04
Dell Direct
Class 2: IT and Business Strategy
Stanford Case
Case Summary by: Maggie Cui
Main Takeaways
1. Over 15 years direct selling experiences in the PC market, Dell’s infrastructure and relationship with
customers have gained significant advantages over other competitors, although competitors tried to
copy Dell’s model.
2. The first step success in the direct selling also led Dell to further extend its IT functions to supply
chain and premier customers. This again enhances Dell’s costs advantages and relationships with its
corporate customers.
3. The internet enabled system has led Dell become the #1 PC company in the States. Over 50% sales
revenues are generated from internet selling. Moreover, most technical supports to customers can be
conducted through internet. This has saved tremendous costs for the company. Finally, internet also
implemented in Dell’s daily operation system such as production information or performance reports.
Dell hence enjoys the benefits of the management efficiency.
4. Fully utilize the modern information technology and implemented in the company’s entire
organization levels is the key to Dell’s success. Most importantly, the company has foreseen the
direct purchasing behavior and initiated the Dell Direct in the PC market has made the company
leading in the industry.
More in-depth Summary
Something similar to what Jon Kea did in Value Disciplines.doc
In Dell Direct case, we can find several similarities to Value Disciplines.
1) Operational Excellence – Dell’s comprehensive IT utilization from customers to suppliers, even
inside its company organization has improved the company’s efficiency such as communication time,
inventory level, reduction of middle channel markup. All these have made Dell more efficient than
other competitors.
2) Customer Intimacy – Dell’s direct selling to customers through electronic commerce system, and
the technical supports conducted by internet system, and Premier Dell.com for those important
corporate customers, all these are related to Customer Intimacy. In terms of communications with
customers, Dell has found the fastest and effective channel to reach its customers. For important
corporate accounts, Dell even assists them to improve operational efficiency. These are achievements
of customer intimacy.
3) Product/Service Leadership – It might be difficult to say Dell’s PC is the product leader in the
industry. However, it is easy to know that Dell’s technical services are leading in the industry.
Through internet enabled system, Dell conducts 50% of technical services with its users. This
definitely is the leader in the industry in terms of services and efficiency.
Case Discussion / Digest Questions
1. What are the main reasons for the success of the Dell Direct model?
I think there are several reasons attributed to the success of Dell Direct:
a) Company determination in implementing the direct selling PC
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04
Dell Direct
Class 2: IT and Business Strategy
Stanford Case
Case Summary by: Maggie Cui
model.
b) The needs from customers to reach PC suppliers in terms of prices
and supports were strong.
c) The company’s infrastructure has adjusted to meet the model
requirements.
2. What are the key differences between transaction and relationship customers?
The differences between transactions and relationship customers are:
Transaction customers – Focus on completion of one-shot order or sales
- The key factor between seller and buyer basically is
price.
- Short-term relationship.
- Very few follow-up activities such as services.
Relationship customers – Focus on long-term relationships connection.
- Customer’s needs are key to supplier.
- Technical services are always included.
- “Total costs” concepts is applied instead of “single
price” concern.
- Look very much on product standardization,
reliability, services..
3. In what ways does the Internet enhance the Direct Model? What benefits does it create
for Dell and for its customers?
The internet enabled system really speed up Dell Direct’s growth and success. Through internet,
Dell hence developed its website, provide customers variety of services through internet in
addition to PC orders. It also provide opportunities for Dell to communication with customers in
depth through FAQ. Customers can track their orders through internet, ask technical services,
download software, and purchase of new device drivers. Dell also developed a Premier Dell for
its important accounts. This website offers various benefits to its customers such as automated
purchasing, integration, facilitated access, centralization control, and management report.
For Dell, the internet enabled system offers the company even more significant benefits. Dell not
only enjoyed big growth, but also utilized the system with its supply chains. Internet was also
applied in Dell’s internal management system. All these have saved a lot of costs and enhanced
its management efficiency.
4. What is happening to growth in the PC Industry at large in the twenty first century?
What are the implications for Dell, and its strategy for the future?
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04
Dell Direct
Class 2: IT and Business Strategy
Stanford Case
Case Summary by: Maggie Cui
The PC industry moved from vertical blocks to horizontal structure allowed most PC companies
to create their own PC based on a common silicone platform. This change also created a costs
advantage on the PC manufacturing, and stimulate the PC demand, and grow the industry. Dell
was born to meet the growth opportunity. With its success in direct strategy, the company hence
achieved a tremendous success by employing the modern IT and internet enabled systems.
In looking into the 21st century, PC industry is continuing to grow especially in the electronic
commerce direct selling model. Most other PC companies were also getting into this model. But
they were not as successful as Dell. It is expected the direct model selling in PC will become a
major channel in PC industry. Dell should fully utilize its advantages and experiences in this
direct selling model. In my personal opinion, Dell also needs to create “more feature services and
benefits” in its website for its customers. Although it might be difficult for competitors’ to reach
the level as Dell in the short period, still there is possibility that some day other companies may
become real competitors in the direct model. The strength Dell has created is the channel
advantages and experiences not product inventions or innovations. We can see from Dell’s
website that Dell has started to carry other electronics other than PC products, such as printers,
digital cameras.. I perceive this is the side benefits from its direct selling channel. For long-term,
I believe Dell must innovate more attractive and unique features or services for its customers.
Otherwise, the competitions are still keen and strong from the company like HP and Japanese
companies like Toshiba, Sony.
5. In what specific ways does the Internet enhance Dell's (i) operational excellence, and (ii)
customer intimacy?
The internet system does enhance Dell’s operational excellence in the following areas:
1) Make its Dell Direct electronic commerce more effectively.
2) Most technical services can be conducted through website with its customers – save time and
costs significantly.
3) Over 50% of sales are generated from internet sales
4) Internet is also applied inside the internal management system such as performance reports,
information announcement,…
5) The internet enabled Dell to manage its supply chains including inventories and production
schedules – reduce costs and time.
In enhancing customer intimacy, Dell achieves this through internet:
1) Dell’s website establishment and communications with its direct customers.
2) Over 50% technical services can be conducted through internet – immediate services to
customers.
3) Premier Dell website for the important large accounts. Dell was able to provide these
customers with in-depth supports through internet.
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