Case Study of Starting Dell Computers

The creation of Dell Computers by Michael Dell is a good case study of

entrepreneurship.

Dell showed skills in salesmanship early on in his youth. While in college, he

built a desktop computer by buying parts from local dealers. He then started
making and selling computers to his college classmates. Business was so
good that he quit school to start up his computer business.

Interests and skills

When Michael Dell was 15, he showed a fascination of the inner workings of
a computer by breaking down his brand new Apple II computer and then
rebuilding it.

Dell did not excel academically while attending Memorial High School in
Houston, Texas. However, he exhibited great business instincts while selling
subscriptions for the Houston Post. He was able to sell $18,000 in
subscriptions by focusing on selling to newlyweds, thus earning himself a
BMW automobile.

This ability to sell was an important element in his future business success.

Starts part-time business

Dell realized that the IBM and IBM-compatible personal computers were not
made of IBM parts, but rather stock parts from various vendors. He then
built his own computer. Friends in school asked if he could build computers
for them too.

Got idea

In 1984, while a student at the University of Texas at Austin, Dell got the
great idea of making IBM-compatible computers to sell to fellow students at
a price much lower than they would have to pay in a computer store.
Plan of action

His plan of action was to buy a needed parts, recruit some students to help
him, advertise through word-of-mouth, and then sell to other students on
campus. This was his initial business plan.

Initial funding

With capital of only $1000, Dell started a part-time business, working out of
his off-campus dorm room.

Starts Dell Computers

By 1985, the demand for his computers motivated Dell to focus full-time on
his business.

Wrote business plan

Dell dropped out of school and wrote a detailed business plan.

Got funding

Dell pitched his idea to friends and family.

His grandparents had enough faith in his idea and his determination that
they provided him with $300,000 so that he could expand his business into a
full-scale company.

Marketing

He advertised his computers—which were custom-made according to a

selection of options—through popular computer magazines. His prices were
lower than retail stores and were sold and shipped directly to the customers.

Business model

This business model—which was the first of its kind in the computer business
—and his reputation for quality and customer service resulted in an
astounding $73 million gross in the company's first year.
Summary
Michael Dell showed interest in the workings of computers, as well as astute
skill in business. He got the idea of putting together IBM-compatible
computers from stock parts and selling them to other students. Demand for
his computers motivated him to form a company, using capital from his
family.

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Questions you may have include:

 What interests and skills did Dell have?

 How did he get the idea for his business?

 How did he start Dell Computers?

Case Study of Starting Dell Computers

Dell showed skills in salesmanship early on in his youth. While in college, he built a
desktop computer by buying parts from local dealers. He then started making and
selling computers to his college classmates. Business was so good that he quit
school to start up his computer business. When Michael Dell was 15, he showed a
fascination of the inner workings of a computer by breaking down his brand new
Apple II computer and then rebuilding it. Dell did not excel academically while
attending Memorial High School in Houston, Texas. However, he exhibited great
business instincts while selling subscriptions for the Houston Post. He was able to
sell $18,000 in subscriptions by focusing on selling to newlyweds, thus earning
himself a BMW automobile. This ability to sell was an important element in his
future business success.

Dell realized that the IBM and IBM-compatible personal computers were not made
of IBM parts, but rather stock parts from various vendors. He then built his own
computer. Friends in school asked if he could build computers for them too. In
1984, while a student at the University of Texas at Austin, Dell got the great idea of
making IBM-compatible computers to sell to fellow students at a price much lower
than they would have to pay in a computer store. His plan of action was to buy a
needed parts, recruit some students to help him, advertise through word-of-mouth,
and then sell to other students on campus. This was his initial business plan. With
capital of only $1000, Dell started a part-time business, working out of his off-
campus dorm room.

By 1985, the demand for his computers motivated Dell to focus full-time on his
business. Dell dropped out of school and wrote a detailed business plan. Dell
pitched his idea to friends and family. His grandparents had enough faith in his idea
and his determination that they provided him with $300,000 so that he could
expand his business into a full-scale company. He advertised his computers—which
were custom-made according to a selection of options—through popular computer
magazines. His prices were lower than retail stores and were sold and shipped
directly to the customers. This business model—which was the first of its kind in the
computer business—and his reputation for quality and customer service resulted in
an astounding $73 million gross in the company's first year.

Michael Dell showed interest in the workings of computers, as well as astute skill in
business. He got the idea of putting together IBM-compatible computers from stock
parts and selling them to other students. Demand for his computers motivated him
to form a company, using capital from his family.