Michael Dell founded Dell Computer Corporation in 1984. In the early 1990s, Dell began expanding internationally and offering notebook computers. However, in 1993 Dell reported profits that were half of projections and its stock price plunged after recalling faulty notebooks. Dell's strategy focused on building customized computers to order using a direct sales model and partnering closely with suppliers to improve quality and efficiency. This allowed Dell to gain competitive advantages through lower costs, strong customer service, and the ability to quickly adopt new technologies.

1. DELL COMPUTER CORPORATIONS

2.  1984 – Michael Dell founds Dell Computer Corporation
 1985 – Dell offers first personal computer of its own design
 1987 – International expansion begins with opening of subsidiary in
UK
 1988 – Dell goes public
 1991 – Dell introduced its first notebook computer

3.  1992 – The company joins rank of fortune 500
 1993 (January) – Michael Dell first hears about Sony’s Lithium Ion
Battery Technology in Tokyo
 1993 (March) – Amid great uncertainty at Dell about fate of its laptop
line, Dell reorganizes its portable division
 1993 (May) – After 14 consecutive quarters with rising stock profits
the firms reports that its profits had been slashed to 10Million
Dollars, half of projected profits. Dell’s stock plunged $7 a share to
$25 dollars on the day of this announcement

4.  1993 (August) – Market decisions are made about new laptop
computer line
 1993 (Oct.) – Dell recalls 17,000 discontinued notebooks after 3
machines were returned by owners reporting such technical problems
as smoke or melted spots

5.  The company focused on selling customized
products directly via e-mail
 Dell serviced its customers with combination of
home based telephone representatives & field
based representatives
 Dell assured product quality by extensively pre-
testing all the configuration options it offered
 A 24hours telephone support system comprising
well-trained technical representatives provided the
first post shipment level of support

6.  Dell maintained a month’s worth of
component inventory, but its suppliers
generally carried supplemental buffer stock
that could be immediately shipped
 By creating close, correlated relationships
with its suppliers, vendors, and third party
maintenance providers- customers were
dealing with one large, well-run company

7.  Through its strategy, the company hoped to achieve what Michael
Dell called "virtual integration"—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
 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

8.  CORE ELEMENTS:
 Build-to-order manufacturing
 Mass customization
 Partnerships with suppliers
 Just-in-time components inventories
 Direct sales
 Market segmentation
 Customer service
 Extensive data & information sharing with both supply partners and customers

9. 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 and 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

10.  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

11.  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)
 Localised 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