Dell Company

Background

- Dell is officially the No. 1 computer systems company in the world. Dell can sustain a
competitive advantage over competitors in the computer industry because of an
extremely efficient supply chain/distribution system. Dell can achieve superior profits
in the industry because they are a knowledgeable user of information, communication,
e-commerce, e-business, internet, and web technologies.

- Michael Dell founded Dell Computer in 1984. At the time he was only 19 years old,
and in his first year of studies at the University of Texas in Austin. Michael Dell had
a simple but powerful vision: that personal computers could be built to order and sold
directly to customers. Dell's new approach to the PC business had two advantages;
First, bypassing distributors and retail dealers reduced marketing and sales costs by
eliminating the markups of resellers, and second, building to order greatly reduced the
costs and risks associated with carrying large volumes of both and finished goods.

- The personal computing industry is one that is constantly evolving and fiercely
competitive. Few players have been able to achieve long-term success and this is
reflected in hugely changeable industry market shares. The lucrative exceptions to
this rule have emerged to lead and define the market through marketing innovation as
much as product innovation. In a market where success or failure has historically
been dictated by very practical product considerations rather than brands, market
leaders have recently strived to develop unique and powerful brand identities and
marketing models (Temporal 2011).

Strategy

- As a multinational enterprise, Dell is very competent in executing its global strategy,

giving the company a competitive advantage. One of the sources of Dell’s initial
competitive advantage can be attributed to its famous direct selling and build-to-order
approach. This just-in-time (JIT) strategy allowed it to operate with the lowest
inventory level in the industry. Reducing excess inventory provided Dell with a
significant cost advantage as component costs depreciate.

- Dell's strategy, the Direct Model, was based on a simple concept - that by selling
computer systems directly to customers, Dell could understand their needs and
efficiently provide the most effective solution. Eliminating the retailer helped save
costs as well as eliminate pipeline inventories, making it possible to provide
 customers with richly configured systems with the latest technology. This helped
minimize delays between purchase and delivery. Therefore, Dell has a general policy
of manufacturing its products close to its customers which give them obvious
advantage. This also allows for implementing a more realistic and reliable “just-in-
time” (JIT) manufacturing approach, which minimizes inventory costs. Low
inventory is one of the core successes factors of the Dell business model.

- Another advantage of Dell’s location is that it improves Cash Flow because inventory
is immediately used. While companies usually are able to invoice quickly and get
paid faster, Dells order from customers is placed even before the inventory is supplied
thus company gets paid double quick time. Essentially, they receive payment from
their customers at the same time they can pay their own suppliers. For successful
operation under the given Dell’s model in different locations, it requires a committed
workforce with the tools to immediately solve any delays or delivery problems.
Having the workforce from each location facilitates a smooth process eliminating
language, cultural and other social barriers and even time zone differences. Dell
realized it by synchronizing global value chain activities through alignment of
processes, technology, and organizational elements.
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