Importance of having a Sustainable Differential Advantage in a competitive market
HP the 2nd largest computer maker has decided that it may spin off its computer business. HP's market-startling move follows that of IBM, which was the biggest technology company until it was usurped a few years ago by HP. IBM sold its PC division to Chinese manufacturer Lenovo in 2005. Welcome to the world of PC manufacturers where competition is cut throat. But there is one company that has stood and fought its rivals. The name of that company is Dell. Started on November 4 1984 by Michael Dell, Dell grew by the early 90’s to become the largest seller of PCs and servers. The company currently sells personal computers, servers, data storage devices, network switches, software, computer peripherals, mobiles and televisions.
So what makes Dell the largest computer maker and how has it sustained its ranking while others have buckled under pressure. What does Dell do and others have not done. Seized Opportunities that came its way
Within 4 Year of its establishment it expanded globally. First in Ireland and now almost all over the world. With the advent of the Internet, E-Commerce took off. Dell did not waste time and started selling via the website which was an instant hit in US. It strategically acquired companies to increase its market share and to introduce new technology. Eg Dell acquired Alienware which introduced several new items like AMD microprocessors to the Dell stable. Direct –To – Home selling model
Michael Dell was of the belief that by selling personal computer systems directly to customers, (A fact that he learned as a kid while selling newspapers) Dell could better understand customers' needs and provide the most effective computing solutions to meet those needs. By selling directly to the customer, the company was able to reduce inventory and introduce new products without needing months to clear out old inventory in the channel. Dell’s rapid growth and superior financial performance in particular put enormous pressure on the rest of the industry, eventually driving some competitors out of the market and forcing others to revamp their distribution channels and supply chains. Initially while different models were applied over the years, Dell moved to selling direct to the customer or to working closely with retailers to match supply and deman`d through sophisticated marketing, forecasting and supply chain management. A key element has been the use of the Internet as a distribution channel and information technology more generally to streamline processes within the firm and across the supply chain. The impacts are greatest in the U.S., where direct sales increased from less than a quarter to over one half of the market between 1995-2005. The direct channel is especially important in serving the commercial market, where PC makers offer a variety of services together with hardware to support IT departments in organizations. +++++++++++++++++++++++++++++++++++++++++++++++
Configure to Order
To minimize the delay between purchase and delivery, Dell has a general policy of manufacturing its products configured by the customer. This also allows for implementing a just-in-time (JIT) manufacturing approach, which minimizes inventory costs. Low inventory is another signature of the Dell business model—a critical consideration in an industry where components depreciate very rapidly. Dell not only sold directly to the customers but also gave them the option of customizing the product to suit their needs. So the customers could choose from different screen sizes, processor speeds, memory, storage devices etc. This is something that no other PC manufacturer provides. This is a perfect example of selling by the marketing concept where focus is given to the needs of the buyer. It is Customer Centered. This involved the Organization’s well thought out strategy in terms of the product and the...