MANAGEMENT

INFORMATION
SYSTEM

DELL COMPUTERS
CASE STUDY
Dell is one of the biggest companies in the
PCs industry. Its phenomenal success
depends largely on its strategic choices, of
which IS strategy is a significant factor. Dell
is the leading company in effectively
applying IT into its business. An in-depth
analysis of how Dell has strategically used IS
to achieve its business goals will offer
practical and useful knowledge for other
businesses in improving their usage of IS and
for further research into organizations IS.

SUBMITTED BY
MAHESH CHANDER
APG12010012009
BBA (Sem-v)

Case study of dell computers

The purpose of this report was to examine an organisation that has different
types of electronic commerce interfaces. I chose DELL Inc. Which was founded
by Michael Dell in 1984.
In the beginning it was based on direct sales approach, and then it became
quickly one of the leading companies in PCs markets. It is one of worlds most
admired business. It has 3 categories of customers Large, Public Sectors and
Home and small sized businesses. Dell uses its website www.dell.com as one of
the main channels to sell products directly to customers and provide products
based on customers customized orders. Dells organizational structure is
divided into four main regions (Americas, Europe, Asia and Japan), each of
which includes their own functional departments. Dell utilises the Internet and
other advanced technology in all aspects of its relations with customers, from
ordering, sales, delivering and services to customers research and forecast
Dells information system also allows customers to use their ERP procurement
application to order products Dell provides customers with personal support
sites where information about the products and their history conditions are kept
and processed. Dell works with various suppliers for components and
softwares. The effective use of information systems to collaborate with
suppliers gives Dell several important advantages.

Introduction
Dell was founded by Michael Dell in 1984 and started as a small computer
selling company. Right at the beginning, its business based on a direct sales
approach. Dell quickly grew into one of the leading companies in PCs market
and one of the most admired businesses all over the world. Its significant
success has been mainly due to its distinctive strategic model in general and its
information systems strategy in particular. Two core elements of its business
strategy include its direct sales and build-to-order approach
Dell uses online sales and services as their main way of doing business.
However, other methods like ordering and technical services through phone and
recently, its introduction of retail stores also contribute to its business process.
This paper will limit the analysis of Dells strategic use of IS in response to two
main competitive forces: the bargaining power of buyers and the bargaining
power of suppliers.

Literature review
I will use Michael Porters competitive forces model and other studies to
analyse the strategic use of information systems in the case of Dell Inc. This
report will use Michael Porters model to analyse how Dell Inc. has used
information systems (IS) strategically and accordingly with its business and
organizational strategies to gain competitive advantages. In doing so, a brief
literature review is necessary

Michael Porters five competitive

forces model
The rapidly development of information technology in general and the internet
in particular has largely changed business process. However, the effectiveness
of IT application for the success of a business depends largely on its capacity of
systems planning. This process is very important but also very difficult and
thus, good frameworks or planning techniques are of great value. Michael
Porters five competitive forces model is one among widely used methodology
for planning of strategic usage of IT. In this model, there are five important
forces that companies have to deal with, including:
(1) Threat of new entrants as a result of emergence of new businesses like ecommerce;
(2) The bargaining power of buyers who demand for better prices and quality;
(3) The bargaining power of suppliers such as those who monopolise in an area,
or can cause high switching cost when changing suppliers;
(4) Substitute products or services which are enabled by the introduction of the
internet, for instance, travel online is a substitute for travel agents;
(5) The intensity of rivalry among competitors

Information Systems (IS) Quality

Triangle
IS Quality Triangle represents the interdependency and integration of three
levels of strategies business strategy, organizational strategy and IS strategy,
of which IS strategy must complement the other two strategies. The aim of a
business is to use IS strategically in accordance with business and
organizational strategies rather than simply using IS.
IS strategy aligned with business and organizational strategies, should be
implemented strategically to alter companys competitive forces to achieve its
business goals.

Business strategy:
Dells core interest to build up a distinct business strategy that helps maintain
its sustainability, customers satisfaction and loyalty while alter the competitive
force from its powerful customers.
In order to succeed in a competitive market, a companys business strategy must
illustrate the companys values which differentiate with competitors. In the PCs
market, where a lot of giant corporations like IBM and Compaq coexist, Dell
chose for itself a distinctive way to serve customers: business based on a direct
sales and build-to-order model. Unlike other PC makers who include retailers,
resellers and other bodies in their marketing and sales, Dell uses its website
www.dell.com as one of the main channel to sell products directly to customers
and provide products based on customers customized orders.

Organizational strategy:
Traditionally, Dell organized its business on a globally centralised and
functional basis, with all functions like sales, manufacturing and service
reporting directly to the head-quarter. Its organization was then changed to a
decentralized basis in accordance with its business model. Dells organizational
structure is divided into four main regions (Americas, Europe, Asia and Japan),
each of which includes their own functional departments. It is also further
subdivided according to business markets (large business,
government/international, small business).

Information systems strategy:

Dell uses information systems strategically and accordingly with its business
and organizational strategy to gain competitive advantages and achieve its
business goals. Build-to-order approach requires tight cooperation with
suppliers through adequately exchanging of data and trusting each other. The
use of Internet and information technology is of great significance for this
process.
When Dell receives an order, its data processing systems will identify specific
components and automatically deliver the request to appropriate suppliers. This
process is done by
1. Supply Chain Management (SCM)
2. System of Dell Enterprise Resource Planning (ERP) system,
3. Which is integrated with suppliers ERP through electronic data
interchange (EDI).
This system will collect orders every 20 seconds, analyse needed components,
check inventory and then automatically set up components requirements to
suppliers. Suppliers systems will update every 2 hours by directly connecting to
ERP procurement application.
The most important tool which increases the speed and quality of information
sharing with suppliers is Dell website www.valuechain.Dell.com. This website
keeps Dells suppliers updated about products supply and demand, inventory
data and component quality.
The effective use of information systems to collaborate with suppliers gives
Dell several important advantages:
Dells information systems enable their strategy of exchanging inventory for
information, which means Dell keeps information about customer orders and
demands instead of storing inventory. Information about current trends,
forecasted demands and news products initiatives shared with suppliers helps
minimize inventory level and cost for both Dell and its suppliers. This
consequently creates Dells advantages over indirect competitors who depend
on their resellers and therefore, lack of understanding about customers
purchasing trends and needs
Regarding components suppliers, Dell helps these partners in making decisions
about inventory ordering by sharing its forecasted information through its
extranet system monthly. These forecasts are the result from interdependent
coordination of different functions: marketing department forecasts future
demands; centre of competence checks for components availability;

commodity departments identify specific required parts to place orders to

suppliers.
For service suppliers, Dell uses its extranet, EDI and other electronic
communication to dispatch service technicians. The company aims at the
integration of its own service and support, its service suppliers and its
customers.

MANAGEMENT INFORMATION
TOOLS OF DELL:
The information processing tools used by dell are:

Computers

Internet

Maps

Spreadsheets

Models

Databases

The tools used at different levels of

management of Dell are:
OPERATIONAL LEVEL:

The tool used by Dell for information processing at operational level is maps.
Maps can determine which country or place would the information be acquired
from. It can also analyse the demographics of the relevant area, analyse sales &
gather information. Maps can be in the form of charts for critical analysis.
Thus the information gathered by the use of maps can help in strategy for
operational level.

Since Dell sell its products directly to customers generally via internet thus
different forms of payment on internet can be considered as the platforms of
Dell transaction processing system (automated transaction support)

TACTICAL LEVEL:

The tool used by Dell for information processing at the tactical level is the
databases.
The databases can be used to analyse the information from operational level &
thus evaluate the strengths & weaknesses of the organization.
This helps in planning for economical productivity & improving sales.

STRATEGIC LEVEL:

At the strategic level the tool used by Dell is the internet & the databases.
The market trends & strategies of other companies can be known via the
internet whereas databases help in analysis of both the internal environment &
the external environment. Thus helping the organization to formulate its
strategy.

INVENTORY CONTROL SYSTEM:

The inventory control system of Dell is a big reason for its success.
Dell's strategy is to keep the inventory levels as low as possible, due to the high
pace of technological advancements resulting in computer related hardware &
software becoming obsolete at a rapid pace.
Hence Dell takes orders from customers knowing exactly what the customer
wants & then using its supply chain to get the components & assemble them &

thus doesn't need to keep much inventory as the products are made to order
rather than ready made.
Thus it avoids having inventory that goes obsolete or outdated.

DELL DIRECT MODEL

Dell pioneered a new business model that focused on speed of execution and
minimum inventory. To this end, the company bypassed the dealer channel,
selling products directly to customers over the phone. This eliminated the
resellers mark-up and the costs and risks of carrying large finished goods
inventories. The Dell direct model was characterized by high-velocity, low-cost
distribution, direct customer relationships, build-to-order, Just in Time
manufacturing, and products and services aimed at specific market segments.
The direct model had several key advantages. By eliminating the intermediaries,
Dell could dramatically reduce its channel costs.

INFERENCE & SUGGESTIONS:

Dell benefits a lot by the use of management information systems. It analyses
the sales, the consumer buying trends, the internal environment, the operational
environment & the external environment using the information processed by the
information systems. Thus Dell makes intelligent well informed decisions based
on its information systems technology.
Dell can further explore the opportunities in the M-commerce & E-commerce
zones since it has to have direct contact with customers. Since it delivers goods

to customers directly the model-driven decision support system (DSS) of Dell

should be of highest quality.

Conclusion
Dells phenomenal success has been largely due to its strategic use of IS to
complement its unique business and organizational strategies. However, it is
now facing a lot of challenges from its competitors who are also very successful
in applying IT such as HP, Acer and Apple. Dells direct sales and build-to-order
model is no longer Dells uniqueness as the development of the internet enables
other companies to adopt this successful model. Therefore, it is of Dells core
interest to find strategic initiatives in addition to its traditional strategies.