Harvard Case - Matching Dell

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Matching Dell

1. Analyzing Dell’s value chain and competitive strategy, explain how Dell was able to succeed (build competitive advantage) in the low profitable situation of the PC market.

“Value Chain Analysis” is a tool for analyzing the value creation system of competitors. Objective is to develop a value creating system with competitive advantage. A value chain is a chain of activities. Products pass all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities. It is important not to mix the concept of the value chain, with the costs occurring throughout the activities. A diamond cutter can be used as
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“Marketing / Sales” While most competitors supplied machines based on orders from distributors, resellers, retailers, Dell took orders directly from customers. Dell used indicators of a company’s potential PC purchases, such as the number of employees and the number of PCs per employee, to divide customers into two groups: Relationship buyers and Transaction buyers.

Relationship buyers were large companies and institutions that could be counted on to place repeated orders for multiple PCs. Dell assigned a team of outside sales reps and inside sales reps to each Relationship account. Over a thousand outside sales reps spent their time in the field, understanding customer needs, courting customer personnel, helping customers configure their information systems, and promoting Dell’s products and services. Inside sales reps, located in call centers, received telephone calls from assigned customers. Because Relationship customers typically specified particular PC configurations that their employees were allowed to order, the inside reps serving such customers simply took orders and provided product and delivery information. Both inside and outside sales reps had access to on-line information about a customer’s entire purchase history and worked closely with Dell personnel responsible for after-sale service and technical support.

Transaction buyers included small-to-medium businesses and home computer users. The company reached these customers via advertisements in trade
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