DELL COMPUTER'S STRATEGY

Built around a number of core elements

Core Elements of Strategy Build-to-order manufacturing Mass customization Partnerships with suppliers Just-in-time components inventories Direct sales Market segmentation Customer service Extensive data and information sharing

with both supply partners and customers.

Virtual Integration

a stitching together of Dell's business with its supply partners and customers in real time such that all three appeared to be part of the same organizational team

Build-to-Order Manufacturing and Mass Customization

No inventory – all built to custom order. No resellers with unsold inventory. PC delivered in five to six business

days. Not the traditional value chain model.

Partnerships with Suppliers name-brand processors, disk drives,

modems, speakers, and multimedia components enhanced the quality and performance of Dell's PCs.

Partnerships with Suppliers Because Dell committed to purchase a

specified percentage of its requirements from each of its long-term suppliers, Dell was assured of getting the volume of components it needed on a timely basis even when overall market demand for a particular component temporarily exceeded the overall market supply.

Partnerships with Suppliers To help suppliers meet its just-in-time

delivery expectations, Dell openly shared its daily production schedules, sales forecasts, and new-model introduction plans with vendors.

Partnerships with Suppliers Dell's formal partnerships with key

suppliers made it feasible to have some of their engineers assigned to Dell's product design teams and for them to be treated as part of Dell.

Partnerships with Suppliers Dell's long-run commitment to its

suppliers laid the basis for just-in-time delivery of suppliers' products to Dell's assembly plants in Texas, Ireland, and Malaysia.

JIT Commitment

major cost advantages shortened the time for new generations

of computer to deploy. Minimized part obsolescence. Prices reducing 1% per week. Utilizing sophisticated data exchange

systems, Dell arranged for its shippers to do the final “assembly” of devices. (monitor and computer)

Inventory Turn

1998 by Dell 7 daysGateway 14 daysCompaq 23 days

Dell’s goal was 3 days by 2000

Direct Sales

firsthand intelligence about customer preferences and needs.

immediate feedback on design problems and quality glitches

Dell had a quick response to the problems.

Market Segmentation

In 1998, 90 percent of Dell's sales were to business or government institutions

In 1997, 31 percent, or $3.8 billion, of Dell's sales came from foreign customers, especially Europe.

1998 sales at its Web site would reach $1.5 billion.

Customer Service Maintaining its close customer relationships allowed

Dell to become quite knowledgeable about its customers' needs and how their PC network functioned.

Corporate customers paid Dell fees to provide support and service.

Problems relating to faulty components or flawed components design were promptly passed along to the relevant supplier,

Dell had plans in place to build Application Solutions Centers in both Europe and North America

capital services group to assist customers with financing their PC networks.

Virtual Integration and Information-Sharing the company was using technology and

information-sharing with both supply partners and customers to blur the traditional arm's-length boundaries in the supplier- manufacturer-customer value chain.

On-line communications technology made it easy for Dell to communicate inventory levels and replenishment needs to vendors daily or even hourly.

A number of Dell's corporate accounts were large enough to justify dedicated on-site teams of Dell employees.

Information Sharing regional forums to stimulate the flow of

information back and forth with customers. Platinum Councils composed of its largest

customers in the United States, Europe, Japan, and the Asia-Pacific region.

Dell found that the information gleaned from customers at these meetings assisted in forecasting demand for the company's products.

Premiere Pages customized intranet sites purchasing and technical information about the specific configurations

of products that their company had purchased from Dell. who the Dell sales and support contacts were in every country where the

customer had operations, detailed product descriptions, what software Dell loaded on each of the various types of PCs the customer

purchased, service and warranty records, pricing, and the available technical support.

>> most comprehensive Web-based PC commerce capability of any PC vendor.

immediate access to the same database and problem-solving information that Dell's support personnel used to assist call-in customers

Demand Forecasting Having credible real-time information about

what customers were actually buying and having first hand knowledge of large customers' buying intentions gave Dell strong capability to forecast demand.

Dell passed that knowledge on to suppliers so they could plan their production accordingly.

Sales-account managers were coached on how to lead large customers through a discussion of their future needs for PCs, workstations, servers, and peripheral equipment.

Research and Development

1,600 engineers working on product development and spent about $250 million annually to improve users' experience with its products.

R&D unit also studied and implemented ways to control quality and to streamline the assembly process.

Much time went into tracking all the new developments in components and software to ascertain how they would prove useful to computer users.

Advertising

first computer company to use comparative ads,

prominent ads in such leading computer publications as PC Magazine and PC World, as well as in USA Today, The Wall Street Journal, and other business publications.

1998, the company debuted a multi-year worldwide TV campaign

Entry into Servers

23,000-square-foot plant dedicated to server production, trained 1,300 telemarketers to sell servers, assigned 160 sales reps with systems know-how

contracted with companies such as Electronic Data Systems

"cell" manufacturing instead of an assembly line to permit faster product updates

Entry into Servers The use of servers by corporate customers

was growing rapidly. big margins on server sales analysts were skeptical about whether Dell

could provide the same quality of service and support to server customers that resellers could.

support staff to 600 employees. Partnered with Electronic Data Systems

and Arthur Andersen.

References

The McGraw-Hill Companies. (1997). Dell Computer Corporation Online Case. Retrieved 3 6, 2011, from McGraw Hill Higher Education: http://www.mhhe.com/business/management/thompson/11e/case/dell5.html