Dell Business Strategy Change

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Dell Computer have recently announced changes to their business strategy and supporting supply chain. They will no longer focus on a made to order direct sales model for their personal computers. Nor will they continue to refine their renowned supply chain model that supported their sales model. Instead, they will be looking to produce personal computers with fixed configurations at lower prices. This essay looks at why Dell have changed their strategy, and then considers the customer value proposition of the new strategy, as well as lessons that other organisations can learn from the Dell experience. According to Michael Cannon, Dell's President of Global Operations, the key differentiators that have made Dell so effective for nearly two decades are its made to order direct sales model and its innovative supply chain (SCN, 2008). 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).... ... middle of paper ... ... , accessed 31 Aug 2008. Kumar S & Craig S, 2007, 'Dell, Inc.'s closed loop supply chain for computer assembly plants', Information Knowledge Systems Management 6, 197-214, IOS Press. Magretta J, 1998, 'The power of virtual integration: An interview with Dell Computer's Michael Dell', Harvard Business Review, vol.76, no.2, pp.73-84 SCN, 2008, 'Complete Transcript of Michael Cannon of Dell Describing Plans for Supply Chain Transformation', Supply Chain News, 14 April, , accessed 16 May 2008. Shah A, 2007, 'HP tops Dell as world's largest PC supplier', Infoworld, October 17, 2007, , accessed 31 Aug 2008.
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