Dell Computer Corporation

Dell Computer Corporation: Strategy and Challenges

You don’t ever really know whether you’ve come up with the right plan until much later—when it either works or it doesn’t. What is the right plan? It’s the one that helps you identify what you need to do to ensure success. It’s the one that rallies your employees around a few common goals—and motivates them to achieve them. It’s one that involves your customers’ goals and your suppliers’ goals and brings them altogether in a unified focus.
—Michael Dell

In 1984, at the age of 19, Michael Dell founded Dell Computer with a simple vision and business concept—that personal computers could be built to order and sold directly to customers. Michael Dell believed his approach to the PC business had two advantages: (1) Bypassing distributors and retail dealers eliminated the markups of resellers, and (2) building to order greatly reduced the costs and risks associated with carrying large stocks of parts, components, and finished goods. While the company sometimes struggled during its early years trying to refine its strategy, build an adequate infrastructure, and establish market credibility against better-known rivals, Dell’s build-to-order, sell-direct approach proved appealing to growing numbers of customers worldwide during the 1990s as global PC sales rose to record levels. And, as Michael Dell had envisioned, the direct-to-the-customer strategy gave the company a substantial cost and profit margin advantage over rivals that manufactured various PC models in volume and kept their distributors and retailers stocked with ample inventories.

Dell Computer’s Market Position in Early 2000

Going into 2000, Dell Computer was the U.S. leader in PC sales, with nearly a 17 percent market share, about 1 percentage point ahead of second-place Compaq. Gateway was third with 8.9 percent, followed by Hewlett-Packard with 8.8 percent and IBM with 7.2 percent. Dell overtook Compaq as the U.S. sales leader in the third... [continues]

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