Dell Computer's Marketing Strategy

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Dell has built their business:
- 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.

Based on:
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

Published in: Technology

Dell Computer's Marketing Strategy

  1. 1. Dell Computer's Strategy<br />Built around a number of core elements<br />
  2. 2. Core Elements of Strategy<br />Build-to-order manufacturing <br />Mass customization <br />Partnerships with suppliers <br />Just-in-time components inventories <br />Direct sales <br />Market segmentation <br />Customer service <br />Extensive data and information sharing with both supply partners and customers. <br />
  3. 3. Virtual Integration<br />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<br />
  4. 4. Build-to-Order Manufacturing and Mass Customization<br />No inventory – all built to custom order.<br />No resellers with unsold inventory.<br />PC delivered in five to six business days.<br />Not the traditional value chain model.<br />
  5. 5. Partnerships with Suppliers<br />name-brand processors, disk drives, modems, speakers, and multimedia components enhanced the quality and performance of Dell's PCs.<br />
  6. 6. Partnerships with Suppliers<br />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. <br />
  7. 7. Partnerships with Suppliers<br />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.<br />
  8. 8. Partnerships with Suppliers<br />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. <br />
  9. 9. Partnerships with Suppliers<br />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. <br />
  10. 10. JIT Commitment<br />major cost advantages <br />shortened the time for new generations of computer to deploy.<br />Minimized part obsolescence.<br />Prices reducing 1% per week.<br />Utilizing sophisticated data exchange systems, Dell arranged for its shippers to do the final “assembly” of devices. (monitor and computer)<br />
  11. 11. Inventory Turn<br />1998 by <br />Dell 7 days<br />Gateway 14 days<br />Compaq 23 days<br />Dell’s goal was 3 days by 2000<br />
  12. 12. Direct Sales<br />firsthand intelligence about customer preferences and needs.<br />immediate feedback on design problems and quality glitches<br />Dell had a quick response to the problems.<br />
  13. 13. Market Segmentation<br />In 1998, 90 percent of Dell's sales were to business or government institutions<br />In 1997, 31 percent, or $3.8 billion, of Dell's sales came from foreign customers, especially Europe.<br />1998 sales at its Web site would reach $1.5 billion. <br />
  14. 14. Customer Service<br />Maintaining its close customer relationships allowed Dell to become quite knowledgeable about its customers' needs and how their PC network functioned.<br />Corporate customers paid Dell fees to provide support and service. <br />Problems relating to faulty components or flawed components design were promptly passed along to the relevant supplier,<br />Dell had plans in place to build Application Solutions Centers in both Europe and North America <br />capital services group to assist customers with financing their PC networks.<br />
  15. 15. Virtual Integration and Information-Sharing<br />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.<br />On-line communications technology made it easy for Dell to communicate inventory levels and replenishment needs to vendors daily or even hourly.<br />A number of Dell's corporate accounts were large enough to justify dedicated on-site teams of Dell employees.<br />
  16. 16. Information Sharing<br />regional forums to stimulate the flow of information back and forth with customers. <br />Platinum Councils composed of its largest customers in the United States, Europe, Japan, and the Asia-Pacific region.<br />Dell found that the information gleaned from customers at these meetings assisted in forecasting demand for the company's products.<br />
  17. 17. Premiere Pages<br />customized intranet sites<br />purchasing and technical information about the specific configurations of products that their company had purchased from Dell.<br />who the Dell sales and support contacts were in every country where the customer had operations, <br />detailed product descriptions, <br />what software Dell loaded on each of the various types of PCs the customer purchased, <br />service and warranty records, <br />pricing, <br />and the available technical support.<br />>> most comprehensive Web-based PC commerce capability of any PC vendor.<br />immediate access to the same database and problem-solving information that Dell's support personnel used to assist call-in customers<br />
  18. 18. Demand Forecasting<br />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. <br />Dell passed that knowledge on to suppliers so they could plan their production accordingly. <br />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. <br />
  19. 19. Research and Development<br />1,600 engineers working on product development and spent about $250 million annually to improve users' experience with its products.<br />R&D unit also studied and implemented ways to control quality and to streamline the assembly process. <br />Much time went into tracking all the new developments in components and software to ascertain how they would prove useful to computer users. <br />
  20. 20. Advertising<br />first computer company to use comparative ads, <br />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.<br />1998, the company debuted a multi-year worldwide TV campaign<br />
  21. 21. Entry into Servers<br />23,000-square-foot plant dedicated to server production, trained 1,300 telemarketers to sell servers, assigned 160 sales reps with systems know-how <br />contracted with companies such as Electronic Data Systems<br />"cell" manufacturing instead of an assembly line to permit faster product updates <br />
  22. 22. Entry into Servers<br />The use of servers by corporate customers was growing rapidly.<br />big margins on server sales<br />analysts were skeptical about whether Dell could provide the same quality of service and support to server customers that resellers could. <br />support staff to 600 employees.<br />Partnered with Electronic Data Systems and Arthur Andersen.<br />
  23. 23. References<br />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<br />

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