Dell Case Study.
1. What is Dell’s strategy? What is the basis on which Dell builds its competitive advantage?
Dell’s Strategy: The Company was focused on a simple idea of understanding the need of the customer and efficiently providing the most accurate Product that could satisfy the need. And this was done by direct selling cutting the role of middleman hence bringing a change in the Supply Chain. This meant that Dell knew the desire and need of the customer before any of its competitor could find. Hence it was easy for Dell to forecast the supply and demand curve.
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The competitive advantage of the Dell was built on following:
No more middlemen: Dell believed that by cutting the role of middlemen it could reach the customer in less time and also understanding their needs. It implemented this idea and started direct selling to customers through mail-order system and then through internet. While PCs sold by big player in the market were characterized by “build to stock” with designed and preconfigured retail stores based of forecast. It also made the product business into a service sector. As now more focussed was on delivery, customer satisfaction as more or less, customer has chosen its own product.
Cost Advantage: Dell offered better customer choice through direct selling reducing the price and also knowing the exact demand of the customer and placing the order and delivering the order is very less time thus also reducing inventory cost. Also research and development cost at Dell was vastly reduced.
Virtual integration: Dell does not manufacture computers but assembled them at its place after ordering the parts from its vendors. Due to very accurate demand information, it could ask for very specific parts to be supplied and then assemble them thus reducing the inventory and manufacturing operations. Dell integrated its order and demand information with its suppliers thus
virtually integrating with them.
Customer knowledge advantage: Through direct selling dell knew the needs of the customers and hence could act to them accordingly with efficiently and also in less time. Dell knew what exactly customer needed, hence assembling the product was easy. Also less time was taken by the customer to place the order. This knowledge with its sales data could be used to predict the supply demand.
2. How do Dell’s control systems help execute the firm’s strategy?
Data is the driver: Dell believed on data as they believed on “facts are your friend”. They used sales data and customer feedback from online sales to somehow predict the demand curve and accordingly make strategy. They believed in Management with these insights due to which few staff left the company. Also they used facts and figures to measure its performance. Learn about Dell Marketing Strategy
Performance measures: Return on invested capital, average selling price, selling and administrating cost, margins, inventory, stock outs, purchasing cost, etc were component of the scorecard that Dell maintained to measure its performance and acted accordingly. Scorecards were prepared using above mentioned financial and non-financial measurements with others. These scorecards were generated on a real-time basis, and relevant insights were generated through using data like customer segment, product category, and country.
Advantage of the control system:
Cost saving through lower inventory: Inventory was largely reduced. Research Manufacturing plants cost were almost perished.
Better product lifecycle: Products were assembled at Dell but parts were procured from best suppliers thus increasing the product lifecycle.
Higher flexibility to market change: With change in demand it was easy for Dell to respond as it had minimum inventory to lose. Hence it was flexible to any change.
Fewer burdens on Research and development. Not only saved money but also saved a lot of time. Also the focus of the management shifted to other important decision making rather than focussing on R&D.
“Case study: Dell- distribution and Supply Chain Innovation”. Retrieved from: http://www.marsdd.com/articles/dell-distribution-and-supply-chain-innovation/ “Budget for innovation: Case study - standardising Dell”. Retrieved from: http://www.computerweekly.com/feature/Budget-for-innovation-Case-study-standardising-Dell Matthew, Davis (2010, November 12). “Case Study for Supply Chain Leaders: Dell's Transformative Journey through Supply Chain Segmentation”. Retrieved from: http://www.johngattorna.com/documents/Dell_Case_study_for_supply_chain.pdf
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