Dell Case Study

Dell Case Study

2006

« We believe that all our businesses should make money. If a business doesn't make money, if you can't figure out how to make money in that business, you shouldn't be in it »

MichaeL DeLL

M

ichael Dell, born in February 1965, is the chairman of the Board of Directors and chief executive officer of Dell, the company was founded in 1984 with $1,000 on a simple concept : by selling computer systems directly to customers, they could best understand their needs and efficiently provide the most effective computing solutions to meet those needs. Their evolving business strategy combines their revolutionary direct customer model with new distribution channels to reach commercial customers and individual consumers around the world. In 1992, Mr. Dell became the youngest CEO ever to earn a ranking on the Fortune 500.

In our report, we will try to analyze the crafting and executing strategy of Dell Incorporated, by answering to the following questions :

* What is our assessment of the job M.Dell has done as the company's leader?

* What grade we'd we give him for his leadership of the company?

* What are the elements of Dell's strategy?

* What does a SWOT analysis reveal about the attractiveness of Dell's situation?

What is our assessment of the job Mr. Dell has done as the company's leader?

As the leader of the Company, M. Dell has developed a new style of management based on both technical knowledge and marketing know-how.

He had lot of good marketing ideas that allow the company to be a strong competitor on the I.T. especially in PCs, internet and e-commerce practices.

As he was the youngest CEO, he worked very hard to be able to overpass his weaknesses.

So he became familiar with all parts of the business, he overcame his shyness and learned to control his ego.

He was very clever when he choose to use a social strategy that allow him to motivate people winning their loyalty and respect. He was also considered as a very accessible CEO because he chooses to delegate authority to subordinates.

I think that being a risk taker and meeting customers all over the world was very helpful for the company to be a big competitor in PCs industry.

What are the elements of Dell's strategy?

Dell's executives believe that five tenets were the key to delivering superior customer value:

* A direct relationship is the most efficient path to the customer;

* Allowing customers to purchase custom built products and custom-tailored services is the most effective way to meet customer needs;

* Non proprietary, standardized technologies deliver the best value to customers

* Searching a low-cost structure where cost savings can be passed along to customers in the form of lower prices;

* Dell should endeavor to deliver added value to customers by: researching all the technological options, trying to determine which ones are "optimal", and being accountable to customers' for helping them obtain the highest return on their investment in information technology (IT) products and services.

In accordance with these tenets, Dell's strategy had seven core elements: a cost-efficient approach to build-to-order manufacturing, partnerships with suppliers aimed at squeezing cost savings out of the supply chain, direct sales to customers, award-winning customer service and technical support, customer-driven R&D, emphasis on using standardized technologies, and product-line expansion aimed at capturing a bigger share of the dollars, its customers spent for IT products and services.

1. Cost-Efficient Build-To-Order Manufacturing

Dell built its computers, workstations, and servers to order; none were produced for inventory. Dell customers could order custom-equipped servers and workstations according to the needs of their applications.

Dell was regarded as a world-class manufacturing innovator and a pioneer in how to mass-produce a customized product. Dell's build-to-order strategy meant that the company had no in-house stock of finished goods inventories and that, unlike competitors using the traditional value chain model; it did not have to wait for resellers to clear out their own inventories before it could push new models into the marketplace-resellers typically operated with 30 to 60 days inventory of prebuilt models. Equally important was the fact that customers who bought from Dell got the satisfaction of having their computers customized to their particular liking and pocketbook.

All assembly plants had the capability to run testing and quality control process on components, parts, and subassemblies obtained from suppliers, as well as on the finished products Dell assembled.

2. Partnerships with Suppliers

Michael Dell believed that it made much better sense for the company to partner with reputable suppliers of PC parts and components than to integrate backward and get into parts and components manufacturing on its own.

Dell management evaluated the various makers of each component; picked the best one or two as suppliers; and then stuck with them as long as they maintained their leadership in technology, performance, quality and cost.

Dell just-in-time inventory emphasis yielded major cost advantages and shortened the time it took for Dell to get new generations of its computer models into the marketplace. New advances were coming so fast in certain computer parts and components (particularly microprocessors, disk drives, and wireless devices) that any given item in inventory was obsolete in a matter of months, sometimes quicker.

3. Dell's Direct Sales Strategy and Marketing Efforts

With thousands of phone, fax,