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e-Business Models of Dell Computer and Gateway
The e-business models of high tech manufacturers that combine quoting, pricing, and product configuration systems with production, Enterprise Resource Planning (ERP), and fulfillment systems exemplify how advanced multichannel selling has progressed over the Internet. The intent of this analysis is to evaluate Dell and Gateway's e-business models, as each have real-time integration of their customer facing quoting, pricing and product configuration systems with production, ERP and fulfillment systems. Both of these companies are redefining the value chain of high tech manufacturing using the speed and accuracy of the Internet as the basis of their multichannel selling strategies. Selling over the Web, through telemarketing, catalogs, through stores, mass merchandisers including WalMart, and for enterprise accounts, through a direct sales force, Dell's e-business strategy is what makes it possible to unify all these channels into a consistent user experience. Dell continues to evolve their e-business strategy to support identical responses to customers' information requests regardless of the channel the request originates from. Investments in the Customer Relationship Management (CRM) systems at Dell have made this level of consistent level of response possible (Walters, Rainbird, 2007).
Dell's e-Business Model and Global Reach
Dell has over the last 26 years has evolved from primarily a build-to-order PC manufacturer to one of the global leaders in the customization, manufacturing and service of laptops, desktops, mid-range and high-end multiprocessor servers and Storage Area Networks (SAN), rack-mounted systems and tablet PCs. Dell's prominence in global markets is directly associated with their continued refinement and fine-tuning of their direct sales model over the Internet, growing expertise in multichannel selling, and expertise in build-to-order production techniques and strategies. Dell is a very metric-driven culture that relies on measures of performance including Key performance Indicators (KPIs) to attain their e-business, selling, operations and manufacturing objectives. The success of the e-business model can be directly attributed to how pervasive the uses of quantitative measures of performance are within the company.
At the center of the Dell e-business model is the quote-to-order process that translates incoming product orders into customized product configurations of a given system type the customers have purchased. What is unique about the Dell e-business model is the ability to take each in-bound order regardless of which selling channel it originated from and route it automatically to the best possible production center for its fulfillment. Dell is unique in this regard as they are the only high tech manufacturer that interprets the incoming order electronically and seeks to route it to the best possible production center globally given the Bill of Materials (BOM) requirements and supply chain dependencies the order has inherent in its structure (Lumpkin, Dess, 2004). Dell has invested heavily in measuring the process performance of each aspect of its quote-to-order and product configuration strategy, which has generated knowledge that continues to give the company a significant competitive advantage (Columbus, 2004). Dell's heavy reliance on measuring the performance of its quoting, pricing and configuration strategies has also led to the company realizing greater returns on their investments in e-business technologies and process improvements. Dell has been able to translate the process efficiencies of their e-business strategy into long-term financial contributions, making a positive contribution to the financial stability of the company (Bois, 2004). Table 1, Analyzing Dell's KPIs' of Key E-Business Processes, illustrates how the company has been able to correlate performance increases on company-specific, sales, quote and order, customer service, and warranty & returns with the contribution to company financial performance.
Sources: (Ash, Burn, 2003) (Bois, 2004) (Columbus, 2004) (Decker, Scholz, 2009)
Dell's e-business model is predicated on the contributions it makes to the company's overall financial performance. Figure 1 illustrates why the use of metrics and KPIs are so pervasive throughout the company. The ability to track profitability and performance of each selling channel is possible with the Dell e-business model as every sales cycle, from the smallest to the very largest, is recorded digitally online. Dell has become a leader in quantifying the sales cycles by product line, channel, accessory, product division, market segment and geographic region (Columbus, 2004). All of this market data is the fuel or catalyst on which the Dell e-business model operates and provides financial growth over time.
To attain this level of synchronization between e-business operating strategy performance and financial results, Dell has had to invest heavily in system and process integration. In addition, their use of Corporate Intranet sites is pervasive for giving customers in the company's dominant market segments a series of applications to gain support quickly and through automated systems. The Dell premier Pages Program, shown in Figure 2, is how Dell establishes mindshare and loyalty in corporate accounts, universities and governments, three of the most profitable markets the company sells into today. Dell also uses the Premier Pages to expedite orders that would take many hours to input on their consumer-oriented websites. Purchasing agents within corporate accounts, universities and governments can quickly order hundreds of customized computer systems and not have to individually configure each one as the consumer websites require. This has accelerated the adoption of Dell as the standard computer systems throughout many of these markets as a result. Figure 2, Analyzing the e-business topology of Dell Computer Corporation provides a graphical representation of how the company has organized its computing platforms and integration links to each area of their value chain (Porter, 1986).
Analyzing the e-business topology of Dell Computer Corporation (Sources: Based on an analysis of Dell's filings with the SEC (10Ks, 10Qs,
(Bois, 2004) (Columbus, 2004) (Walters, Rainbird, 2007))
Dell continues to successfully integrate their global e-business strategy, which has today grown to be multichannel in scope, with their lean manufacturing strategies including quote-to-order, build-to-order and engineer-to-order. Dell also uses its e-business platforms to attain higher levels of loyalty in their three most dominant and profitable customer segments.
Analyzing the Gateway/Acer eBusiness Strategy
The reliance on ERP systems as the basis of a successful e-business strategy is the strategy Gateway/Acer has taken. This strategy has been successful in supporting the multichannel e-business model that Gateway/Acer has chosen to pursue. Unlike Dell, Gateway/Acer has not been successful with their equivalent Premier Pages program, not finding the same level of acceptance in corporate accounts Dell has. This is attributable to the approach Gateway has taken to managing its sales channels based on the e-business systems it has implemented. Gateway's e-business strategy was implemented while the channel strategies were being defined, while Dell's were implemented after the channel strategies were defined and solidified. The difference is that the Dell e-business model looks to intermediate and potentially minimize channel conflict while the Gateway/Acer e-business model at times has promoted channel conflict. This can be seen in the structure of the channels that Gateway/Acer has created over time. The U.S. plants are the center of the e-business strategies, the locations where the legacy and JD Edwards ERP systems are located.
Analyzing the e-business topology of Gateway/Acer (Sources: Based on an analysis ofGateway/Acer filings with the SEC (10Ks, 10Qs,
(Bois, 2004) (Columbus, 2004) (Walters, Rainbird, 2007))
Gateway has advanced lean manufacturing processes in place for managing their build-to-order, configure-to-order and engineer-to-order workflows and is ahead of Dell in terms of technologies used internally for completing server configurations (Columbus, 2004). Gateway has also created an effective series of metrics to measure the hand-off of quotes and orders into manufacturing to ensure order accuracy (Bois, 2004). While Gateway does not have the depth of metrics and KPIs that Dell has, they do have the ability to measure profitability and performance by channel partner and by channel overall. Dell has the superior advantage in orchestrating across all channels and is more effective in the areas of synchronizing multichannel response to consumers and enterprise accounts. Yet Gateway…[continue]
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