Dell Competitive Advantage and Value Chain Analysis

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Strategic Management: Dell Value Chain Activities Analysis

According to Porter the value chain is defined as the complete flow of products from the suppliers to the customers and management of the information flow in a way that maximizes the consumer satisfaction with the increase in the profit margins of the company.(ivythesis,2009) Dell’s value chain is one of a kind, they outsource all there components across the world and then assemble and sells it directly to the customers. Dell works in a very complex manner by directly supplying to the customer and by this they skip the market middlemen. They achieve value addition at the same time because of incurring low on total expenditure. This ensures dell to get the maximum advantage in the market. The computer industry is a very fast growing industry and is very competitive, according to Porter’s (1980) theory, the level of competition in an industry is decided by five forces: 1. The threat of entry of new competitors

2. The threat of substitutes
3. The bargaining power of buyers
4. The bargaining power of suppliers
5. The degree of rivalry between existing competitor

Key points that ensure Dell’s advantage in its value chain activities: * Dell has good relations with its suppliers ensuring easy procurement of hardware. * Dell has a good information channel due to which the customers are always well informed about the product * Direct selling to customers through internet hence cutting the middlemen * Dell provides its customers with the latest and the best technological up gradation in their products * Provision of experienced customer service workforce

Source: emeraldinsight,2010

DELL value change activities are based on two models below : * DIRECT SELLING STRATEGY

Dell never used retail channels for distribution like its competitors, according to dell they waste unnecessary cost and time which could be saved. Hence dell adopted a strategy in which the linked itself directly to its customers and avoided the intermediaries. Dell sold its computers directly to the customers through their website this is effectively known as there direct selling strategy. This strategy is key to Dell ‘s competitive advantage. Another significant component in Dell’s strategy to note is built to order which is related to Dell’s manufacturing practices. Dell adopted a policy of manufacturing only once the order was in place this came to be known as Built to order model , while the other players were following build to stock dell focussed on built to order which enabled high customization and valuable feedback and establishment of a direct relationship with the customers as well as reduced inventory cost therefore gave Dell a competitive edge when it came to cost. Dell could also adapt to the technology since it had no inventory bounding therefore Dell became the fastest technological adapter in the industry and provided the customers with the best working models. Source: Google images


The above table shows the direct distribution model (DELL) and the indirect distribution model (COMPETITORS). Dell started the “Built-to-order” model while Industry competitors followed the “Build-to-stock” model. Because of this dell became the easiest and the cheapest option to buy for its customers. The customer can order their product online and also has an option of customization which others competitors were not offering. After the order is placed online it is directed to the nearest workplace so that the order can be shipped within 6-7 working days of the order date. This type of business model helped dell to build close relations with its customers and received direct feedback which competitors could not receive .The effective strategy adopted by Dell places it as a forerunner by giving it cost and technology advantages. Dell benefits from early payments due...
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