Dell's global operations and product strategy

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 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.

Toyota was the forerunner in establishing the so-called "lean, just-in time" supply and manufacturing system that swapped enormous inventories associated with large, batch production runs with one where products or components are made or ordered only when required in the later stages of manufacturing sequence. (New Software makes 'Dell' Business Model Possible for any Industry, Company: Adaptive Enterprises, "Build What They Want and They Will Come" is the Way of the Future) Lean concepts primarily examine the value chain in an attempt to find a way to configure an organization so as to add value as quickly as possible. It removes all the in-between steps, all the in-between time and all the in-between people. Only those people, time and activities that enhance value for the customer are in place. (Principles of Lean Thinking)

Dell stretched out this idea all the way to the last customer, who, in reality, draws product out of the system with each fresh order. (New Software makes 'Dell' Business Model Possible for any Industry, Company: Adaptive Enterprises, "Build What They Want and They Will Come" is the Way of the Future) While touring the facilities of a big customer, Michael Dell observed technicians adapting new Dell computers with their company's 'standard' hardware and software. The host inquired Dell whether their personnel can do this for him. Immediately, Dell replied that they can do it and they like to do it. Within a few weeks, Dell was dispatching computers with factory-installed, customer-specific hardware and software. While the customer took an hour but the factory took only minutes to complete installation, and additionally, computers can be dispatched straightaway to end-users instead of making a halt in the corporate IT department. This spirit of lean thinking is this abbreviation of the value chain. (Principles of Lean Thinking) As per Lee, the market wars of the future will be triumphed and be defeated in the supply, manufacturing and distribution networks, not in the front office, by companies that are highly flexible and persistently proficient in real time.

The Dell model is an illustration of a class of planned business schemes that concentrate on the complete removal of waste, errors, and delay in supply, manufacturing and distribution, by the use of demand-driven, lean supply principles, and near-zero defects. These principles together with the concept of the flexible enterprise are more and more being regarded by enterprises as fundamentals for their very survival, said Dr. Lee. (New Software makes 'Dell' Business Model Possible for any Industry, Company: Adaptive Enterprises, "Build What They Want and They Will Come" is the Way of the Future) Dell utilizes the detached stretched-out supply chain model to catch custom-assembled or custom-packaged orders from an assembly plant or distribution center to the delivery destination with the help of third-party delivery specialists like FedEx and UPS. (Best practice resources enabling lean manufacturing excellence) Dell gets its obvious competitive edge over its rivals through its concentration on forcing down material costs and sustaining a lean inventory. (Build-To-Order Model for Success (Part-II)) Many have attempted to duplicate Dell; only some have made it. (Principles of Lean Thinking)

Specific advertising campaigns, including the well-known 'Steven' (e.g. 'Hey, Dude, you're getting a Dell' campaign

Recently, Dell came out with a novel product commercial plan that is emerging out to be its best idea ever. The new marketing promotion the "Steven" campaign is called "Plain English." (Brief Description of the Product/Service) For those who see TV, there is better possibility that they would have come across Steven. (Dude, you're getting a career) In the advertisement, the character Steven is a goofball who scolds friends and family for purchasing Dell computers. In the same commercial, Steven, by looking at the camera, asks his father to purchase a Dell for him due to the free utilities that he can get and his father's love for a haggle. Steven convinces his friends' parents to get them Dells in other advertisements that end with the slogan "Dude, you're getting a Dell." (Dude, are you getting canned?) Since December 2000, "Steven" commercials have been shot and were yielding returns. (Dude, you're getting a career)

All the company personnel are pleased with the advertisement as it started paying returns to the company from the very first day. According to David Marmonti, vice president of marketing for Dell's Consumer Group, the Steven character through its message of reasonable technology constructed just for customer needs with great prices and service has been a powerful messenger for Dell and it is also a great supporter for what a consumer is looking for in a computer company by the way of its customer reaction to the advertisements. Marmonti continues that they are delighted to hear from customers that Steven is so famous and they are planning to begin his fan site as reciprocation to customers request for additional information. Presently, this is the huge advertisement from Dell. They also advertise in television and journals. While some advertisements present a laptop or computer with the price list and the characteristics, others show Steven. Depending upon where the advertisement is being watched, the advertisements can be made suitable for anyone from young adult to businessperson. (Brief Description of the Product/Service)

The introduction of the "Dell Guy" enabled the Dell to achieve amazing success. In a struggling economy where many rivals are finding it difficult, Dell has achieved a huge home consumer market share. (Dude, you're getting a career) Even though the appearance of Steven and his voice in TV sets embarrassed many people; Steven was successful in making people but PCs from Dell. Steven's success even resulted in the advertisement made by iMac-attacker Gateway which goes like "Dude, you're getting a Dell." (Dell May Be Giving 'Steven' His Pink Slip)

The company's spending on research, development and engineering pursuits is a part of annual budget process and depends on cost-benefit analysis and income projection; the company feels that this is essential for its continuous success and growth. Those projects that can give greatest market approval and can attain highest return on the company's investment are given preference by the company. This enables Dell to achieve leading position in the computer industry. No strong company is without some drawbacks, but its capability to conquer its drawbacks will make it stronger. Dell is a strong company, but it can be conquered. To remain at the top Dell has to improve in some of its fields. Their present limited inventory may lead to troubles with regard to timely delivery. If they do not have what they require immediately then one has to wait forever till the part or component reaches its stock. As the plus points are more than the minus points, it is a good trend. Even with a few limitations with regard to on time delivery, one can still get their computer in the way they want it quickly. (Brief Description of the Product/Service)