DELL INC.: TIME TO DISCARD DIRECT SELLING MODEL?
4. Results / Findings
5. Strengths / Weaknesses / Analysis
6. Recommendations / Conclusion
Dell is a multinational computer company which managed to stay in the first place of computer system sales for over a decade. Its strong and revolutionized strategy of direct selling computers to the customers increased its success in the computer companies’ field providing it with a competitive advantage. However, the last year the revenue trend shows a significant decrease while other competitors’ share of the market has become threatening. This case study presents the economic situation Dell faces from the year it was founded according to real financial findings. It researches the benefits from its direct selling strategy as well as possible problems it may face if it continues to follow this strategy. Recommendations are made in order to improve the volume of sales and lead to greater success and higher customer satisfaction.
Dell was founded in 1984 by Michael Dell a 19-year old teenager and it was named as PC’s Limited. Starting with a capital of $1000 and the aim of selling IBM PC-compatible computers he managed to establish Dell as one of the most worldwide successful and profitable companies only after the first years of its function. The first year gross revenues amounted to $6 million. In 1985 Dell introduced the first computer of its own design- the Turbo PC. In 1988 the company made its initial public offering at $8.50 a share and was renamed to Dell Computer Corporation. By 1990 it had been expanded in 12 different countries. Six years later(1996), Dell began selling computers via its web site and offered online technical support at the same time and by the 1997 Dell was one of the top five computer makers in the world. By the end of the millennium, company sales via the Internet had reached $50 million per day and Dell maintained its top position with 13% market share and sales $31.89 billion. One year later, Dell took the first place in global market share. In 2003 the company was renamed to Dell Inc as it was involved in diverse businesses such as PDA’s and Internet servers. In 2004 Kevin Rollins filled the position of the Chief Executive Officer in 2005 Dell appeared in first place in a ranking of the "Most Admired Companies" published by Fortune magazine. In the year 2006, Dell was declared 25th largest company in best 500 fortune companies and in that time it employed more than 78,700 people internationally. From the third quarter of 2006 Dell faced a significant decline in its Pc volume shipments and although it managed to stay in the first place of market share the difference with its main competitor HP was 0.1%.
The aim of this study is to identify the current situation as well as evaluate the problem that Dell may face if it continues to follow current strategy. Suggestions are made in order to enhance its performance and stay in the first place of customers preferences.
Dell’s success was largely attributed to the direct business model it adapted. The innovative idea of direct selling focused on the customer’s needs and demands and gave the possibility of customizing products. Customers had the option of configuring the features of the product according to their wants. Focus was also on issues like low operation costs, improving delivery time, and maintaining customer service. Costs and prices were reduced as retail outlets were eliminated and inventory costs were low. At first Dell’s computer prices were 40% lower than IBM computers. In addition the materialization of online ordering kept Dell close to its customers. The target market for Dell was the large organizations and public sector and then the smaller and medium sized businesses. However this type of model...