Dell Inc company overview and business operations

Dell Inc.

The head office of Dell is at Austin, Texas at the same place where the company was based. Dell Americas is also located in Texas, which is the regional business unit for the United States, Canada and Latin America. The regional headquarters offices of the company are in England, for Europe Middle East and Africa; in Singapore catering to Asia-Pacific; and in Kawasaki, Japan, to serve the market for Japan. The production unit for the manufacture of computers is located in Texas, Tennessee, Brazil, Ireland, Malaysia, and China. Dell Computer Corporation sells products and services meant for Information Technology and the Internet backbone. The proceeds of the company for the previous four quarters were $31.2 billion. (Stories of Entrepreneurs: Michael Dell)

Dell's product, pricing, distribution, and promotion strategies

Product

The Dell product line-up of high performance computer systems comprises of PowerEdge servers, PowerApp server applications, PowerVault storage products, Dell Precision workstations, Latitude and Inspiron Latitude C810 computers and OptiPlex and Dimension desktop computers. The company makes arrangement for system deployment and organization, helps customers through the evolution of technology and presents a comprehensive array of additional services. Dell devises and makes custom build products and services according to the needs of its customers and puts up for sale a wide range of peripheral hardware, together with handheld products, and computing software. (Brief Description of the Product/Service)

Pricing

To meet the demands of the multinational customers, the company presents a lot of schemes devised to give global capability, maintenance and coordination. By the use of these programs, the Company can be able to provide one-stop contact centers and answerability with international experts, unique international pricing, uniform service and maintenance programs worldwide and availability of central purchasing facilities. One of the major pricing goals is its worldwide potential. This primary goal presents customers a constant price structure that is applicable throughout the country. (Brief Description of the Product/Service) On a particular day not very long ago, the Dell Latitude C810 Laptop was marked at $2,307 appearing on the Web page of the company meant for small business units. In case of sales to healthcare companies, in the web page, the price of the equivalent device was stated as $2,228 a discount of 3%. State and local governments would have to dish out $2,072.04 or 10% lower compared to the price for the small business units. "The variation in prices is right." (Brief Description of the Product/Service)

In the midst of a slowdown, which is eating away its own profits, the top ranked PC manufacturer of the planet is using an aggressive futuristic strategy to corner a larger than before share of the PC market. The sales force of the company numbering more than 5,000 are always interacting with big corporate customers on their PC buying proposals and in their business they are comparing with the competitors of Dell. Moreover, Dell has been insisting flexible pricing in its agreements with suppliers, a lot of whom even recurrently keep Dell informed on their own prices. These permit Dell to fine-tune the price tags and inducements at once in the wake of changes in its own prices and demands from buyers, from one market segment of the PC market to another." (Brief Description of the Product/Service) "Our flexibility permits us to maintain a distinct stand even within a given day" states a Dell spokesman. A tele-sales executive shortly referred the price of a PC for $50 lower than the price announced in an advertisement in the New York Times on the same date." (Brief Description of the Product/Service) As Dell has no market intermediaries and the company delivers the product directly to the customer, they are capable of managing the prices. As the prices of the component are lower, the net prices of their laptops are lesser resulting in a more content and delighted customers. (Brief Description of the Product/Service)

The business of Dell is well-known by corporate purchasers. It is open that the company sells low cost, average servers, which are somewhat not the latest in technology offering. However, that method has poised certain major companies craving for more. According to Michael Koval, Chief Information Officer with Long & Foster Cos, a property dealer service unit in Fairfax, Va, "the major part of my computer workload is handled ably by a regular Dell server" (Dell Servers: Too Generic?) They come at a low cost, possess sufficient capacity to accomplish the workload and they are simple to organize." (Dell Servers: Too Generic?) But some of the Long & Forster applications, comprised of in-house commission-calculation technique are all set to need more stuff compared to Dell's server having the highest capacity, the PowerEdge 650 equipped with four processors in terms of its performance. Koval says "In case I am going for something larger, I would not buy Dell." (Dell Servers: Too Generic?)

Dells's assertion as the price warrior on Intel-based servers has gradually diminished. As stated by Glenn Gies, director of information technology with ElkCorp, a maker of building products in Dallas who changed to Dell servers in the year 2001 as "our hardware costs were going up due to purchase of Compaq products." (Dell Servers: Too Generic?) However, there was a period when Dell products were 50% cheaper than its competitors, the price gap has now narrowed down to a mere 3%. In the words of Gies: "The scenario at present is at an equal footing." (Dell Servers: Too Generic?) During February 2001, Dell initiated a drive to be the largest player in the PC industry. The company stated that it was deliberately selling at 10% less than its rivals to capture market share very rapidly. That statement, coupled with the familiar information that Dell enjoys price superiority over its rivals, was an indicator that to the remaining players of the PC industry that in case other companies attempted to equal Dell's price tag they will be waging a war they will eventually lose.

The policy and statement of Dell is akin to "low price assurance" notice is widespread among electronics retailers. A low price assurance addresses your rivals, "In case you attempt to chip away our prices, we are going to lower our prices still further." (Dell boosts guidance on strong hardware sales) Truly, this nature of risk has to be supported by the capability to really stay afloat selling at rock bottom prices without going bust. The potential to be in business with lower margins is truly what Dell does and because of this reason they are unbeatable. (Dell boosts guidance on strong hardware sales)

Distribution

In order to comprehend in a better manner the type of system employed to optimize the exposure in the market, it is pertinent to consider the type of delivery channel employed, direct or indirect. The direct distribution delivery system scores over indirect distribution due to a number of causes. The foremost is that through the direct distribution, Dell is able to interact effortlessly and cater to their target market. It lets them to be in charge of the information content that reaches to the intended market. Through the system of direct distribution, it is possible to eliminate the intermediaries, restructure the supply chain and aids in enhancing the Total Quality Management - TQM. Since it enjoys a leadership status in the industry of sales delivery of Laptop computers, Dell was capable of boosting the margins of their Laptops to never before figures by discarding non-value added elements of the sales and distribution process. By building a well-organized and efficient value chain, Dell has the advantage of lowering costs and boosting profits on sales. Dell even has a direct connection with their customer responses, such that they are capable of assessing the performance, contentment and/or malfunction of their merchandise as also the choices and inclinations of the customers. (Brief Description of the Product/Service)

Getting hold of such information lets Dell to rule the apex of the TQM process, adjusting to the modifications on demands. Considering the employing of direct distribution aids in recognizing what type of delivery channel is employed. Dell employs a pioneering distinctive channel distribution structure. The company is even redefining what the value of employing a special distribution channel is. The archaic description of exclusivity was restricted by the closeness of a retailer to its buyers. Due to information technology revolution, Dell is capable of employing a distinctive marketing system, which just uses a telephone access, or computer, and the logistics support of UPS/FedEx that circuits the world in its destination coverage. Dell has been capable to reap enough from the market for which the very existence of the company depends. (Brief Description of the Product/Service)

As the products of the company are obtained only through phone or through the Internet, Dell is a category leader of Internet retailing. Their present system is definitely in place as the company has not made any substantial initiative to deliver their products to conventional electronic merchandisers, and the company has created success history for itself and the industry in general. To me, it is the unified approach of the distribution system employed, the total absence of middlemen, and the efficient use of the Internet, which makes Dell such a revolutionary in the "sunrise industry." The achievement of Dell's business model has been an example for others to follow the path of growth, aiming to emulate the booming revenues by Dell. The company Gateway endeavored to tread Dell's path, with a novelty. Dell has totally metamorphosed the concept of selling computers in a big way. (Brief Description of the Product/Service)

The company takes online orders that is sent to a central warehouse and delivered to the buyer through the logistics support of Federal Express or simply through the mail. The main benefits are that a single warehouse can cater throughout a country or can distribute worldwide. There is a directly linkage with the suppliers through the Internet hence they can employ the Just in Time - JIT inventory. Dell through the use of a present infrastructure, a worldwide service provider, removes a majority of the logistical non-value added components out of the value chain. Stated in an unambiguous manner, Dell uses FedEx or the U.S. mail to its benefit, as it employs the Internet to its optimum use. Undoubtedly, other companies always view Dell as an ideal quintessence of success. (Brief Description of the Product/Service)

Promotions

The managers at Dell indicated that sales of their products commanding increased profits are on a continual path of increase. Earnings from the sale of servers, storage items, workstations and Notebook PCs also went up. There was a 100% increase in the sales of storage items. The company was contributing to 40% of the worldwide industry growth in servers and mentioned that it added in excess of three points of the global market share and five complete share points in the United States. The managers at Dell chalked up a blueprint under which they mentioned that they would concentrate increasingly on products like servers, laptop computers and storage products as an initiative to give a fillip to profits. The company in making their product assortment to the top end has done a remarkable advancement. According to Barry Jarulski, a market analyst with Booz Allen & Hamilton in New York, who stated that bringing in variety, explained the impressive achievement of Dell. (Dell's 1Q surprises Street)

Dell manages all types of sales campaigns. Dell can manage any requirements of a customer including installation of an advanced free DVD when he buys a laptop. They issue coupons that can be used when a sale of Latitude takes place and they permit discounts too. They also participate in commercial exhibitions and offer unique price if order is placed during the exhibitions. Dell is utilizing all kinds of sales advertisements that are available in order to ensure that their products are fully known to the customers and are getting sold. (Brief Description of the Product/Service)

Dell's product portfolio strategy

In keeping with the rising sales volume, Dell has grown a mechanized production system that is able to take care of its quickly intensifying business needs. In the opinion of Wilson, the system accepts the requirement details of the customer from the company's order entry system. He said that "In case of every order, we prepare a customized software graphic that includes every application the client has stipulated as also applications built by the client. We employ our Novell® NetWare® network to fix and download these customized graphics to every system soon after it arrives from the assembly line. NetWare has been contributing a great deal in the production system." (Success Story: Dell Computer Corporation) The significant part of business concerned with the production system was formed under NetWare and leverages its forte. With the advancement of NetWare, Dell has progressed to recent releases to take the advantage of new networking technologies. For instance, Dell progressed to NetWare 4.11 to take the benefit of Novel Directory Services® - NDS™, the foremost international directory. (Success Story: Dell Computer Corporation)

NDS makes the network administration easier and lowers networking costs by extending centralized and integrated management of the total network. To support its enhanced capacity of production process, Dell's Netware network has persistently extended the dependability and scalability necessary. This is important since any disruption of service might impinge on the company's capability to ensure delivery promises to the customer. Hence the NetWare network aids Dell in fulfilling its obligations for customer fulfillment. "One of the Dell's main ingenuity for 1999 concentrates on providing an enhanced customer experience." (Success Story: Dell Computer Corporation) According to Wilson, "A significant portion of that is leveraging business relationship in a manner that facilitates us to extend enhanced customer service." (Success Story: Dell Computer Corporation) Dell and Novel have pooled their technical proficiencies to allow Dell to bring customized turnkey Netware server solutions straightaway. To sum up, Dell considers technology as a significant part in pulling off a competitive edge through doling out improved service to the customers. They concentrate on guaranteeing excellence in customer experience from the period products are ordered, during the course of the production process to the deliverance of superior quality products. In order that the customer is guaranteed an enhanced experience, Dell hopes to persist on leveraging the appropriate technologies. (Success Story: Dell Computer Corporation)

Target market strategy

In order to comprehend customers' wants and to supply high quality computer products and services adapted to satisfy those wants, the Company builds and uses direct customer relationships. The customers who buy the products and services of Dell include huge corporate, government, healthcare and education customers, small-to-medium businesses and individuals. With regard to small-to-medium businesses and individuals, the Company maintains direct relationships with the help of account representatives, telephone sales representatives or Internet connection. A steady stream of information giving needs and strategies of customers received through these direct customer relationships helps the Company to understand the requirements of its customers and to match them with upcoming technologies. As an element of business agenda, at Western Michigan they have incorporated a plan with Dell letting business students to get the Dell products. They have aimed at the young students and have presently embarked on building a customer relationship with the greater part of the Western Michigan University business students. Consequently, this service to WMU business students is nowadays generating a plenty of customers faithful to Dell brand. (Brief Description of the Product/Service) Similarly, there are programs being initiated by Dell to target the market.

Market penetration strategy

Recent products launched by Dell in 2003 comprises: the Dell Music Store, a newly started service to sell downloaded music; an integrated, HDTV-compatible, 17-inch flat-screen TV and computer monitor with unified speakers; and the Media Experience that is a software application which comes with every Dell Dimension PCs for handling digital media, like photographs, music, video and DVDs. Apart from these collection of devices, Dell launched a new handheld computer, the Axim X3, with extra 802.11b wireless connectivity facilities to choose from, and an added new desktop, the Dimension XP3, devised for 3D gaming and premium multimedia applications. A new projector for the home segment was also introduced by Dell, which is 2200MP that will show breathtaking pictures of sporting events, video games or DVDs on a wall or screen in 2003. (Dell Pulls Wraps off Consumer Electronics Products Strategy)

Dell's recent concentration in consumer electronics is not at all a cause of concern for keen competitor Gateway. "The share of profits is more, and there is a rapid growth of markets," announced by Brad Williams, the Director of Gateway communications. Williams clarified that making forays in some areas of consumer electronics is not that too difficult for PC manufacturers as they can capitalize their associations with the current production partners. "When you see at an LCD TV, it has a resemblance to an LCD screen of a computer," he stated. (Michael Dell spells out strategy for market defiance)

It was stated by Dell that the company in order to embark upon a wider sphere of consumer electronics market comes a normal competence for the company. Business analysts, producers and consumers are lying in wait for the PC and consumer electronics to assemble for certain time, and the latest explosion of digital media, is partly accounted for the dropping of prices of products using which digital content can be recorded and played which is encouraging a lot of companies to gear up in their pursuits. A lot anticipate Dell to be a major power in the consumer electronics market due to its renowned direct business model, that have a propensity to force down profits and costs, to the advantage of consumers, however to the disadvantage of rivals. Dell mentioned about the company's proposals to reduce costs in the consumer electronics market, indicating about the "incompetence" in the retail business model and consumer electronics business. (Michael Dell spells out strategy for market defiance)

The launching of TV from the Dell stable is a timely pointer that the company is aiming to make it presence increasingly felt in every portion of home technology that would comprise home PC, amusement and every related peripheral device, as stated by Brooks Gray, an analyst of Technology Business Research. However, Gray mentioned that Dell ought to be cautious so that it does not concentrate itself on selling excessively only one part of its consumer electronics policy -the Personal Computer. Dell is also plunging into the LCD TV market with its 17-inch Dell W1700 LCD TV. The company is eyeing to make the most on the latest interest in LCD TVs that surged 223% to 734,000 deliveries right across the globe - during the first quarter, as per the market research firm Display Search. Lower prices aided to drive the growth of the LCD TV market; however the share of technology continues to be a miniscule part of the total TV business scenario. Nearly, 170 million TVs are delivered each year, a fact stated by Ross Young, president of DisplaySearch. Yet the heightened growth rates are motivating keenness from PC and consumer electronics companies. In addition to that Dell launched its recent handheld, the X3 as well that is a slender and lighter edition of the existing X5. Dell is offering WiFi features as an alternative in the gadget. The yet to be launched projector from its stable will be named as Dell 2200MP Projector 5. (Michael Dell spells out strategy for market defiance) decision, which amazed the industry, was in not offering Itanium II-based systems. Dell said that the decision was just a business preference. "It is not a volume garnering product." (Michael Dell spells out strategy for market defiance) Volume game is our hallmark. When there is volume, we take the plunge. In my case, the appropriate episode at the top end is bunches of superior performance, not Itanium II," he went on to say. A particular sphere where Dell eyes a chance of great volumes is the printer market and the company proposes to introduce an array of printers in the later part of this year. "We want to be present in the inkjet and laser segments as well," quoted by Dell. (Michael Dell spells out strategy for market defiance) "We suppose a chance exists to give value to customers in this scenario. It is our conviction that is not going to be that simple." (Michael Dell spells out strategy for market defiance)

The decision is a reflection of the company's resolution during 1995 to begin the production of servers. The demand for servers "was the subsequent opportunity to follow" mentioned by Dell. "It was also a fact that one of our rivals - Compaq was charging an astronomical sum for those products." (Michael Dell spells out strategy for market defiance) This helped them; in paper at least, the capability to charge less on other products, stated Dell. "That was over since we joined the fray in the server market and thereafter it started to get competitive. The prospect in the printer market, "he stated, "is extremely related." (Michael Dell spells out strategy for market defiance)

Dell's key competitors (Hewlett-Packard, Sun Microsystems, and IBM)

Dell's rivals are Hewlett-Packward Co., IBM and Sun Microsystems Inc. In the server and storage market. Even though each of these corporations have seen their bottom lines being affected due to a bad patch in IT investment horizon, Dell announced that the company has sold an increased quantity of servers and storage systems compared to what was anticipated earlier. Dell has posted increased market share at the time of economic slowdown, especially with low-specifications systems. (Dell boosts guidance on strong hardware sales)

Dell will be entering the competitive arena flanked by players like Gateway, Hewlett-Packard, Sony Electronics and Apple Computer in an attempt to exploit the home electronics market. The business strategy adopted by Dell and Gateway is alike that employs the customary direct PC model to obtain a lot of third-party manufacturing associates to build Dell or Gateway branded devices as per the manufacturers' own stipulations. The two companies are even working on approaches, which would permit several home entertainment and computing gadgets to share data with a PC. But the two companies are launching products in the market from two rather varied approaches. Whereas Dell's viewpoint is focused on the PC, like its Dimension XPS desktop game system or it's yet to be launched Media Centre Desktop, Gateway intends to draw customers by offering flat-screen TVs. (Dell's 1Q surprises Street)

Whereas Dell is viewing at customer electronics as a means to increase an existing robust income inflow and enhance the figures of profits, Gateway is pledging that its foray into the category will aid in releasing it from a series of quarterly losses. HP's range of products which includes PCs, printers, cameras and other household entertainment gadgetry are also devised to share data effortlessly, its newly launched products includes 160 newly introduced products for the home segment including a Digital Media Receiver for swapping multimedia files between domestic electronic gadgets and a PC. HP could also penetrate more deeply into the consumer electronic market by employing a method like that of Dell and Gateway, a Manager tipped at the time of an interview at the recent TechXNY show. However, the company has not yet declared about these recent initiatives before the press. (Dell's 1Q surprises Street)

During September, 2001, Hewlett-Packward took over Compaq for a nearly $25 billion in HP stock. The investors disliked it. The share prices of HPs and Compaq went down around 25% within a few days following the news; hence the agreement was hurriedly valued below $20 billion. The New York Times narrated the pact as the marriage of the two besieged companies into one colossal loaded with twice the problems. The dilemma encountered by HP and Compaq was identical as that experienced by Gateway and IBM, which is Dell Computer. Since the last few years, Dell has been able to build an amazing competitive edge by becoming the most competent PC producer. Dell's competency stems from two reasons. To start with they sell to their customers directly so that their delivery channels are trouble-free and less costly with no dealer's margin. Secondly, they supply products after receiving orders, which means that their inventories are at low levels. With low levels of stocks, it ensures that when there is a price cut from Intel processors, Dell is not piled up with ex-stocks of processors that are expensive. (Dell boosts guidance on strong hardware sales)

Dell is able to lower the price tags of its computers quickly compared to its competitors as the spares that are assembled to build those computers are the most recent and less costly. Till date, no other PC manufacturer has been able to steal a march over Dell as regards cost structure is concerned. A price war by HP and Compaq to contest Dell's price does not hold water, as HP and Compaq cannot keep on bearing losses forever. The predicament of HP and Compaq can be represented through Game Theory as a 2 x 2 matrix. Moreover, this game is not played for just a single occasion. It goes on and on, wherein the result of the last round is considered as the starting point for the subsequent round. Till the period Dell has a reduced price structure, Dell will be triumphant every time when HP and Compaq wage a price war. Going through the news after Dell's declaration, you can look the manner in which the competition on price front is done. During April 2001, after the February drop in prices, Dell came to be the biggest PC manufacturer of the world leaving behind Compaq in market share. During the month of May, HP and Compaq reacted to Dell with another round of price war placing all rivals into the lower-right quadrant. (Dell boosts guidance on strong hardware sales)

Compared to the competitors IBM and Hewlett-Packard, Dell has taken more faith on standard industrial processors, operating systems, and other equipments. Sun Microsystems, Dell's one more rival, has been unwilling to accept the Intel-based computing world. Sun keeps on spending in its UltraSparc chip architecture even though it possesses Intel and x86-based servers. (Dell and Sun Offer Different Visions) When compared mainly with respect to profits, Dell is obviously the leader due to reduced pricing. Even when other suppliers are finding it difficult, Dell has kept on making considerable earnings. For example, in the first quarter, IBM's personal and printing systems division lost $58 million on earnings of $3.18 billion. This loss actually became Dell's profit in their statements. Dell's cash flow is encouraging even in circumstances where a price war removes all profit margins of all companies including Dell. Dell has showed its rivals with a real lose-lose predicament by thrusting for market-share benefits through a price war. One possibility to uphold market share against Dell is to lower the prices. However, due to the benefit derived from its business model, Dell can withstand all such efforts everlastingly. Though Dell's rivals fully know the Dell's plus points, but they have not achieved the Dell's operating efficiency so far. (Why Dell's War Isn't Dumb)

Dell's direct-to-consumer distribution model

The business model of Dell being direct-to-customer is the secret behind the company's remarkable development and star-studded achievement. Not like a lot of other computer makers who keep in place multiple selling channels, Dell has concentrated on selling to the customers directly. In this manner, it does away with intermediaries and gives the customer more powerful featured computer systems with enhanced capabilities compared to the majority of the rivals. The direct distribution system makes possible to build up a detailed appreciation of customer hopes, which, in turn reinforces customer relationships and enhances customer contentment and loyalty. (Success Story: Dell Computer Corporation) They make their design, make and customize products and services to the satisfaction of an array of customer demands. Ranging from the server, storage, and expert service requirements of the biggest companies at the international level, to the consumers at home, Dell has a solution for every segment. (Success Systems)

Spotting the additional and avoidable expenses of delivery through a retail network, Dell's pioneering direct service industry has build a PC that is cheap and devised to fulfill the requirements of the individual customer. The uniqueness and groundbreaking business practice of Dell lies in the fact that the company does not make the products before securing the orders. Customers design a PC on the basis of their own stipulations at Dell. Soon after the order is placed, the assembling of the Computer is done. (Stories of Entrepreneurs: Michael Dell) Dell makes the right arrangement of hardware and software the customer has ordered, supplying it ready to be used. Their manufacturing facility can also consist of customer-developed software and asset labels. Since the orders placed are huge which runs into thousands daily, manufacturing and supplying these made-to-order computer systems by the deadline and consistently is quite demanding. As a maker of latest technology products, Dell realized from a preliminary stage that the novel application of technology to restructure business processes is fundamental to deal with this challenge. Dell has solved the challenge of production and supplies customized solutions to each and every customer. (Success Story: Dell Computer Corporation)

The chief competitive edge of our customer-focused direct business model are extending further, stated Michael S. Dell, the Chairman and Chief Executive of Dell. This situation is also applicable in the case of server and storage products at the core of the Internet infrastructure. Because of the fact that Dell is engaged in direct selling based on the build-to-order model, it is more susceptible to locate scarcity of components compared to companies that manufacture computer systems prior to getting orders and their distribution channel is handled through resellers. (Dell's 1Q surprises Street)

Lean manufacturing model

Lean manufacturing is the technique employed by well-run operations to perfect their processes, attain their targets and achieve a competitive edge. As companies keep attempting to run their operations more competently and to enhance earnings and work flow, their dependence on lean manufacturing is on the rise. (Simulation Nation) Not only have the Lean principles been established worldwide, they are also triumphant in enhancing results in some companies. (Principles of Lean Thinking) According to Dr. Hau Lee, Thoma Professor at the Graduate School of Business, Stanford University, and one among the top authority in the world on IT and "supply networks," companies like Dell and Toyota in the past and companies like Procter and Gamble and others at present, are illustrations of a great change in the quality of business.