Dell—Using E-Commerce for Success

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PEBA
1-2 Part 1: Introduction to E-Commerce and E-Marketplaces

ONLINE FILE W1.2

Application Case

DELL—USING E-COMMERCE FOR SUCCESS
The Problem/Opportunity Founded in 1985 by Michael Dell, Dell Computer Corp. (now known as Dell) was the first company to offer personal computers (PCs) via mail order. Dell designed its own PC system (with an Intel 8088 processor running at 8 MHz) and allowed customers to configure their own customized systems using the build-to-order concept (see Chapter 2, Appendix 2A). This concept was, and is still, Dell’s cornerstone business model. By 1993, Dell had become one of the top five computer makers worldwide, threatening Compaq, which started a price war. At that time, Dell was taking orders by fax and snail mail and losing money. Losses reached over $100 million by 1994. The company was in trouble. The Solution The commercialization of the Internet in the early 1990s and the introduction of the World Wide Web in 1993 provided Dell with an opportunity to expand rapidly. Dell implemented aggressive online order-taking and opened subsidiaries in Europe and Asia. Dell also started to offer additional products on its Web site. This enabled Dell to batter Compaq, and in 2000 Dell became number one in worldwide PC shipments. At that time, Internet sales topped $50 million per day (about $18 billion per year). Today, Dell (dell.com) sells about $62 billion a year in computer-related products online, from network switches to printers, employing over 88,000 people. Direct online marketing is Dell’s major electronic commerce (EC) activity. Dell sells to the following groups: ◗ ◗ ◗ ◗ Individuals for their homes and home offices Small businesses (up to 200 employees) Medium and large businesses (over 200 employees) Government, education, and health-care organizations allows BA (and other businesses) to browse, buy, and track orders on a Dell Web site customized for the user’s requirements. The site enables authorized users to select preconfigured PCs for their business unit or department. A more advanced version, Premier B2B, supports e-procurement systems, such as from Ariba. This provides automatic requisition and order fulfillment once an authorized user has chosen to buy a PC from Dell. BA has placed the e-procurement tools on its E-Working intranet. This allows authorized staff to purchase PCs through a portal that connects directly into Dell’s systems. In addition to supporting its business customers with e-procurement tools, Dell also is using EC in its own procurement. Dell developed an e-procurement model that it shares with its business partners, such as BA. One aspect of this model is the use of electronic tendering to conduct bids (see Chapter 5). Dell uses electronic tendering when it buys the components for its products. In 2000, Dell created an online B2B exchange. This venture was a failure, like most other exchanges (see Chapter 5). E-Collaboration. Dell has many business partners with whom it needs to communicate and collaborate. For example, Dell uses shippers, such as UPS and FedEx, to deliver its computers to individuals. It also uses third-party logistics companies to collect, maintain, and deliver components from its suppliers, and it has many other partners. Dell is using Web Services, an EC technology, to facilitate communication and reduce inventories. Web Services facilitate B2B integration. Integration efforts began in 2000 with other technologies when Dell encouraged its customers to buy online. The B2B integration offer combines Dell PowerEdge servers based on Intel architecture and WebMethods B2B integration software to link customers’ existing ERP (enterprise resource planning) or procurement systems directly with Dell and other trading partners. In addition, Dell can provide e-procurement applications and consulting services. Dell also educates customers in its technologies and offers suggestions on how to use them. This is particularly true for emerging...
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