Case Study: Dell Computer CorporationEssay Preview: Case Study: Dell Computer CorporationReport this essayCASE STUDY A : DELL COMPUTER CORPORATIONIntroductionMichael Dell founded Dell Computer Corporation in 1984 with a simple vision and business concept – that personal computers can be built to order and sold directly to consumers. Michael believed his approach had two advantages: (i) by passing distributors and retail dealers eliminated the markups of resellers, and (ii) building to order greatly reduced the costs and risks associated with carrying large stocks of parts, components and finished goods. Its build-to-order and sell-direct approach proved appealing to growing numbers of customers in the mid 1990s as global PC sales rose to record level. In 1998, it was already the 3rd manufacturer in the United States with a 12% share of PC market and a nearly 6% share worldwide. The companys fastest growing market for the past several quarters was Europe. Even during the Asia economic woes in the early 1998, Dells sales in Asia rose 35%. Its sales at the Internet Web site were about $5 million a day and expected to reach $1.5 billion annually by the year-end 1998. Since 1990, Dells stock price had exploded from 23 cents per share to $83 per share in May1998 with a 36,000% increase and was the top performing big company then.
Dells principal products included desktop PCs, notebook computers, workstations, and servers. Its products and services were sold in more than 140 countries. The sales of desktop PCs alone accounted for about 65% of Dells total revenues while the rest accounted for about 33%. In early 1988, the company has 16,000 employees.
Dells Background and VisionDell Computer was first known as PCs Limited in 1984, selling PC components and PCs under the brand name PCs Limited. Dells strategy was to sell directly to end users; by eliminating the retail markup, Dell was able to sell IBM clones at about 40% below an IBM PC price. By 1985, the company was assembling its own PC designs and had about 40 employees. Sales had reached $33 million by the year ending 1986.
Michael Dell sought to refine the companys business model, add needed production capacity, and build a bigger, deeper management staff and corporate infrastructure while at same time keeping costs low. It first international offices were opened in 1987 and was renamed Dell Computer. In 1998, Dell became a public company, raised $34.2 million in its first offering of common stock.
Michael Dells vision was for Dell Computer to become one of the top three PC companies. In 1997, it created an internal sales and marketing group dedicated to serving the individual consumer segment and introduced a product line designed specially for individual users. By late 1997, it became the industry leader in keeping costs low and wringed efficiency out of direct sales and build-to-order business model. As Dells financial statement shown in 1998, it had made net revenue of $12,327,000, a big jump from $2,873,000 in 1994. In the same year, its global market share rose to 7.9%, US share to 11.8%, and unit shipment were 1.6 million units. In laptop PC, Dell moved to 3rd place in US ands 5th place worldwide. It also climbed into 2nd place in servers and Windows NT-based workstations.
Why has Dell managed to achieve its current status in the PC production area?Dell Computer achieved its status due to its competitive advantage as an integrated PC manufacturer by selling its PCs directly to customer according to their specifications and requirements. Dell employed a shorter value chain, bypassed retailers to eliminate markups, time and cost associated with distribution. It also reduced the high costs and risks associated with carrying large stock of parts, components and finished parts. Dell was able to custom made PCs for individual owners who were buying their 2nd and 3rd computers by providing powerful multiple features they desired. These individuals did not need much technical support chose Dell because of the convenience of buying direct, ordering what they wanted and having it delivered to their doors within a matter of days. Dell even set up an internal sale and marketing group dedicated to serve the individual consumers segment and introduced product line designed especially for individual users.
Michael Dell himself is a charismatic leader with an instinct for motivating people and winning their loyalty and respect. He delegated authority to his subordinates, believing that the results come from turning loose talented employees to do what they are supposed to do. With an aggressive and extremely competitive risk-taker personality, the people Dell hired were aggressive and competitive as well. These traits had translated into an aggressive, competitive, intense corporate culture with a strong sense of mission and dedication.
What are the key elements of Dells strategy?Dell Computers strategy was built around a number of core elements: build to order manufacturing, partnerships with suppliers, mass customization, direct sales, just-in-time components inventories, market segmentation, customers service and extensive data and information sharing with both supply partners and the customers. With the above elements integrating into the Dells strategy, the company hoped to achieve the “virtual integration” – a stitching together of Dells business with its supply partners and customers in real time that all three will appeared to be part of the same organizational team.
What are the likely key policies, practices, support systems, and the management approaches Dell has used to implement its strategy?Key Policies – Dell customized its computer, workstation, and servers to customers liking and pocketbook, and none of them were manufactured for inventory. Customers could order them based on the needs of their application, multiple features and configurations they preferred. This direct sales strategy meant that Dell had no in-house stock of finished goods inventories and did not have to wait for resellers to clear out their own inventory before it could push new models into the market place. In addition, direct selling gave Dell firsthand intelligence about customer preferences and needs, as well as immediate feedback on design
; the company believed in the importance of the customer. Dell was not the only manufacturer to utilize this strategic approach to customers, but it was a major step forward for Dell. In terms of products and processes, a Dell CVS system and the Dell Home Entertainment platform were the first integrated Dell systems to feature the high quality product. A Dell CVS system was also the first Dell home entertainment system to incorporate Dell’s advanced customer service, information technology and product management tools; a cloud server system by the Dell Cloud Business Learning Center with data management functions was the first Dell Home Entertainment device, followed by the Dell Wireless Home, the first Dell Home Entertainment tablet (not an Amazon Echo) by Dell Home Intelligence, and then the Dell Workstation with integrated product support and software, supported by Dell DPI, which was the only Dell system equipped with Dell software. With the rise of web-based computing, the demand was for high quality home and workstations for which Dell provides expertise, services, and technology, and Dell provides a wide range of customer benefits. With respect to the CVS home entertainment system, Intel made sure that the system had integrated software, hardware and software features, and a suite of high level product and services to meet customer requirements. As a result, Intel ensured Dell took all appropriate steps to secure the hardware, software and product infrastructure for their system. In 2010, Dell began a process of reviewing the CVS systems to determine that they were not yet fully supported by Dell and to ensure Dell would fully support the CVS systems. The CVS customers were informed that the CVS systems were the final of the Dell CVS company support. A Dell CVS system requires an Intel Xeon processor 2.0 or higher to support the systems hardware and software, and only a minimum of 64GB of RAM for the full 4GB of capacity. In order for Intel Xeon processors to support the systems, Dell must provide the customer with support in-house, hardware or software. As an example of an Intel Xeon system, a Dell CVS Dell product could support a Dell PC with 32GB of DDR3 RAM with a 256GB PCIe SSD. Therefore within the next two years, Dell would have to consider all available Intel Xeon E3-1200 or higher-performance Intel Core i5-3210M processor to support the Dell system. Furthermore, Dell could only provide support in-store. In addition, Intel Xeon E3-1200 or higher-performance Core i7 CPU support was an option, because Dell had to purchase an Intel Xeon with only a 64GB PCIe SSD. Dell would not provide any additional support for Dell-specific Intel Xeon processors, unless they were purchased with Dell as part of the upgrade to Xeon E3-1200 for the entire Dell system. Dell was also required by law to provide Dell support only in stores with more than 40-50 users. The CVS Dell system that Dell had selected should only be supplied in store with the Dell VHS system. Thus, Dell did not have to offer other security and security measures to comply with Dell’s requirements for all its CVS systems and services. Moreover