Article Summary “Dell’s PC Growth Strategy – In It To Win It,” an article by Patrick Moorhead in Forbes, talks about Dell’s growth strategy plan that was rolled out by Jeff Clarke, Dell’s Vice Chairman and President of Global Operations and End User Computing Solutions. Patrick has spent more than a decade as a chip guy for PC makers and almost a decade as a PC maker himself; he talks about his own experience within the market. He states that “PCs are a volume game.” PC makers need to play a successful role in “every channel, country and price point.” Except for Apple, any other company needs to prioritize their PCs sales volume everywhere, literally. In May, 2013, during Dell’s annual industry analyst conference in Austin, Texas, Jeff Clarke …show more content…
This production line is known as build-to-order (BTO). Simultaneously, Dell is also offering a system where customize their own PC with specific styles and configurations, which is known as configure-to-order (CTO). With BTO, instead of CTO, configurations are produce in large amount with scheduling manufacturing time in advance. As a result, BTO decreases supplier and production costs. Additionally, performing BTO also makes it easier for Dell to provide customer service as well. Since configurations are produced in large number, the company and customers already have ideas of what is inside; therefore, it is easier for both to perform PC diagnosis and fix. Additionally, Dell acquires new customer by taking advantage their customer intelligence while perform its CTO production line system. Giving customers the option to choose their designs and configuration leaves Dell a reasonable amount of customer intelligence to develop specific configurations for specific markets, broaden its portfolio by offering tablets, and optimize its distribution channel. Finally, Dell also focuses on its cloud client computing business by offering another alternative, in addition to their previous and only choice, iPad. This gives the company a certainty of long-term growth. (Moorhead,
PC industry is affected by two opposite forces: technological advance that pushes the industry forward and the industry sensitivity to economical stagnation (if the economical situation is bad customers won't upgrade their computers).
Success started at a young age for Michael Dell, he was only 12 years old when his first product catalog called “Dell’s Stamps” advertised in the local trade journal. He learned early in life to develop a direct relationship with the customer which later would provide the key to his success (Krames, p. 58). Andy Grove had teamed up with Bob Noyce, and Gordon Moore in 1968 after discovering they could create chips with massive memory. Grove used a metaphor to describe his foundation of success – a three-legged stool; execution and strategy (Krames, p. 137). When one leg is off, it throws off the whole system. Dell’s major accomplishment came when he planned and sold personal computers out of his dormitory room which lead to the creation of Dell Computers Corporation. At the age of 27, Dell was the Top CEO of a Fortune 500 company. He had clear ideas about how-to-do business.
Dell’s main strength lies in their perfection of the Direct Model, which boasts a production process that lasts only a day and a half so the company is able to serve customers quickly and has the capacity to withstand very large orders. Dell built held no finished goods inventory on hand, which helps to reduce idle assets and risk. The company maintained excellent relations and communication with suppliers who were able to adhere to Dell’s just-in-time inventory management and allowed suppliers to send shipments direct to customers, reducing inefficiency. Dell encouraged suppliers to locate their facilities in close proximity to assembly operations. Additionally, Dell had very high customer service and support satisfaction and maintained some of the best performance metrics in the industry. Finally, their main source of revenue came from businesses and large government institutions and no single customer represented more than 2% of their sales, which lowers their risk of buyer power.
There are several current legal and regulatory aspects that face the company. The company has to meet the entire legal requirement and frame work of operating in computer technological industry as far as quality and price regulations are concerned. Dell has been able to meet the legal and standard requirements in the manufacture, distribution and promotion of its products. For instance it offers its products at reasonable prices that reflect the industry pricing regulations. The...
Dell Computer Company is known for its meteoric rise to industry dominance based on founder Michael Dell’s ability to transition a part-time business of building and upgrading personal computers into a multi-billion dollar enterprise (O’Rourke, 2010). Dell’s business model was producing low cost, high quality PC’s that were built-to-order called “Dell Direct”. The strategy of shipping direct to customers eliminated the need for middlemen and gave Dell a competitive advantage (O’Rourke, 2010). Company growth surged in the 1990’s with over 38,000 employees and a global platform. Dell and Chief Operating Officer, Kevin Rollins, created a fast-past, win-at-all-cost, highly competitive organizational culture whereby compensation and promotions were based on exceptional performance (O’Rourke, 2010). Finally, in 2000, Elizabeth Allen joined the company as vice president of corporate communications.
The sites give both Dell and its partners a real-time access to order and manufacture systems, so that replenishment can be tied closely to orders.
It is known that manufacturing process and cost reductions, which are pillar of the Dell business model, high profit margin will break the mightier growth for the company, through which, the best practices come in all forms. Hence, to conclude, when it comes time to decide the selection of the strategies, Dell should accept both strategies to a greater extent. It will be popular course of action for Dell to refute the claims of experts about the future of Dell. However, in this uncertain age of market, where globalization can play a key and integral role for business progress, Dell has to contemplate all the factors now to enhance its brand via products and marketing together with wide-ranging business models. Nonetheless, the management has to put its shoulder to the wheel to make the things
Dell Inc, was founded as “PC’s Limited” in 1984 by Michael Dell, while still a student at the University of Texas at Austin, with just $1000. From Michael Dell's off-campus dorm room at Dobie Center, the startup aimed to sell IBM-compatible computers built from stock components. Michael Dell started trading in the belief that by selling personal computer systems directly to customers, PC's Limited could better understand customers' needs and provide the most effective computing solutions to meet those needs. In that year, the company became the first in the industry to sell custom-built computers directly to end-users, bypassing the dominant system of using computer resellers to sell mass-produced computers.
Why has Dell been so successful despite the low average profitability in the PC industry?
Distribution channel deals with the delivery of the product to the customer. How good the distribution channel is, depends how effectively the channel fulfils the customers need of time utility and place utility as well as keeping the channel structure under manageable levels.
Historically, personal computer companies produced most of the components for a computer which they assembled into their final products and distributed to resellers. The manufacturing of these components was vertically integrated into the organisation. Dell, as a small start-up, could not build this infrastructure. Instead, they developed a model where they developed relationships with organisations that could provide these components, allowing Dell to focus on selling and delivering computers. By selling directly to customers, initially through mail orders and later by using the internet, Dell avoided reseller mark-up. Dell also enabled customers to order customised computers, which Dell then assembled after receiving the order (Magretta, 1998, p.73-74). “Customers got exactly the computer they wanted and Dell saved money making the computers only when they were ordered” (Hill & Seggewiss, 2008)....
In 1984, Michael Dell invested $1,000 in start-up capital to register his business as Dell Computer Corporation, which was known as PC's Limited. The company becomes the first in the industry to sell directly to end-users by passing the dominant system of using computers resellers to sell mass-produced computers. Dell Computer also pioneers the industry first thirty-day money back guarantee. It became the cornerstone of Dell's commitment to expand its service offerings, superior customer satisfaction, and the industries first on site service program. It also established its first international subsidiary in the United Kingdom, and raised $30 million in its initial public offering.
Michael Dell founded Dell Computer Corporation in 1984 with a simple vision and business concept – that personal computers can be built to order and sold directly to consumers. Michael believed his approach had two advantages: (i) by passing distributors and retail dealers eliminated the markups of resellers, and (ii) building to order greatly reduced the costs and risks associated with carrying large stocks of parts, components and finished goods. Its build-to-order and sell-direct approach proved appealing to growing numbers of customers in the mid 1990s as global PC sales rose to record level. In 1998, it was already the 3rd manufacturer in the United States with a 12% share of PC market and a nearly 6% share worldwide. The company’s fastest growing market for the past several quarters was Europe. Even during the Asia economic woes in the early 1998, Dell’s sales in Asia rose 35%. Its sales at the Internet Web site were about $5 million a day and expected to reach $1.5 billion annually by the year-end 1998. Since 1990, Dell’s stock price had exploded from 23 cents per share to $83 per share in May1998 with a 36,000% increase and was the top performing big company then.
The PC industry is highly competitive and constantly changing as technology evolves and customer needs change. Some of the top competitors in the PC industry are IBM, Hewlett-Packard, Dell and Apple. Theses rivals are constantly jockeying for the top competitor’s position. They compete in prices, product innovation, advertising, etc.
Dell’s initial competitive strategy, when it was founded in 1984 by Michael Dell, was to focus mainly on differentiation. Its strategy was to sell customised personal computer systems directly to customers, which was a rapidly emerging market at that time (1). This was done by targeting second-time customers, those that already understand computers and know what they wanted. Meanwhile other companies at the time was selling “’plain brown wrapper’ computers” (2). By offering customisations, Dell gained a better understanding of customers’ needs and wants. This helped the organisation position itself differently against the more popular brands, such as Compaq and IBM.