Dell's strategy focused on delivering the best customer experience through direct sales and building high-quality, customized computer systems after receiving orders. This allowed Dell to gain cost advantages in components, inventory, and selling while also developing strong customer knowledge. Dell further strengthened its advantages through continuous technology improvements and expanding into new product lines. Dell's control systems, including a performance scorecard, localized decision-making, business unit metrics, and expedited assembly, helped execute this strategy and maintain Dell's competitive advantages.

1. Case 7-5: Dell Computer Corporation

2. 1. What is Dell’s strategy?
Dell’s strategy was based on:
 Market leadership as a result of a persistent focus on delivering the best possible customer
experience. Direct selling, from manufacturing to consumer, was a key component of its strategy.
 Its reputation as one of the world’s most preferred computer systems companies and a premier
provider of products and services that customers worldwide needed to build their information-
technology and internet infrastructure.
What is basis on which Dell builds its competitive advantage?
Dell redesigning PC industry value chain as a tool in developing competitive advantage based on:
Cost advantage: This was done in three areas:
 Component purchase costs,
 Inventory costs
 Selling and administrative costs.
Customer knowledge advantage: Dell understood consumer needs and efficiently met those needs by
selling computer systems directly to customers. The direct business model eliminated retailers, who added
unnecessary time and cost, and shipped directly from its factories to end customers. It took orders for
hardware and software over the phone or via the internet. Dell designed an integrated supply chain linking
Dell’s suppliers very closely to its assembly factories and order-intake system. Dell outsourced all
components but performed assembly.
Technology advantage: dell custom-built its machines after receiving an order instead of making machines
for inventory in anticipation of orders. Dell introduced the latest relevant technology much more quickly than
companies with slow moving inventories; turning Dell to become the number-one retailer of PC, outselling
IBM and Hewlett-Packard.
IBM and Hewlett-Packard
Dell moved into IT portfolio; it moved into servers, and storage, mobility products, and also challenged
Printer leader HP.
2. How do Dell’s control system help execute the firm’s strategy?
Performance Measures: Dell’s scorecard included both financial measures (such as ROIC, component
purchasing costs, selling and administration costs) and non-financial measures (component inventory stock
outs, finished goods inventory, A/R day and A/P days).
Localized decision making system: Dell used its structure as a flat organization as a competitive
advantage and localized its decision-making. If an issue did not require a higher up’s attention, then
decision would be made without involving him. This would not have been possible in companies bogged
down by layers of bureaucracy.
Business unit Performance: in 1993, Dell developed a set of metrics to judge business-unit performance.
Expedited the assembly process: Dell recognized early the need for speed, or velocity, quickening the
pace at pace at every step of business.