Dell's Competitive Strategy Essay

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Competitive Strategy Competitive strategy is the approach that an organisation takes in order to gain advantage over its competitors. According to Porter, there are two major sources of competitive advantages: costs and differentiation. Cost-based competitive advantage involves reducing production costs so that an organisation can earn higher profit margin or offer products at lower price compared to competitors. Differentiation-based competitive advantage involves offering unique properties that are not offered by competitors’ products. Differentiation allows an organisation to charge a premium for their products because they offer additional benefits to buyers. Dell’s initial competitive strategy, when it was founded in 1984 by…show more content…
Dell was also the first computer company to create a direct-sale website. As the first-mover in the online retail market for computers, Dell had a tremendous advantage compared to its competitors, as evident from a 50 percent growth rate against the industrial average of 5 percent in 1998 (2). However, because of changes in the industry in recent years, Dell has started partnering with discount-retailer, such as Wal-Mart, to supplement its online sales (1). By partnering instead of opening its own retail store, Dell is able to reach a broader market while still maintaining its focus on direct-sales approach. In addition to selling directly, Dell also concentrated itself on targeting high-margin business customers instead of the highly competitive retail PC industry (2). Dell’s focus on providing information and technology to corporate client shows that Dell applied a focus strategy. A focus strategy is indicated by choosing a specific target market within an industry to concentrate on (4). This approach allowed Dell to avoid intense price wars and concentrate on building important reputation with businesses. In 2007, Dell corporate sales represented 45% of Dell total sales by volume (5). Currently, Dell is ranked as the No.1 PC supplier for small and medium businesses. It is also the provider for the 10 largest U.S. companies and top 5 U.S. commercial banks (6). Besides reputation, Dell gained
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