Dell Analysis

I. Analysis on Dell Computer's Strategy

1. Pieces of Dell's strategy

1.1 Cost-efficient build-to-order manufacturing

Dell built its computers, workstations, and servers to order; none were produced for inventory.

Dell's build-to-order strategy meant that it had no in-house stock of finished goods inventories and that, unlike competitors using the traditional value chain model, it did not have to wait for resellers to clear out their own inventories before it could push new models into the marketplace-resellers typically operated with 30 to 60 days inventory of prebuilt models.

Dell customers could order customer-equipped servers and workstations based on the needs of their applications. The orders were directed to the nearest factory. At all locations, the company had the capability to assemble PCs, workstations, and servers; typical orders were built and delivered in three to five days.

Its in-house manufacturing delivered about 6% cost advantage versus outsourcing.

1.2 Direct sales strategy

It can be illustrated in the following pictures.

Figure 1. Indirect PC value chain (traditional value chain)

Figure 2. Direct PC value chain: Dell's hardware delivery system

Dell offered competitive prices, high levels of support, and a focus on selling and supporting PCs without the distraction of offering a full line of hardware and services.

① Partnerships with suppliers

Dell partnered with reputable suppliers of PC parts and components in long-term rather than to integrate backward and get into parts and components manufacturing on its own.

② Customer service and technical support

This strategy includes value-added services, premier pages designed for all kinds of customers, company's website with local language and currencies, on-site service which charges fees to provide technical support and other services.

③ Use of the internet and e-commerce technology

Dell was a leader in using the Internet and e-commerce technologies to squeeze greater efficiency out of its supply chain activities, to streamline the order-to-delivery process and to encourage greater customer use of its website, and to gather and utilize all types of information.

2. How these strategies fit together?

Dell's business has been built on a direct sales, build-to-order strategy for producing and selling PCs.

 Build-to-order strategy resulted in a just-in-time inventory which yielded major cost advantages and helped that expensive inventory does not build up in the channel and lose value before it can be sold, and new products can be introduced without having to clear out old inventory in the channel.

 Unlike indirect vendors whose channel partners generally refuse to reveal even who the final customer is, Dell knows who the end user is, what equipment it has bought from Dell, where it was shipped, and how much the customer has spent with Dell. Dell uses that information to offer add-on products and services, to coordinate maintenance and technical support, and to help the customer plan its PC replacement and upgrade cycle. With many of its customers, Dell has become what it calls a "PC outsourcer," taking responsibility for managing part or a customer's entire PC inventory, from purchase to disposition.

 Dell's close partnership with suppliers was allowing it to operate with no more that two hours of inventory. Suppliers are selected to ensure high product quality. Dell's long-run commitment to its suppliers made it feasible for suppliers to locate their plants or distribution centers within a few miles of Dell assembly plants, putting them in position to make deliveries daily or every few hours, as needed. Also, long-term partnerships enlisted greater cooperation on the part of suppliers to seek new ways to drive costs out of the supply chain.

II. Resources Strength of Dell

The resource strength, which means what Dell is good at doing or the attributes enhancing Dell's competitiveness, is taken in the following forms:

1. the skills and important expertise

1.1 strong capabilities in supply chain management

1.2 low-cost manufacturing capabilities

1.3 direct sales capabilities

1.4 strong e-commerce expertise in squeezing greater efficiency out of its supply chain activities, order-to-delivery process, information gathering and utilization etc.

1.5 skills in improving production processes such as failure tracking and information obtained from customers through its service and technical support programs

1.6 expertise in providing consistently good customer service

1.7 unique advertising and promotional talents

2. valuable physical assets

2.1 state-off-the-art plants and equipment

2.2 worldwide distribution facilities

3. valuable human assets

3.1 experienced and capable workforce in key areas such as customer service and technologies

3.2 cutting-edge knowledge in cost cutting by direct sale

3.3 collective learning built up over time

3.4 proven managerial know-how in supply chain management

4. valuable organizational assets

4.1 proven quality control systems

 all of the company's plants had been certified as meeting ISO 9002 quality standards.

 all assembly plants had the capacity to run testing and quality control processes on components, parts and subassemblies obtained from suppliers, as well as on the finished products Dell assembled.

4.2 a cadre of highly trained customer service representatives

4.3 sizable