Dell
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Dell. Selling Directly, Globally. History. Founded in 1983 by Michael Dell at age 18 Began selling upgraded PCs and add-on components from a dorm room at the University of Texas In its 15 th year of operation Ranked 2 nd in the US and worldwide PC market in 1999 . History (continued).

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Dell

Selling Directly, Globally


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History

  • Founded in 1983 by Michael Dell at age 18

  • Began selling upgraded PCs and add-on components from a dorm room at the University of Texas

  • In its 15th year of operation

  • Ranked 2nd in the US and worldwide PC market in 1999


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History (continued)

  • In 1985, Dell was a $6.2 million business

  • In 1996, Dell began its Internet approach

  • Dell expanded to $21.7 billion in 1999


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Dell Profile

  • Dell Computer Corporation became official in May 1984.

  • It was founded on the Direct Business-to-Consumer Model.

  • It is the fastest growing among all major computer systems companies worldwide.

  • Michael Dell is the youngest CEO of a Fortune 500 company

  • In July 1999, Dell became the #1 PC Vendor to businesses in the US


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General Environment

  • Demographic

    • Target Consumers: small to medium sized businesses in the US market

    • Location: In the US, UK and 14 international subsidiaries by 1999


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General Environment

  • Global

    • Operated sales offices in 33 countries

    • Served customers in more than 170 countries and territories around the world

  • Technological

    • Internet presented a medium which Dell used to enhance its direct sales approach

    • 24 hour on-line technical support, order status information, and downloading of software


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Industry Analysis

  • Intensity of rivalry

    • Legend remains #1 in China

  • Product Substitutes

    • Legend is adopting the just-in-time delivery mode

  • Power of Suppliers

    • IBM, HP, and Compaq establish plants in China

  • Power of Buyers

    • Chinese were uncomfortable using credit cards online thus hurting online sales


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Competitive Environment

  • Shipping in US and worldwide: Compaq, IBM, HP, and NEC

  • Competition in China’s PC industry in 1999:

    • Legend

    • IBM

    • HP

    • Founder

    • Great Wall

    • Dell


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SWOT Analysis

Strengths

  • Great Customer Service

    • Customers can call or access Dell’s website and order a customized computer in less than 10 minutes.

    • A customer then has a number of methods to contact Dell’s technical support such as the phone, online and on-site repairs should a problem arise.


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SWOT Analysis

Weaknesses

  • Unfamiliarity with the Chinese socioeconomic situation

    • The price of a PC was the equivalent of two years of a person’s savings.

    • Retail buyers only accounted for 10% of sales.


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SWOT Analysis

Opportunities

  • To increase market presence in China, the second largest PC market in the world

    • China’s PC Industry had seen extraordinary growth between 1990 and 1996.

    • Dell had a good chance of increasing its presence in the Chinese market by introducing the Direct Model.


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SWOT Analysis

Threats

  • Red Tape with the Chinese Government

    • China’s nationalistic policies made US companies operating in China vulnerable to the ups and downs of Sino-American relations.

    • The Chinese government made no secret than national PC vendors would be promoted.


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Capabilities

  • Direct sales operations

  • Customer service

  • Just-In-Time inventory usage


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Core Competencies

  • Tangible Resources

  • Intangible Resources


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Strategic Analysis

  • Current Strategies

    • Business-level strategy

      • Differentiation from competitors.

    • Corporate-level strategy

      • Financial position


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Performance Appraisal

  • Success in niche market

  • Fast service

  • Current value

  • Consistent sales growth


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Strategic Alternatives

Channels

  • Direct

    • Direct business-to-customer model

    • Cutting out the cost of distribution

  • Indirect

    • Selling through distributors and adding value resellers


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Strategic Alternatives

Products and Service

  • Build-to-Order direct sales approach

    • Knowing exactly what customer wants

    • Free installation of applications software

    • Timely delivery of orders

    • Comprehensive on-line purchasing tool

      • On-line technical support

      • Order status information

      • On-line downloading of software


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Strategic Alternatives

Building a business solely on pricing

  • Pricing advantage


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Epilogue

  • Does Dell succeed?

    • Partially yes, and partially no.

    • Dell could not succeed its business compared to the other markets

  • The factors affecting Dell’s direct-business model in China

    • Uncomfortable with credit card sales

    • Costs of enforcing the direct model took a sizable chunk away from Dell’s earnings

    • Future potential for Internet growth was huge

    • Uncertain


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