Dell Business Model
Background
Dell traces its origins to 1984, when Michael Dell created PCs Limited while a student at the University of Texas at Austin. The dorm-room headquartered company sold IBM PC-compatible computers built from stock components. Dell dropped out of school in order to focus full-time on his fledgling business, after getting about $300,000 in expansion-capital from his family. In 1985, the company produced the first computer of its own design, the "Turbo PC", which sold for $795. PCs Limited advertised its systems in national computer magazines for sale directly to consumers and custom assembled each ordered unit according to a selection of options. The company grossed more than $73 million in its first year of operation. The company changed its name to "Dell Computer Corporation" in 1988 and began expanding globally. In June 1988, Dell's market capitalization grew by $30 million to $80 million from its June 22 initial public offering of 3.5 million shares at $8.50 a share. In 1992, Fortune magazine included Dell Computer Corporation in its list of the world's 500 largest companies, making Michael Dell the youngest CEO of a Fortune 500 company ever.
In 1993 to complement its own direct sales channel, Dell had plans to sell PCs at big-box retail outlets such as Wal-Mart which would have brought in an additional $125 million in annual revenue. However Bain consultant Kevin Rollins persuaded Michael Dell to pull out of these deals which would be a money loser in the long run.
From 1997 to 2004, Dell enjoyed steady growth and it gained market share from competitors even during industry slumps. Dell attained and maintained the #1 rating in PC reliability and customer service/technical support, according to Consumer Reports, year after year, during the mid-to-late 90s through 2001 right before Windows XP was released. In 1996, Dell began selling computers through its website, and in 2002, it expanded its product line to include televisions, handhelds, digital audio
Dell traces its origins to 1984, when Michael Dell created PCs Limited while a student at the University of Texas at Austin. The dorm-room headquartered company sold IBM PC-compatible computers built from stock components. Dell dropped out of school in order to focus full-time on his fledgling business, after getting about $300,000 in expansion-capital from his family. In 1985, the company produced the first computer of its own design, the "Turbo PC", which sold for $795. PCs Limited advertised its systems in national computer magazines for sale directly to consumers and custom assembled each ordered unit according to a selection of options. The company grossed more than $73 million in its first year of operation. The company changed its name to "Dell Computer Corporation" in 1988 and began expanding globally. In June 1988, Dell's market capitalization grew by $30 million to $80 million from its June 22 initial public offering of 3.5 million shares at $8.50 a share. In 1992, Fortune magazine included Dell Computer Corporation in its list of the world's 500 largest companies, making Michael Dell the youngest CEO of a Fortune 500 company ever.
In 1993 to complement its own direct sales channel, Dell had plans to sell PCs at big-box retail outlets such as Wal-Mart which would have brought in an additional $125 million in annual revenue. However Bain consultant Kevin Rollins persuaded Michael Dell to pull out of these deals which would be a money loser in the long run.
From 1997 to 2004, Dell enjoyed steady growth and it gained market share from competitors even during industry slumps. Dell attained and maintained the #1 rating in PC reliability and customer service/technical support, according to Consumer Reports, year after year, during the mid-to-late 90s through 2001 right before Windows XP was released. In 1996, Dell began selling computers through its website, and in 2002, it expanded its product line to include televisions, handhelds, digital audio