Dell’s main strategic elements are built around a variety of core fundamentals which give Dell the competitive advantage it needs to regain its position as the leading manufacturer of IT products and services. Dell’s build-to-order manufacturing strategy is one of the main areas that differentiate it from its competitors in the IT industry. By introducing this strategy Dell were able to keep inventory to a minimum of six to seven days which enabled the company to operate as efficiently as possible and pass on the cost savings they made to the customer.
Dell’s mass customisation strategy was its unique selling point as it offered customers the ability to modify a computer to their personal requirements e.g. RAM capabilities. In order to reduce costs and gain competitive economic advantage Dell’s strategy was to build long term relationships with its suppliers to minimise component inventories by using just-in-time and working in conjunction with nearby suppliers to improve quality control measures. A zero-level distribution strategy was implemented by Dell to cut out middle men in order to be price competitive as it shortened the supply chain to the customer.
To make their advertising campaigns more effective Dell introduced a market segmentation strategy to reduce unwanted, costly leakages in their campaigns e.g. the introduction of Kiosks. By introducing a market segmentation strategy Dell targeted customers that were likely to purchase their broad product range and therefore increase sales. To facilitate customer retention and sustain the companies reputation Dell put a strong emphasis on its CRM strategy to get a better understanding and knowledge of their customers present needs and demands to aid future development of its products as well as its services. To build loyal, trustworthy relationships with its customers Dell uses an information sharing strategy that gives current Dell customers’ updates on new products, services and customer service information. Dell’s R&D strategy along with engineering is in place, to concentrate solely on identifying and fulfilling customers’ needs and wants, in order to offer superior products and services than its competitors.
Which one of the Five Generic Competitive Strategies does Dell employ?
Dell employs the best-cost provider strategy as it targets value conscious buyers by offering direct sales, customer service and information sharing with suppliers and customers, all with the intention of providing its customers with the best quality product/service at a competitive price. Dell’s competitive advantage is to offer a best cost and provide equal quality to its competitors. They achieve this by build-to-order manufacturing and mass customisation. Dell strives to produce products that are already on the market at a lower cost by reducing the cost of all elements in the supply chain. Dell’s production lines are capable of mass producing quality products that have upscale features and appealing attributes at a reasonable price.
Their most recent method of achieving this is by using “cell manufacturing” techniques. One of Dell’s main focuses is on production. Dell’s strategy has been to provide customers with high quality products at low cost than rivals. Their other main focus is their marketing strategy. They rely on direct sales, existing brand awareness and loyal customers to promote their products. Due to their reputation customers are willing to try other products they produce. It also relies on how successful their website has been. Dell has continued to develop its business strategy, by managing to cut costs while incorporating upscale features and attributes. Learn about Dell Marketing Strategy
Most recently by entering new markets such as notebooks, flat-screen LCD TV’s and retail-store equipment including electronic registers in order to increase revenue. Dell proactively re-evaluates its supply chain strategy to make sure it is in line with business strategy while keeping ahead of the competition. According to CEO Rollins, Dell “manages the value chain better than anyone else on the planet, the only one who might come close to us might be Wal-Mart”.
How well do the different pieces of Dell’s Strategy fit together?
Dell’s strategies have different elements that have allowed the company to reach its current market position. The pieces of Dells strategy fit together just like all the elements of a clock, all the major pieces rely on one another in order for the company to succeed as a whole. This has permitted Dell’s strategy system to work so well because of its excellent logistics system. The system works so well it has enabled them to manage multiple pieces of the strategy simultaneously without glitches. Dells sales force management is able to interact with millions of customers worldwide through direct selling that is hands on and user friendly.
They also have sales representatives for major clients such as governments, institutions and corporate clients who then customise their order. Once received, Dell incorporates just-in-time management when manufacturing. Parts for the operating systems arrive “just in the nick of time” while the desktop is being combined. This process in turn would not be possible if Dell did not have a unique relationship with its suppliers. They have excellent supplier co-ordination, almost making their suppliers like partners. Dell do not make the parts for their own computers but work in harmonisation with suppliers, and get suppliers who are located close to the factory so that they make several deliveries a day if needed that arrive just before assembly. After-sales then come to the forefront. Their CRM is also excellent. The internet and phone service has enabled Dell to have achieved a 88% customer satisfaction rating. This service has been improved by the acquisition of smaller firms who have increased IT service capabilities. Everything Dell does is different from the competition, and does not resemble a traditional PC manufacturer.
The pieces of the strategy have to fit perfectly in order for Dell to function, if the pieces of the strategy did not fit, then none of the processes mentioned above would work. The processes work like a stair case, one step leads to the next. It is airtight. Larry Lapider claimed that supply chains are as unique as individuals. Not everything gelled at first, it involved experimentation, feedback and adjustment e.g. the huge mistake of moving call centres to cheaper locations and that hurt their customer services greatly but this issue was resolved. Dells strategy is so perfect it is almost impossible for companies to copy. Michael Dell states that the success of his strategy is due to “ an 18½ year process, it comes from many, many cycles of learning”.
What way is Dell’s strategy evolving?
Dell is constantly trying to regain the top position in the IT industry. Michael Dell states that “I don’t believe for any second, that they are not trying to catch up. But it is also safe to assume that Dell is not staying in the same place”. This means that Dell is focused on finding new and innovative strategic methods to gain competitive advantage e.g. expansion into new products like the white-box and IT firm acquisitions. Dell’s main strategy since its inception has been the continuous pursuit of cost reduction initiatives. Michael Dell has announced that tighter operating expenses would be implemented immediately. Dell is currently looking for further inroads in how to cut costs throughout its global operations. This is all to cope with the current economic climate.
It has also reignited revenue growth in its five focus areas which are global consumer products, sales to large enterprise customers, laptop computers, sales to small and medium enterprises, and sales in emerging countries. Dell recently purchased six companies at $2 billion to increase value added service in IT operations, this is to cope with the global trend that the IT industry will be worth $613 billion. This will also help satisfy the rapidly growing demand for IT services in emerging countries.
Other ways in which Dell is improving their strategy is by discovering what new needs consumers’ desire and then developing new products. They then adapt their business offerings and communication methods to meet customer demands for example Dell believed that one of their biggest competitors are white-box vendors alongside IBM and HP. They are now thinking of entering the white-box PC segment to provide for customers with lower income spending. Dell are now becoming more visible to potential customers, since marketing strategies suggest that people like to buy a “person” rather than a “product”.