Product Development at Dell Computer Corporation

Product Development at Dell Computer Corporation

By M.Kavita

IMI Bhubaneswar

Roll no. - 4

Operations Management

Faculty : Dr.P.K.Dash

Date : 10.11.2011

Introduction

This case deals with Dell Computer Corporation and its foray into the portable computers market. It speaks about the rapid rise of Dell and then its fall in the early 1990s with terrible losses due the unstructured production process.

Dell looks forward to regaining its position in the market with a new line of laptops. Its first attempt with portables was unsuccessful. It hopes to differentiate its product by using LiOn batteries which will give a battery life of greater than 3 hours which the current NiHi battery does not provide. It plans to get this technology from Sony where it is currently being developed. Dell also realizes that since this is a new technology not used with laptops before, it's a risky undertaking and might prove to be another failure.

1. What competitive forces were shaping the computer industry during 1993?

Some of the first personal computers in the computer industry were Simon and IBM 610 introduced in the 1950s. Before that computers were known to be of the size of a room, dissipating heat and too bulky to manage known as the mainframes. The most significant event of 1981 for the personal computing industry was the introduction of the IBM PC.

In 1993, the competitive forces shaping the computer industry were as follows:

Threat of new entrants such as Apple, IBM, Compaq into the portable computers industry. Currently there was focus on desktops.

Need for portable computers which gave rise to the laptop. In 1993 portables were classified as laptops if they weighed between 4.5 and 8 pounds and subnotebooks if they weighed below 4 pounds.

A greater demand and market for the portable machines with a market above 3-5 % above that of desktops.

2. What has been the state of Dell prior to and in 1993? Focus on financial situation, customer base , product quality and development process.

Dell,started by Michael Dell in 1983 started by upgrading the IBM compatible PCs.Dell then started assembling the parts itself and selling it under his name.

Financial situation - Dell made $180,000 in the first month of business in 1983.The company grew to $6 million in 1985 and ended up in $70 million sales with its own brand of PCs.Dell entered the retail market and the new market boosted its sales to $2 billion, overshooting its target by half a billion dollars in 1992.

In 1993, it experienced its first loss when its profits came down to $10 million.Its shares plunged to $7 from $25.

Customer base - Dell started its business by selling from door to door to local businesses. It concentrated on building relationships with the customers and personally meeting them. Thus they continued with their strategy of eliminating the middle man even as the company grew by leaps and bounds.

They sold the computers directly to savvy customers through mail. They serviced the products and attended to customer complaints in a personal manner and had in place a 24 hour telephone support system to support customers and help them diagnose and solve problems themselves.

It also has a good relationship with its suppliers, vendors and third party service providers giving the customers the impression of one big company handling all the operations.

Product quality - Dell introduced its first notebook computer in 1991 and in 1993, Dell had to recall 17000 of its notebooks which were discontinued following customer complaints. There were technical problems such as smoke and melted spots on the plastic body.

Development process - The product development process until 1993 was not structured. A one storied converted warehouse housed all the developers and professionals at Dell. There were no clear rules or procedures for the production process. Earlier, when the orders came, the specifications were written on a sheet and sent to the assembly line. There the parts were installed and wired, the software was loaded, quality checks were carried out and the product was packaged and shipped. There was no consistency in the results.

In 1993, a structured process was put into place where the design and planning was given emphasis. The functional prototypes were built and tested. Then production prototypes were built and given to key customers and their feedback was implemented. Then following the launch, feedback was collected for 3 months.

Up until 1993, Dell was quite successful, but its venture into the retail market did not prove profitable. Its failure in one of the projects, led to its downfall followed by the unsuccessful line of notebooks introduced.

3. What problem the Dell's senior management trying to solve with its new development process? How will the new process