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Dell direct Inc. is one of the world’s leading direct sale computer vendors. Founded (Dell) in 1984 with an aim of selling computers directly to customers. Dell Inc. Competitors include Hewlett-Packard selling computers directly t (HP). Dell offers a wide range of products ranging from workstations, storage systems, network servers, and Ethernet switches for enterprise customers among a divergent range of desktop and notebook personal computers designed for the consumers use. Dell is also in the market of selling handheld computers as well as marketing third party peripherals and software. Michael Dell, the founder and chairman of dell started his college education at the university of Texas, his college education started as a premed student, he, however, found time to start and run a business of selling random-access memory (RAM) chips as well as disk drives for IBM PCs. He was able to buy these products at cost from IBM dealers, who at this time were required to order large monthly quotas of PCs from IBM. He was later reselling this stock through computer and newspaper magazines at a price below the retail price, 10 to 15 percent below the market retail price. Dell made substantial gross from the sales that he dropped out of college. Soon he started selling and making IBM clones under the brand name, PC’s limited. Different from what other manufactures in the business did, Dell sold his products, or rather, his machines directly to consumers without using the service of middlemen. This, as a factor, contributed to him selling his products at a lower retail price than the other manufacturers in the business. Relatively, by eliminating the middlemen retail markup, Dell could sell his PC’s at about 40 percent of the retail price of an IBM PC (Scherer, 2007).
Dell renamed the company as Dell Computer and went ahead and added international offices in the year 1987. Later the following year, the company made a significant step after it started selling its products to bigger companies, including government agencies. In the same year, 1988, Dell Computer became public. In the year 1996, Dell Computer started selling its products, notebooks and PCs through its then created website. The electronic and order confirmation, shipping and handling is still the leading means through which Dell makes its sales, its main way and means of reaching out to its customers as well as getting to know the consumer needs and changing preferences. Selling through the internet expanded room for a big market. Orders can be made from every corner of the world; order processing costs are acutely minimal both to customers and the company itself. In the year 1997, Dell got into the market of workstations. It was able to strengthen its business through several deals. In the year 2001, Dell was able to expand its storage offerings when it made a deal to resell systems from EMC (Dell & Catherine , 1999).
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Dell Inc. as an informational technology corporation is based in USA. It supports computers, in addition to computer related products and services. Dell is best known for The Dell Direct Model-innovations in its supply chain management and the well mastered e-commerce. The Dell Direct model aims primarily at eliminating trade intermediaries in order to reach out to consumers on a direct manufacturer-consumer basis. The direct relationship started slowly with direct phone calls to customers, advanced to direct face to face interactions and currently through the internet. Every new customer brings a new experience, information about service and product requirement is gathered through customer’s interactions. Direct consumer interactions make consumers feel as part of the whole process, customers feel engaged in the manufacture of products which are later meant for their use.
It is the rule of Dell that, no new computer is made before it has been ordered and all the credit cleared. There is no room for taking chances. This rule, or operations strategy, also helps Dell to save on inventory space and reduce idle capital. Thus, it would be unbelievable to say that Dell factory has no warehouses. There is also reduced raw material inventory: suppliers deliver supplies as Dell uses them.
The delivery of a final, ready product to the customer takes several stages. Stage one is the order processing. The orders made by the customers on the internet are downloaded to the manufacturing set-up in every quarter of an hour. Orders are further put into a factory planner which later generates material requests from suppliers. Dell suppliers respond to material requests ultra-fast, mostly within a period of only two hours. All Dell suppliers have local and are supposed to have a ready stock enough to last for two weeks.
The second stage is order validation. The validation is meant to ensure that customers are informed about the availability of any of their orders, if supplies cannot be gotten from suppliers, then customers are supposed to be advised accordingly. To enhance quality assurance, Dell maintains an exceptionally close relationship with its suppliers.
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The third and crucial stage, is the manufacturing stage, the company usually has multiple or many assembly lines for notebooks, servers and desktop PCs. All the factory’s assembly lines can be manipulated and changed in line with the product demand. Manufacturing process commences in the kit area, proceeds to the build section, and may later move to the custom factory line for anything unusual that needs to be done. As aforesaid earlier in this paper, Dell has no warehouses and thus the finished products are transferred to the customers immediately after they are finished. A barcode is printed to represent customer unit throughout the whole process. This manufacturing tag is particularly important and useful, both in the factory and in the customer’s hands. When a customer rings, asking for any information regarding the purchase, reference is made using the tag.
The final stage in the process of processing an order is delivery to the customer. The barcodes on the pizza box, shipping box and system box is all scanned to ensure that they all match. After that verification, boxing and addressing is done immediately. Dell has an average fulfillment promise of five to seven days.
Dell has an operations plan that enhances the closure of the gap between customers, manufactures and suppliers. It creates a partnership for capital intensive and labor intensive.
Dell computer’s strategy was built and is still maintained along a number of core elements: built-to-order manufacturing, massive customization, JIT components inventories, direct sales, partnership with suppliers, customer service, market segmentation, and extensive sharing of data with both the supply partners and customers. Through this, the company aimed at achieving virtual integration. Virtual integration aimed at bringing the customers, suppliers and the company itself together in a manner that all appeared to be part of one integrated organization (Holzner, 2006).
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In the early 2000, Dell attempted to diversify its through direct sales to personal consumers. Personal consumers as students as families that were in need of computers. Dell used direct email campaigns to target personal consumers as well print advertising and television advertising. This came up with the introduction of many features that are considered as highly valued by personal users. The features include enhanced graphics, soundcards and multicolored laptops. They went ahead and started promoting larger servers and consulting services to their corporate customers as a way of increasing their market share, thus enabling Dell to stay ahead of the competition.
Dell’s advantage in the market was primarily attributable to the cost drivers, cost advantage and not necessarily differentiation advantage. The company’s cost advantage in the year 1996 was estimated at about thirteen percent of revenues. The cost advantage was primarily derived from lower component prices, reduced distribution costs all of which were linked to lower short cycles.
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In the recent past, the corporate computer business of Dell has dropped. This has forced the company to increase its efforts of wooing and attracting personal computer users. Amazingly, in the year 2007, Dell announced partnerships with leading computer retailers as Best Buy, Office works and Wal-Mart. The partnership brought to an end the reliance on the direct Dell to the consumer channel. The partnerships also allowed the company to access the mass merchandise of distribution channels, business potential for the company itself. The recent marketing efforts have seen Dell concentrate more on low price and less on product features and customizability.
Dell as a company uses many tools in the analysis of the status of its operations. One of the tools it uses is the SWOT analysis. It is a way of examining a company’s strengths, weaknesses and opportunities and most importantly the threats the company is exposed to. Strengths and weaknesses are examined from the internal organization of the company while the opportunities and threats are a component of the external composition of a business.
In early 2007, Dell had already lost as the number one in worldwide shipments. Dell lost this position to Hewlett-Packard Company (HP). It has been able to restructure its operations strategy from its original direct sales strategy. It has undergone a lot of changes in the business model. It is engaging and focusing a lot on channel strategy. In the year 2008, Dell came up with a partner program that was able to bring their existing partners under one umbrella. The main aim was to expand the program globally in the mission of reaching out to more customers and being the destination for their needs. In line with this strategy, they began selling or offering select products in their retail stores in America, Asia, and Europe. This enabled Dell to reach extend the business model to customers it had been able to reach directly before.
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With the utilization of the equity Dell has been able to build up for so long, it has been able to push further into consumer products. Dell has ventured into the business of manufacturing flat screen TVs. This are TVs using the latest technology, the initiative is enabling Dell to diversify further. Diversification is extremely beneficial to any enterprise as it enables it increase its market share, thus beating competitors at an advantaged position (Dell M. , 2001).
Battle in the PCs world has now turned into printers. Dell is making its way into this HP dominated market. Product diversification is one of the marketing strategies that is immensely useful and will help Dell meet demands of its customers in a better and refined way, making it a one stop shop for its esteemed customers.
As recommendations to the Dell management, there is a need to configure the marketing strategy, production process, customer relations, product quality and all the factors that will lead to effective delivery of Dell mission. This is against focusing on only one line of action such as product price which may not give the company a hold of the market share
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Dell has a unique operations strategy. It has also been able to diversify into different product chain away from its original purpose. It has been able to reach out to so many customers and established its position in all the continents.