Dell Computer Corporation was established in 1984 and today ranks among the worlds largest computer systems companies. Dell pioneered the concepts of selling personal computer systems directly to customers; offering build-to-order computer systems; and providing direct, toll-free technical support and next-day, on-site service. The company designs and customizes products and services to end-user requirements, and offers an extensive selection of peripherals and software.
Dells complete range of high-performance computer systems include: Dell Dimension and OptiPlex desktop computers, Latitude notebook computers, and PowerEdge network servers. The companys products and services are sold in more than 140 countries and territories to customers extending from major corporations, government agencies and medical and educational institutions to small businesses and individuals. The company employs approximately 11,000 people. Headquarters are located in Round Rock, Texas, with manufacturing facilities in Austin, Texas; Limerick, Ireland; and Penang, Malaysia.
Dell Computer’s business strategy is centered around its direct business model and customer-focused initiative aimed at delivering the best customer experience through direct, customer relationships, cooperative research and development with technology partners, custom-built computer systems and service and support programs tailored to customer needs. Dell believes that this approach provides it with several competitive advantages. The approach eliminates the need to support an extensive network of wholesale and retail dealers, thereby avoiding typical dealer mark-ups; avoids the higher inventory costs associated with the wholesale/retail channel and the competition for retail shelf space; and reduces the obsolescence risk associated with products in a rapidly changing technological market. In addition, direct customer contact allows the Dell Computer to maintain, monitor and update a database of information about customers and their current and future products and service needs, which can be used to shape future product offerings and post-sale service and support programs. This direct approach, combined with the company’s efficient procurement, manufacturing and distribution processes, allows the company to bring relevant technology to its customers faster and more competitively priced than many of its competitors.
The company was plagued by management changes during the mid-1980s. Renamed Dell Computer, it added international sales offices in 1987. A year later it started selling to government agencies and added a sales-force to serve larger customers. That year Dell went public in a $34.2 million offering.
Dell tripped in 1990, reporting a 64% drop in profits. Sales were growing, but so were costs, mostly because of Dell’s efforts to design a PC using proprietary components and RISC chips. Also, the company’s warehouses were oversupplied. Within a year Dell turned itself around by cutting inventories and coming out with eight new products.
Dell entered the retail arena by letting Soft Warehouse Superstores (now CompUSA) in 1990 and office supply chain Staples in 1991 sell its PCs at mail-order prices. Also in 1991 Dell opened a plant in Limerick, Ireland.
In 1992 Xerox agreed to sell Dell machines in 19 Latin American countries. That year Dell sold a new line of PCs through Price Club (now Price/Costco). Dell opened subsidiaries in Japan and Austria in 1993 and began selling PCs through Best Buy stores in 16 US states.
The computer maker abandoned retail stores in 1994 to refocus on its mail-order origins. The company took a $40 million charge to retool its troubled notebook computer line and later that year released its Latitude notebook to general acclaim. The company also introduced a line of servers.
In 1995 the firm offered Pentium-based notebooks, and hastened the interest in its desktops by cutting prices and releasing a dual-processor PC. The following year Dell ramped up its efforts in the Asian computer market with new mail-order service in Hong Kong, Japan, and Singapore; a new Asia/Pacific Customer Center in Malaysia; and direct-sales operations in South Korea and Taiwan.
In 1997 Dell and Toronto-based Newcourt Credit Group formed Dell Financial Services, a joint venture that will provide financing for Dell customers. That year Dell also announced plans to enter the market for engineering, analysis, and design computers called workstations. Dell built up its consumer business in 1997 by separating that operation from its small-business unit and beginning a leasing program for individuals.
The Dell Direct Model
Dell’s award-winning customer service, industry-leading growth and financial performance continue to differentiate the company from competitors. At the heart of that performance is Dell’s unique direct-to-customer business model. “Direct” refers to the company’s relationships with its customers, from home-PC users to the world’s largest corporations. There are no retailers or other resellers adding unnecessary time and cost, or diminishing Dell’s understanding of customer expectations. Why are computer-systems customers and investors increasingly turning to Dell and its unique direct model? There are several reasons:
h Price for Performance. By eliminating resellers, retailers and other costly intermediary steps together with the industry’s most efficient procurement, manufacturing and distribution process Dell offers its customers more powerful, more richly configured systems for the money than competitors.
h Customization. Every Dell system is built to order. Customers get exactly, and only, what they want.
h Service and Support. Dell uses knowledge gained from direct contact before and after the sale to provide award-winning, tailored customer service.
h Latest Technology. Dell’s efficient model means the latest relevant technology is introduced in its product lines much more quickly than through slow-moving indirect distribution channels. Inventory is turned over every 10 or fewer days, on average, keeping related costs low.
h Superior Shareholder Value. During the last fiscal year, the value of Dell common stock more than doubled. In 1996 and 1997, Dell was the top-performing stock among the Standard ; Poor’s 500 and Nasdaq 100, and represented the top-performing U.S. stock on the Dow Jones World Stock Index.
Apple ComputerMatsushita Toshiba
CanonMicro Warehouse Unisys
Compaq**Micron Technology Siemens
Digital Equipment NCR Sony
Fujitsu Oki Electric Sun Microsystems
Gateway 2000**Packard Bell Sharp
Hewlett-Packard Philips Electronics Hitachi
h High performance and Low price
h Direct marketing
h High sensitivity of the customer needs (because it sells direct and has direct contact with its customers)
h Custom Configured product
h Catalog/mail out database of customer
h Its commitment to sold relative high quality, relative low price products that are custom configured
h Have the best customer satisfaction in the industry: warranty packages, installation, maintenance, repair services, and user support
h Service Innovation & Recognition
h Value added service
h The second largest PC manufacture in the U.S. market and the third largest PC in the world, rank at 190 position in the Fortune 500
h Efficient distribution channel keep the production cost low
h A substantial cost advantage coming from the resellers markup, the costs and risks associated with carrying large inventories of finished goods
h Stock Keeping Unit / Inventory
h Not have so many product lines (2 for desktop, 2 for laptop/notebook and 2 for workstation)
h Lacked of / neglected laptop computers / Notebook, which is the hottest bit of the PC market
h Lack of diversifying distribution channel (too much focus on the direct channel)
h Its stock control and product forecasting systems could not keep up with its growth
h Dependent too much on the Wintel architecture. Dell Computer is the only manufacture who uses no other brand processor except Intel and the only manufacture who offers an operating system from Microsoft for all of its broad range of product.
h Fastest Growing market in the Notebook segment
h International Growth opportunity; Japan (Dell is the ninth largest local vendor in Japan), Korea, Europe, Asia, Africa
h To be the most leading computer industry in terms of efficiency, profit margin, return on equity (ROE) and innovation
h PCs is a huge market (Every person buys approximately 3 PCs every 10 years, The U.S. statistics)
h Huge opportunities to enter the derivation of the PC market, such as software, printer, scanner, and peripherals.
h Develops and markets its own operating systems that built based on the order of its customer
h Wintel Architecture
h Government Regulation, such as Recycling, EPA
h Because of its main customer is large company, it means they have a buying power and this could squeeze its profit margin
h Gateway 2000 is the closest competitor which has the same strategy (direct marketing, cut mark up cost, custom build computer and target the same segment customer; such as middle size and big corporation customers). In addition, Dell has to face head to head competition with Gateway 2000 in the same country; because both of them have the plants in the same country: Ireland & Malaysia.
h Short product life cycle of the semiconductor from 5 years to 3 months (Rapid technology cycles).
h Operating in one of the most competitive business in the history.
h Product Transitions.
h Production Forecasts / high degree of uncertainty demand.
h Technology standards and Key licenses.
h Credit Risk
h Year 2000 Compliance
“Channeling their energies”; by Paley, Norton; Sales and Marketing Management magazines.
“THE POWER OF VIRTUAL INTEGRATION: AN INTERVIEW WITH DELL COMPUTERS MICHAEL DELL”; by Magretta, Joan; Harvard Business Review edition March-April 1998.
“Dell shows that Web-based business isnt just a dream”; by Tebbe, Mark; Infoworld.
“Dell hopes to up channel business by going after regional resellers”; by Zarley, Craig; Computer Reseller.
“Dell Computer Corporation”; Hoovers Company Profiles; WWW.HOOVERS.COM
“Compaq Computer Corporation”; Hoovers Company Profiles; WWW.HOOVERS.COM
“IBM Corporation”; Hoovers Company Profiles; WWW.HOOVERS.COM
“Gateway 2000 Corporation”; Hoovers Company Profiles; WWW.HOOVERS.COM
“Making the right choices for the new consumer”; by Dell, Michael S; Managing Service Quality.
“1997 Warp-Up and 1998 Predictions”; by Creative Consumer Marketing
“Service sells”; by Dell, Michael S; Executive Excellence magazines