Activity 10:
Chapter 4 – Slides 39 & 40
Choose a company and try to describe its situation in each cell of
the following matrix.
GLOBALIZATION
DRIVERS
PEOPLE PROCESSING
POSSESSION
PROCESSING
Competition
Simultaneity of
production and
consumption limits
leverage of foreign
competitive
advantage, but
management systems
can be globalized
Technology drives
globalization of
competitors with
technical edge
Highly vulnerable to global
dominance by competitors
with monopoly or
competitive advantage in
information
Market
People differ
economically and
culturally, so needs
for service and
ability to pay may
vary
Level of economic
development impacts
demand for services
to individually owned
goods
Demand for many services
is derived to a significant
degree from economic and
educational levels
Technology
Use of IT for delivery
of supplementary
services may be a
function of
ownership and
familiarity with
technology
Need for technologybased service
delivery systems
depends on
possessions requiring
service and the cost
trade-offs in labor
substitution
Ability to deliver core
services through remote
terminals may be a function
of investment in
computerization, etc.
Cost
Variable labor rates
may impact on
pricing in laborsensitive services
Variable labor rates
may favor low-cost
locations
Major cost elements can be
centralized and minor cost
elements localized
Government
Social policies (e.g.,
health) vary widely
and may affect labor
cost, etc.
Policies may
decrease/increase
cost and encourage/
discourage certain
activities
Policies may impact
demand and supply and
distort pricing
INFORMATION BASED
Dell Computer's Strategy
Dell Computer's strategy was built around a number of core elements: build-toorder manufacturing, mass customization, partnerships with suppliers, just-intime components inventories, direct sales, market segmentation, customer
service, and extensive data and information sharing with both supply partners
and customers. Through this strategy, the company hoped to achieve what
Michael Dell called "virtual integration"—a stitching together of Dell's business
with its supply partners and customers in real time such that all three appeared
to be part of the same organizational team.
GLOBALIZATION
DRIVERS
Competition
PEOPLE
PROCESSING
Acting alone;
only
Partnerships
with Suppliers
Entry into
Servers
Advertising
Market
Customer
Service
Market
Segmentation
Partnerships
with Suppliers
Research and
Development
Technology
Customer
Service
POSSESSION PROCESSING
Customer Service
(repair) at the
production facility
Cost
Just-in-Time
Inventory
Practices
Partnerships
with Suppliers
Advertising
Direct Sales
Virtual Integration
and InformationSharing
Partnerships with
Suppliers
Downloading
software
Entry into Servers
Entry into Servers
Advertising
Market Segmentation
Direct Sales
Partnerships with
Suppliers
Research and
Development
Direct Sales
Software
Different
labor costs
could
influence
customer
Service prices
INFORMATION BASED
Different production
locations worldwide 
focus on fast delivery
ability
Advertising
Virtual Integration
and InformationSharing
Market
Segmentation
Partnerships with
Suppliers
Research and
Development
Virtual Integration
and InformationSharing
Virtual Integration
and InformationSharing
Direct Sales
Just-in-Time
Inventory Practices
Just-in-Time Inventory
Practices
Partnerships with
Suppliers
Partnerships with
Suppliers
Build-to-Order
Manufacturing and
Mass Customization
Build-toOrder
Manufacturing
and Mass
Customization
Government
Customer
Service
Build-to-Order
Manufacturing and
Mass Customization
Direct Sales
Direct Sales
Virtual Integration
and InformationSharing
Direct Sales
Build-to-Order Manufacturing and Mass Customization
Dell built its computers, workstations, and servers to order; none were produced
for inventory. Dell customers could order custom-built servers and workstations
based on the needs of their applications. Desktop and laptop customers ordered
whatever configuration of microprocessor speed, random access memory (RAM),
hard-disk capacity, CD-ROM drive, fax/modem, monitor size, speakers, and other
accessories they preferred. The orders were directed to the nearest factory.
Until recently Dell had operated its assembly lines in traditional fashion, with
workers each performing a single operation. An order form accompanied each
metal chassis across the production floor; drives, chips, and ancillary items were
installed to match customer specifications. As a partly assembled PC arrived at a
new workstation, the operator, standing beside a tall steel rack with drawers full
of components, was instructed what to do by little red and green lights flashing
beside the drawers. When the operator was finished, the components were
automatically replenished from the other side of the drawers and the PC chassis
glided down the line to the next workstation. However, Dell reorganized its
plants in 1997, shifting to "cell manufacturing" techniques whereby a team of
workers operating at a group workstation (or cell) assembled an entire PC
according to customer specifications. The result had been to reduce assembly
times by 75 percent and to double productivity per square foot of assembly
space. Assembled computers were tested, then loaded with the desired
software, shipped, and typically delivered within five to six business days of the
initial order.
This sell-direct strategy meant, of course, that Dell had no in-house stock of
finished goods inventories and that, unlike competitors using the traditional
value chain model (Exhibit 6), it did not have to wait for resellers to clear out
their own inventories before it could push new models into the marketplace.
(Resellers typically operated with 60-70 days' inventory.) Equally important was
the fact that customers who bought from Dell got the satisfaction of having their
computers customized to their particular liking and pocketbook.
Dell had three PC assembly plants—in Austin, Texas; Limerick, Ireland; and
Penang, Malaysia. The company was constructing another plant in Ireland to
serve the European market as well as a new plant in China (the company
expected the market for PCs in China to soon be huge). Both of the new plants
were expected to come into use at the end of 1998.
Partnerships with Suppliers
Michael Dell believed it made much better sense for Dell Computer to partner
with reputable suppliers of PC parts and components rather than to integrate
backward and get into parts and components manufacturing on its own. He
explained why:
If you've got a race with 20 players all vying to make the fastest graphics chip in
the world, do you want to be the 21st horse, or do you want to evaluate the field
of 20 and pick the best one?6
Management believed long-term partnerships with reputable suppliers yielded
several advantages. First, using name-brand processors, disk drives, modems,
speakers, and multimedia components enhanced the quality and performance of
Dell's PCs. Because of the varying performance of different brands of
components, the brand of the components was as important or more important
to some buyers than the brand of the overall system. Dell's strategy was to
partner with as few outside vendors as possible and to stay with those vendors as
long as they maintained their leadership in technology, performance, and
quality. Second, because Dell committed to purchase a specified percentage of
its requirements from each of its long-term suppliers, Dell was assured of getting
the volume of components it needed on a timely basis even when overall market
demand for a particular component temporarily exceeded the overall market
supply. Third, Dell's formal partnerships with key suppliers made it feasible to
have some of their engineers assigned to Dell's product design teams and for
them to be treated as part of Dell. When new products were launched, suppliers'
engineers were stationed in Dell's plant. If early buyers called with a problem
related to design, further assembly and shipments were halted while the
supplier's engineers and Dell personnel corrected the flaw on the spot.7 Fourth,
Dell's long-run commitment to its suppliers laid the basis for just-in-time delivery
of suppliers' products to Dell's assembly plants in Texas, Ireland, and Malaysia.
Some of Dell's vendors had plants or distribution centers within a few miles of
Dell's Texas assembly plant and could deliver daily or even hourly if needed. To
help suppliers meet its just-in-time delivery expectations, Dell openly shared its
daily production schedules, sales forecasts, and new-model introduction plans
with vendors.
Michael Dell explained one aspect of the information-sharing relationship with
suppliers as follows:
We tell our suppliers exactly what our daily production requirements are. So it's
not, "Well, every two weeks deliver 5,000 to this warehouse, and we'll put them
on the shelf, and then we'll take them off the shelf." It's, "Tomorrow morning we
need 8,562, and deliver them to door number seven by 7 am."8
Dell also did a three-year plan with each of its key suppliers and worked with
suppliers to minimize the number of different stock-keeping units of parts and
components in designing its products.
Why Dell Was Committed to Just-in-Time Inventory Practices
Dell's just-in-time inventory emphasis yielded major cost advantages and
shortened the time it took for Dell to get new generations of its computer models
into the marketplace. New advances were coming so fast in certain computer
parts and components (particularly microprocessors, disk drives, and modems)
that any given item in inventory was obsolete in a matter of months, sometimes
quicker. Having a couple of months of component inventories meant getting
caught in the transition from one generation of components to the next.
Moreover, there were rapid-fire reductions in the prices of components—most
recently, component prices had been falling as much as 50 percent annually (an
average of 1 percent a week). Intel, for example, regularly cut the prices on its
older chips when it introduced newer chips, and it introduced new chip
generations about every three months. And the prices of hard-disk drives with
greater and greater memory capacity had dropped sharply as disk drive makers
incorporated new technology that allowed them to add more gigabytes of harddisk memory very inexpensively.
The economics of minimal component inventories were dramatic. Michael Dell
explained:
If I've got 11 days of inventory and my competitor has 80 and Intel comes out
with a new 450-megahertz chip, that means I'm going to get to market 69 days
sooner.
In the computer industry, inventory can be a pretty massive risk because if the
cost of materials is going down 50 percent a year and you have two or three
months of inventory versus eleven days, you've got a big cost disadvantage. And
you're vulnerable to product transitions, when you can get stuck with obsolete
inventory.9
Collaboration with suppliers was close enough to allow Dell to operate with only
a few days of inventory for some components and a few hours of inventory for
others. Dell supplied data on inventories and replenishment needs to its suppliers
at least once a day—hourly in the case of components being delivered several
times daily from nearby sources. In a couple of instances, Dell's close partnership
with vendors allowed it to operate with no inventories. Dell's supplier of monitors
was Sony. Because the monitors Sony supplied with the Dell name already
imprinted were of dependably high quality (a defect rate of fewer than 1,000 per
million), Dell didn't even open up the monitor boxes to test them.10 Nor did it
bother to have them shipped to Dell's assembly plants to be warehoused for
shipment to customers. Instead, utilizing sophisticated data exchange systems,
Dell arranged for its shippers (Airborne Express and UPS) to pick up computers at
its Austin plant, then pick up the accompanying monitors at the Sony plant in
Mexico, match the customer's computer order with the customer's monitor order,
and deliver both to the customer simultaneously. The savings in time, energy,
and cost were significant.
The company had, over the years, refined and improved its inventory-tracking
capabilities and its procedures for operating with small inventories. In 1993, Dell
had $2.6 billion in sales and $342 million in inventory. In fiscal year 1998, it had
$12.3 billion in sales and $233 million in inventory—an inventory turn ratio of
seven days. By comparison, Gateway, which also pursued a build-to-order
strategy, had 1997 sales of $6.3 billion and inventories of $249 million—an
inventory turn ratio of 14 days. Compaq had inventories of $1.57 billion at yearend 1997, and 1997 sales of $24.6 billion (thus turning its inventories about every
23 days). Dell's goal was to get its inventory turn down to three days before the
year 2000.
Direct Sales
Selling direct to customers gave Dell firsthand intelligence about customer
preferences and needs, as well as immediate feedback on design problems and
quality glitches. With thousands of phone and fax orders daily, $5 million in daily
Internet sales, and daily contacts between the field sales force and customers of
all types, the company kept its finger on the market pulse, quickly detecting
shifts in sales trends and getting prompt feedback on any problems with its
products. If the company got more than a few similar complaints, the
information was relayed immediately to design engineers. When design flaws or
components defects were found, the factory was notified and the problem
corrected within a matter of days. Management believed Dell's ability to respond
quickly gave it a significant advantage over rivals, particularly over PC makers in
Asia, that made large production runs and sold standardized products through
retail channels. Dell saw its direct sales approach as a totally customer-driven
system that allowed quick transitions to new generations of components and PC
models.
Despite Dell's emphasis on direct sales, industry analysts noted that the company
sold 10-15 percent of its PCs through a small, select group of resellers.11 Most of
these resellers were systems integrators. It was standard for Dell not to allow
returns on orders from resellers or to provide price protection in the event of
subsequent declines in market prices. From time to time, Dell offered its
resellers incentive promotions at up to a 20 percent discount from its advertised
prices on end-of-life models. Dell was said to have no plans to expand its reseller
network, which consisted of about 50-60 dealers.
Market Segmentation
To make sure that each type of customer was well served, Dell had made a speco
finer, more homogeneous categories (see Exhibit 7).
In 1998, 90 percent of Dell's sales were to business or government institutions
and of those 70 percent were to large corporate customers who bought at least
$1 million in PCs annually. Many of these large customers typically ordered
thousands of units at a time. Dell had hundreds of sales representatives calling
on large corporate and institutional accounts. Its customer list included Shell Oil,
Exxon, MCI, Ford Motor, Toyota, Eastman Chemical, Boeing, Goldman Sachs,
Oracle, Microsoft, Woolwich (a British bank with $64 billion in assets), Michelin,
Unilever, Deutsche Bank, Sony, Wal-Mart, and First Union (one of the 10 largest
U.S. banks). However, no one customer represented more than 2 percent of total
sales. Because corporate customers tended to buy the most expensive
computers, Dell commanded the highest average selling prices in the industry—
over $1,600 versus an industry average under $1,400.
Dell's sales to individuals and small businesses were made by telephone, fax, and
the Internet. It had a call center in the United States with toll-free lines;
customers could talk with a sales representative about specific models, get
information faxed or mailed to them, place an order, and pay by credit card.
Internationally, Dell had set up six call centers in Europe and Asia that customers
could dial toll free.12 The call centers were equipped with technology that
routed calls from a particular country to a particular call center. Thus, for
example, a customer calling from Lisbon, Portugal, was automatically directed to
the call center in Montpelier, France, and connected to a Portuguese-speaking
sales representative. Dell began Internet sales at its Web site (www.dell.com) in
1995, almost overnight achieving sales of $1 million per day. In 1997 Internet
sales reached an average of $3 million daily, hitting $6 million some days during
the Christmas shopping period. In the first quarter of 1997, Dell's Internet sales
averaged nearly $4 million daily; and the company expected that 1998 sales at its
Web site would reach $1.5 billion. The fastest growing segment of Dell's
international segment was on the Internet in Europe, where sales were running
at a weekly volume of $5 million in early 1998. Internet sales were ramping up
rapidly from Asian buyers. In early 1998, Dell's Internet sales were about equally
divided between sales to individuals and sales to business customers. Nearly 1.5
million people visited Dell's Web site weekly to view information and place
orders, about 20 times more than called to talk with sales representatives over
the telephone.
In 1997, 31 percent, or $3.8 billion, of Dell's sales came from foreign customers.
Europe, where resellers were strongly entrenched and Dell's direct sales
approach was novel, was Dell's biggest foreign market. Dell's European sales were
growing at 50 percent annually. The market leader in Europe was Compaq, with a
14.8 percent market share, followed by IBM with 8.3 percent, Dell with 7.8
percent, Hewlett-Packard with 7.6 percent, and Siemens Nixdorf (Germany) with
5.6 percent. In Britain, which Dell had entered in the late 1980s, Dell had a 12
percent share, trailing only Compaq. Sales of PCs in Europe were expected to
reach 22-24 million in 1998 and 28.5 million in 1999. Total European sales in 1997
were 19.7 million units.
Customer Service
Service became a feature of Dell's strategy in 1986 when the company began
providing a guarantee of free on-site service for a year with most of its PCs after
users complained about having to ship their PCs back to Austin for repairs. Dell
contracted with local service providers to handle customer requests for repairs;
on-site service was provided on a next-day basis. Dell also provided its customers
with technical support via a toll-free number, fax, and e-mail. Dell received
close to 40,000 e-mail messages monthly requesting service and support and had
25 technicians to process the requests. Bundled service policies were a major
selling point for winning corporate accounts. If a customer preferred to work
with his or her own service provider, Dell gave that provider the training and
spare parts needed to service the customer's equipment.
Selling direct allowed Dell to keep close track of the purchases of its large global
customers, country by country and department by department—information that
customers found valuable. Maintaining its close customer relationships allowed
Dell to become quite knowledgeable about its customers' needs and how their PC
network functioned. Aside from using this information to help customers plan
their PC needs and configure their PC networks, Dell used its knowledge to add
to the value it delivered to its customers. For example, Dell recognized that
when it delivered a new PC to a corporate customer, the customer's PC personnel
had to place asset tags on it and then load the software from an assortment of
CD-ROMs and diskettes—a process that could take several hours and cost $200$300.13 Dell's solution was to load the customer's software onto one of its own
very large Dell servers at the factory and, when a particular version of a
customer's PC came off the assembly line, to use its high-speed server network to
load that customer's software onto the PC's hard disk in a few seconds. If the
customer so desired, Dell would place asset tags on the PC at the factory. Since
Dell charged customers only an extra $15 or $20 for the software-loading and
asset-tagging services, the savings to customers were considerable. One large
customer reported savings of $500,000 annually from having Dell load its
software and place asset tags on its PCs at the factory.14 In 1997, about 2 million
of the 7 million PCs Dell sold were shipped with customer-specific software
already loaded on the PCs.
Corporate customers paid Dell fees to provide support and service. Dell then
contracted with third-party providers to make the necessary service calls. When
a customer with PC problems called Dell, the call triggered two electronic
dispatches—one to ship the needed parts from Dell's factory to the customer sites
and one to notify the contract service providers to prepare to make the needed
repairs as soon as the parts arrived.15 The service providers sent the bad parts
back to Dell. Dell then endeavored to diagnose what went wrong and what could
be done to see that the problem wouldn't happen again. Problems relating to
faulty components or flawed components design were promptly passed along to
the relevant supplier, who was expected to improve quality control procedures
or redesign the component. Dell's strategy was to manage the flow of information
gleaned from customer service activities both to improve product quality and
speed execution.
Dell had plans in place to build Application Solutions Centers in both Europe and
North America to assist its customers and independent software providers in
migrating their systems and applications to Intel's new next-generation, 64-bit
computing technology. Dell was partnering with Intel, Microsoft, Computer
Associates, and other prominent PC technology providers to help customers make
more effective use of the Internet and the latest computing technologies. Dell,
which used Intel microprocessors exclusively in its computers, had been a
consistent proponent of standardized Intel-based platforms because the company
believed those platforms provided customers with the best total value and
performance. Dell management considered both Intel and Microsoft as long-term
strategic partners in mapping out its future.
In recent months Dell, following Compaq's lead, had created a capital services
group to assist customers with financing their PC networks.
Virtual Integration and Information-Sharing
But what was unique about Dell's latest incarnation of its strategy was how the
company was using technology and information-sharing with both supply partners
and customers to blur the traditional arm's-length boundaries in the suppliermanufacturer-customer value chain that characterized Dell's earlier business
model and other direct-sell competitors. Michael Dell referred to this feature of
Dell's strategy as "virtual integration."16 On-line communications technology
made it easy for Dell to communicate inventory levels and replenishment needs
to vendors daily or even hourly.
Boeing offers an example of how the lines were becoming blurred between Dell
and its customers. Boeing, which had 100,000 Dell PCs, was served by a staff of
30 Dell employees who resided on-site at Boeing facilities and were intimately
involved in planning Boeing's PC needs and the configuration of Boeing's network.
While Boeing had its own people working on what the company's best answers for
using PCs were, Dell and Boeing personnel worked closely together to understand
Boeing's needs in depth and to figure out the best ways to meet those needs.
A number of Dell's corporate accounts were large enough to justify dedicated onsite teams of Dell employees. Customers usually welcomed such teams,
preferring to focus their time and energy on the core business rather than being
distracted by PC purchasing and servicing issues.
In addition to using its sales and support mechanisms to stay close to customers,
Dell had set up a number of regional forums to stimulate the flow of information
back and forth with customers. The company formed Platinum Councils
composed of its largest customers in the United States, Europe, Japan, and the
Asia-Pacific region; regional meetings were held every six to nine months.17 In
the larger regions, there were two meetings—one for chief information officers
and one for technical personnel. As many as 100 customers and 100 Dell
executives and representatives, including Michael Dell himself, attended the
three-day meetings, at which Dell's senior technologists shared their views on the
direction of the latest technological developments, what the flow of technology
really meant for customers, and Dell's plans for introducing new and upgraded
products over the next two years. There were also breakout sessions on such
topics as managing the transition to Windows NT, managing the use of notebooks
by people out in the field, and determining whether leasing was better than
buying. Customers were provided opportunities to share information and learn
from one another (many had similar problems) as well as exchange ideas with
Dell personnel. Dell found that the information gleaned from customers at these
meetings assisted in forecasting demand for the company's products.
Dell had developed customized intranet sites (called Premier Pages) for its 3,000
largest global customers; these sites gave customer personnel immediate on-line
access to purchasing and technical information about the specific configurations
of products that their company had purchased from Dell or that were currently
authorized for purchase.18 The Premier Pages contained all of the elements of
Dell's relationship with the customer—who the Dell sales and support contacts
were in every country where the customer had operations, detailed product
descriptions, what software Dell loaded on each of the various types of PCs the
customer purchased, service and warranty records, pricing, and the available
technical support.19 Dell was readying Premier Page software improvements for
introduction in the second half of 1998 with even greater functionality. One new
feature made it easy for a customer to specify what types of machines and
options their personnel should be authorized to purchase. Other features
included allowing customer personnel to access detailed information about Dell
products on-line, view all the different machines and options the customer had
authorized for its personnel, obtain the price of the particular PC they wanted,
place an order, and have the order automatically routed to higher-level
managers for approval. These features eliminated paper invoices, cut ordering
time, and reduced the internal labor needed to staff corporate purchasing
functions. Dell was said to have the most comprehensive Web-based PC
commerce capability of any PC vendor. The company's goal was to generate 50
percent of its sales on the Internet within the next two or three years by setting
up Premier Pages for virtually all of its large customers and adding more features
to further improve functionality. So far, customer use of Premier Pages had
boosted the productivity of salespeople assigned to these accounts by 50
percent.
The company also gave its large customers access to Dell's own on-line internal
technical support tools, allowing them to go to www.dell.com, enter some
information about their system, and gain immediate access to the same database
and problem-solving information that Dell's support personnel used to assist callin customers.20 This tool was particularly useful to the internal help-desk groups
at large companies.
Demand Forecasting
Management believed that accurate sales forecasts were key to keeping costs
down and minimizing inventories, given the complexity and diversity of the
company's product line. Because Dell worked diligently to maintain a close
relationship with its large corporate and institutional customers, and because it
sold direct to small customers via telephone and the Internet, it was possible for
the company to keep a finger on the pulse of demand—what was selling and what
was not. Moreover, the company's market segmentation strategy paved the way
for in-depth understanding of its customers' evolving requirements and
expectations. Having credible real-time information about what customers were
actually buying and having first hand knowledge of large customers' buying
intentions gave Dell strong capability to forecast demand. Furthermore, Dell
passed that knowledge on to suppliers so they could plan their production
accordingly. The company worked hard at managing the flow of information it
got from the marketplace and seeing that it got to both internal groups and
vendors in timely fashion.
Forecasting was viewed as a critical sales skill. Sales-account managers were
coached on how to lead large customers through a discussion of their future
needs for PCs, workstations, servers, and peripheral equipment. Distinctions
were made between purchases that were virtually certain and those that were
contingent on some event. Salespeople made note of the contingent events so
they could follow up at the appropriate time. With smaller customers, there was
real-time information about sales, and direct telephone sales personnel often
were able to steer customers toward configurations that were immediately
available to help fine-tune the balance between demand and supply.
Research and Development
Company management believed that it was Dell's job to sort out all the new
technology coming into the marketplace and help steer customers to options and
solutions most relevant to their needs. The company talked to its customers
frequently about "relevant technology," listening carefully to customers' needs
and problems and endeavoring to identify the most cost-effective solutions. Dell
had about 1,600 engineers working on product development and spent about
$250 million annually to improve users' experience with its products—including
incorporating the latest and best technologies, making its products easy to use,
and devising ways to keep costs down. The company's R&D unit also studied and
implemented ways to control quality and to streamline the assembly process.
Much time went into tracking all the new developments in components and
software to ascertain how they would prove useful to computer users. For
instance, it was critical to track vendor progress in making longer-lasting
batteries because battery life was important to the buyers of portable
computers. Dell was the first company to put lithium ion batteries with a life of
5.5 to 6 hours in all of its laptop models.
Advertising
Michael Dell was a strong believer in the power of advertising and frequently
espoused its importance in the company's strategy. Thus, Dell was the first
computer company to use comparative ads, throwing barbs at Compaq's higher
prices. Although Compaq won a lawsuit against Dell for making false
comparisons, Michael Dell was unapologetic, arguing that "[the ads were] very
effective. We were able to increase customer awareness about value."21 Dell
insisted that the company's ads be communicative and forceful, not soft and
fuzzy.
The company regularly had prominent ads in such leading computer publications
as PC Magazine and PC World, as well as in USA Today, The Wall Street Journal,
and other business publications. In the spring of 1998, the company debuted a
multi-year worldwide TV campaign to strengthen its brand image.
Entry into Servers
Dell entered the market for low-end PC servers (those priced under $25,000) in
the second half of 1996. The company had opened a 23,000-square-foot plant
dedicated to server production, trained 1,300 telemarketers to sell servers,
assigned 160 sales reps with systems know-how to big customer accounts, and
recruited a staff of systems experts to help the sales reps. It had contracted with
companies such as Electronic Data Systems, which had in-depth systems and
networking expertise, to help provide service to large customers with extensive
server networks. Dell's server plant used "cell" manufacturing instead of an
assembly line to permit faster product updates and keep costs low; there were
30 cells at the plant, each with a self-contained work team that performed the
entire assembly process from a kit of components and a customized
motherboard.
Dell's entry into servers had several purposes. The use of servers by corporate
customers was growing rapidly. The margins on servers were large. Moreover,
purchase price was not as significant a factor in selecting which brand of server
to buy because servers required far more in the way of service, support, and
software. Several of Dell's rivals, most notably Compaq, were using their big
margins on server sales to subsidize price cuts on desktops and notebooks in an
attempt to win corporate PC accounts away from Dell. According to Michael Dell,
"To neutralize that, Dell needs to be in the server market." The company
expected that sales of servers would grow to about 50 percent of corporate
revenues by 2001.
Dell's build-to-order and sell-direct strategies gave it a significant pricing
advantage over rivals. Servers from such competitors as Compaq, IBM, and
Hewlett-Packard, all of which relied on networks of resellers, were estimated to
cost 15 to 20 percent more than Dell servers. However, analysts were skeptical
about whether Dell could provide the same quality of service and support to
server customers that resellers could. To counter that perception, Dell had
bolstered its field sales and support staff to 600 employees and created an inhouse consulting group to assist customers. For customers that required
extensive system support and integration, Dell partnered with systems experts
that were not resellers, such as Electronic Data Systems and Arthur Andersen.
Source:
http://www.mhhe.com/business/management/thompson/11e/case/dell5.html
It is important to remark that Dell consider itself as a part of Globalization and has its own
commitment about it: The Dell Global Citizenship Principles
 Dell's global citizenship principles guide the company as it globalizes its operations,
enters new markets, and expands its global employment base. Dell's goal is to be a
good neighbor in the communities where we live and work.
 Our global citizenship principles are based on our corporate values and policies
regarding social and environmental stewardship and draw from the Universal
Declaration of Human Rights and fundamental conventions of the International
Labour Organization, the International Organization for Standardization, as well as
the experience of other corporations around the globe.
The Dell’s commitment is based in 10 principles:
1. Dell will grow our global operations and manage our expansion responsibly
2. Dell will be a competitive employer
3. Dell will work with local governments to provide jobs and create meaningful
employment opportunities
4. To minimize the disruption for Dell employees whose jobs may be changed,
relocated or eliminated as Dell builds a global presence
5. To ensure that Dell suppliers around the world understand and embrace high
standards of ethical behavior and treat their employees with dignity and respect
6. Dell will contribute positively in every community it calls home
7. Dell will help protect the natural environment
8. Dell will adhere to stringent standards for product safety to protect our customers
9. Dell will protect critical technology by complying with all laws of the United States
and those of other countries concerning the import or export of goods, services,
software and technology including regulations that restrict the sale of advanced
technologies to terrorists or rogue nations or organizations
10. Dell respects customer privacy around the world by restricting the collection,
storage and use of personal information
And distributed in 5 areas:
 Environment
 Accountability
 Sustainability
 Community
 Customer Experience
http://www.dell.com/content/topics/global.aspx/corp/en/global_principals?c=
us&l=en