An investigation of Dell and Hewlett Packard’s business models: How is competitive advantage created?
Introduction:
Dell and Hewlett Packard (HP) are two of the most influential companies in the PC market. The CEO of HP requires an understanding of how dells strategy allows it to achieve a competitive advantage so that he/she can counteract it. This report has been carried out to provide the CEO with the necessary information to do this. Therefore the objective of the report is to provide the CEO with detailed information on Dell as a business and its strategy. In order to achieve this, first the main strategies of Dell and how they provide competitive advantage will be identified, then the business models and e-business initiatives used
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Hp’s business model is a traditional business model whereas Dells business model is direct.
The advantages of Dells model are: The internet allows Dell an extensive scope and reach for its products at a relatively low price (Dedrick and Kraemer 2001). Using the internet Dell has been able to automate many of its business functions, such as product configuration, order entry and technical support (Dedrick & Kraemer 2001), therefore the company can achieve higher revenues without customer service costs increasing greatly. Online configuration ensures that the customer gets exactly what they want. Dells build to order strategy means that inventory levels are low, they only hold approximately 4-8 days of stock, therefore inventory costs are low (Breen 2004).
Some authors say that Dells business model is successful because they offer ‘dependable support, combined with competitive prices and build to order convenience’ (Lee & Thornhill 2005). However it is argued that Dells success is falling due to a lack of investment in customer service, recently their reputation has been damaged as complaints increase (Gross 2005).
HPs business model is advantageous because their customers have more choice in purchasing options, they can buy online, but if they need more assistance they can buy from a store where advice will be provided. Although this is good for the customer, it has detrimental effects on HPs traditional
Dell's business strategy combines its direct customer model with a highly efficient manufacturing and supply chain management organization and an emphasis on standards-based technologies. This strategy enables Dell to provide customers with superior value; high-quality, relevant technology; customized systems; superior service and support; and products and services that are easy to buy and use.
Dell Company is one of the leading brands in the computer industry. Its long stint in this computer business has been inspiring for many small IT companies and current entrepreneurs. The given case study has blended a lot of crucial info on the Dell regarding its early growth period with issues, industry specific details, business model, product line and structure, issues and policies in its business in cooperation with future prospects of the Dell Company. Hence, this paper will reply the below questions, based on this case study of Dell Company.
By grafting its system of custom direct sales onto the Internet infrastructure, Dell has transformed these activities, creating an innovative and efficient procurement, production, and distribution network. The innovative advance made by Dell in deploying Internet communication as the foundation of its production network, is a process innovation. Although to some extent, the Internet has enabled Dell to create a new product -- a PC custom-configured through Internet communication -- it is the process of organizing flows of materials and information within its network, from customer order to procurement, production and delivery, by means of Internet communication, that defines the innovation at the Firm. The case supports this notion by stating “While most other PCs were sold preconfigured and pre-assembled in retail stores, Dell offered superior customer choice in system configuration at a deeply discounted price, due to the cost-savings associated with cutting out the retail middleman. Additionally, an important side-benefit of the Internet-based direct sales model was that it generated a wealth of market data the company used to efficiently forecast demand trends and carry out effective segmentation strategies. This data drove the company’s product development efforts and allowed Dell to profit from information on the value drivers in each of its key customer
The PC group within HP PPS has been refocused around customer needs. The PC group changed its product line which had a stronger focus on product design. New business models have been the focus of the print group. Business models such as Ink Advantage, is a program designed to target price-sensitive customers in emerging markets. Ink in the Office is an initiative of the print group that targets business customers. The group has expanded differentiated services and solutions by leveraging HP's portfolio of hardware and software, including combining multifunction printers with Autonomy management solutions to develop cloud-based document management services (HP,
Dell Computer Corporation was founded in 1984 by Michael Dell. From the early 1990s until the mid-2000s, Dell was ranked as a PC market leader relying on their distinctive marketing pattern “Direct Model” which undertook direct communication with customers and provided customized products. Recently, the PC industry is facing inconceivable worldwide competition, and Dell is gradually losing their competitive advantages by using its direct model in critical business segments. The company is facing shrinkage of growth, increasing competition, declining quality of customer service, and limitation of expansion. These issues have an enormous impact on Dell’s position as a technological giant in the PC industry.
Affordability of latest technology through Direct Sales Services - Dells uses direct customer relationship or as it calls it “customer intimacy” as its distribution strategy. This means meeting customer needs directly and cutting middleman interference as much as possible. This is done either through dedicated sales representatives, telephone based sales and online at www.dell.com. As a result, the purchase price would be lower than other competitors.
Dell Company has a successful business strategy. As it is following cost leadership strategy. Its success story is hidden in cost proposition, delivery, and unique customization. In response to the high performance and better chances for growth Dell is applying two way strategy parallel to one another.
The Dell Computer Corporation was founded in 1984 by Michael Dell, who began the company by refurbishing IBM clones out of his dorm room for extra money. From the beginning and through the 1990’s, the company grew quickly and was very successful. Dell used a cost leadership strategy and focus on creating products that were already in the market place, but changed the timing of production and the method of distribution that was in place with the company’s competitors by assembling computers to order and selling directly to the customers. The company focused on creating value for customers and meeting their needs, but into the
Dell is the most successful company in PC industry of 21st century. It has shown phenomenal growth record over the past decades & listed as America’s third most admired company. Their core strength lies in Direct model offering closer customer interaction and Virtual Integration. This is giving a low cost advantage to Dell and its competitors are not able to imitate this model for all these years.
What is Dell’s strategy for success in the marketplace? Does the company rely primarily on a customer intimacy, operational excellence, or product leadership customer value proposition? What evidence supports your conclusion?
Because of these views DELL has the competitive advantage over others because of many reasons. The level of inventory costs is really low since the case of fastest reply to demand changes, it is also observable that customer pays for an order before DELL pays its supplier for the products components.
Added to this has been the threat from competitive rival Dell as their profits and market share grew. Using key frameworks, I will examine and conclude
Dell Computer's initial business model concentrated on creating build-to-order personal computers to customers' specific needs. This has grown from a fairly modest operation to a $62B business as of the close of their latest fiscal year (FY 2012). Dell succeeded with an Internet-based business model by concentrating on the accuracy, agility and speed that its much larger competitors could not match. Honeywell, IBM and others could not match the speed and agility that Dell had in basic build-to-order product strategies, which would eventually grow into the core part of their business model. Dell was able to rely on the ubiquity of the Internet to create a much large, diverse customer base compared to its competitors who were constrained by traditional retail channels (as was IBM's case) or a reliance on direct sales forces (Salvador, de Holan, Piller, 2009). Dell was able to capitalize on latent customer demand for customized PCs, laptops and servers at a much greater rate that competitors who failed to see the disintermediating influence the Internet was having on distribution channels (Salvador, de Holan, Piller, 2009). Dell succeeded at this strategy where dozens of other companies failed by concentrating on having the most thorough integration of their supply chain, production, fulfillment and services online globally, all unified through secured Internet-based networks. While the many competitors Dell had
Although Dell is an extremely successful company, there are areas of improvement and enhancement that should be considered. After a thorough analysis of Dell¡¯s IT tools, business model, IT infrastructure and competitive advantage, we have developed seven key suggestions. By implementing these recommendations, Dell can keep its high ranking in the competitive computer industry by increasing customer satisfaction, competitive advantage and superior value chain, without changing its principal operations to achieve these goals.
Dell developed its internal business process by creating production cells that start assembly at the point of order. It also established an internal information system to make the details of the products under production electronically available to all parties within the chain. To manage the supply of computer parts, Dell maintained close relationships with their suppliers and logistics providers to make their vendors manage the inventory system while Dell focused on product assembly (Kumar and Craig 2007)[4]. In addition, Dell used enterprise technology to make their database and methodologies available to the supplier to understand how Dell works. On the consumer side, orders made through the phone or online