OPPapers.com

Dell Case

Dell’s business strategy was based on creating a new marketing and distribution strategy. This strategy provided differentiation through low cost, speed of delivery, and superior customer service. The major channel for sales was the “Direct” model which connected the customers to sales reps. Dell’s business strategy was grounded in the formal integration of operational components (e.g., logistics, manufacturing, distribution, inventory management) and development of a supply chain strategy. The supply chain strategy focused at driving costs out of the supply chain – being the low cost provider – while at the same time supporting a business strategy emphasizing customer service.

Dell’s business strategy was grounded in the formal integration of operational components (e.g., logistics, manufacturing, distribution, inventory management), innovative channel management and superior customer service. Dell generates its competitive advantage through low costs primarily via usage of innovative channels e.g. Direct model, Build on Demand model, tight supply chain, no buffer inventory management and high quality with superior customer service.

Innovative Channel management
Dell was the pioneer in instituting the Direct model. Unlike customers who supplied machines based on orders from distributors, resellers and retailers, Dell took orders from the customer directly. These created operational and cost efficiencies by eliminating the middlemen. These operational efficiencies are clearly visible via the high gross margin of 19% achieved via the direct channel. Further more Dell received almost 86% of its revenues via its Direct model compared to 4% or less for the prominent competitors. Dell further streamlined its Direct channel via its www.dell.com website.

Superior Supply Chain and Inventory Management
Dell made PC’s based on actual orders not on forecasts. It held no finished goods inventory of standardized machines. The whole organization was integrated...