How the Internet is Enabling Dell to Reinvent E-Commerce

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. 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.

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

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.

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.

Dell was more capable of maintaining the Direct Model strategy than most, if not all, of its competitors. The resources that supported this advantage were the close relationship Dell had with its suppliers, a solid just-in-time inventory management system, and proximity of warehouses and production facilities to assembly operations. In addition, Dell’s computers developed a reputation of reliability and the company excelled at customer service. While the Direct Model seemed to challenge competitors, many other companies were able to imitate Dell’s reliability and customer service.

Dell entered into China, the world 's fastest growing PC market in 1998. Even though it was a late entrant, Dell initially succeeded through its direct business model, which is primarily aimed at industry and public service units. But this approach will leave the Chinese consumers ' desire to touch the product before buying. Although the actual growth of the zones, the third and fourth tier cities are left behind. But the Chinese grass was tamed domestic brand, Lenovo. It 's relational and efficient supply chain business model, combined with the commercial network helped Lenovo corner 35% market share; Dell continues to dip. But 2005 was a challenging year for Dell. Not only did the company 's struggles in the consumer electronics segment, which leads to the cancellation of MP3 players, but also the core of the PC segment, Dell was the corner of its traditional competitors, such as Hewlett-Packard and Gateway, and new competitors, such as Lenovo and Acer. This resulted in lower average sales prices of Dell products and operating margin weakened. Dell has problems on various fronts; the share price fell to $ 29 in October 2005. (IBS Case Development Centre, 2015)

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

Dell responded to changes in the market by determining how different segments of customers derive value from its products and services. The company 's analytics showed customer demand had become quite complex. The B2B market demands predictability, speed, customization, services and precision delivery. Consumers want multiple channel options, the ability to personalize for niche products, low-price options and devices that deliver content. This complexity will only increase as content and virtualization begin to drive the market. To address

Due to a changing market environment and existing product life-circle there is a need for the company to revise its present business units and to think about further expansion. There is a shift in customer demand and therefore it is crucial for Dell to recognize in what ways best to satisfy the customers?needs.

Dell Inc. is an American exclusive multinational PC innovation organization situated in Round Rock, Texas, United States, that creates, offers, repairs, and backings PCs and related items and administrations. Eponymously named after its originator, Michael Dell, the organization is one of the biggest mechanical companies on the planet, utilizing more than 103,300 individuals around the world. Dell offers (PCs), servers, information stockpiling gadgets, system switches, programming, PC peripherals, HDTVs cameras printers MP3 players and hardware worked by different makers. The organization is understood for its advancements in store network administration and electronic trade, especially its immediate deals model and its work to-request design to request way to deal with assembling—conveying singular PCs arranged to client details. Dell was an immaculate equipment seller for quite a bit of its presence, however with the obtaining in 2009 of Perot Systems, Dell entered the business sector for IT administrations. The organization has subsequent to made extra acquisitions away and organizing frameworks, with the point of extending their portfolio from offering PCs just to conveying complete answers for big business clients.

With a net revenue of $61,133,000,000 is the second largest computer manufacturer company in the word and the number one in United States. Dell focuses on Business to Business(B2B) and Business to Consumer(B2C) commerce to satisfy their business and individual customers. Dell differentiates between classes of customers because the needs of their business customers, who buy large quantities of computers, are different than the individuals who want to configure a single unit. The present