Dell Ecommerce Case Study

Introduction

Currently e-commerce has expanded as a major part of business plans and strategies. E-commerce can be described as the process of buying and selling, or exchanging services, products, or information through web and Internet. Nowadays, almost any business involves e-commerce for dealings with their customers and consumers. This processed was started using in early 1990s. One of the pioneers in that sector is the company Dell.

Dell is one of the principal technology companies, that offers a wide variety of products, including desktop PCs, servers, networking products, storage, mobility products, software and peripherals, and services. The company mostly works in the US as its main office is situated in Round Rock, Texas and it employs 96,000 people including 1,700 temporary employees. During the financial year ended January 2010 (FY2010), the company recorded revenues of $52,902 million, which shows a decrease of 13.4% over FY2009. The operating profit of the company was $2,172 million in FY2010, a decrease of 31.9% over FY2009. Its net profit was $1,433 million in FY2010, a decrease of 42.2% over FY2009.

Question 1: Identify and describe the business models used by Dell.

Dell has implemented its own unique business model which includes the combination of several effective business strategies that has contributed enormously to company's success.

The prime and most important model is the Dell's direct model made through the solid value chain which avoided the use of the usual distribution way. According to Marc Schniederjans and Qing Cao (2002) "if any normal company uses the 4-step supply chain, Dell uses the 2-step".

By contacting the consumers directly, Dell succeeded to undercut resellers' prices. The company sought to contact customers directly through the uses of:

a) Phone: There are phone-lines to accept orders from clients and also to provide a 24/7 help desk.

b) Physical stores, which were first created in 2006 all over the world as an attempt to end users' concern.

c) Internet: The World Wide Web gives Dell the ability to offer online-shopping catalogs for both individuals and big organizations and to have the auction site, where products are renovated and sold for cheaper price. Moreover, Dell is able to instruct company's product users on its www.learndell.com website. Additionally, Dell offers customer-services such as self-diagnosis, download updates and software, and so on. Also, company has live chat, which also gives customers the chance to interact with the company's employees to have more information about the product they are concerned with. Providing all of those services to consumers was the main reason why Dell was able to decrease the direct costs of construction, purchasing, recording and maintainance for its transactional purposes. Most prominently, using Internet - the E-commerce - ensures that Dell avoids inventory spending and other costs related to that activity.

Additionally, Dell offers its customers the build-to-order manufacturing with just-in-time system. This strategy gives consumers the chance to make their own desired computer and have it in practically no time. Build-to-order in combination of just-in-time service has ever since been the main key to the success of the company.

If at the start customers had to contact Dell with snail mail or fax to place an order, now they have the possibility to contact the company through Internet or phone. The consumer can go to www.dell.com and experience a quick process to create the PC the way they want. This gives the purchaser the ability to pay for only the software and equipment that they want.

As a result, the build-to-order process takes place with the order information roaming with product through the building process. Once the consumer has deposited their customized order on the Internet or by phone, Dell starts producing that order. With its suppliers in more than six countries spread all over the world, Dell is able to finish the order very fast.

Among other business strategies that Dell has adopted the important ones are:

a) Intrabusiness EC -- e-commerce dealings performed inside an organization or among employees in the same business. For instance, Dell works together with Accenture create a better supply chain planning solution.

b) E-collaboration - team working with partners. As an example the FedEx or UPS postage companies can be mentioned as they provide Dell the delivery services.

c) Dell uses affiliate program to attract its partners in selling Dell products. To do so the partners' WebPages should have a link to www.dell.com

Question 2: Explain the different types of EC transactions used by Dell

Dell's customers are categorized as: large enterprise, public, small and medium business (SMB), and consumer. Thus, the company uses two types of E-commerce transactions: Business-to-Consumer (B2C) and Business-to-Business (B2B). Usually the main profit of company comes from B2B transactions.

The company's expanded revenue flows is provided by extensive variety of customer foundation. As the Company Profile for the Financial Year 2010 states, the company has generated 27% of the total revenues from large enterprise, 27.4% from public clients, 22.8% from SMBs, and 22.8% from consumers.

Business-to-Consumer

Sales to individual customers, who want to purchase computers for home or personal use, are considered as Business-to-Consumer transaction. Dell offers customers three options for buying, which are: the online shop at www.dell.com or www.dellauction.com , another is to place an order by phone, and the third and recently introduced method is the visit to physical stores.

Business-to-Business

The most of Dell's sales are to business organizations. Steven Holzner (2006) describes the Dell's Web site - www.dellmarketplace.com , as "outstandingly planned so that clients can simply access the information and goods that they would likely find interesting". The ordering mechanisms are easily adjustable, providing for a wider range of configurations of products than offered by Dell's competitors. He also considers that Dell's web site is the industry's innovative attempt in the direct-to-customer e-business model.

Moreover, Dell offers