Dell 's Direct Sales Market Essay

Dell. Dell’s products—computers, servers and printers—are commodities. Dell tends not to develop the technologies underlying these products. Instead, it purchases the components from firms that develop the technologies (semiconductors and computer software). Dell’s direct-to-customer marketing strategy is not unique, but the extent to which Dell performs this strategy better than anyone else in the industry gives it a competitive advantage. Its size, purchasing power, quality control, and efficiency permit it to operate as a low-cost provider.

Dell is a software company that started off with changing up the buying aspects of a computer. Dell would personally customize

In 2007, Dell decided to change the supply chain strategy to support the use of retailers for selling a standard configuration computer for customers. Customers could visit their local Wal-Mart or if in China, the local GOME retail store to pick from the standard computer models available (Chopra, 2012, Pg. 6). The changes Dell made to support the retailer to end customer model helps increase the revenues and provides a low cost solution at retail points of sale. Dell utilizes the retailer’s distribution and retail store facilities which keeps the costs low for Dell and also sees lower outbound transportation costs compared to the online supply chain model (Chopra, 2012, Pg. 21).

Having the low cost advantage Dell is able to expand the gap between cost and customer's willingness to pay. Therefore, they are able to satisfy their end-consumers, who are educated want product stability, high-end performance and low lifetime costs. They have served the US market and started to expand their market worldwide; in addition, they have

Dell positioned itself as a successful differentiator; however, its competitive differentiation is no longer an advantage for it due to the ease of their Direct Model imitation.

more discounts then Dell may be able to afford, or increase spending in areas of investment for

• Transactional buyers – SMB and Personal,user call centers, and AD’s by DELL to reach out to them

Direct Approach: Unlike competitors Dell has done away with Resellers thereby reducing costs and offering better customer satisfactions.

One of the biggest external threats to Dell is that price difference among brands is getting smaller. Dell’s Direct Model attracts customers because it saves cost. Since other companies are able to offer computers at low costs, this could threaten.

IOW: I buy Dell because I want the best solution for the money and I know they’ll have exactly what I need.

This enabled strong customer relationships and increased customer satisfaction. One of the characteristics that distinguishes Dell from its other competitors is that Dell provides the facility to customize computers of their choice and taste and deliver the system to the customer as it is. This is the most crucial and critical success factor behind Dell Computers. Dell’s direct to consumer model concept helped them reach above-average returns and remain in business today. Customers have developed a brand-name loyalty to Dell because of their cost efficient differentiation strategy. Their strategic moves for their products created an image for themselves in the market and is the reason for their dominant existence. This enabled them to earn more market share in the industry. The customer segmentation that Dell focuses on is the corporate segment and large businesses form the majority of its clients. This customer segment targeting is more likely a result of its operational strategy and not the other way round. However, with corporate segment customers seeking high performance, reliable, affordable solutions, Dell fits in comfortably. Dell also appeals to those customers who want hands on experience of the latest technology and the idea of customized computers is very appealing. For Dell, it focused on providing superior quality services to its customers through its sales representatives. It also shifted

Dell owed much of its success to its vaunted “Direct Model”: While competitors sold primarily

The technology industry is one predicated on constant innovation. Products within the field must provide a compelling value proposition for consumers in order to properly maintain both margins and revenue. Technology companies, particularly those who manufacture products are realizing decreasing margins as the competitive environment matures (Bodie, 2004). Competition for foreign competitors has reduced margins and subsequently profit margins. Cost conscious consumers are now purchasing product based primarily on price rather than specifications. Combine this fact with the macroeconomic factors prevailing in the market and the industry has significant headwinds going forward one year from now. This is particularly true of Dell who has seen an erosion of market share due to the influx and demand of tablet computers. Less demand for traditional laptops has also decreased the profit and operating margins of the firm. Even within its own market, Dell has encountered significant competition for rivals such as HP, IBM, and Microsoft who recently announced its own tablet (Scheck, 2008). Below is a chart indicating markets share within the PC market over the last decade. Notice that market share gains after the housing market collapse have deteriorated. This reflects changing consumer sentiments regarding the overall purchase of PCs and heightened demand for alternative products such as tablets and notebooks.

Dell has always been one of the largest PC makers in the United States. Recently, though its share of the PC industry has been declining. It went from the number one low cost provider of PCs in the world to number 3. Its inability to adapt to the new markets that have emerged has caused the company to fall behind other hi-tech companies such as IBM, Apple, and even HP. I feel this is an important topic because it is an example of a large company that has lost touch with what consumers want and is currently trying to restructure itself in order to gain back the dominance they once had. Consequently, Michael Dell has announced his decision to attempt a leverage buyout in order to retain control of his company. Furthermore,

1. What are Dell’s FSAs? What are the macro-level requirements for the direct sales model to be successful? What are the major advantages of the direct model, compared with the traditional channel strategy in the computer business?