Dell Case Study

I. Background

Michael Dell started running business in computers when he was in college. He bought random access memory chips and disk drives for IBM PCs at cost from IBM dealers, who had excess supplies on hand because they were required to order large monthly quotas from IBM. Dell's sales grown up to $80,000 per month and because of his success he decided to drop out of college and form a company. His company was known as PCs Ltd where he sells both PC components and PCs under the brand name PCs Limited. During the next several years, PCs Limited was hampered by growing pains. Michael Dell sought to refine the business model and made different strategies while at the same time keeping costs low. The company was renamed Dell Computer in 1987, and the first international offices were opened at the same year. Sales to large customers quickly became the dominant part of Dell's business. Michael Dell's vision was for Dell computer to become one of the top three PC companies.

In the years 1990-1993, the company began distributing its computer products through Soft Warehouse Superstores. But soon, the company realized that they made a mistake using that kind of distribution so they withdrew from it.

During the year 1993, further problems emerged: Dell reportedly lost $38 million in risky foreign currency hedging, quality difficulties arose with certain PC lines made by the company's contract manufacturers, profit margins declined, and buyers were turned off by the company's laptop PC models.

The company realized that there were higher costs and unacceptably low profit margins in selling to individuals and households that is why Dell did not pursue consumer market aggressively until sales took off in 1996 and 1997. PC savvy individuals are now looking for powerful computer with multiple features, did not need much technical support, liked the convenience of buying direct from Dell, ordering a PC configured to their liking, and having it delivered to their door. Dell formed and internal sales and marketing group to cater to the needs of these consumers during the year 1997. In late 1997, Dell became a low cost leader among PC vendors by wringing greater and greater efficiency. Since then, the company had continued driving hard to reduce its costs by closely partnering with key suppliers to drive costs out of its supply chain and by incorporating e-commerce technology and use of the Internet into its everyday business practices.

From 2002-2007, Dell was widely regarded as the lowest cost producer among all the leading vendors of PCs and servers worldwide. Dell products received more than 400 awards relating to design, quality, and innovation.

II. Problem

1. Dell computer brand name is not popular to the college market.

2. The erosion of Dell's brand value continues due to the perception of declining customer service.

3. Dell's inability to serve all market needs due to the current strategy of limited vendors in its supply chain. Dell brings few products to market and leverages technology created by other companies effectively and efficiently.

4. The company has such a huge range of products and components from many suppliers from a plethora of countries, that there is the occasional product recall that can cause Dell some embarrassment.

5. Customers just can't buy Dell as simply as other brands because each product is custom-built according to their specifications and this might take days to finish.

III. Objectives

1. To aid or to make actions to the declining customer service and support efforts of the company.

2. To strengthen Dell's customization position.

3. To strengthen Dell's visibility and revitalize the company's marketing to the other markets.

4. To strengthen Dell's position as the low-cost personal computer producer and provider within the market

IV. Theoretical Framework

Wharton Model of Competitive Advantage Cycle

Understanding the key sources of advantage and how they are sustained or eroded become crucial in formulating competitive strategy. The Wharton Model below will help assess the nature and magnitude of present advantages and the reasons why they have been sustained.

Analysis

Dell's primary source of advantage is product differentiation and specialization because they have the most differentiated and customized line of computers/laptops for the consumers in the market. They have different specialized features for each particular user such as heavy users for education, business, entertainment and gaming. Dell has different types of brands each catering to the said categories.

Dell's positional advantage is its variety of scopes and brands aiding to that of its source of advantage which is the product differentiation and specialization. Dell has tapped many specific market segments as shown here:

Its Business/Corporate class represent brands where the company advertises emphasizes long life-cycles, reliability, and serviceability. Such brands include:

 OptiPlex (office desktop computer systems)

 Vostro (office/small business desktop and notebook systems)

 n Series (desktop and notebook computers shipped with Linux or FreeDOS installed)

 Latitude (business-focused notebooks)

 Precision (workstation systems and high-performance notebooks),[35]

 PowerEdge (business servers)

 PowerVault (direct-attach and network-attached storage)

 PowerConnect (network switches)

 Dell/EMC (storage area networks)

 EqualLogic (enterprise class iSCSI SANs)

Dell's Home Office/Consumer class emphasizes value, performance, and