Dell Strategic Management

Explaining Dell's Success from a Strategic Management Perspective Maris G. Martinsons Dell Computer is arguably the most successful business among those established within the last twenty years (Microsoft just misses qualifying under this timeframe). As I have stated recently in different venues, I believe that this company provides a classic example of how the principles of strategic management have been used to translate an innovative vision into a successful and sustainable enterprise. Dell Computer has also realized tremendous benefits from its application of information technology. IT has been used not only to create competitive advantages at the operational level, but also to introduce an unprecedented type of strategic information management. As a result, I am pleased to accept the invitation from the Stockholm School of Economics to review the success of Dell Computer, and to explain it from a strategic management perspective. Michael Dell founded Dell Computer in 1984. At the time he was only 19 years old, and in his first year of studies at the University of Texas in Austin. Michael Dell had a simple but powerful vision: that personal computers could be built to order and sold directly to customers. This followed from his belief that the PC, made up of little more than software from Microsoft and chips from Intel, was rapidly becoming a commodity product. Dell's new approach to the PC business had two advantages: (1) bypassing distributors and retail dealers reduced marketing and sales costs by eliminating the markups of resellers, and (2) building to order greatly reduced the costs and risks associated with carrying large volumes of both and finished goods. Michael Dell started his company with only US$ 1,000 of capital. Dell Computer experienced its share of difficulties in the first few years, to the point where some family members and friends wondered whether it had been wise for Michael to drop out of university. Several times it had to refine its