Business Analysis: Case Analysis Of Dell's Business

After careful consideration of all relevant data, the following recommendations are being made:

1. The direct sales model that has been successful in the past is no longer sufficient for several reasons. Dell’s core competencies include customized products, fast order fulfillment, and great customer service. While these features must be retained and enhanced, customers are looking for more. Additionally, competitors have copied parts of Dell’s business model, thereby reducing its ability to drive sales. Techies and IT intensive businesses will always want products customized to their specific needs, but a large segment of the population wants instant gratification. Dell needs to utilize multiple sales channels to attract the customer base needed

The simultaneous use of multiple sales and distribution channels, while it does create some channel conflict, is needed to increase market share and profitability. Selling direct to the customer, whether by phone or over the internet, is what Dell is known for. However, there are customer segments that don’t want to purchase without seeing a product, or just want or need to purchase a computer that same day. Others want to see and test a product before purchasing it online. Still others desire to speak with experts (salespeople) while comparing products before making decisions. Direct sales, while attractive to segments of the commercial market, might not be as attractive to small businesses, or to those in need of same day service. Direct sales allow Dell to continue to offer customization at a good price because there is no middleman. This will allow Dell to continue its product differentiation. Sales through electronics and mass market stores, such as Best Buy, Costco, and Walmart, will allow Dell to sell standardized products at a low price. Sales through this channel will allow Dell to take advantage of economies of scale and compete in the highly commoditized PC

There are potential problems associated with traditional retail sales that need to be addressed. The first is that, as a segment, retail sales are slowing while internet sales are growing. Dell needs to make sure that its products are available through all the major retailers. The second, and more important issue is that, when producing thousands of PCs for sale in stores, Dell is taking a huge gamble when determining what features to include on any one model. This use of a push strategy of manufacturing, while able to take advantage of economies of scale, risks high levels of inventory and requires warehouse space that Dell does not currently poses. Additionally, if a model does not sell, Dell risks having large amounts of unwanted inventory that must be disposed of. To reduce some risks associated with a push strategy, Dell might consult directly with the retailer and contract to make models, in specific quantities, for them. These orders would be shipped directly to the customer’s warehouses, thus negating the need for Dell to warehouse large amounts of product. Dell should also investigate the use of secondary markets, i.e. markets in developing nations, as an outlet for excess inventory.

4. Several managerial changes need to be made in order to regain market share in order for Dell to become the global leader of the PC industry. Dell cannot rest on its laurels. It must become an innovative and outward looking organization that is focused on total quality. Dell must eliminate