Dell Business Strategy Change

DELL Computers, a leading PC supplier to corporate and government customers, today is now among the first companies to provide its customers with the next level of industry-standard Pentium processor power, while many vendors are still struggling to broaden their processor-based product lines. Dell's unique ability to take a market strategy position during important technology transitions because of its build-to-order manufacturing process. This build-to-order approach allows the company to maintain low inventory levels and integrate emerging technologies into systems. Today's customers are reducing their supplier bases, providing the opportunity for the most capable suppliers to seize huge market share gains as Dell needs to redefine its strategy to make business capabilities within the core of the business model as it requires creating a new strategy and bringing the company's core activities into alignment with its business model in customer operations strategy, core operations capabilities and organization structure. In 1994, Dell was a struggling second-tier PC maker, the company ordered its components in advance and manufactured to inventory. Then Dell began to implement a new business model. It converted its operations to a build-to-order process, eliminated its inventories through a just-in-time system, and sold its products directly to consumers putting these new supply chain capabilities at the core of its strategy, Dell developed a supply chain mastery that went far beyond the simple pursuit of efficiency and asset productivity. However, the company had to make a series of very difficult strategic tradeoffs to bring its functional activities into alignment with its new business model.

DISCUSSIONS Dell carefully targeted corporate relationship customers that had predictable, budgeted needs and that wanted a predetermined set of product models. The company also selected individual customers who were high-end, repeat purchasers with a preference for early technology adoption. Both account segments had the stable, predictable purchase patterns that Dell needed to make its joint build-productto-order/buy-component-to-plan system work. Effective in-customer operations require powerful technical capabilities, crucial customer knowledge, and the ability to fit into the customer's organization and work processes their unique customer knowledge and customer relationships created a set of barriers to entry that others could not overcome. It was this capability at the grassroots level that drove companies' meteoric increase in customer market share as internet becomes a more pervasive and powerful element of company business models, it offers companies the ability to differentiate them based on their in-customer operations. These enhanced capabilities make customer intimacy both more feasible and more efficient. Dell differentiated itself in the corporate market by developing a set of extremely effective customerspecific intranet Web sites. Each Web site was highly tailored to the customer's individual situation. Dell worked with each customer to specify a particular set of product configurations that would work best in the customer's network. Tailored offerings were specified and developed for each customer. At the same time, Dell used its direct links with both corporate and individual customers to get immediate, real-

time insights about latent customer needs and to identify new generations of products and services. THE CHANNEL STRATEGY: RESOURCE PERSPECTIVES An effective channel strategy which is a necessary element of supply chain mastery, the process of choosing a channel strategy, the supply chain master can create a powerful new channel that reduces its competitors' access to important target accounts and market segments. In many industries, a battle looms between producers and distributors and among horizontal competitors over customer ownership through inter-company supply chain relationships. Most...