Essay on Dell's Working Capital

4303 Words18 Pages
TABLE OF CONTENTS
Description Page #
Executive Summary 1
Introduction
Background
Purpose 2
Research and Analysis
Dell’s Competitive Advantage
Funding 52% Growth in 1996
Funding 50% Growth in 1997 3
Conclusion 5
Exhibits
Exhibit 1: Dell’s Annual Worldwide Sales Dollar Growth Versus Industry
Exhibit 2: DSI Comparison of Dell, IBM, and Compaq
Exhibit 3: Working Capital Financial Ratios for Dell
Exhibit 4: Percent of Dell Computer Systems Sales by Microprocessor
Exhibit 5: Profit & Loss Statements for Dell Computer Corporation
Exhibit 6: Balance Sheets for Dell Computer Corporation
Exhibit 7: Projected Balance Sheet of Dell Computer Corporation for 1996
Exhibit 8: Projected Balance Sheet of Dell Computer Corporation for 1997
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The most important questions facing Dell was – how to grow and at what cost. The purpose of this research is to analyze Dell’s core strategy, its working capital management, and come up with a plan to finance its future growth by evaluating its financial statements.

RESEARCH AND ANALYSIS
Dell revolutionized the PC industry in the 1990’s because of its strategic innovation of the Build-To-Order model. It was a bold new business model that changed the rules of the industry. Through our research we have come to know that in today’s competitive world, a brilliant business model alone does not create a sustainable advantage, unless it is supplemented by operational excellence, the continuous identification and adoption of best practices.
Dell’s Competitive Advantage
Dell set itself apart from the competition by developing a system to better manage its working capital. While competitors focused on forecasting future sales, Dell developed the Build-To-Order model. This allowed for Dell to maintain their inventory cost at a minimum, which in turn lowered their cost of goods sold. Through this process Dell’s Work-In-Process (WIP) inventory and finished goods inventory in relation to present total inventory in the 1990’s was approximately 10% to 20%. This knocks out the competition which stood at about 60%. Dell definitely set itself apart from the competition. Dell made sure to master this process which allowed them to provide a service to

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