Case Study: Critical Success Factors of Dell

DELL’s direct-to-customer business model is the key to the company’s dramatic growth and success and has focused on selling directly to customers. This helps eliminate the middleman and offers customers more powerful configured systems than most competitors. The direct model enables DELL to develop a thorough understanding of customer expectations, which strengthens customer relationships and increases customer satisfaction and loyalty. One of the characteristics that distinguishes DELL from its other competitors is that DELL provides the mode to custom the computers of the customers’ choice and taste and deliver the system to the customer as it is the most crucial and critical success factor behind DELL Computers. Therefore, DELL must be aware of the benefits they wish to realize, how it will be realized and ensure only investments of appropriate amounts of resources to obtain benefits. DELL relies on reputation in the US market of award-winning service and a high-quality product. Customer satisfaction and consumer awareness surveys should be conducted quarterly to ensure the image that DELL creates for itself within a culture has not existed before there is a positive one. Market timing and speed are critical to many industries, such as technology, pharmaceuticals, and some consumer goods.

DELL’s competencies are their cost/ strategy. In consistent to being an integrated cost leader, DELL produces high quality PCs by using their Direct Business Model approach and sells them directly to the customers. DELL’s weaknesses are single sourcing, new product and reliance on corporate clients. DELL has opportunities like the potential growth in overseas markets as the industry is still in growth phase and the entering of the new product markets. Henceforth, the threats are technological changes that are expected since technology can only get better. Global economy and increased competition in which DELL’s financial ratios identifies that the company is no match for their competitors. DELL’s most competitive force is the Direct-Model concept which helped them to reach above-average returns and remains in business today. Customers have developed a brand-name loyalty to Dell because of their low cost differentiation strategy. The huge threat faced by DELL is the fierce competition in the industry. If DELL enters into a merge it would not have to spend so much money and time trying to develop a face-to-face communications, if the local business is already well known. According to cost saving benefits, the company will not have to spend any extra money for product development if it is already developed. Furthermore, there will be plenty of joint financial support. If there is synergy between the two companies, their market penetration will be that much easier to achieve. DELL initiated ways to overcome its weaknesses and use its strengths to gain advantages over its competitors- by careful analyzing of the factors that contribute to the company’s success in business strategies that had implemented created the path for the company’s continued success. Today, in fast-moving areas such as wireless and hybrid cars, you can see how market windows open and close relatively quickly. The economic rents accrue to those who can thoughtfully scan the market environment and quickly spot profitable opportunities. One of the hottest areas in technology and business process today is around predictive analytics, which is all about helping companies to determine their next move and stay one step ahead of the competition. One way to analyze a competitor’s strategic intent and migration path is to assess its expansion plans into new market segments and offering sets for example, think of Dell moving into printers or Microsoft moving into the CRM space.

Although time-to-market is important, it doesn’t mean doing things haphazardly or without some analysis. Often, companies do get stuck in an “analysis-paralysis” loop and don’t take action until it’s too late. In companies, strategy means nothing more than a plan based largely on today’s markets, today’s product set and today’s competitors and emphasizing the financial forecast and such a strategy may successfully identify opportunities to capture the upside of the current business over the next few years but can rarely anticipate extreme competition, much less show how to reposition a business to face it. Effective strategy should steer companies toward where an industry is heading and where it is today.

Dell Corporate Strategies

The economic activities performed by Dell encompass the development, manufacturing, sale and support of personal computers and computer-related products.

Since its foundation, the company has been based on the Direct Model, i.e. Dell has always tried and managed to create direct relationships with its customers, by selling products directly and without the participation of intermediaries. The sale has always taken place through a telephone service or via the Internet.

In order to accomplish its goal of being as fast as possible in the delivery of the customized products it supplies, Dell has created an ample network of manufacturing plants around the world. The corporation is present in each continent and in most of the states with national basis. For instance, in Italy Dell has established its Italian department – Dell Italia.

What’s more, Dell has forced many of its suppliers to set their plants alongside its own facilities in order to minimize the time of the transactions that occur between them and the company itself. They provide the company with a constant flow of information regarding their inventory levels and, by contrast, the company contributes to the development of their performance and the decrease of their costs of production by providing them with the necessary training to keep reducing costs at a fast pace and meet its strict targets. In fact, suppliers are quarterly met and classified according their levels of reliability, cost, quality and speed, and these are compared to their industry average. Once a supplier meets the targets imposed by Dell, the latter establishes a long-lasting relationship in which even know-how and new achievements are shared so as to enable Dell to meet its financial fundamentals and ensure the highest return on investment to its shareholders.

Dell Business Strategies

Business strategy involves leveraging the core competencies of the organization to achieve a defined high-level goal or objective. It also includes the analytic and decision-making process surrounding what to offer (e.g., products and services), when to offer (timing, business cycles, etc), and where to offer (e.g., markets and segments) as a competitive plan.

Michael Dell, chairman and chief executive officer, summed up the strategy by saying, “We are combing Dell’s Internet expertise, and our unique ability to organize resources around distinct needs to create new Web-related capabilities. The Dell advantage is based on direct relationships, low cost, speed to market and e-commerce expertise as much as it is on Internet hardware, appliances and customers services and support.”

Included in this strategy is “Service Provider Direct,” a three tiered package of service, support and co-marketing programs designed specifically to benefit ISPs, ASPs and Web hosting companies. Current program users include Exodus Communications Inc., NaviSite Inc. And Corio Inc.

A second initiative is Infrastructure Computing. Dell announced PowerApp appliance servers designed for specific Internet infrastructure tasks such as Web serving, caching and load balancing. This will provide customers will a full range of server and storage solutions for building their Internet infrastructure.

“Expert Services is a new and expanded service offering that will help businesses take advantage of the power of the Internet, according to Dell.

Its fourth initiative is Universal Access, a drive enabling universal Internet access through a combination of leading-edge devices, connectivity offerings and access choices, encompassing narrow band services, broadband offerings and wireless products and services.

The final aspect of Dell’s business strategy is Dell Ventures. Through strategic links to companies with technologies, products and services that create breakthroughs related to the Internet, Dell will provide equity investments and incubation services for selected early-stage private companies to accelerate development.

Supply Chain Strategy

Supply chain strategy also focuses on driving down operational costs and maximizing efficiencies. For example, an organization may choose a strategy directed at supplier management as a way to remain competitive. By providing a clear purpose, the organization keeps sight of the strategy and is able to devise tactical steps to achieve these goals. Another reason for having a supply chain strategy is to establish how you work with your supply chain partners, including suppliers, distributors, customers, and even your customers’ customers. As the marketplace becomes more competitive, it is critical to reinforce existing relationships and work together. And for all these reasons, a well executed supply chain strategy results in value creation for the organization.

Marketing Strategies

The Dell marketing strategy was simple and basic. Cut out the middleman and sell the product cheaper. Offer great customer service by giving the customer exactly what they want.

There you have it. That is how Dell is about to become the largest company in the world selling computers. They did it by building computers made to order for the customer. By handling all the sales (retail) themselves. If you want a Dell computer you can only get it from Dell. Their marketing strategy allowed them to pass the savings onto the customer.

Source: Scribd.com

About Abey Francis

Abey Francis is the founder of MBAKnol - A Blog about Management Theories and Practices - and he's always happy to share his passion for innovative management practices. You can found him on Google+ and Facebook. If you’d like to reach him, send him an email to: [email protected]
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