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dell strategy history
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The computer industry has benefited from the explosion of home computer usage and has become one of the most competitive industries in the world. With technology growing at amazing paces, many of the computer companies have fallen behind and even out of the industry since the development of the computer. Only the strongest companies have been able to be profitable and efficient. Dell Inc. is one of the few corporations to be able to remain at the top of the market.
Dell began as the vision of Michael Dell. The company began in 1984 with a simple business concept to build computers to order and to sell directly to customers. Dell has a history of achieving double-digit increases in annual sales. To maintain this growth, Dell is faced with many challenges in maintaining it’s distinctive capabilities and using objective analysis to ascertain it’s strength’s, weaknesses, opportunities, and threats.
“Dell's vision is to work closely with our development partners to provide 100% perceived availability to the application environment.” "Dell's mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve.” In doing so, Dell will meet customer expectations of: highest quality, leading technology, competitive pricing, financial stability, and individual and company accountability. From the nine essential components of a mission statement, Dell’s mission statement includes: products or services, markets, technology, and concern for survival, growth, and profitability. The most important value to Dell is to satisfy their customers and the second most important value is to be profitable.
Dell has three distinctive capabilities which consist of: 1) selling products directly to consumer’s which eliminates the markups of resellers 2) build products as they are order, which eliminates overstocked products and 3) having the ability to respond quickly to customers who experience problems with their products.
1. How and why did the personal computer industry come to have such low average profitability?
Michael Dell is the founder and CEO of Dell Computers Inc. one of the largest sellers of personal computers in the world. His contribution to the computer industry is the “one-to-one relationship between the company and the customer— there are no intermediaries, no middlemen” (Krames, 2003, p.59). Not only did he relinquish the middleman, he also perfected combination of the bottoms up strategy and the just-in-time (JIT) by waiting till he received orders from the customer to build computers. In doing this, Dell increased its return on investment (ROI) while reducing its inventory overhead cost.
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.
Dell inc. is mostly known for personal computers, storage devices and computer peripherals. The company is highly innovative and has been known for its excellent direct-sales and build-to-order model that have contributed highly to the growth and profitability of the company. Dell is known for best organizational practices and organizational culture. It promotes a positive culture that encourages team spirit and good relationship between all the stakeholders. Technology industry or sector is among the toughest industries which demand much effort, innovation and effective marketing and promotional strategy in order to compete favorably.
Dell attended the University of Texas immediately after high. While at college, he noticed computer dealers standing on street corners to locate customers. More importantly, he noticed that these same computer dealers had “very high markups, very low service, and inventory everywhere”. (Thorpe, Helen 1) It was then that Dell realized what would become his life’s career. He used a portion of his savings and began to build and sell computers from his dorm room. “His emphasis, however, was not just making good machines but ensuring strong customer support and cheap prices.” (Michael Dell e.g.) Soon after Dell began selling to the students that attended his college, he established new accounts with customers outside of the school as well. It w...
...e will be self-designed and computer generated, of course. Fulfillment of services will be provided exclusively by CCC's owner. Technology is obviously a critical component of this business: It will be important to stay up to date on both equipment and knowledge to remain competitive in th? future. Bibliography Crayton, Harrison. Michael Dell steps aside as CEO of Dell Inc.: Dallas Morning News, Th? (TX), 03/04/2004; (AN W73230395460) pp 2Caroline, Humer. Dell Inc. reports 24% gain in fourth-quarter net profit By: Toronto Star (Canada), 02/13/2004; (AN 6FP2158689500). Pp 3McWilliams, Gary. Dell Inc. Installs Security Chip In Business PCs. By: Wall Street Journal - Eastern Edition, 2/2/2005, Vol. 245 Issue 23; (AN 15943600) , p D4Caroline, Humer. Dell Inc. reports 24% gain in fourth-quarter net profit By: Toronto Star (Canada), 02/13/2004; (AN 6FP2158689500). Pp 5
Dell Inc. is a privately owned multinational technological company, which develops, sells repairs and supports computers and relates products and services. Dell Computer has a fully Internet-enabled supply chains, which is constructed by the extranet to automate interactions with suppliers, service partners and customers .
To conclude, in order for Dell to compete successfully in today's industry, it needs to take advantage of all of the above opportunities. Consumers are becoming more demanding and price-sensitive. The next generation of products must be consistent with the relevant trends affecting the industry today. If Dell excels in its attempt to make a product that fits the trends, it will probably still remain one of the leaders in today and tomorrow's industry.
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.
Michael Dell founded the company Dell to offer network servers, workstations, storage systems, Ethernet switches, desktops, and notebook PCs after successfully selling his computers to customers directly in Texas. Over the course of three years his sales volume warranted the opening of an international sales office in 1987. In 1988 he began selling to large customers including several government agencies and Dell became a publicly traded company.
Why has Dell been so successful despite the low average profitability in the PC industry?
During the next several years, however, PCs Ltd. was hampered by a lack of money, people, and resources. Michael Dell sought to refine the company's business model, add needed production capacity, and build a bigger, deeper management staff and corporate infrastructure while at the same time keeping costs low. The company was renamed Dell Computer in 1987, and the first international offices were opened that same year. In 1988 Dell added a sales force to serve large customers, began selling to government agencies, and became a public company¡Xraising $34.2 million in its first offering of common stock. Sales to large customers quickly became the main part of Dell's business. By 1990 Dell Computer had sales of $388 million, a market share of 2-3 percent, and an R&D staff of over 150 people. Michael Dell's vision was for Dell Computer to become one of the top three PC companies.
Dell Inc. weakness was cell manufacturing because their assembled computers were being shipped five to six days after the order was placed. It is an inconvenience for the customers to always send their computer away to have it repaired. First, they are left without internet access. Second, the time it reaches Austin, Texas, have it repaired, and shipped back can take days. The company opportunities were the Dell U.K. that open business in 1987 and in that country it was a lot of companies selling cheap computers. Dell Inc. strides on loyalty among customers and employees, and that could only be derived from having the highest level of service and performing products. Segmentation within the company enables them to measure the efficiency of the business in terms of assets use. Dell Inc. evaluates their return on invested capital in each segment, compare it with other segments, and target what the performance of each should be.
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.