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
Inventory turnover increase of 634.9% at Dell against 202% at Compaq shows the competitive advantage if Dell in managing and maintaining its stocks
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
1. How was Dell’s working capital policy a competitive advantage? Dell’s core strategy in the 90’s, build to order business model, allowed the firm to work with minimum finished goods and work-in-process (WIP) inventory. As a result, Dell maintained low inventory costs and permitted the company to adjust to technological innovations in the market. Dell’s WIP and finished goods inventory as a percent of total inventory was about 10%-20%, compared to the industry rate of 50%-70%. This led the company have low accounts payable, low cash conversion cycle, and high inventory turnover (Dell DSI 32 days vs. 58 days). As Dell’s computers were assembled after the company received the sale order and, as the rate of
If Dell were to operate at Compaq’s DSI level, we estimate that Dell would have to increase its 1995 inventory from $293m to $668m, which is an increase of $375 million. This would mean that Dell would have needed to invest in $668 million in inventory. I believe that the main reason that Dell was able to maintain such a low level of inventory compared to their competition has a direct result of their competitive strategy to maintain a minimum level of inventory.
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.
1. From Tab #1, what is the meaning of the Unneeded Investment? Why is having fewer “days” of inventory an advantage over Compaq?
Dell Company has a successful business strategy. As it is following cost leadership strategy. Its success story is hidden in cost proposition, delivery, and unique customization. In response to the high performance and better chances for growth Dell is applying two way strategy parallel to one another.
Dell and Hewlett Packard (HP) are two of the most influential companies in the PC market. The CEO of HP requires an understanding of how dells strategy allows it to achieve a competitive advantage so that he/she can counteract it. This report has been carried out to provide the CEO with the necessary information to do this. Therefore the objective of the report is to provide the CEO with detailed information on Dell as a business and its strategy. In order to achieve this, first the main strategies of Dell and how they provide competitive advantage will be identified, then the business models and e-business initiatives used
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
Thanks to just in time manufacturing system, Dell built its brand as an efficient and
Essay 1 : Introduction to Dell 3 Parts - Look at the Business Model in Particular (Is it fit for purpose?) – Then the Ecosystem – The Modularization and mention licensing Look the Paradigm of Dell Conclusion
From the findings, we learn about the management style of both, Michael S. Dell, Kevin B. Rollins and his management. At start, Mr. Dell was seen as aloof and Mr. Rollins as autocratic. Trying to improve the company, Mr. Dell took step to enhance relationship with their team. In order to be the leader in low-cost PC, he uses a direct sales model which causes Dell to transform from a no-name PC player to a powerhouse. He focuses on cost efficiency to reach his goals. As a result, his overhead expense was just 9.6% revenue,
Although Dell is an extremely successful company, there are areas of improvement and enhancement that should be considered. After a thorough analysis of Dell¡¯s IT tools, business model, IT infrastructure and competitive advantage, we have developed seven key suggestions. By implementing these recommendations, Dell can keep its high ranking in the competitive computer industry by increasing customer satisfaction, competitive advantage and superior value chain, without changing its principal operations to achieve these goals.
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 has managed to become remarkably successful in a short span of time by following a direct "business to customer" model. By selling computers directly to customers, they have been able to best understand their needs and provide effective solutions to meet those needs. Dell built PCs to order, so customers received only what they wanted. Dell 's just-in-time inventory system allowed them to order only parts that customers demanded, thus keeping the minimal inventories and enjoying the cost-reductions which in turn were passed to customers. Dell 's extensive use of e-commerce contributed to further cost minimization, reduced the order and delivery time for customers, and customization. There are three golden rules