Caselet: Dell Inc.

– A Market Driven Approach

Dell Inc. is an American multinational computer technology corporation that develops, sells
and supports computers and related products and services. It is the third largest PC vendor in
the world after HP and Lenovo. Customers trust Dell to deliver technology solutions that help
them do and achieve more, whether they are at home, work, school or anywhere in their
world.

Breakthrough thinking at Dell has produced technology innovations that advanced not only
Dell products, but the global technology industry as well. Its engineering community
distinguishes themselves through ingenuity, intellectual curiosity and inventiveness in
delivering technology solutions to customers. From its early beginnings, Dell operated as a
pioneer in the "configure to order" approach to manufacturing—delivering individual PCs
configured to customer specifications. In contrast, most PC manufacturers in those times
delivered large orders to intermediaries on a quarterly basis. Supply chain management and e-
commerce are the key elements in Dell’s success. Minimize the delay between purchase and
delivery and low inventory is another signature of the Dell business model.

It is quite evident that customers are at the core of everything done at Dell. The company
believes in listening carefully to customer’s needs and desires, and collaborates to find new
ways to make technology work harder for them.

In the year 1984, at age 19, Michael Dell founded PC's Limited with $1,000 and a game-
changing vision for how technology should be designed, manufactured and sold.
In 1988, growing at roughly 80 percent annually, Dell decided to go public. The company
was officially renamed as Dell Computer Corporation, which used the newly acquired capital
to expand its product offerings and global presence.

Dell’s rocket ship growth earned it a spot among the top five computer makers in the world.
The company decided to go for online sales in 1996, setting the bar for e-commerce
worldwide. Internet sales on dell.com reached to the extent of $40 million a day, making it
one of the highest-volume ecommerce sites in the world.

From 1997 to 2004, Dell enjoyed steady growth and it gained market share from competitors
even during industry slumps. Dell earned and maintained the #1 rating in PC reliability and
customer service/technical support, according to Consumer Reports, year after year, during
the mid-to-late 90s through 2001 right before Windows XP was released. In 2003, the
company was rebranded as simply "Dell Inc." to recognize the company's expansion beyond
computers.

However in 2005, while earnings and sales grew, sales growth slowed considerably, and the
company stock lost 25% of its value that year. The slowing sales growth was attributed to the
maturing PC market, which constituted 66% of Dell's sales, and analysts suggested that Dell
needed to make inroads into non-PC businesses segments such as storage, services and
servers. Dell's price advantage was tied to its ultra-lean manufacturing for desktop PCs,
however this became less important as the market shifted to laptops, and as rivals such as
Hewlett-Packard and Acer made their PC operations more efficient. Throughout the entire PC
industry, declines in prices along with commensurate increases in performance meant that
Dell had fewer opportunities to up-sell to their customers (a lucrative strategy of encouraging
buyers to upgrade processor or memory), and as a result the company was selling a greater
proportion of inexpensive PCs than before which eroded profit margins.

Also, there was a decline in consumers purchasing PCs through the Web or on the phone, as
increasing numbers were visiting consumer electronics retail stores. Dell's low spending on
R&D relative to its revenue (compared to Apple Inc.) which worked well in the
commoditized PC market prevented it from making inroads into more lucrative segments
such as MP3 players.

After four out of five quarterly earnings reports were below expectations, Dell announced a
change campaign called "Dell 2.0," reducing headcount and diversifying the company's
product offerings. The company took a fresh look at the rapidly changing industry and
responded with a new business strategy to address the end-to-end IT needs of its customers.
Dell got serious about ramping its solutions skills and capabilities with organic and inorganic
investments in key intellectual property and talent. By 2011, the company had its best
solutions portfolio ever and celebrated the largest single-year revenue increase in company
history.

The company is highly customer oriented in its approach. It has the concept of Customer
Advisory Panel (CAP) in place wherein, conversations and interactive panels take place in
front of the eager ears of many Dell executives and employees across various groups of the
business, to hear firsthand what the attendees think of the brand overall, the products, the
website and the customer service. The agendas for the events are driven via comments from
conversations with and a pre-event survey of participants. The Dell teams globally learn a lot
with each event and are motivated to implement ideas heard during the event and improve
internal processes. The Dell team agrees that the success of CAP Days is about what happens
after the customers leave. Dell is committed to delivering on the promise to execute ideas and
key changes where possible, and to stay accountable for taking the feedback seriously.

Dell's Consumer division offers 24x7 phone based and online troubleshooting as a part of
technical support. In addition, the company provides protection services, advisory services,
multivendor hardware support, "how-to" support for software applications, collaborative
support with many third-party vendors, and online parts and labor dispatching for customers
who diagnose and troubleshoot their hardware.