Selling Directly, Globally BY ARUN KUMAR T -028

Founded in 1983 by Michael Dell at age 18 Began selling upgraded PCs and add-on components from a dorm room at the University of Texas In its 23rd year of operation Ranked 2nd in the US and worldwide PC market in 1999 Expanded from a US$6.2 million in 1985 to US$21.7 billion.

In 1985, Dell was a $6.2 million business In 1996, Dell began its Internet approach Dell expanded to $21.7 billion in 1999

Dell Computer Corporation became official in May 1984. It was founded on the Direct Business-toConsumer Model. It is the fastest growing among all major computer systems companies worldwide. Michael Dell is the youngest CEO of a Fortune 500 company In July 1999, Dell became the #1 PC Vendor to businesses in the US

Demographic

Target Consumers: small to medium sized businesses in the US market Location: In the US, UK and 14 international subsidiaries by 1999 The Direct Model:By selling personal computers directly to customers. With Closer contact with customers, there was less need for massive amount of inventory.

Dell computer directly sells to customer and therefore, both retailer and distributors are omitted from supply chain. The supply chain has three main links:
1. 2. 3. Materials flow from suppliers and their upstream suppliers at all levels Transformation of materials into semi-finished and finished products through the organizations own production process Distribution of products to customers and their downstream customers at all levels

Global

Operated sales offices in 33 countries Served customers in more than 170 countries and territories around the world
Internet presented a medium which Dell used to enhance its direct sales approach 24 hour on-line technical support, order status information, and downloading of software They very much dependendent of just in time inventory.

Technological and Decision oriented

On line purchasing Strategy: Online technical support, order status information and online downloading of software. Intensity of rivalry

Legend remains #1 in China Legend is adopting the just-in-time delivery mode

Product Substitutes

Power of Suppliers

IBM, HP, and Compaq establish plants in China

Chinese were uncomfortable using credit cards online thus hurting online sales

Power of Buyers

Shipping in US and worldwide: Compaq, IBM, HP, and NEC Competition in Chinas PC industry in 1999:
1. 2. 3. 4. 5. 6. 7.

Legend IBM HP Founder Great Wall Dell

Strengths

Great Customer Service

Customers can call or access Dells website and order a customized computer in less than 10 minutes. A customer then has a number of methods to contact Dells technical support such as the phone, online and on-site repairs should a problem arise. With to online sales , it was helpful in reducing the sales and marketing costs. In dell internet offering, it included more than 6500 products from its dell ware catalogue.

Weaknesses

Unfamiliarity with the Chinese socioeconomic situation

The price of a PC was the equivalent of two years of a persons savings. Retail buyers only accounted for 10% of sales.

Opportunities

To increase market presence in China, the second largest PC market in the world

Chinas PC Industry had seen extraordinary growth between 1990 and 1996.

Dell had a good chance of increasing its presence in the Chinese market by introducing the Direct Model.

Threats

Red Tape with the Chinese Government

Chinas nationalistic policies made US companies operating in China vulnerable to the ups and downs of Sino-American relations. The Chinese government made no secret that national PC vendors would be promoted.

Direct sales operations Customer service Just-In-Time inventory usage Customisation: To attract the corporate clientele , dell created customised premier pages that allowed them to purchase through intranet. E support E commerce strategy. Building customer loyalty.

Tangible Resources
Intangible Resources Direct model

Dell was named the as one of 1999s ten best web support sites by the association of support professionals

Current Strategies

Business-level strategy
Differentiation from competitors.

Corporate-level strategy
Financial position

Dells Customer Group were divided into three segments: LARGE CORPORATE ACCOUNTS(1500+ EMPLOYEES) PREFERRED ACCOUNTS DIVISION (500 -1500 Employees) HOME AND SMALL BUSINESSES(<500 EMPLOYEES)

Success in niche market Fast service Current value Consistent sales growth

Channels

Direct
Direct business-to-customer model Cutting out the cost of distribution

Indirect

Selling through distributors and adding value resellers

Products and Service

Build-to-Order direct sales approach

Knowing exactly what customer wants Free installation of applications software Timely delivery of orders Comprehensive on-line purchasing tool

On-line technical support Order status information On-line downloading of software

Building a business solely on pricing

Pricing advantage Chinese were uncomfortable with credit card sales , especially of high price ticket products that cannot be viewed before purchases.

Does Dell succeed?

Partially yes, and partially no. Dell could not succeed its business compared to the other markets

The factors affecting Dells direct-business model in China

Uncomfortable with credit card sales Costs of enforcing the direct model took a sizable chunk away from Dells earnings Future potential for Internet growth was huge Uncertain