Dell Case Study


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Dell Case Study

  2. 2. INTRODUCTIONDell was founded in 1984 by Michael Dell, the computerindustrys longest-tenured chief executive officer, on a simpleconcept: that by selling computer systems directly tocustomers, Dell could best understand their needs andefficiently provide the most effective computing solutions tomeet those needs. This direct business model eliminatesretailers that add unnecessary time and cost, or can diminishDells understanding of customer expectations. The directmodel allows the company to build every system to order andoffer customers powerful, richly-configured systems atcompetitive prices. Dell also introduces the latest relevanttechnology much more quickly than companies with slow-moving, indirect distribution channels, turning over inventoryevery three days on average.
  3. 3. HISTORY OF DELL• Dell grew through the 1980s and 1990s to become at one stage the largest seller of PCs and servers• In 1992 , Dell entered into the Fortune 500 list• In 1996 , Dell began selling computers via its web site(, generating $1 million in sales per day just six months after site is live.• In 1999 , Dell overtook Compaq to become the largest seller of personal computers in US• In 2006 , Dell was 25th in Fortune 500 list
  4. 4. COMPETITION IN PC INDUSTRY• The PC industry is driven by rapid technological improvements in components, particularly microprocessors, other semiconductors, and storage devices• Two factors come into play in determining the ability of PC companies to manage inventory and introduce new products.• The traditional distribution system of the PC industry is an indirect model often referred to as “the channel”
  6. 6. DELL BUSINESS MODEL• Dell operated as a pioneer in the “configure to order” approach to manufacturing - delivering individual PC configured to customer specifications• To minimize the delay between purchase and delivery, Dell has a general policy of manufacturing its products close to its customers.• This also allows for implementing a just-in-time (JIT) manufacturing approach, which minimizes inventory costs• Low inventory is another signature of the Dell business model - a critical consideration in an industry where components depreciate very rapidly.
  7. 7. Comparison b/w Compaq and Dell sales model
  8. 8. DELL’s value web modelComponent supplier- The high-tech components, such asmicroprocessors and software areprovided by firms as Intel and Microsoft,they rely on big players.- The low-tech components are providedby small multiple players who compete onprices and availabilityOriginal Equipment Manufacturer (OEM)The OEMs traditionally would receive allthe parts from their suppliers, assemblethe computers in their production linesand ship them over to their distributors,or Corporate resellers.
  9. 9. DELL’s value web modelDistributors- They generally supply to corporateresellers and other distributors- They carry large quantities of differentproducts to increase their leverage whendealing with their customers- They also provide specific software,peripherals, furniture,as well as service- For example: Ingram Micro, Tech Data,Computer 2000, and Santech.Corporate resellers / System integrators-The corporate resellers or systemintegrators buy systems directly frommanufacturers and install these systemsat their corporate clients- These are firms whose main purpose isto provide customization to their clients
  10. 10. Benefits by implementing this model• DELL - Cash :Dell maintains a negative cash conversion cycle, that means the payment receive for the product before it has to pay for the material - Cost :Dell´s direct sales and build-to-order model has achieved superior performance in the PC industry in terms of inventory turnover, reduced overhead, cash conversion, and return on investment. Bypassing the reseller channel that causes further cost reduction to the company - CRM :Direct customer relationship is the key to Dell´s business model, and provides distinct advantages over the indirect sales model -Demand forecast: Dell has additional advantages over PC vendors who must try to forecast demand and ship products based on those forecasts• CUSTOMERS - Tailored offerings from Dell in terms of add-on products and services - Very customizable systems at an affordable rate, since Dell manufacturing builds specifically for each customer
  11. 11. Customer Driven Innovation at Dell• Dell has continued to provide distinctiveness to the industry, giving new products, pioneering critical developments and innovations in home, small business and enterprise computing.• Dell’s R&D efforts now extend to all over other industries, driven by some of the industry’s leading product designers and engineers.• The focus point of Dell’s innovation approach remains an unwavering commitment to delivering new and better solutions that directly address customer needs.• Dell start their innovation process with asking their customers, “What would you really want this thing to do? Is there a different way to accomplish that?” Then they meet with their suppliers and ask, “Can we do this in a different way?”
  12. 12. Customer Driven Innovation at DellThey learn from the feedback from customers and suppliers.• Listen • Dell understands the necessity directly through tens of thousands of customer interactions, organized events, social media venues such as communities and customer panels.• Impact • Many innovations commence in-house, led by a global team of top engineers, product designers and technical experts. Others begin as a team effort with Dell’s strategic partners. • The mission is to deliver innovative and cost-effective solutions that meet today’s real-life customer challenges and work seamlessly in existing environments and with other products.• Solve • Dell is uniquely positioned to impact industry trends. We maintain strong internal development capabilities. We associate, rather than compete, with top industry technology suppliers and original development manufacturers.
  13. 13. Dell’s Latest Experiment• To reach the customer through social media eg. Twitter , facebook , linked in etc.