Analysis of IT news

Tuesday, June 20, 2006

Case Study: Dell

Although much younger than a lot of established PC manufacturers, Dell was able to carve its place in a market with cutthroat margins.

Dell's success comes mainly from the fact that they understood and embraced the horizontal model. Dell spends very little on Research & Development, and lets its suppliers take care of the R&D. It indeed understood there isn't much product innovation a PC assembler can come up with that will result in real competitive advantage.

Instead, Dell focuses on other ways to come up with a competitive advantage. When a PC with 1 GB of RAM is a PC with 1 GB of RAM no matter what the brand, customers look at other factors to make their decisions:
  • Price: one of Dell's focuses is operational excellence: how to assemble faster and cheaper than the competition. That's where the Internet comes into play by bypassing the retailers who take their cut of the final price.
  • Convenience: Dell's Website allows customers to customize their PC. Once again, the key is operational excellence to assemble and deliver a customized PC as fast as possible.
  • Customers service: a PC might be a PC, but it's still far from being problem-ridden, so customers (especially the corporate ones) care more and more about service, one area Dell has been trying to emphasize.


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