That was the case study. In the final chapter, he tells the tale of what happened after he left Dell Computers. After that unfortunate experience, he decided to take a chance and he made his decision to try a different computer company. He spent a little bit more money, but he was able to get a brand new Dell computer that he could afford. Now he had to make the decision of which company to sell the information to. It was a decision that he was going to make for the rest of his life.
He did an online search for a company that sells information and he found several that were selling information on Dell Computers. So he decided to join the company and was very happy with the company. He ended up saving a lot of money, which he never would have been able to do if he had stayed with Dell Computers. Are you an educator? Product : Pages: Related Topics: Competitive strategy , Business models , Business history ,. Newsletter Promo Summaries and excerpts of the latest books, special offers, and more from Harvard Business Review Press.
Sign up. This Product Also Appears In. Rivkin, Michael E. After years of success with its vaunted "Direct Model" for computer manufacturing, marketing, and distribution, Dell Computer Corp. The case…. Get access to this material, plus much more with a free Educator Account:. Already registered? In other words, Dell believed that using direct model of sales will allow them to capture market share, which was not possible through retail distribution.
As a result, Dell employed this model as their primary strategy. This assumption was validated with the performance of the company as Dell was not only able to create differentiation in the minds of the customer but was able to translate this differentiation with sales. The second key assumption is related to the quantity of the transaction.
Dell assumed that as the most direct customers will be businesses or government institutions, the purchase will be done on a wholesale basis. This will allow the company to sell bulk of their products in one-go.
Last of all, Dell also assumed that the major attraction for the customers will be the customization services provided by Dell, which was unmatched by the rest of the market. Time proved that Dell was also correct in this assumption as customer approached Dell to develop customized PCs, which were according to the requirements of their processes and operations.
For instance, IBM took a number of steps in order to improve the coordination between distributors and resellers. Likewise, IBM also came up with Model 0, which was capable to be designed according to the requirements of the customers. Despite targeting the customers directly, HP still kept the importance of resellers at the center of its strategy. Furthermore, these programs allowed the respective companies to challenge Dell in the market of customized PCs. There are a number of factors, which contributed to the creation of attractive computer industry in the late s.
First of all, the popularity of internet and World Wide Web fuelled the demand of personal computers. Similarly, strong economic growth also increased the purchasing power of the customers, which, subsequently, enabled the customer to afford new PCs. On the other hand, different manufacturers were able to bring the price of PCs to a level, where it can be targeted to the mass market unlike in the past.
The reduction in the price can be attributed to new cheaper technology and economies of scale achieved by the manufacturers. In this regard, Dell played an instrumental role using its direct model. This model allowed the company to cut the cost of intermediary and directly target the customers.
The reduction in the cost was passed down to customers through decreased prices. This did not provide the customers the choice to select the components they would have desired. We can say that the products provided by Dell had a pull effect whereas product provided by its competitors had a push effect. Internal Case Analysis So far we have looked at the external market, the product Dell was selling and now look at Dell and its internal factors that helped it to become a cost leader and make better profits than its rivals.
The primary activities consist of inbound logistics, operations, outbound logistics, sales and marketing and services.
To reduce the cost, Dell introduced "Just In Time". This system helped to make inventory turnover very high. It therefore helped to have "no stock lying around" and as soon as the raw material components arrived, they were assembled and shipped to the customers. This Matching Dell case solution helped Dell reduce large amount of cost as there would not be any obsolete stocks.
Furthermore, there was minimal holding cost to the company hence, reducing the cost. Whereas, this system had not been followed by its competitors and this built huge cost for its competitors hence reducing the profit of the company.
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