Dell Computers aims to stretch its way of business
In an interview with the Financial Times in November 2003, Kevin Rollins, the CEO of Dell Computers, explained how he was putting his job on the line by leading a major strategic change in the company.
The US company famous for selling PCs is planning a big push into consumer electronics. If things go according to plan, Michael Dell could eventually become the Henry Ford of the information age.
For a maker of desktop personal computers who founded his company, famously, in a University of Texas dormitory 20 years ago, this may sound unlikely. But the ambitions of Dell Inc are boundless – and thanks to a simple business idea that has proved highly adaptable, and a fearsome relentlessness.
..Consumer electronics are about to provide what could well be the biggest test of the Dell way of doing business. Until now, the company has sold mainly to corporate customers: only a ﬁfth of its sales in the US are to consumers, and much less than that elsewhere.
...Dell’s simple but effective idea has been to sell standardised electronic products direct to customers, usually over the internet. That removes most of the research and development that is normally required, while also cutting out retailers and other middlemen. Armed with the information it gets from taking orders directly from customers, Dell has gained two other powerful advantages. One is the ability to build products to match orders as they come in, slashing its inventory costs. The second is a highly efﬁcient marketing machine that can adapt its message based on real-time results as orders arrive.
With its lower costs, Dell sets out to undermine proﬁts in the markets it enters and destroy the margins that sustain its more entrenched competitors. ‘Our goal is to shrink the proﬁt pool and take the biggest slice,’ says Mr Rollins. Consumer...