Harvard Case - Matching Dell
Matching Dell
1. Analyzing Dell’s value chain and competitive strategy, explain how Dell was able to succeed (build competitive advantage) in the low profitable situation of the PC market.
“Value Chain Analysis” is a tool for analyzing the value creation system of competitors. Objective is to develop a value creating system with competitive advantage. A value chain is a chain of activities. Products pass all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities. It is important not to mix the concept of the value chain, with the costs occurring throughout the activities. A diamond cutter can be used as an example of the difference. The cutting activity may have a low cost, but the activity adds too much of the value of the end product, since a rough diamond is a lot less valuable than a cut diamond.
The value chain categorizes the generic value-adding activities of an organization. The "primary activities" include: Inbound logistics, Operations manufacturing, Marketing / Sales, Outbound logistics, and After sales service. The "support activities" include: Firm infrastructure, Human resource management, Technology management, and Procurement. The costs and value drivers are identified for each value activity. The value chain framework quickly made its way to the forefront of management thought as a powerful analysis tool for strategic planning. Its ultimate goal is to maximize value creation while minimizing costs.
“Inbound Logistics” Dell worked closely with suppliers to arrange just-in-time delivery of parts. Dell had whittled its days of inventory down from 32 in 1995 to 7 in 1998. Since 1992, it had reduced the number of suppliers for its Austin facility from 204 to 47. With remaining suppliers, Dell maintained close electronic links, communicating replenishment needs to some vendors on an hourly basis. The electronic
1. Analyzing Dell’s value chain and competitive strategy, explain how Dell was able to succeed (build competitive advantage) in the low profitable situation of the PC market.
“Value Chain Analysis” is a tool for analyzing the value creation system of competitors. Objective is to develop a value creating system with competitive advantage. A value chain is a chain of activities. Products pass all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities. It is important not to mix the concept of the value chain, with the costs occurring throughout the activities. A diamond cutter can be used as an example of the difference. The cutting activity may have a low cost, but the activity adds too much of the value of the end product, since a rough diamond is a lot less valuable than a cut diamond.
The value chain categorizes the generic value-adding activities of an organization. The "primary activities" include: Inbound logistics, Operations manufacturing, Marketing / Sales, Outbound logistics, and After sales service. The "support activities" include: Firm infrastructure, Human resource management, Technology management, and Procurement. The costs and value drivers are identified for each value activity. The value chain framework quickly made its way to the forefront of management thought as a powerful analysis tool for strategic planning. Its ultimate goal is to maximize value creation while minimizing costs.
“Inbound Logistics” Dell worked closely with suppliers to arrange just-in-time delivery of parts. Dell had whittled its days of inventory down from 32 in 1995 to 7 in 1998. Since 1992, it had reduced the number of suppliers for its Austin facility from 204 to 47. With remaining suppliers, Dell maintained close electronic links, communicating replenishment needs to some vendors on an hourly basis. The electronic