HBR Case Revitalizing Dell
March 4, 2011
Case-Revitalizing Dell I. Diagnosis
Question 1: The most critical shifts in Dell’s contextual factors, including industry dynamics, trends, technology changes and shift of the competitive landscape are following: The industry has changed significantly over the last 20 years. The traditional business model in the PC industry was inside-out, supplying machines based on orders from distribution, resell and retail channels, thus following the indirect selling concept. Dell’s direct model was at this time a new, challenging concept, taking orders directly from the end-consumer, and thereby, eliminating the middleman, costs and time. This was the initial crucial shift away from the traditional schema, allowing Dell’s quick and tremendous growth. In 1993, however, Dell reached a point where it had grown too large, without making the necessary internal improvements to stay profitable. Therefore, by bringing in four new ‘seasoned’ managers to focus on specific aspects of the business, Michael Dell hoped that Dell could become a synchronized, efficient, and profitable business again. This was another critical shift for Dell, because the resulting improvements led to Dells competitor-killing concept of “virtual integration,” which goes a significant step further than traditional integration by connecting the right parts together in the business and thereby, enhancing its efficiency in management and operation processes.
Additionally, the strong trends within PC customers towards customized devices increased Dell’s success even more, and contributed significantly to its ultimate triumph over IBM as the 2nd largest market shareholder globally. However, Dell’s “vaunted Direct Model” for distribution and the focus on innovative marketing led to further critical shifts, particularly within the competitive landscape around Dell. Giants, such as IBM, Compaq and HP challenged Dell’s standing through following actions:
a) IBM: After steadily losing market
Case-Revitalizing Dell I. Diagnosis
Question 1: The most critical shifts in Dell’s contextual factors, including industry dynamics, trends, technology changes and shift of the competitive landscape are following: The industry has changed significantly over the last 20 years. The traditional business model in the PC industry was inside-out, supplying machines based on orders from distribution, resell and retail channels, thus following the indirect selling concept. Dell’s direct model was at this time a new, challenging concept, taking orders directly from the end-consumer, and thereby, eliminating the middleman, costs and time. This was the initial crucial shift away from the traditional schema, allowing Dell’s quick and tremendous growth. In 1993, however, Dell reached a point where it had grown too large, without making the necessary internal improvements to stay profitable. Therefore, by bringing in four new ‘seasoned’ managers to focus on specific aspects of the business, Michael Dell hoped that Dell could become a synchronized, efficient, and profitable business again. This was another critical shift for Dell, because the resulting improvements led to Dells competitor-killing concept of “virtual integration,” which goes a significant step further than traditional integration by connecting the right parts together in the business and thereby, enhancing its efficiency in management and operation processes.
Additionally, the strong trends within PC customers towards customized devices increased Dell’s success even more, and contributed significantly to its ultimate triumph over IBM as the 2nd largest market shareholder globally. However, Dell’s “vaunted Direct Model” for distribution and the focus on innovative marketing led to further critical shifts, particularly within the competitive landscape around Dell. Giants, such as IBM, Compaq and HP challenged Dell’s standing through following actions:
a) IBM: After steadily losing market