Dell New Horizons

1 Introduction

Dell, one of the most sucessful companies in the PC Industry, was founded in 1984 by Michael Dell. The company is specialized in the production of personal computers, workstations, servers and storage and is characterized by a efficient distribution system based on build-to-order manufacturing.

Today, Dell considers different strategies for accelerating DellÐ'Ò's success. This paper tries to analyse and evaluate these alternative strategies.

2 Context Analysis

From the beginning of 1999 until the fourth quarter of 2000 the PC industry was characterized by a hyper-growth. This could be explained by enormous investments in technology infrastructure to prepare for the millenium and the explosion of the internet. At the end of 2000, all companies in the PC industry had to suffer from a slump in stock price and market capitalization. The main reason for the slowdown in revenue growth (from 30% to 10%) was the saturation of the U.S. market, as more as the half of all homes are already equipped with a PC. Due to modernization of many Asian and South American countries, it will be easier to gain market share in these countries, as the porcentage of households equipped with PC is yet not nearly as high as in the U.S. The development of the market can best be seen in the change of the NASDAQ stock index, which rose from 1,835 in March 1998 to a high of 5,132 in March 2000 to a low of 1,619 in April 2001.

3 Customers

3.1 The U.S. market

Relationship customers are large enough to have ongoing technology purchase requirements and expect continuity in their interaction with Dell, with their payment usually effected through coporate purchase orders or lease agreements. Transactional customers (including customer, small and medium businesses) were consumers or small businesses that tended to make only one purchase at a time, usually with credit-card based payment.

3.2 International markets

Dell had created three regions outside the United States:

пÑ"? Americas International (Canada, Mexico, South and Central America):

пÑ"? EMEA (Europe, Middle East and Africa)

пÑ"? APCC / Japan (Asia Pacific, China, Australia, India, Japan)

4 Company

DellÐ'Ò's key to success was primarly based on its concept of customizing PC configurations to meet the unique needs of the consumers and its efficient distribution system based on build-to-order manufacturing. Also the low cost of their products, their direct customer relationships and virtual integration played a major role in becoming the leading seller of PCs in the United States.

With their way of doing business, they were able to deal with the manufacturers and customers directly and could target their products and services at specific market segments. DellÐ'Ò's model is one of continuous improvement, therefore difficult for competitors to emulate.

Dell follows two strategies at the same time: on the one hand, it focuses on price leadership and offers products of similar quality like its competitors at lower prices. This could be explained by its just-in-time ordering system, its short-term inventory (only 6 days compared to 20-70 days for most of its major competitors) and its operating costs, which are the lowest in the PC industry (11,5% in 2000). On the other hand it also focuses on the differentiation strategy with its uniqueness, as it offers its consumers tailoring the products according to their needs.

5 Competitors

In 2000, Dell was the market share leader in PCs and notebooks in the United States as well as worldwide. Its major