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  • Pricing Execution Error at Dell: Ankit Rathore Atul Sharma Durgesh Kumar Mayank Gupta Shubham Chhabra

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    Dell pursued a strategy of market share leadership through aggressive pricing in the computer industry during the early 2000s. By undercutting competitors' prices, Dell was able to gain over 25% of the market by 2001, surpassing companies like Compaq, HP, Gateway, and IBM. However, this pricing strategy led to declining profit margins across the industry as competitors tried to match Dell's low prices. It also negatively impacted product innovation over time. When entering new markets, Dell employs a strategy of price cutting to target market share growth during periods of industry expansion, but also has the flexibility to prioritize profits by stopping deep discounts when market conditions allow.

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    Dell pursued a strategy of market share leadership through aggressive pricing in the computer industry during the early 2000s. By undercutting competitors' prices, Dell was able to gain over 25% of the market by 2001, surpassing companies like Compaq, HP, Gateway, and IBM. However, this pricing strategy led to declining profit margins across the industry as competitors tried to match Dell's low prices. It also negatively impacted product innovation over time. When entering new markets, Dell employs a strategy of price cutting to target market share growth during periods of industry expansion, but also has the flexibility to prioritize profits by stopping deep discounts when market conditions allow.

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    34 views11 pages

    Pricing Execution Error at Dell: Ankit Rathore Atul Sharma Durgesh Kumar Mayank Gupta Shubham Chhabra

    Uploaded by

    Sagar Chhabra
    Dell pursued a strategy of market share leadership through aggressive pricing in the computer industry during the early 2000s. By undercutting competitors' prices, Dell was able to gain over 25% of the market by 2001, surpassing companies like Compaq, HP, Gateway, and IBM. However, this pricing strategy led to declining profit margins across the industry as competitors tried to match Dell's low prices. It also negatively impacted product innovation over time. When entering new markets, Dell employs a strategy of price cutting to target market share growth during periods of industry expansion, but also has the flexibility to prioritize profits by stopping deep discounts when market conditions allow.

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    PRICING EXECUTION ERROR AT DELL

    Ankit Rathore Atul Sharma Durgesh Kumar Mayank Gupta Shubham Chhabra

    Question 1- a. Which pricing objectives is dell pursuing?


    Market share leadership To gain more market share dell decided to leverage its cost advantage and challenged competitors to a price war. By 2001 dell was leader with over 25% surpassing Compaq(13%),HP(10%),gateway(8%),IBM(6%).

    Question1- b. What type of long term impact will dell`s pricing strategy have on the computer industry?
    Profit margins fell for dell and competetors who tried to match dells prices faced simillar declines. Product innovation suffered drastically. eg.Compaqs spending on R&D fell from 6%of revenues in 1991 to 3.5% in 2000 . As a result Compaq suspended development of its alpha chip.

    Question2- How are Dell`s prices influenced by the other elements in its marketing mix?
    PRODUCT DELL assembles components to meet customers expectations i.e CUSTOMISATION.

    Distribution

    DELL relies on direct sale approach and catalogs. Also DELL has embraced internet like no other company.

    CreateVirtual integration: the entire supply chain acts like a single integrated company. Acts like a single integrated company. Upstream partners:contract manufacturers(CM) and component suppliers. Dell order components and parts from numerous suppliers-sometimes placing on an hourly basis.It reduces the cost of inventory. Dell maintains stocks for just 4 days of operations by comparision COMPAQ maintains it for 24 days.

    Contd.
    Downstream partners/customers(most are business corporations) Share information with suppliers on inventory levels. Maintain long term relationships with key suppliers for design collaboration. Dell deliever customised pcswith preloaded software in as little as 3 days which reduces inventory cost substantially. Computers are made to order thus Dell isnt struck with unwanted computers.

    PROMOTION DELL began running ads featuring STEVEN(actor BENJAMIN CURTIS) which usually ended with STEVENS catch phrase Dude you are getting a DELL. Michael Dell started personally selling his companys products on QVC-a home shopping channel

    Question3- When entering new markets, what type of pricing strategy does dell employ?
    With net margins far higher than its main rivals, Dell can cut prices to target market share when it wants to -- typically, during periods of fast overall PC market growth.

    Similarly, it also has the luxury of going for profits instead. In other words, Dell can stop slashing prices, yet remain competitive with rivals' offerings

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