Our paper will analyze the reasons behind its exit from the retail sector and why it failed where its competitors such as Compaq succeeded. It also delves into some of the expansion strategies that Dell should pursue in other countries.
We hypothesize that Dell's failure in using the retail channel can be attributed to the following:
Conventional retail channels and pre-configured computer models did not allow the company to leverage its most effective competitive weapon: mass-customization of products. Moreover, Dell's stock configurations could not command their accustomed price premium while sitting on retail shelves because they were insufficiently differentiated from competitors' offerings.
Dell experienced a sizable increase in its capital costs, as it had to maintain 60-day finished goods inventory for the channel, whereas before it needed no finished good inventory.
Companies such as Compaq had existing relationships with retailers which Dell found difficult to emulate in the short time that it made its foray into the retail sector.
We shall now attempt to explain our hypotheses further with some cogent arguments.
Let us begin with a look at Dell's USP; its business model. Dell's Direct Model was based primarily on the following
Direct customer... [continues]
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