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TABLE OF CONTENTS
1. Introduction.
2. History of Dell.
3. Importance of Strategy.
Strategies of Dell
Competitive environment of Dell
Indirect Channels
The Direct Model
5. Management principles of Dell.
7. Recommendations.
8. Conclusion.
9. References.
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1. INTRODUCTION:
emphasises the company to look into short Term goals and Plan for Long term goals
and future plans. It not only provides the company the capability to face a problem but
also helps to find the root cause of it so as to avoid such consequences in future.
the company, Scope of the company and Competitive advantage of the company.
These strategic key objectives help employees to know about the strategy of the
company, Roles and responsibilities inside the organisation. The purpose of this case
study is to understand the Strategy of “Dell” which is world known as the market leader
of “IT Industry”.
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2. History of DELL:
In the year 1983, A 18 year old kid named Michael Dell decided to discontinue
his education at University of Texas at Austin in order to work for full time in the
company so he founded the company and named it as ‘DELL’. Initially Dell was
serving corporate companies by providing computer hard drive upgrades and built-in
IBM PC computers using stock Components. Dell had annual sales of $6 million till
1984. In the year 1985, Dell came up with a new strategy by offering customers to
personalize built-in-order computers. And there by Dell generated annual sales of $70
million in 1985. Dell preferred lower cost for marketing strategies. It placed
in the customer who is expecting high quality configuration at lower cost and also
assigned a Dell toll-Free number thereby encouraging customer to reach the company
through telephones to place an Order and enquire about the product. These factors
helped dell computers to reach top position in the direct-mail market. Within a decade,
Dell has reached an annual sales of around $1000 million, and by the end of 20th
century, Annual revenue of Dell reached $25 billion. Now, Dell Inc. is known for its
innovative techniques in the market. It not only builds up and repairs computers but
also supports services of other accessories. Dell carries its hold in personal computers,
hard drives, HDTV, MP3 format games, cameras, hosting space, circle switches,
printers. The Key for Dell success was not only due to Innovations manufacturing and
supply chain but also due to Distribution strategy implementation. Analysing the
emerging market trends of personal computers and changing the present strategy of
value chain, Dell Inc. topped in PC Market sales and is still dominating as a global
leader in IT Industry.
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3. DEFINITION OF STRATEGY
Strategy aims to find ways to achieve goals, which even helps in solving many
issues of the company facing in between the parties. The companies in the current era
have a competitive strategy to gain more profits or else to produce in a bulk so that the
turnover will be high. The strategy can be developed by planning directly or indirectly
the activities of different departments of the company. The key strategies of a company
comprises of leadership in costing, differentiation with other companies and the focal
point at which the company needs to focus. If these strategies aren’t applied then the
Strategies of Dell
Dell is one of the top competitors in market but even then it faced many challenges
due to instability with its strategy and the change in environment. The Dell’s strategy
just in time inventories, direct sales, customer service and the data sharing with
suppliers and customers. The Dell has managed to make the profit margin while prices
are falling too. The Dell’s successful business strategy is cost leadership. The
the product. In effect to the losing momentum in performance the company had to
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Competitive environment of Dell
The Dell’s competitive advantage is the direct sales. Dell monitors its supply chain,
which makes it easier to build a computer with the requirements of the customer, which
is termed as customization. Dell has strong customer relationship. Dell has some minor
points to be considered as that can affect the company's growth because Dell mainly
depends on suppliers. The Dell has opportunities in applying various strategies, which
is by meeting product demands. Dell also has direct sales in which the company sells
the products directly to retailers and corporate customers. The threat Dell is facing is
competitive rivalry from HP and inconsistency in currency markets which effects the
sales.
4. METHODOLOGY:
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The research includes information and data obtained from several journals, books, and
articles. The companies involved in research are HP and DELL. The reports, which
are made annually, and websites of the companies are the references for the
information and data. In addition the strategies for managing and models for business
of both the companies are scrutinized and discussed in arrangement with financial
1. Indirect Channels:
The manufacturers of personal computers are using indirect distribution channels for
sales. The sales of personal computers in indirect distribution channel is shown in the
below figure. In this process the distributors purchase the computers directly from
manufacturers and will sell to the corporate customers who buys in bulk. The resellers
also purchases directly from manufacturer and the computers are customised according
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The direct sales of the computers from manufacturers is shown in the below figure.
The DELL company has developed a new prototype in business which helps in
reducing time for execution and minimum inventory, by doing this the company
avoided the dealer channel and started selling products to the customers directly even
with the required customization by the customers. This eradicated the resellers to mark
the costs properly and taking the risks of finished products in the inventories. The
distribution, maintaining direct relations with the customers, computers are Build-to-
intermediate channel which helps in reducing channel costs. The DELL computers are
build-to-order so that customers can have their computers with their requirements. The
DELL Company has very quick supply chain and in which the products are moved
quickly rather than the indirect channel. Dell depends on IT to strictly control its
supply chain value to gain high level coordination within their suppliers, but not only
that but Dell also maintains quality and data links are built to supervise real time flow
of materials throughout the chain. Suppliers are informed exactly about the daily
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requirements for production. The dell uses IT to maintain logistics so that if defect
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5. Management Principles of DELL:
ideology. Dell is using this strategy to be very different from the competitors. Dell
has won many awards in customer service and it is one of the companies which has
achieved growth in a short period of time. ‘Direct’ means Dell is having direct
relationship with the customers by avoiding retailers, traders or resellers. This helps
the company in maintaining a fixed price as there is no variation in the price of end
product as well as any part of discounts involved from any new retailers. Dell is
using this strategy to provide customers high quality configured systems for a much
cheaper price compared to competitors. Dell has the most efficient manufacturing
requirements. Dell also gained more data on which configuration are in demand
and which spares could be manufactured in excess to meet consumers demand. Dell
also uses the data to keep the customers in touch before and after sale of the systems
providing the customers product in a very less period of time as the inventory is
changed every 10 days on an average by keeping the inventory cost to be very less
.Due to all these reasons the stocks of Dell has a massive gain every year making it
a top company.
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The Dell Direct model explained above how the Dell is managing the Build-to-
order technique. The Dell’s direct model is known to everyone giving more
visibility among the other competitors making it a sole competitor in this principle.
The Direct model in the means that anyone who buys the product is an end
customer. For example, if any other company first sells its products to distributors
and then in turn sells it to retailers and then the retailers sells the product finally to
customers and taking effective feedback might change from the hierarchy but in
case of Dell it is direct and so the budget will come from each of its trade units. The
Dell’s survival was mostly based on customer satisfaction and this made the Dell
to be most successful and rapid increase in its business as it managed to cater to the
needs of the ordered spares to be delivered before the finished product was
assembled. This time management and all the processes involved in it were required
The Dell was not only based on customised order and direct sales but it also has
some key features to make the difference and few other principles were also
included that were very much essential for the business and these included:
c) Constant change
d) Criticality of coordination
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A. Exchange inventory for information
Dell has a strategy of collecting data and analysing and using the data for its
business. In this strategy, Dell has exchanged inventory data in order to fulfil the
supply and demand. Dell does not keep the inventory ready in a warehouse or in a
retail outlet but will be stored as an information. Dell analyses the information and
forecasts if the customer demands are more. Manufacturing in Dell depends on the
data forecasted and in turn at the same time the suppliers of parts or spares would
be informed in advance for the spares which have huge demand. Dell also forecasts
business. The information can be stored much effortlessly. The company no longer
company had to store only information which was very easy even to discard. The
information was much cheaper than to store the inventory. This was made linked to
the same principle of Dell’s made to order strategy and to eradicate the middlemen.
This strategy made them deliver cost effective products for a very competitive
pricing. In case of the other competitors would put the finished goods and when the
technology is advanced or changed they had to dispose the out-dated product and
this did not happen in case of Dell as they reduced these to stop this type of losses.
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B. The Focus of Dell on velocity, volume and value
The idea of Dell exchanging the data for inventory increased the company’s
termed as velocity. The focus on velocity was the main criterion of the company. In
order to fulfil the change in technology and change in products accordingly was very
important. The objective to respond quickly to the change was termed as velocity at
Dell. Michael Dell explained the same as a “Time driven culture”. The volume in the
business would increase rapidly when the velocity increased. The volumes were also
the result of the information collected through the online stores and processes involved
in the same .The majority of the values were given to customers, stakeholders and
staffs. The Dell’s systems provided gave the data of customer demand in time to time
basis and this helped in Dell to negotiate favourably with the suppliers of the products
because Dell had grown out to be a huge company in a short period of time compared
to other competitors in the same business platform. This was termed as ‘value’ for Dell
customers. The velocity, values and volume wanted the improvement in the systems
in Information Technology and hence they did not make any new decisions in
management. The company wanted to reduce the problems incurred in the data flow,
origin of data, and everywhere the company could find data. Time was most valued
parameter in Dell and reduction in time in processes added value to all stakeholders.
The reduction in task and process time was done to all processes. Value was offering
the products at low cost to customers and in turn the business would be more and the
stakeholders also profited. The company even shared the bonuses with employees. The
compression in time led to the increase in value in all the business processes.
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The change is the only constant in this world and environments in every
businesses change rapidly due to the change in technology and Dell managers knew
that everything would change from time to time and even processes change. The
change made the Dell to focus more on velocity and to engage the managers to be
aware of the changes in the environment and adapt to the changes. As there was an
emergence of a new technology the product would change again and the processors
inside the computers keep changing every 3-4 months on an average as very large
scale integration makes processor chipsets to change giving faster processing time.
Dell predicted the change would be very often and used strategies to be a sole
competitor in the fast changing environment and Dell predicted the changes would
successful than any other competitors. Dell is also advancing at a same pace as a
D. Coordination is critical
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The efforts to coordinate to the company’s objectives were very difficult initially
in a fast paced changing environment. The top management team in the Dell consisted
of 16 professionals and they will meet every month to discuss about new strategies and
new products to be developed under proper authorization and optimization. The most
of the time spent in Dell is planning and coordination between employees. The
keep all the employees moving in the same direction as there are rapid changes in the
environment and coordination between employees and business units are very critical.
The business model is made initially and according to that model the coordination is
achieved at Dell. The proper training is issued on how to collect valuable information
In Dell the most of the budget is spent on training new employees. The new employees
are given their specific job role and specific training on product is given and a CD is
given to each employee to teach the overview and essential information required for
an employee and this provides the virtual guided tour of Dell before the employee
starts working in the company. This is how the coordination is achieved in Dell by pre-
training new employees and allowing the managers to coordinate with the velocity of
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A Business model is a strategic plan of a company to generate revenue and
segmenting the product based on customer requirements and price and improving
Business model describes the structure of the company and the methodologies
applied to increase the profits of the company. Business model and business strategy
are different from one another. Strategies deal with implementation of different ideas
from competitors so as to attract customers and satisfy their requirements. Where the
Business model deals with the basic structure of the business. A company has to
indulge in both market strategy and an ideal model to succeed in the market. Business
model is a fundamental element for a Strategic planning of the business. This type of
strategic planning is the key for altering the present business plan to improve
performance financially and thereby company gains higher capital returns for its
investment.
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Business model of Dell is a combination of Built-to-order production and its direct
sales strategy. This model might look so very simple conceptually, but its execution is
very complex. Dell puts its own efforts to reach customers but other PC makers depend
on retail sector, resellers and distributors and other marketing agents to improve sales.
thereby saving 6 percent of the product cost when compared to competitors who follow
Indirect selling method.(Rappa, 2007). This direct approach helps Dell to analyse
about the present trends of customer requirements and thereby can respond to market
quickly than the competitors. Dell has classified its customer base into three categories
namely Relationship customers, Transaction customers and Public customers are also
principles like Lean Manufacturing and JIT [Just-In-Time]. And the main reason for
these principles is to reduce the Inventory stock based on regular consumption. The
Common point of contact for Sales, Manufacturing, logistic and delivery domains is
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Dell initially sold the products directly to the customers using E-mail ordering system.
The emerging Internet technology was used to benefit as it turned out to be an online
sales platform. As Internet technology was new, a lot of customer support had to be
deployed to help the new users in ordering the product successfully. Dell started
generating an approximate revenue of 4 million per day by the year 1997. The
competitors of the dell which were other PC (Personal Computer) and Laptop
or their requirements which they thought would suffice the customers and this was a
standard product as it was a finished end product which cannot be altered or changed
according to customer’s requirements. The customers had to select among the different
models and adjust the specifications to their criteria and buy the pre-configured
products whereas Dell offered customer to select their own specifications like RAM
(Random Access Memory) size, ROM (Read Only Memory), Hard disk size,
Processor, Graphics configuration, screen size ETC. This initiation from Dell was
accepted by majority of the customers as the people could as per their custom
requirements .The people would not buy the parts which they never use and thus the
laptops and PC’s were available for a cheaper price compared to the competitors. The
use of online platform eradicated the middlemen, traders and retailers. This ideology
used by Dell helped the company in its initial growth of the company as the products
were much cheaper and good quality .The company generated a lot of customer data
by using internet sales .The company could recognise the demands based on the data
collected and could analyse the future demands and based on that could divide the
most selling spares and this developed product development and production as which
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product should be produced more and is likely in demand and these information’s
manufacturing sector. Dell ensures that the quality of the component manufacturers
are up to industrial standards. Vendors and suppliers had a long term agreement by
developing its components based on Brand name and Barcode. Dell undergone
agreement with suppliers ensuring to establish a place to stock their inventory near its
Assembly Plant. This move from Dell helped them to communicate in real time with
suppliers. This new concept of “just-in-time” overruled the Inventory storage concept.
construction of Warehouse for Inventory storage. This close relation with suppliers
Information technology is used to make sure that there wouldn’t be any boundaries in
supply chain that is between Supplier, manufacturer and customers. This helped the
firm to increase their manufacturing Efficiency and thereby cutting down the
Operation cost to the minimum. This results in gaining more profits to the Investors.
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Consider a Situation where A Customer by name ‘YOU’ walks into a Subway for a
MEAL, reaches Counter for placing an Order and finds a Touch screen virtual access
on Internet. More than 3 Million Customers view this website weekly. www.dell.com
not only provides wide range of information about product line up but also offers an
option to configure systems and purchase it online. It also provides information about
Sales planning and strategy of both ‘DELL’ and ‘SUBWAY’ are quite similar to
one another. They help the customers to plan the module based on the necessity and
The Web Pages also contains information about features and benefits of both hardware
The Sales and Customer database helps all the departments of the company like
Logistics and supply chain, design and Manufacturing, Production and quality control,
Sales and Marketing and all the employees to improve the performance in their
About the product by analysing the number of Promoters towards the company and
number of detractors of the company, It also helps in testing new products and services
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The sales strategy of DELL remains in service after customization. IT plays a vital
role in DELL Success. Website will provide the tentative amount of the product which
which will be imposed in competitors can be excluded here at DELL. With the help of
the product, universal pricing and Purchase order tracking using real-time tracking
technique, Customer Purchase history and Audit trail of the product service
information, virtual help desk which can help customers to access information in
D. Partner Relationship.
Time]. Dell gives more priority to inventory movement rather than its Inventory stock.
It ensures higher pace in refilling the inventory to its MSL. Virtual integration plays a
vital role in maintaining better relationship with Suppliers. This technique helps Dell
to share its complete information with external suppliers in real time. On the other
hand, this also helps external suppliers to keep a track on its daily material
E. Mass Customization
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Dell webpages Offer customers to virtually customize their PC’s in thousands of
the components of the computer including Processor, Internal and External Memory
hard drive, Operating system, RAM, video card, Graphics card, CD-ROM and DVD-
ROM drive, Inbuilt Antivirus, zip drive, sound card, networking options for LAN,
Outer looks and Colour, Panel, Touch Screen. Dell ensures that technologies
and Engineers who are qualified and capable of validating the quality Check in
different areas such as Design of System Architecture, Designing Logic Board layout
channels like WIFI, Bluetooth and LAN port, Operating Systems speed, Audio and
Display check, Battery backup, LED and LCD Display screen quality, Etc. This
Performance check and Internal Audit is to ensure that the PC manufactured from Dell
is up to the industrial standards and thereby meeting the cost objectives of the company
F. Just-In-Time Manufacturing
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The Dell has this concept of Just in time manufacturing and this means that after
the customer has given confirmation or ordered a product. The product is assembled
after that according to the customer’s requirements in a very short period of time and
delivered to the customers address directly. This concept is called just in time
by a small group of employees. The small work group is well trained and each one of
them have a designated work to carry on effectively. The inventory control is based on
customer satisfaction and is carried on at the point of assembly. After the order is taken,
and baskets. The computer is assembled by the small group of employees. Each
computer is made separately. To manage the whole world, the people should work in
all shifts making to suffice the product with quality and time providing the customer
satisfaction. In a tightly coordinated supply chain it is all about how the managers
The Dell’s ideology of maintaining closer relationships with the customers gives some
value delivered to them from factory. As Dell loads the software in the factory itself
and initially it was like an employee would visit the each desk manually and install the
software one by one and it would take a lot of time to do the manual process and the
labour cost involved was too high and so Dell came up with an idea to create a massive
network of high speed 100 MB Ethernet and by using this network a software can be
installed in a short period of time by providing the network cable in the each
workstation and when the system is identified automatically and the software’s are
automatically installed on the hard disk of a computer. The process involved would
initially cost around 100-200$ but after this technique was developed it cost them
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around 15-20$, which made the products and services more valuable to the customers
and the cost saved by this ideology was to reduce the product cost. Michael Dell stated
that the virtual integration model helped them to meet the customers faster and to be
more efficient than any other model. By using the virtual integration, makes the
company to be more efficient and to be able to respond to changes at the same time.
The main goal of the company is to be in advance of the change always and knowing
the change a little bit in advance to respond to the change and adapt to it more quickly.
This is the reason why Dell spends most of its time with customers.
The use of Virtual integration with IT by Dell has created a lot of competitive
G. Manufacturing Process
Dell has a strong priority towards its operations. The computers manufactured by dell
are designed according to the customer requirement and there wouldn’t be any
warehouses or inventory, it shows the status as work in progress. The parts come from
the suppliers just in time and then directly the manufacturing process starts so that the
storage can be avoided. Several teams are present for building the computers from
initial process till the end, the team members have share in profits and incentives, the
performance of the teams are monitored hourly in the factory. There is no inventory
for finished products, once the computer is ready it is directly taken out from the
factory, this is achieved by maintaining close relationship with the supplier. Dell main
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7. Recommendations:
Dell is facing more strategic issues being a top company in the market and the company
is also having many drawbacks as the current trend of selecting PC’s is based on only
IOS or windows software. There are many competitors for Dell like HP, Lenovo and
Acer ETC. The competitor companies also get the same manufactured products from
china and now a days the price of all the components has become the same everywhere
and people are giving more importance to quality of product and services offered. The
company takes 7 days to assemble and deliver the product as in the Dell’s website but
the current trend is that time is one of the important factors that play a vital role in
selecting Dell PC’s. The Dell should also come out with having own retail stores
making the product to be available instantly. The Dell can also launch pre-configured
systems and as well as provide customisation to the people who have enough time to
wait. The Dell is also not able to supply to all market needs due to the current strategy
of having limited vendors in the supply chain. The company should consider more
diverse suppliers enabling the company to offer more customised products. The Dell
8. Conclusion:
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The Dell continues to be a top leading company by its unique ideas such as
customization and customer service. Dell is also able to cater quality products at
nominal pricing rates. The parts are readily available and they are just assembled and
shipped out in a few hours and Dell is able to maintain this consistency by using data
analytics. The Dell will always respond to the changes very quickly making it to adapt
to any environment. The Dell will focus more on Information Technology to make the
company to provide Information systems solutions. The Dell has an effective supply
chain management strategy to cater direct sales and it is also improving on technology
of fast information flow mechanisms like POS data .The risks associated with finished
demand-driven and coordinated with true customer demand. Dell has decreased lead
time and variability in the manufacturers supply chain. Overall these factors of
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Models of Instant Customization
9. References:
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