while still a student at the University of Texas at Austin, with just $1000. From Michael Dell's off-campus dorm room at Dobie Center, the startup aims to sell IBM-compatible computers built from stock components. Michael Dell started trading in the belief that by selling personal computer systems directly to customers, PC's Limited could better understand customers' needs and provide the most effective computing solutions to meet those needs.
Michael Dell founded the company Dell to offer network servers, workstations, storage systems, Ethernet switches, desktops, and notebook PCs after successfully selling his computers to customers directly in Texas. Over the course of three years his sales volume warranted the opening of an international sales office in 1987. In 1988 he began selling to large customers including several government agencies and Dell became a publicly traded company.
Sony, as an organisation, must deal with the dynamic industry they operate within. They established themselves by developing a stable work environment where engineers had profound appreciation of technology and could work as freely as they pleased, focussing on developing dynamic technologies and creating products that people longed for (Mintzberg et al, 2003).
This strategy was carried out by selling via phone, fax and direct sales, instead of selling through retail stores. Not only this approach differentiated Dell from other competitors at the time, it also reduced its operating costs as it did not have to rent expensive retail space. In addition, Dell’s strategy of selling customised computers allowed it to hold only a small amount of inventory, which reduce...
Launched as a static page in 1994, Dell.com took the plunge into e-commerce shortly thereafter, and by 1997 was the first company to record a million dollars in online sales, according to Dell spokesperson Deborah McNair.
Dell Inc had very effectively used the direct marketing channel for the sales of computers to the end consumer. When all the other pc makers were selling through retailers and distributors, Dell had started efficient use of the direct channels.
Historically, personal computer companies produced most of the components for a computer which they assembled into their final products and distributed to resellers. The manufacturing of these components was vertically integrated into the organisation. Dell, as a small start-up, could not build this infrastructure. Instead, they developed a model where they developed relationships with organisations that could provide these components, allowing Dell to focus on selling and delivering computers. By selling directly to customers, initially through mail orders and later by using the internet, Dell avoided reseller mark-up. Dell also enabled customers to order customised computers, which Dell then assembled after receiving the order (Magretta, 1998, p.73-74). “Customers got exactly the computer they wanted and Dell saved money making the computers only when they were ordered” (Hill & Seggewiss, 2008)....