Dell's Competitive Advantage
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During the heyday of the technology boom throughout the 1990’s many companies experienced enormous success for a few years, however without creating a solid internal framework many of these companies did not survive. An exception to that business trend is Dell, which was able to address its problems associated with rapid growth, and build itself into a lasting profitable company. Dell was able to create this lasting profitability with three essential ingredients: 1. “Virtual Integration” 2. Real value customer service features 3. Tailoring Manufacturing to customer needs.
In 1993 Dell reached a point where it had grown too large, without making the necessary internal improvements to stay profitable. Dell reached a “Eureka” moment in 1993 when its cash flow sank to $20 million, net income was negative $40 million, and its market share had shrunk considerably. By bringing in several seasoned managers to focus on specific aspects of the business Michael Dell hoped that Dell could become a synchronized, efficient, and profitable business again. These improvements lead to Michael Dells breakthrough concept of “virtual integration,” which goes a step further than traditional integration by connecting the right parts together in the business.
From this concept three key integrations formed: 1. A symbiotic relationship between Dell and its suppliers; 2. Customers linked directly to manufacturer; and 3. End user were linked to proper customer service assistance. Each one of these measures enabled costs cuts; quicker deliver time, and a more reliable finished product. For instance, with this new symbiotic relationship with its suppliers allowed Dell to trim the number of suppliers it used from 204 to 47 in their Austin facility between 1995 and 1998. These integrations caused the number of days a PC sat in inventory from 32 days to 7 days. By customizing orders the customer received a product tailored to their desires while Dell saved money and time on manufacturing.
Tailoring manufacturing to a customer's specific needs allowed Dell to integrate production schedules with sales flows, assemble all parts of the PC on site, and install the specific software that the customer requested. These manufacturing interactions sped up the final products completion time to thirty-six hours. The swiftness of the manufacturing process added value to the customer by quickening the delivery time. As well suppliers wanted to do business with Dell because there inventory levels rarely pilled up. The advantages in this chain of integrations added value to the customer’s product, while also adding value to Dell as a corporation. Dell's corporate value made it one of the best investments in the 1990’s.
Dell did something else other PC companies were not doing; strategically targeting only the customers they wanted. By defining their customer as a ‘knowledgeable PC user’ Dell made their task of providing a PC easier. Their customers did not need to go to a retail store to gain knowledge about their product. This enabled the ‘Direct Model’ for purchasing PC’s to work.
Dell further expanded its ability to meet customers needs by classify customers into specific categories. Customers were categorized into Relationship buyers, large businesses and institutions, and Transaction buyers, small business and home PC users. The Relational buyers made up a significantly larger portion of Dell’s business but also had different needs than Transaction buyers. Every relational buyer was assigned a representative who guided the business and institution through each stage of the buying experience. By integrating both Relational and Transaction buyers into their business system repeat purchases were quick and easy, purchasing history could be consulted, and follow up customer service was able to be more effective.
Dell’s business structure of “virtual integration” allowed it to excel in an incredibly competitive industry. It's competitiveness in the industry resulted from a highly efficient business model that sought out every opportunity to work more productively without compromising the quality of their product. Production efficiency lowered cost which in turn provided Dell with larger profit margins. As Porters Five Forces demonstrates, when bargaining power of buyers is high, the potential for price battles increases. Dell combated failing into the trap of a price battle by making a PC that was a better product than the competitors, yet near their competitor’s price. There costs were able to stay competitive while delivering an exceptional product because their business kept internal costs low, thus showing the effectiveness of “virtual integration.” Like Honda, Dell was able to provide a technologically superior product at a reasonable price. As well, Dell was able to evade a price war because its customers were aware of the technological value in a Dell PC.
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Love Dell. Ordered a customized one a couple years ago, still working strong. Need Windows 7 though, and some other upgrades now.
I like my Dell, too. It was better when support was local, but it's still a great deal, working hard and long.
nice article, and a good review of this page from the history of computer manufacturing.
more recently Dell acknowledged their lack of competitiveness against consumer products from HP, Acer and even Asus, especially in pricing and lead times, and came back with a new strategy - pre-built laptops ready to ship as soon as the order is confirmed online. it's hard to implement for anyone, but most difficult for them, since the company always targeted the savvy buyers as your hub explains very well and is now facing the risk of offering the very same buyers configurations they are not really interested in, and lacking customizable options as well. a very interesting transformation of an American staple brand, well worth following! Thank you for your article.
My wife thinks the Dell looks like her Makeup Mirror.
It's difficult to compare the iPad with a device running Win7. The only thing new about the Dell unit is the screen swivel, which other Windows based manufacturers (like HP) had a go at a few years ago.
We have 2 iPads and a Win7 Netbook. I think there's a place in the house for them all.
ed into the computer market, but it still is one of the best performance and price combinations for thrifty and demanding clients. The model has been mainly used in companies’ business field for its strict chassis design as well as reasonable performance, fitting most of small and medium companies' needs.
Dell PC GX620 has been produced in 4 product lines – Desktop (DT), Mini-tower (MT) , Small – form – factor (SF) and Ultra – small – form – factor (USFF)with design ranging from large Optiplex desktop tower to thin and mountable ultra-small-form-factor computer, which can be attached on a monitor stand, thus saving some precious space on a table.
Features - Design
All 4 models use latest BTX format design and all have the same Dell like color – dark metallic grey is dominating here. The last three chassis models can be placed vertically, thus saving more space on the table, though they lack some rubber padding for this kind of orientation. That’s why you might feel some slight vibrating noise on a smooth surface.
The outside connectors in the front panels are two audio (microphone and headphone) and 2 USB 2.0 port. The back of the desktops has 6 more USB ports.
Those wanting to perform their own in house maintenance will be surprised at the ease of chassis opening, which is quite pleasing, having in mind the complexity of previous model unsealing. There is a new chassis feature - diagnostic LED lights on the front panel, indicating which of the inner hardware components might be broken or malfunctioning.ed into the computer market, but it still is one of the best performance and price combinations for thrifty and demanding clients. The model has been mainly used in companies’ business field for its strict chassis design as well as reasonable performance, fitting most of small and medium companies' needs.
Dell PC GX620 has been produced in 4 product lines – Desktop (DT), Mini-tower (MT) , Small – form – factor (SF) and Ultra – small – form – factor (USFF)with design ranging from large Optiplex desktop tower to thin and mountable ultra-small-form-factor computer, which can be attached on a monitor stand, thus saving some precious space on a table.
Features - Design
All 4 models use latest BTX format design and all have the same Dell like color – dark metallic grey is dominating here. The last three chassis models can be placed vertically, thus saving more space on the table, though they lack some rubber padding for this kind of orientation. That’s why you might feel some slight vibrating noise on a smooth surface.
The outside connectors in the front panels are two audio (microphone and headphone) and 2 USB 2.0 port. The back of the desktops has 6 more USB ports.
Those wanting to perform their own in house maintenance will be surprised at the ease of chassis opening, which is quite pleasing, having in mind the complexity of previous model unsealing. There is a new chassis feature - diagnostic LED lights on the front panel, indicating which of the inner hardware components might be broken or malfunctioning.ed into the computer market, but it still is one of the best performance and price combinations for thrifty and demanding clients. The model has been mainly used in companies’ business field for its strict chassis design as well as reasonable performance, fitting most of small and medium companies' needs.
Dell PC GX620 has been produced in 4 product lines – Desktop (DT), Mini-tower (MT) , Small – form – factor (SF) and Ultra – small – form – factor (USFF)with design ranging from large Optiplex desktop tower to thin and mountable ultra-small-form-factor computer, which can be attached on a monitor stand, thus saving some precious space on a table.
Features - Design
All 4 models use latest BTX format design and all have the same Dell like color – dark metallic grey is dominating here. The last three chassis models can be placed vertically, thus saving more space on the table, though they lack some rubber padding for this kind of orientation. That’s why you might feel some slight vibrating noise on a smooth surface.
The outside connectors in the front panels are two audio (microphone and headphone) and 2 USB 2.0 port. The back of the desktops has 6 more USB ports.
Those wanting to perform their own in house maintenance will be surprised at the ease of chassis opening, which is quite pleasing, having in mind the complexity of previous model unsealing. There is a new chassis feature - diagnostic LED lights on the front panel, indicating which of the inner hardware components might be broken or malfunctioning.ed into the computer market, but it still is one of the best performance and price combinations for thrifty and demanding clients. The model has been mainly used in companies’ business field for its strict chassis design as well as reasonable performance, fitting most of small and medium companies' needs.
Dell PC GX620 has been produced in 4 product lines – Desktop (DT), Mini-tower (MT) , Small – form – factor (SF) and Ultra – small – form – factor (USFF)with design ranging from large Optiplex desktop tower to thin and mountable ultra-small-form-factor computer, which can be attached on a monitor stand, thus saving some precious space on a table.
Features - Design
All 4 models use latest BTX format design and all have the same Dell like color – dark metallic grey is dominating here. The last three chassis models can be placed vertically, thus saving more space on the table, though they lack some rubber padding for this kind of orientation. That’s why you might feel some slight vibrating noise on a smooth surface.
The outside connectors in the front panels are two audio (microphone and headphone) and 2 USB 2.0 port. The back of the desktops has 6 more USB ports.
Those wanting to perform their own in house maintenance will be surprised at the ease of chassis opening, which is quite pleasing, having in mind the complexity of previous model unsealing. There is a new chassis feature - diagnostic LED lights on the front panel, indicating which of the inner hardware components might be broken or malfunctioning.ed into the computer market, but it still is one of the best performance and price combinations for thrifty and demanding clients. The model has been mainly used in companies’ business field for its strict chassis design as well as reasonable performance, fitting most of small and medium companies' needs.
Dell PC GX620 has been produced in 4 product lines – Desktop (DT), Mini-tower (MT) , Small – form – factor (SF) and Ultra – small – form – factor (USFF)with design ranging from large Optiplex desktop tower to thin and mountable ultra-small-form-factor computer, which can be attached on a monitor stand, thus saving some precious space on a table.
Features - Design
All 4 models use latest BTX format design and all have the same Dell like color – dark metallic grey is dominating here. The last three chassis models can be placed vertically, thus saving more space on the table, though they lack some rubber padding for this kind of orientation. That’s why you might feel some slight vibrating noise on a smooth surface.
The outside connectors in the front panels are two audio (microphone and headphone) and 2 USB 2.0 port. The back of the desktops has 6 more USB ports.
Those wanting to perform their own in house maintenance will be surprised at the ease of chassis opening, which is quite pleasing, having in mind the complexity of previous model unsealing. There is a new chassis feature - diagnostic LED lights on the front panel, indicating which of the inner hardware components might be broken or malfunctioning.
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MikeNV Level 4 Commenter 2 years ago
Dell had "backend" agreements to purchase large quantities of software from Microsoft and Motherboards from Intel at prices that were not made available to other companies.
Intel has been fined by the European Union over 1 Billion Dollars for continuing these non competitive back door deals. The United States Government just looks blindly at these arraignments.