Dell's Competitive Advantage
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Dell keep the competitive advantage by bringing assembly and distribution closer to its customers. Dell's manufacturing, logistics and shipping strategies make it possible to customize computers for individual consumers at low cost and for low price. Days of inventory. Dell days of inventory is 7.11 in 2000 and 5.73 in 2001. These incredible numbers allows it to pass on component price declines faster than anyone else in the industry. Lean inventories help Dell benefit from falling component prices faster than companies with significant inventory levels. Because it keeps only about 6 days of inventories, days account receivable are over 30 days, and push payable out 60 days, Dell's model will generate a lot of cash. For this point, Gateway is the only player that has followed this strategy in the market. From the income statement, Dell is clearly the low cost leader in the industry. By transacting directly with customers, Dell can reduce costs associated with a traditional , tiered distribution system. Selling directly to customers enable more effective use of selling and advertising expense. Indirect distribution channel of the PC Industry: Suppliers---PC maker----Distributors----Retailers; Resellers; Integrators-----Final Customers. Dell's direct distribution channel: Suppliers---Dell---------Final Customer. Dell's business model which combines direct sales and build-to-order production has competitive advantages. Dell's strategy have proven successful in minimizing inventory and bringing new products to market quickly, enabling it to increase market share and achieve high returns on investment in a highly competitive industry. Dell's use of the direct approach provides it with cost advantage compared to in direct sellers. It also allows Dell to build a relationship, which makes it quick and easy for customers to do business with dell.
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