Dell Computer adopted an internet-based direct sales model in 1996. This allowed them to eliminate inventory costs and achieve 60x inventory turnover compared to competitors. Dell customized PCs to customer requirements and coordinated its entire value network through the internet with suppliers and partners. This virtual corporation model placed Dell at the center of all communication. Dell leveraged e-commerce to improve customer reach and enable online ordering. However, Dell struggled to convert its e-marketplace into success and lacked integration between its IT tools. Its future strategy focuses on increasing e-commerce usage in developing countries through education and incentives, providing more value-added services through business analytics, and improving its partner network and local support for geographical expansion.

1. Case: Dell Computer – Using E-commerce to Support the Virtual CompanyGROUP-4Alok Joshi - 2009EPGP003Kapil Wadhwa - 2009EPGP013Mohammed Jaipuri - 2009EPGP016Prateek Narula - 2009EPGP024Rajendra Inani -2009EPGP027Prof. S. Ramanathan EPGP 2009-10IT StrategyIIM, Indore

2. Topics Background and Overview

3. Business Strategy

4. Organization of Business Activities

5. Internet and E-commerce

6. Future Strategy for Growth Dell – Background and OverviewFounded by Michael Dell – 1984

7. Youngest CEO in the World

8. Included in Forbes 500 list – 1992

9. Forbes 2010 Rank – 38, Revenue $53 Billion, Profit $1.4 Billion

10. Number one PC seller in US – 1999 (No. 2 in the world)

11. Adopted internet selling model – 1996

12. Inventory turnover – 60 times a year

13. Competitors – Compaq, IBM, HPDell – Background and Overview (contd.)Design, develop, manufacture, market, sell, and support a wide range of products and services

14. Customized to individual customer requirements

15. Products and Services

16. Enterprise solutions: include servers, storage, and related services, software and peripherals

17. Client categories: include mobility, desktop products, and also related services, software and peripheralsDell – Background and Overview (contd.)Broad range of configurable IT and business services, including infrastructure technology, consulting and applications, and business process services

18. Customer financial services for business and consumer customers in the U.S.Business Strategy - Direct sales – Build to order No build up of expensive inventory

19. No inventory in channel to lose its value before sale

20. New product can be introduced without waiting for old inventory clearance

21. 60 times inventory turnover vis-à-vis 12-15 times for most vendors

22. Negative cash conversion cycle Business Strategy – Direct Customer RelationshipDetailed customer data (Name / equipment / duration of relationship)

23. Information can be used for add-on Product and services – Replacement and product upgrade

24. Customer calls Dell – PC Outsourcer – Full life cycle managementBusiness Strategy – Dell E-Commerce CompanyFirst web site – 1994 – ahead of competitors – selling online (Dell.com)

25. No channel conflict – resellers / distributors

26. Build to order – Opportunity to customer to configure products online