Dell 's S Current Situation

In 1994, Dell made the bold decision to remove their products from retail stores and focused on direct to customer sales. In 1996 Dell began selling through their website which is to this day their most successful sales channel. By eliminating their retail store presence Dell was able to reduce costs on multiple fronts, reduce inventory, and maximize profits. Dell created an order system which allowed customers to specify and select options, components and features they wanted on their Dell device. Dell 's just in time inventory system lowered inventory holdings to just 3 days from 9 days and storage costs were thus minimized significantly. In 1995, Dell entered the Chinese market where a population of 1.3 billion was a great opportunity to create a significant market presence; IBM, Compaq, and Hewlett-Packard had all penetrated the Chinese market prior to this date and had opened offices in China during the early 1990’s. It wasn’t long before Dell proved to be worthy competition with not only international companies but also with local companies like Toshiba, Samsung, NEC and Acer. With so

The most critical shifts in Dell’s contextual factors, including industry dynamics, trends, technology changes and shift of the competitive landscape are following: The industry has changed significantly over the last 20 years. The traditional business model in the PC industry was inside-out, supplying machines based on orders from distribution, resell and retail channels, thus following the indirect selling concept. Dell’s direct model was at this time a new, challenging concept, taking orders directly from the end-consumer, and thereby, eliminating the middleman, costs and time. This was the initial crucial shift away from the traditional schema, allowing Dell’s quick

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 uses a just in time order fulfillment policy and accurate forecasting of sales to minimize inventories. This allowed Dell to hold inventory of finished products far below levels of their competitors (10-20% compared to 50-70% industry level) and furthermore allowed them to quickly implement changes to their product lines as new technologies became available. This quick inventory turnover also allowed Dell to retain more capital. Finally, this policy enabled Dell to respond immediately to technological progress in components and deliver state of the art new finished products (e.g. Pc’s holding the newest Pentium microprocessors) while competitors

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.

Historically, Dell has been known as an industry leader in supply chain management. They have been credited with developing supply chain processes that have come to be recognized as some of the most innovative not only in their industry but throughout all business sectors. All of these accolades made Dell an unlikely choice since there didn’t appear to be much room for improvement, at least from a supply chain standpoint. However, over the past few

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).

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

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).

Dell is able to sustain a competitive advantage over competitors in the computer industry because of an extremely efficient supply chain/distribution system and its JIT inventory system. Since inventory and labor are the highest liabilities of a firm and Dell operates with a few days of inventory, they are able to cut costs on warehousing, hiring people to track and maintain inventory, and avoid holding on to obsolete technology.

The proposal presented herein gives the background information of Dell Computers Corporation highlighting the current operation for the manufacture of computers. The proposal highlights the potential of the company to increase its market share and profitability through change of its culture from order based to inventory base.

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.

What are the key challenges DELL should be concerned with as it enters the large-scale server market? (3 Points)

REF OF GROUP MEMBERS’: TABLE 1 : 5 C’s SITUATION ANALYSIS Factors Dell Company: Resources 1.4 Licensing, Distribution channel, Supply • Intellectual property, Human resources, Patent, Competences Brand acuity1 chain management 24 25 Techno structure • Just-in-Time; CRM; Engineer R&D, Acquisition

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