Dell Business Strategy Change Essay

1928 Words 8 Pages
Dell Computer have recently announced changes to their business strategy and supporting supply chain. They will no longer focus on a made to order direct sales model for their personal computers. Nor will they continue to refine their renowned supply chain model that supported their sales model. Instead, they will be looking to produce personal computers with fixed configurations at lower prices. This essay looks at why Dell have changed their strategy, and then considers the customer value proposition of the new strategy, as well as lessons that other organisations can learn from the Dell experience.

According to Michael Cannon, Dell's President of Global Operations, the key differentiators that have made Dell so effective for nearly
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Dell have also focused on building strong partnerships with their suppliers, and sharing information with them to help them provide better service to Dell. The direct model allowed Dell to gain access to valuable purchasing information that could also be passed down the supply chain to suppliers (Magretta, 1998, p.73-74). Dell were also able to reduce inventory turnover to 3-4 days compared to its competitors 30-45 days, providing a slight first mover strategic advantage (Kumar & Craig, 2007, p.201).

Up until quite recently, this model had served Dell extremely well, helping them to become the largest supplier of personal computers in the world, until 2007 when HP took their place (Shah, 2007). Since then, Dell's profits have gone down, along with their share price. Furthermore, Dell's major competitors have improved their position in the personal computer market. Hill & Seggewiss (2008) believe that while HP has made improvements to its customer service and prices, Dell has had problems with its customer service and product quality, resulting in Dell replacing its senior management and cutting jobs.

In response, Dell have announced a radical change to their business strategy, effectively planning to move away from their trademark made to order direct sales model and reduce the complexity of their supply chain. Dell will adopt a more traditional approach of selling computers with fixed

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