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Dell

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27 views2 pages

Dell

Uploaded by

henock
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Dell

“We have a tremendously clear business model,” says Michael Dell. “There’s no confusion
about what the value proposition is, what the company offers, and why it’s great for customers.”
Dell is now the number-one computer systems company.
Dell is extremely responsive. Buyers go on Dell’s Web site and design their own computers.
They give their payment authorization, which means that Dell receives the money in advance
and can use the funds to pay for the supplies needed to build the computer. Because its
computers are built-to-order, Dell carries an industry-leading four days of inventory. It takes
delivery of components just minutes before they are needed. At its Austin, Texas, factories, a
Dell System can in some cases be built, have the software installed, be tested, and be packed in
eight hours. Dell’s costs are lower, allowing it to price its computers lower than competitors’
prices if it wishes.
Yet speed is only one part of the Dell equation. Service is the other. In fact, it was through
veering away from its successful business model that Dell discovered the importance of
customer service. In 1993, the company began trying to sell to retailers, mainly because
everyone else was. Customers were disgruntled because of poor retail service. Dell ultimately
abandoned the retail channel.
Most important, Michael Dell decided that “there would be more things we’d have to do besides
build a PC.” He knew his company had two kinds of customers, corporate and consumer.
Whereas the consumer would buy mainly because of price, the corporate buyer needed a
carefully developed relationship. Like most successful companies, Dell put the most resources
into building relationships with its most profitable customers.
Corporate customers make up about 80 percent of Dell’s business, and the company manages its
corporate accounts with a top-notch sales team. Dell also installs custom software and keeps
track of business customers’ inventory for them. Through the use of Premier Dell.com,
customized customer Web pages at the Dell site, the company has created a 24-hour order-entry
system. Big customers can click on the site to see all kinds of information about their preferences
and needs. The site can be accessed worldwide by any company subsidiary; and employees, not
just purchasing agents, can use the Premier Dell.com to purchase computers according to an
automated policy. “It’s the ultimate network,” Michael Dell says, “and a fabulous way for us to
interact with our customers.”
The normal practice of companies is to “build-to-stock.” This is a guessing game that companies
often lose by building too much or too little. In the auto industry, cars will sit unsold in dealers’
lots for 60 days, tying up working capital. Why have auto and other companies not moved from
the inefficient “build-to-stock” model of production to Dell’s “build-to-order” model? Auto
manufacturers have invited Michael Dell to speak to them on several occasions. The consensus
seems to be that Dell works with 50 main suppliers to put together a $1,000 PC, but a car
manufacturer may have to work with 900 suppliers to put together a $20,000 car. In addition to
the technical challenge, the auto industry faces dealer and legislative hurdles.

Questions

1. What have been the key success factors for Dell?


2. Where is Dell vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives going forward?

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