Dell Business Case Study

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Business Model

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 at Dell: disdain inventory, always listen to the customer, and never sell indirectly.

Key Issue(s)

China had been identified as a very promising market and Dell has set the goal to improve its rank from seventh to second place in this PC market. However, Dell faces many challenges in this market. The Chinese government actively promotes the Chinese PC maker "Legend" who dominated the market; penetration of the Internet is relatively slow; software piracy is rampant; competition is intense. In addition, there is fierce competition for market share and Dell's competitors have started imitating Dell's business model. Dell needs to determine how it should modify its strategy to succeed in the Chinese market.

Alternatives and Evaluation

1. Open up Dell Retail Stores

The Chinese are uncomfortable with purchase high-ticket-price products that cannot be viewed before purchase. This is one of the reasons that Dell has invested in door-to-door sales calls. If Dell were to open up retail outl...

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...s option addresses the hesitance of customers to make such a large purchase for a product brand that is not well established in China. This option will allow customers to transfer residual risk and implement a disciplined approach to technology rotation. I believe that for China, customers will be more likely to choose Dell products because this is in a sense a "try before you buy" opportunity. There won't be such a large initial investment, plus they can feel secure that the purchase they make will not become obsolete technology in the near future. I believe that this option will help Dell established a more recognized, stronger brand name and that it will allow Dell to establish long-term relationships with their customers. This option is in line with Dell's plan for growth in China and will allow Dell to leverage its strengths to make it a successful strategy.
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