The Generic Value Chain
Dell Inc. was founded by Michael Dell in the early eighties. It has now grown to become one
of the largest players in the Information Technology sector. The initial business model aimed
selling PC’s directly to customers however, now they have diversified into other areas like
printers and software that allows management of IT assets. This helps provide efficient
effective solutions to the customers ever changing needs.
In the recent years they have faced stiff competition from other competitors like HP, Apple,
Toshiba and Sony to name a few. Unlike its competitors Dell Inc. adopted a build-to-order, sell
direct value chain which has proved successful over the years.
Value Chain is the most conventional approach towards exploring career opportunities. The
concept was designed by Michael E. Porter to express the customer value that builds up along
the chain of activities that an organization performs to lead to the final product or service. A
company’s value chain is categorized into two groups of activities namely Primary Activities
and Support Activities.
The constitution of the primary and secondary activities depends on the nature of the business.
The value chain of a company represents the business operations, the technology, the operating
procedures and the organization strategies. Since these factors are different for different
companies, the value chain for a company differs from the other, sometimes within the same
Primary Activities lead to generating a profit margin for an organization and help in creating
value for customers. They are inbound logistics, operations, outbound logistics, marketing and
The primary activities illustrated are helped by support activities. These activities are industry
specific. They are procurement, technology development, human resource management and
Value chain activities are not different from one another; one value chain activity affects the
performance of the other.
Dell revolutionized the traditional value chain of computer manufacturing industry by
introducing the direct to customer model. Dell also employed a global business consultancy, to
help it develop a set of metrics to judge business-unit performance. By doing so, daily decision
making were more efficient. The chief financial objective that steered managerial evaluation at
Dell was return on invested capital (ROIC). Which leads to no inventory build-up, Dell turns
over inventory every six days on average, keeping related costs low.
Dell’s mission statement is “to be the most successful computer company in the world at
delivering the best customer experience in markets we serve”. Dell employees, direct
salespeople, help-desk operators, engineers, and the like all have to be knowledgeable and
customer focused to ensure Dell’s continued competitiveness.
Dell Inc. has 88,200 employees worldwide as part of its primary value chain and to support it.
Fifty seven percent of these employees are in customer facing and frontline roles.
Dell Inc. has formed strategic alliances with local service providers to provide on-site services
to its customers. Dell Inc. has also entered into White-Box PC Segment forming alliance with
private labels. Dell Inc. formed strategic alliance with Lexmark to make printers and cartridges
under the Dell label.
Dell Inc.’s R&D group employed four thousand engineers and had a budget of six hundred
million dollars in 2008. In 2007 through its website Dell Inc. invited customers to give their
ideas on improving Dell’s products and till date has received 8900 ideas out of which 45 have
been incorporated into Dell’s products.
Dell Inc. has high standards of quality control in it plants with all plants having ISO 9001:2000
certification. Various tests and quality control process are in place to check the quality of parts,
components, sub-assemblies and end products. Audits are conducted for ongoing product
reliability; failure tracking process is also in place for early detection of problems.
It is on this activity that Dell is weak because Dell do not enjoy protected by trademark or
patent or copyright technology. The technology being used in the industry is shared by all
Dell Inc. is works closely with their suppliers to maintain high quality of components. Dell’s
long term relationship with reputable suppliers has provided the following advantages:
Supply of enhanced quality components like branded processors, disk drives, modems etc.
Timely delivery of components
Suppliers have located their distribution centers close to Dell’s assembly plants.
Suppliers’ engineers are stationed at the company’s plants for development and launch of new
Under procurement strategies, the corporation is mainly concerned at reducing the bargaining
power for its key suppliers; Microsoft and the Intel.
Inbound logistics are concerned with the practices involved to receive and also to provide
storage of the externally sourced materials. In the inbound operations, the company believes in
time delivery of the manufacturing materials. To achieve this, the company is usually very
close to the suppliers. Its main suppliers are the Intel and Microsoft corporations. Intel is
involved in the manufacture of the microchips while Microsoft develops the system software
for their products. To strengthen the relationship with the suppliers, the excellent e-commerce
system developed to support its operations allows effective management of the inbound
logistics. The suppliers are also very reliable to ensure a smooth operation in the assembly
processes. The company also uses a computer monitor supplier who is responsible for directly
shipping the products to the customers. The suppliers are supposed to retail the leadership
position of the Dell (Dell Corporation, 2012).
Until 1997 each worker performed a particular task in the assembly lines. However, after
reorganization in 1997 the company shifted to “Cell Manufacturing” where a team of workers
assembled the entire PC to consumer specification. Cell Manufacturing was also dropped in
favor of more improved assembly line. This improvement in assembly line was largely
associated to PC design, innovative assembly process and reduction in the number of time a
computer was touched by workers. Instantaneous build and test facilities also allowed the
testing of components before the assembly of PC thereby saving on cost and time. As consumer
specifications vary for certain computer components only, Dell Inc. latest initiative is to pre-
assemble a mixture of configurations that are commonly ordered by the consumers. In times
where major PC rivals have outsourced their manufacturing process Dell Inc. has stuck to in
house assemblies as it believes that there is a six percent cost advantage in doing so.
Outbound logistics are concerned with the activities involved in delivering the final or the
finished product to the customers (buyers involved in the supply chain). At Dell, the
corporation believes in being close to customers. Although the company is a global
organization, Dell has engaged various technologies to ensure a close contact with the
customers. Under this, the corporation continues to invest heavily on e-commerce systems. Its
e-commerce system allows a closer contact between the customers and the company. The
system also allows customers to automatically place their customized orders directly. There are
special deliveries such as the evening deliveries to enhance the differentiation. Whereas the
competitors sold computers and their accessories through middlemen, Dell used differentiation
to sell their products directly to the customers. In this case, the company enjoys the real
customer experience, able to obtain direct information from the customers through direct
communication with them. In this case, they are able to observe the sales trends, identifying
the unmet customer needs.
Marketing and Sales
Dell Inc. sales are a mix of sell-direct-to-customer strategy and selling through retailers. Dell
Inc. sells its products through its website, toll free lines and in case of corporate clients; it has
special sales teams taking care of them. In markets where the sell-direct-to-customer strategy
failed Dell Inc. installed Kiosks in leading electronic stores for the customer to physically check
the product and then place an order. In a response to its declining share in the computer market,
Dell Inc. lately has formed partnerships with computer retailers and has had success in doing
Unlike other manufactures whose marketing efforts are directed more towards the retailers and
wholesalers Dell Inc.’s marketing efforts are focused towards the end users. Advertising is a
major emphasis in Dell Inc.’s business strategy. Dell Inc.’s advertising efforts include TV
promotion, promotion in magazines, inserts in newspapers, newsletters, online promotion and
periodic mailing of Dell’s latest product catalogue to existing Dell customers.
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