2. Do you think personal computer sales will increase in the
near future? Or do you think expanding to the information
services is inevitable for survival for companies like Dell?
If not by direct selling which channel Dell could
have distributed its systems efficiently, suggest any?
Vikas Kumar Tyagi
4. DELL sells personal computers, servers, data storage devices, network switches,
software, and computer peripherals HDTVs, cameras, printers, MP3 players
1984 -age of 19- Michael Dell (youngest CEO to
guide a company to a Fortune 500 ranking )
founded under brand name PCs Limited
With simple vision—that personal computers
could be built to order and sold directly to
customers bypassing intermediaries &
reduction costs and risks associated with
carrying large inventories.
Struggled during its early years
But later declared stock of the decade in 90’s.
Vikas Kumar Tyagi
5. …….Always listen to the customer
……Never sell indirect
……Disdain inventory
Vikas Kumar Tyagi
6. Monitoring Customer preferences.
Extremely fast services i.e. 36 hour turnaround
Sensing Market Changes
Internet Model-50%-2000.
Server market in 1996, and within 3 years, servers
accounted for 12% of its sales.
Workstation market - 1997 by 2000 worldwide market
leader.
Direct Model approach for major markets,
Distributors for smaller markets
Vikas Kumar Tyagi
8. Lowest operating cost 11.5%.
Consumers valued the ability to customize their
computers and purchase them directly from the
manufacturer.
Uses telephone and internet in selling model. Internet
sales leadership.
Nearly two-thirds of Dell's sales are to large corporations,
government agencies and educational institutions.
Customer list included Toyota, Boeing, Microsoft,
Unilever, Deutsche Bank, Sony, and Wal-Mart.
Retail concept may have instantly available products and
offer more comprehensive support, but cannot profitably
stock as many different products as direct sellers.
Difficult to copy SCM model.
Vikas Kumar Tyagi
9. Lower facility and inventory costs but higher
transportation costs.
Technology follower.
High dependency on component suppliers.
The company has such a huge range of products and
components from many suppliers from a plethora of
countries, that there is the occasional product recall
that can cause Dell some embarrassment.
Dell’s focus on the corporate and government
institutional customers somehow affected its ability
to form relationships with individual customers.
Retail format not developed fully.
Vikas Kumar Tyagi
10. Expansion into Service Sector.
After smart phones i.e. Venue & pro, is planning
to come in made to order smart phones.
Strong potential market in Europe, China and
India.
Growth in business, education and government
markets.
SecondTime buyers.
More and more people are moving for online
shopping , giving added advantage to Dell’s
established internet model.
Vikas Kumar Tyagi
11. Slowdown of corporate computer business.
Saturated PC market.
New products are coming out all the time, the
competition is brutal, and customers are changeable,
and technology obsoletes overnight.
More affordable personnel computers- reduced profit
margin.
IBM sold its laptop business in 2005 to focus more on
customized IT solutions
Hewlett-Packard purchased Electronic Data Systems
Entry of new players like Samsung and HCL.
Vikas Kumar Tyagi
12. Dell sources from Far Eastern nations where labour costs remain
low, but there is nothing stopping competitors doing the same -
even sourcing the same or similar components from the same or
similar suppliers.
New software, new hardware and computer accessories are
introduced at a lightning speed.
One of the biggest external threats to Dell is that price difference
among brands is getting smaller. Dell’s Direct Model attracts
customers because it saves cost. Since other companies are able
to offer computers at low costs, this could threaten Dell’s price-
conscious growing customer base.With almost identical prices,
price difference is no longer an issue for a customer.They might
choose other brands instead of waiting for Dell’s customized
computers.
Vikas Kumar Tyagi
16. Dell selected i2 technologies for its SCM
system.
i2 serves almost 70% of the SCM market.
Every 20 seconds the software aggregates
orders, analyzes material requirements,
compare Dell’s on hand inventory with its
supplier’s inventory and then creates a supplier
bill of material to meet its order needs.
Instead of forecasting the daily supply needed,
Dell receives the exact material every two hours
to fulfill actual customer order while industry
average is 40-70 days.
Vikas Kumar Tyagi
17. Acquired Alienware in 2006-Gaming.
Acquired Perot Systems for $3.9 billion in
2009.
Acquired Boomi (SaaS) in 2010.
Acquired CompellentTechnologies for $960
million in 2010.
Vikas Kumar Tyagi
18. Feedback from Customers, Retailers and Suppliers.
Focus on specific customer types as narrowly as you
can afford. Higher segmentation leads to more
customized programs and solutions for that
segment, at added cost.
Centralize database, where practical, to more fully
understand your customers.
Take inventory of every customer touch point. Every
interaction with a customer makes an impression or
leads to learning
Vikas Kumar Tyagi
19. Long term relationship with vendors.
No effect of market demand and supply.
Dedicated Engineers to 0Dell.
Just inTime.
Vikas Kumar Tyagi
21. Globalized business with integrated R & D, marketing
and sales.
Focus on “Killer” products, next generation materials,
shorter development cycle, solutions and advantaged
costs.
Build portfolio for long term growth by adding new
capabilities.
1 to 2 partners in the top 20 markets – with 10,000
stores by year end.
Vikas Kumar Tyagi
22. Vikas Kumar Tyagi
• Lead in customer segments most important design and features to
create brand lust.
• Lead in next generation WiMAX, 4G.
• Tailor mobile devices for customer segments.
• Bring products to customers 40-50% faster.
• Expand the range of products sold globally.
23. Dell Inc plans to cut more jobs than the 8,800 it had
targeted as it seeks to reduce expenses by at least $3
billion annually by 2011
Build-to-Order Manufacturing and Mass Customization.
Direct Sales
Market Segmentation
Customer Service
Virtual Integration and Information-Sharing
Demand Forecasting
Research and Development
Comparative Advertising
Work towards employee satisfaction as happy employees
lead to satisfied customers.
Vikas Kumar Tyagi
26. Company Market Cap Net Income P/E Ratio EPS
Apple 309.64 16.64b 18.77 17.91
HP 99.69b 8.76b 12.33 3.69
Dell 25.38b 1433.00m 12.64 0.95
Lenovo 5.729b 129.4 26.91 0.44
Vikas Kumar Tyagi
29. Dell altered its direct approach by selling computers in CompUSA
and Sam’s Club in 1992, but entry into retail channels was not
successful
In 2007, Dell partnered with computer retailers, includingWal-
Mart, Best Buy, Gome Electrical Appliances &Tata Croma, also
started opening its own retail stores starting from Russia.
Dell stock price, October 2005 to October 2007
Vikas Kumar Tyagi
30. Dell still enjoy competitive advantage.
Hybrid model includes both direct and reseller
channels.
Retailer Model.
Medium and Large business as target model.
24-hour technical support services ,
customizability and ease of ordering.
Leasing PCs to individuals, financing PCs on low
monthly payment.
Low price marketing strategy.
Vikas Kumar Tyagi
31. Impressed many in early years with distinct
model of supply chain management, selling
customized computers directly to customers
to meet burgeoning PC demand.
By using this innovative sales model, Dell
became an industry and shareholders’
darling, a high-tech pioneer with seemingly
limitless growth. But later Dell’s profits and
shares dropped considerably from their
peaks.
Vikas Kumar Tyagi
Notas do Editor
4. Dell was labeled as a “mail order company” , but less than 5% of sales actually came from individual consumers . Most sales were to business customers through its direct sales force, with 50% of sales going to large corporate accounts and the other 4 5% of sales going to medium and small businesses.
Dell's competitors shifting their business models to build-to-order manufacturing to reduce their inventories and speed new models to market , but all found it hard to duplicate Dell's approach
Software, datacenter, cloud _ computing, storage, virtualization to reduce dependence on the desktop and notebook market where profit margin are typically lower & to better compete in market. While primarily known as a hardware provider, Dell is not new to professional services as it acquired Alienware (2006), Perot Systems (2009), Software-as-a-Service (SaaS) (2010) , helping both the hardware and service side of Dell. Customers getting more educated about computers. Second-time buyers would most likely avail of Dell’s custom-built computers because as their knowledge grows, so do their need to experiment or use some additional computer features.
Dell's corporate computer business slowed gradually, forcing the company to increase its efforts to attract personal computer users. Also, personal computers have become more affordable to consumers over the past several years which have decreased the profit margins for major manufacturers.
Dell's strategy was to partner with as few outside vendors as possible and to stay with those vendors as long as they maintained their leadership in technology, performance, and quality. Second, because Dell committed to purchase a specified percentage of its requirements from each of its long-term suppliers, Dell was assured of getting the volume of components it needed on a timely basis even when overall market demand for a particular component temporarily exceeded the overall market supply. Dell's formal partnerships with key suppliers made it feasible to have some of their engineers assigned to Dell's product design teams and for them to be treated as part of Dell. Dell's long-run commitment to its suppliers laid the basis for just-in-time delivery of suppliers' products to Dell's assembly
In the early 1990s Dell products were available through Best Buy, Costco, and other retailers, but the company stopped this distribution in 1994 due to low profit margins. Advantage from customizing computers and selling them directly to consumers, but the market for such offerings has shrunk that includes the centralized channel for wider variety and the retail channel to more popular standardized PCs and other products. Other model involves the retailer’s performing the final product configuration, thus decreasing inventory costs—because supplies are maintained in component form—but increasing assembly capacity costs. This model has been used successfully in India, where customization is valued and technicians inexpensive to employ. In early years, targeted its marketing efforts at medium and large businesses that needed to purchase numerous highly customized computers fitting seamlessly with their business processes 6. Recently, Dell's marketing efforts have been less focused on product features and customizability and more focused on low price as the defining feature of Dell computers.