Dell Computer Corporation was founded in 1984 by Michael Dell. From the early 1990s until the mid-2000s, Dell was ranked as a PC market leader relying on their distinctive marketing pattern “Direct Model” which undertook direct communication with customers and provided customized products. Recently, the PC industry is facing inconceivable worldwide competition, and Dell is gradually losing their competitive advantages by using its direct model in critical business segments. The company is facing shrinkage of growth, increasing competition, declining quality of customer service, and limitation of expansion. These issues have an enormous impact on Dell’s position as a technological giant in the PC industry.
Generally, in order to consolidate its top market position, Dell Computer Corporation has to keep its competitive advantage and figure out the issues which come from the internal and external environment. First, as globalization continues to develop, it is bringing both opportunities and threats to companies worldwide. The PC market is experiencing constant renewal and replacement and this results in the reducing of differentiation and the increase in price wars among competitors. In the early 1990, Dell was positioned as “focused differentiation” in the PC market and attracted a lot of customers by using their superior customer service. However, Dell’s competitive differentiation from its competitors, which is based on its “customized product”, is not its core competence anymore in 2007 since Dell’s remarkable direct model has been imitated by other companies. Second, although the PC market is a highly competitive and rivalrous market, the profitability is still attracting the attention of companies to squeeze into this market. Therefore, Dell is facing the challenging threat of new entries into the market. Additionally, due to the diversified products, customers have more options on computer brands, styles, and functions in the current market. This also forces Dell’s position to move from supplier power towards buyer power. In brief, when an industry is growing, more rivalry is likely to enter the market. Third, internal erroneous decisions will negatively impact Dell’s long-term operations as well. In 2001, Dell decided to move its support center to India, and this directly resulted in a declining perception of the company’s customer service. Although the company is providing its “superior customized product”, the quality of customer service is another key element for keeping customer loyalty. Finally, the traditional direct model strategy is not appropriate in the current PC market. The direct model mainly focuses on operational efficiency and organizational restrictions on individual customers, but this limits the company to step into new business segments for long-term operation. This model has restricted Dell from gaining market share in the “single consumer” segment, and has resulted in an inability to offer more customized products to diverse customer segments. Furthermore, globalization is creating additional opportunities for the PC market. The United States is Dell’s primary market and yet the company is competing in the global computer market. Therefore, Dell will need to consider expanding its market globally in order to develop its differentiation advantage outside of the U.S.
Dell’s accomplishments through the mid-2000s caused its rivals to take notice and action. IBM and Lenovo launched a direct distributive initiative and created the Authorized Assembly Program which improved their inventory turnover rate. Compaq also optimized its distribution model by building orders only after they were received which declined their inventory holding. HP began selling PCs directly to business customers online and initiated a toolkit to increase consulting and sales training. Gateway focused on individual customers rather than large corporations....
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