Chapter 3
Dell Computer Example
Value Chain
Top 5 Vendors, U.S. PC Shipments, Year: 2000
(000) units
2Q 2000
2Q 2000
Market
2Q 1999
Market
Growth
Rank
Vendor
Shipments
Share
Shipments
Share
2000/99
1
Dell
2,293,284
20.07%
1,808,767
16.56%
26.8%
2
Compaq
1,693,002
14.82%
1,798,279
16.46%
-5.9%
3
HewlettPackard
1,220,625
10.68%
840,736
7.70%
45.2%
4
Gateway
963,511
8.43%
845,449
7.74%
14.0%
5
IBM
713,137
6.24%
875,853
8.02%
-18.6%
Others
4,542,323
39.75%
4,753,498
43.52%
-4.4%
Total
11,425,882
100.00%
10,922,582
100.00%
4.6%
Dell’s Tangible & Intangible
Resource Analysis
The key is Value-Added throughout the Chain

Mass Customization Abilities

Just In Time Inventory Systems

Vertical integrations into sales & marketing
activities

Shifting of Value Chain Activities (Sales &
Marketing to start of the Value Chain)

Strong Brand Name & Reputation

Economies of Scale & Leveraged Power with
Suppliers (Market Leadership)

Strong Customer Service & Support Skills (needs
lessened by repeat customers/knowledgeable
customer base)
Required Capabilities in Dell’s Mass
Customization Process
Applies bundled resources & skills in:





Flexible Product Manufacturing Systems
Just In Time Inventory System
Strong, leveraged relationships with suppliers
Fast, accurate, and reliable product ordering
systems (both online and phone)
Strong IT Communication & Support Linkages
between Logistics, Operations, Sales & Marketing
Required Resources for Dell’s Mass
Customization Process





Capital to invest in flexible manufacturing
hardware, software, plant & equipment (Tangible)
Strong IT infrastructure & support systems
(Tangible)
Management & Employees with strong skills and
cross-training in logistics, operations & flexible
manufacturing, marketing & sales, IT (Tangible)
Strong reputation & brand recognition (Intangible)
Corporate culture and knowledge required to
integrate complex systems (Intangible)
What a firm Does...
Core Competencies
that is Strategically
Core Competencies must be:
Valuable
Valuable
Capabilities that either help a firm to exploit opportunities to create
value for customers or to neutralize threats in the environment
Rare
Capabilities that are possessed by few, if any, current or potential
competitors
Costly to Imitate/Substitute
Capabilities that other firms cannot develop easily, usually due to
unique historical conditions, causal ambiguity or social complexity
Organizational Activatability
Firm is organized to take advantage of the resource