Introduction

Dell followed the Direct Selling approach. Dell was the market leader until 2006 with approximately 17.1% market share Competitors: HP, Acer, Toshiba, Lenovo After a sharp decline in the market share, decided to adopt the channel marketing strategy Dell started a formal channel partner programme for Value Added Resellers (VAR), retail outlets

Dells Value Web Model

OEMs Logistics Partners System Integrator s

Component Suppliers

DELL

Customer s

Third Party H/W and S/W Suppliers

Distributor s --------- INFORMATION FLOWS ______ PHYSICAL FLOWS

Maintenance and Support Companies

Five Tenets of Dells Direct Selling Model

Most efficient Path to the Customer

Single Point of Accountability

Build-to-Order Low-cost Leader Standards-based Technology

Advantages of direct selling

Customization benefits, so the consumer could got

precisely what he wanted and pay for the same Reduces inventory and related costs like holding and stocking were nil No middlemen and their commissions

Advantages of direct selling

The attention could be given to the quality of the

product rather than managing the supply channel Lower prices due to absence of distributors margins and inventory costs Knowledge of customers preferences Scope for improving the technology and bringing in innovations

Disadvantages of direct selling

Lack of economies of scale because there was

no mass production involved Lead time limitation; no scope for on-the-spot delivery Low on innovations concerned with offers and schemes No Service centers led to dissatisfaction amongst current users of non-technical background

Reasons for Dells failure

Lack of channel members, and therefore no push

strategy. Dell is a technical product, so a lot of subcontracting is involved. This led to reduction in sales. After sales services not accessible to people with less technical knowledge.

Reasons for Dells Failure

Mature PC market in USA, growing laptop

segment Decline in consumers purchasing through web and phone Consumers wanted a touch and feel option before buying the product

Reasons for Change

Dell saw a further erosion in its market share in

2007 HP became the market leader Direct selling and supply chain efficiency were no longer a competitive advantage for Dell HP had a much more diverse channel strategy, it was selling direct and through retailers Dell had no retail presence

Dells New Strategy

Michael Dell took over as CEO replacing Rollins
Dell decided to sell the PCs in USA, Canada, and

Puerto Rico through Wal-Mart and Sam Club stores Dell opened a retail store where PCs were kept on Display and there was no inventory of PCs Tie Ups with Carphone Warehouse group in UK and Carrefour in Europe

HPs distribution strategy

The distribution method included third party resellers and direct & indirect selling to business as well as consumers. The various types of channel partners utilized by HP for various customer groups include retailers, resellers, distribution partners, independent distributors, OEMs, ISVs, system integrators.

HPs distribution strategy

HP had also exposed loopholes in the direct

selling model adopted by companies such as dell. Viewed its channel partners as strategic allies and tried to make their association more profitable. Actively promoted its channel partners to the end user.

Embracing the Channel

Apart from retailing Dell focused on VAR

To focus on enterprise and midsize business

markets VAR (Value Added Reseller) :Adds some features to an existing product, then resells it as an integrated product VARs wanted following things from Dell:
Decent Margins

Co-marketing material to include VARs

A channel chief who is trusted by the channel Participation of Dell in channel partner events Dedicated technical support team for VARs

Embracing the Channel

Dell appointed a new Channel Chief

The sales revenue from the VARs channel was

touching US$ 4 Billion Dell launched PartnerDirect program to facilitate the channel members

PartnerDirect
Exclusive channel partner program for resellers

and service providers Structured with two levels of participation:

Registered partners Certified partners

Dell hoped to increase its channel partners in

North America from 15,000 in November 2007 to 30,000 by the end of 2008

Smart Move by Dell?

The new channel strategy was appreciated by

many experts Dell had changed its strategy and was customer centric Partnering with Wal-Mart was a win-win since both of them benefitted in the process

Is Dell taking a big risk?

Some analysts felt that Dell was taking a big risk

by entering into retail Many risk associated with supply chain operations like change inventory management, vendor management Many VARs had long term relationship with competitors and were skeptical about Dells initiatives

Results
Initially Dells market share fell by 5% and there

was a rise in HPs market share By the end of 2007 Dell started showing signs of recovery but was still trailing behind HP Companys retail push increased sales in the consumer market and the channel partnerships increased sales in the professional segment A total 0f US$ 9 Billion sales had been made through the channel (Oct 2007)

Outlook
Dell was confident that the initiatives it had taken

would lead to a healthy growth and profitability in the long term A revamp of the brand image was planned to shed the image of a low cost manufacturer All kiosk would be closed to focus on Direct selling and retail It still believed that it had the best supply chain effeciency

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