Dell Corporate Strategy

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Corporate Strategy
The economic activities performed by Dell encompass the development, manufacturing, sale and support of personal computers and computer-related products. Since its foundation, the company has been based on the Direct Model, i.e. Dell has always tried and managed to create direct relationships with its customers, by selling products directly and without the participation of intermediaries. The sale has always taken place through a telephone service or via the Internet. In order to accomplish its goal of being as fast as possible in the delivery of the customized products it supplies, Dell has created an ample network of manufacturing plants around the world. The corporation is present in each continent and in most of the states with national basis. For instance, in Italy Dell has established its Italian department – Dell Italia. What’s more, Dell has forced many of its suppliers to set their plants alongside its own facilities in order to minimize the time of the transactions that occur between them and the company itself. They provide the company with a constant flow of information regarding their inventory levels and, by contrast, the company contributes to the development of their performance and the decrease of their costs of production by providing them with the necessary training to keep reducing costs at a fast pace and meet its strict targets. In fact, suppliers are quarterly met and classified according their levels of reliability, cost, quality and speed, and these are compared to their industry average. Once a supplier meets the targets imposed by Dell, the latter establishes a long-lasting relationship in which even know-how and new achievements are shared so as to enable Dell to meet its financial fundamentals and ensure the highest return on investment to its shareholders. Through these forceful ties with its suppliers, Dell can shift upward those activities that do not contribute to create added value for its products and focus on those processes that actually produce added value, such as customization. For instance, both the addition of the fan and the power supplier are not essential operations and, for this reason, the company outsources them to its suppliers. The processes that are carried out inside the manufacturing plants of the company consist of the assembly of components, software installation, functional testing and quality control. The relative short distance between Dell’s manufacturing plants and those of its suppliers allows the company to implement the JIT – Just In Time – manufacturing approach. This approach consist of maintaining low levels of inventory, a fact that is crucial in the computer industry where inventories are subject to a fast depreciation. This is possible, since Dell utilizes a “push” system, in the sense that computers are built and materials from suppliers are requested only after customers place their orders. The final product delivery is outsourced to logistic service providers, such as DHL or FedEx. Nevertheless, the Direct Model has begun to dwindle at least since the return of Michael Dell as CEO of the company in 2007. The continuous commercial expansion of the company has led to the decision of not continuing to sell only directly, but also to return to sell in shops. Dell had made deals with Wal-Marts, which became in 2007 an official reseller in the US and Canada, and had approached the Chinese market, by establishing a stronger retail presence through Gome’s stores, which are scattered over the overall Chinese territory. Dell has also opened a store in Dallas. Another way the computer producer has begun to sell is by means of VARs, Value Added Remarketers, whose contribution amounted to roughly 10% of the total revenues of the company in 2006, when they were circa 600. Despite this, the relationship between the company and these third parties has led both to clash, since some of the services they provide tend to be not well matched with the...
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