The Dell Direct Model:
What it means for customers(users)
• PROS:
–
–
–
–
Perceived customization
Convenience
No sales pressure
No price comparisons/objections
• CONS
– No immediate delivery
– No touch and feel
The Dell Direct Model:
What it means for (corporate) customers
• PROS:
–
–
–
–
Premier pages: approved configurations only
Reduces procurement cost
Reduced overshipment costs
E-support
• CONS:
– No immediate delivery
The Dell Direct Model:
... for suppliers and complementors
• PROS:
–
–
–
–
Rapid introduction of new technology
Rapid feedback on product problems
Good data for forecasting
Increased switching costs
• CONS:
–?
The Dell Direct Model:
... for Dell itself
• PROS
– Lower inventory and little product
obsolescence
– New technology to market faster
– Quick feedback on problems
– Ability to manage product shortage and demand
by advertising and pricing
– Dell gets paid early
The Dell Direct Model:
... for Dell itself (2)
• PROS (continued)
– Lower component cost than indirect
competitors
– Creates real switching barriers for large
customers
– Customer database>>customer information,
lowers cost of followup services and support
• CONS
– may not appeal to all segments
Dell’s core competencies
• Core competencies are skills, knowledge, and collective
learning that allow a company to execute some critical
processes better than any of its competitors
•
•
•
•
Supply Chain Management (SCM)
Customer Relationship Management (CRM)
E-service
Demand Management
1: Indirect channel
(with e-efficiency; pooling of inventory, etc.)
• PROS:
–
–
–
–
Current strength
Ally with major retailers (CompUSA, Staples, etc.)
Touch and feel; local service and support
Many competitors withdrawing
• CONS
–
–
–
–
Declining market
High costs
Lack of customization (for customer; for channel)
Will channel members cooperate?
2: Direct Model
• PROS:
– Overall market trend
– Lowest cost (commoditization of market;
importance of price)
• CONS:
– Lack the core competencies (Lagger forever?)
– Loss of channel support?
– More competition in the direct model?
3:Harvest the PC Market
(move to next generation products/ or to enterprise )
• PROS:
– Higher margin segments
– Leverage their strong service capability (through DEC)
or their server/storage product line in corporate market
• CONS:
– not a product innovator
– integration problems
– Strong competitors
What resources and capabilities does
Compaq have that it can leverage?
• RESOURCES
– High speed enterprise computing hardware
– Server and storage design, manufacturing,
sales, and service
– Millions of users of Compaq products
• CAPABILITIES
– Fault tolerance
– Can handle large customers/ complex needs
LESSONS
•
•
•
•
•
•
Value of quantitative and qualitative analysis
Value of customer relationships
Value of market segmentation
Don’t rely on past successes
Maturing of IT/PC market: special requirements
A standard global model has several benefits
WHAT HAPPENED?
• Compaq aimed at global leadership in internet
infrastructure, access services, and solutions
• Acquired Inacom: to boost direct capabilities
• IBM> moving away from retail
• Hewlett Packard>early 2000; grabbed leadership in US
retail market
• Dell has slowed down slightly; Compaq picked up
• Hewlett Packard purchased Compaq ($19b); HWP,
CPQ HPQ
• Dell continues to outperform others (2005)