Dells Strategy and E-Commerce
Dell Company was started by Michael Dell in 1984. After its establishment, it has grown to be one of the industry leaders in the PC industry through its two core strategy: i. e. customer satisfaction and cost lowering strategy. The core idea that Michael Dell had when he started Dell at the age of 19 has not changed even though the company has changed into a billion dollar corporation. The strategic plan of Dell includes the feature of individualized products as well as direct sales to the end users thus lowering their retail costs.
Dell’s focus on the efficiency of manufacturing its products, and the approach of direct marketing, allowed him to establish a firm ground in the world of personal computers. In many cases, companies start out as aggressive but are left behind either by their competitors or by a poor and an unstable management. Dell entered the market with a very strong strategic mission and visions a powerful strategic management. One of the biggest advantages is that Dell has simple business concept which is building computers according to the customer’s needs and selling it directly to its customers.
This simple strategy gives Dell an edge over its competitors on several competitive advantages. One of them is that, it bypasses retailers and distributors which eliminate the markup profit of the resellers and secondly, it helps Dell to avoid the inventory heavy inventory costs that are required to stick all the manufactured products. Dell believes that its model of e-business policy is applicable everywhere, anywhere and for any customer. Dell has witnessed remarkable success in a short period of time by choosing a strategy of direct business to customer form.
Looking at its history, it began selling online in 1996, by 1999 it became the largest manufacturer of computers in industry, its name was changed to Dell Inc. in 2003, CEO Michael Dell resigned from his position in 2003 and again gained back his position in 2007. Therefore in 1992, Dell became successful in putting its name in the list Fortune 500 companies and establishing itself as one of the largest companies in the world. Later in 1993, due to substantial growth, Dell finally was able to place themselves in the top five PC manufacturers in the industry (Rock, 1999).
In 2009 it acquired KACE Networks after which the company benefitted a lot from this acquisition. The low costs concept established by their partners with suppliers and wonderful use of just-in-time inventory help Dell to reduce the price, leading to the extraordinary successes of Dell This paper explains how Dell successfully launched itself successfully and the strategies like e-commerce, e- marketing they adopted along the road to put themselves ahead in the competition. There are many other competitors who have utilized similar type of strategy to reach to their customers.
Dell’s major competitors include Hewlett-Packard, Acer, Toshiba, Gateway, Sony, Lenovo, IBM, Samsung, and Apple. New entrants have not been a real threat to established company like Dell. Dell understands the significance of working with diverse suppliers is a must to the success of their company. As such, Dell has many competitive suppliers from around the world that provide them materials for the end product. E-commerce is fast becoming an outstanding way of doing business in today’s business environment. It integrates different elements that are similar to those of regular businesses but using a unique direct model.
Dell’s e-business model is based on penetrating into computer industry, by allowing the choice on the customer end where personal computers are built after the order has been approved and processed through the internet. The two key advantages of e-business model are that the products are customized for customer and the cost of inventory is very less. Looking at the business approaches, Dell was one of the first companies to make e-commerce thorough internet as their weapon strategy to lead them ahead in the competition. Dell’s e-commerce business has been very successful since its launch in the mid 1900’s.
The company’s core strategy of selling over the Internet is what that makes itself unique from other competitors. With its proven success over years, Dell’s e-commerce strategy has dominated the entire online industry and has been admired as well as imitated from many competitors. The e-commerce also integrates the e-marketing strategy which has been very important for Dell. The objective of an e-Marketing Strategy is to establish and create a consistent competitive advantage and improve the overall performance by capitalizing on modern technology and project resources.
The e-marketing strategy is necessary to business in order to flourish their attempt of continuing their e-business strategy. According to Wilder, “Many businesses are struggling with the question: What is e-business? What is best e-business model for the business etc.? And hence are unaware about its strong influence and benefits. ” But in simple words e-marketing is a concept which enables the businesses to convey the information of their product to consumers in such ways that have never been accomplished in the past through internet.
The internet allows them to know about the entire product and gain every information that they are interested in. In today’s competitive business competition, in most of the cases, we can see that companies are experimenting with different new formula; some businesses are fitting in e-business throughout the organization, while some are completely moving their businesses to the internet or simple words Web. In this way, Dell’s wide use of e-commerce added to further cost minimization, reduced the order as well as delivery time for customers, and customization of computers.
One question arises here as to how does Dell’s use e-commerce to improve supply chain process? When the world of internet technology arrived, Dell was very fast to set up the e-commerce practice that would enable them to sell their products direct to customers online. In this way, selling online allows Dell to be more efficient and automate the whole process. The year 1996 was the year when Dell started its online website www. dell. com for ecommerce. Since then Dell has reports of tremendous sales success. By 1997, Dell was able to make a record of $1 million in online sales.
Soon the online internet sales reached $50 million in a single day by 2000. The process of ordering Dell’s product is very easy and user friendly. (Farfan). The customer simply has to follow some easy and automatic instructions that appear on screen. These instructions allow the customer to customize the computer with different features that they want on it. They have the option of increasing the hard disk space, and in the end they can view the difference between the original price and the increment price because of more added feature.
Customers can choose the color they want from 10-15 different options and can even engrave their names on it. Later during the process different options of payments are offered either directly or through a customer care representative. Dell also offers an option of automated leasing available through a financing deal that the company has with different credit card companies. This arrangement includes an interest free for the 1st year and then ongoing interest rate of market after the first year.
After this process is finished, order is then approved and the requirements of the new order are automatically forwarded to the production department facility at Dell’s manufacturing factory in Limerick. Here, the order is manufactured according to the requirement, then tested and finally shipped to them Basically all the sales processed are done through e-commerce in these different phases: order placement, order fulfillment, payment, order manufacture, testing and inspection, deliver, and order tracking.
Likewise, internally at Dell, the entire purchase and procurement process of materials is automatically recorded between Dell and its suppliers. Through one of the Dell’s web site, www. valuechain. dell. com, they share important information with their suppliers on different topics like product quality, product price, inventory etc. The main benefit is that due to the automation of the entire process, it not only makes the flow of information faster and efficient, but also helps to minimize the cost, especially in conditions when Dell has to deal with large volume of business.
Dell’s website receives more than 1 million page requests every quarter at 80 different countries in 28 different languages and 26 different currencies. In this way, Dell’s e-commerce approach simulates the advantages of face-to-face interface between the end buyer and the seller. This ensures the proper attention of the employees in delivering a quality product and providing top notch customer service. Dell generates more than 50% of its revenue from online business. (B2B Solutions for E Commerce Collaboration)
On the customer satisfaction part, Dell has been offering many services online in order to help the customer better understand the purchasing process. The core principle of Dell’s business is selling its products directly to customers, i. e. , customers orders Dell exactly what they prefer and Dell offer them their choice directly. In addition to this, customers can track the progress of the order as it is being produced and before it is delivered. In this way, the customer sees different stages as the computer is being manufactured and knows the possible delivery times.
Also, Dell has made it easy for customers to view their purchase records online and create an account for future reference in their web site. This includes all the features like product support, registration of the product, shipment information, delivery dates, promotion information, etc. Each purchase comes with a unique service tag number which can keep track of the product purchased and its service requirements like updates. With the unique code, Dell customer service representatives can immediately and efficiently handle concerns and questions.
This facility of 24 hour customer service and immediate response helps Dell to build a very strong customer relation, which is crucial for the Dell in understanding the customer needs and to continue its road of success. It is also a very cost effective method of providing both sales and support. In this way, these cost savings can be passed to customers in the form of good prices and better deals. (Broin) Dells success also depends largely on the efficient supervision, and user friendliness of the website.
The customer must find the website user-friendly and have a good experience when shopping online. They should have a sense of security and faith that the website is trustworthy to safeguard their asset and successfully complete their order without any hassle. Customers also need to be happy and comfortable when using paperless transactions as there is almost no involvement of face-to-face. Dell has to make sure customers consider purchasing online as one of the alternative to the traditional method of visiting the market and buying the product from the retailer off the shelf.
Dell is not only concerned on building its image and relationships with customers but also with its employees and the community. Dell’s website is used as a means of communication tool to provide latest news, press conferences and releases and other general information to help customers, employees, and the media know more about the company. (Well at Dell Challenge ) In summary, Dell started out as a professional company in the personal computer industry horizontally segmenting the industry composition.
It made its own computers from different parts and components manufactured by other companies and finally delivered its products directly to customers on line. Dell focused highly on the relationship with its customer, but in order to maintain a high growth rate while offering extraordinary customer service, Dell managed to build very good relationship with its suppliers as well as employees. With its extraordinary option of build to order model, Dell was able to win the customers heart as well as trust.
Thus, Dell became an example of a very successful and practical company as a matter of e-business strategy. The main element to the strategy was exploiting modern information technology, the uses of the Internet, and the benefits of e-commerce. References: B2B Solutions for E Commerce Collaboration. (n. d. ). Retrieved from ftp://ftp. dell. com/app/ps-exec. pdf Farfan, B. (n. d. ). Dell Computer – Facts, Research, History, Trivia, Mission Statement and Quotes. Retrieved from About. com. Rock, R. (1999, September 13).
Dell Outlines B2B Commerce Strategy; Drive to Linkwith Customer Procurement Systems Encompasses E-Commerce Solutions,Middleware, Web Purchasing Portals. Retrieved from All Business: http://www. allbusiness. com/technology/software-services-applications-electronic/6705935-1. html Well at Dell Challenge . (n. d. ). Retrieved from Global Business Challenge: http://www. wellatdellchallenge. com/business-groups/dell-corporate-strategy-e-commerce-and-executive-it-support-services Broin, Erin (1999). Selling to businesses: Dell’s Computer, Fortune, May 23: 114.