Revitalizing Dell

Central Question In the face of changing consumer preferences and adapting competitors, how can Dell refine its business model to improve profitability and position itself to regain market share?

Key Questions How has consumer behavior changed that it has disrupted Dell’s business model? What has changed among the competition that has disrupted Dell’s business model?

The Dell Model Direct to consumer All computers customized to order Big business / Education focus Just-in-time manufacturing Provide tiered after-sale support Offer drop-shipped, branded peripherals This model allowed Dell to remain nimble, carry little inventory, and offer mass-customization at a highly competitive price.

How has consumer behavior changed that it has disrupted Dell’s business model?

Ratings of PC Vendors Dell IBM HP 2003 Business Buyer Ratings Dell IBM HP Price & performance 81 - 1st 75 - 2nd 74 - 3rd Vendor reputation 80 - 2nd 78 - 3rd Product reliability & quality 80 - 1st 79 - 2nd 75 - 3rd Desired feature set 79 - 1st 76 - 2nd Web-site ordering & support 78 - 1st 70 - 2nd 69 - 3rd Customer Service 75 - 1st 73 - 2nd 71 - 3rd Product Innovation 72 - 3rd Ergonomics 71 - 2nd Collaboration 69 - 1st 67 - 2nd 2003 Consumer Ratings - 70 - 3rd This data suggests that in 2003 Dell’s model was working for Dell’s largest consumer groups that accounted for 93% of sales. Despite a slight decline by 2009 to 75 and 2nd place to Apple, consumer ratings seem to continue to support Dell’s model.

GENERIC STRATEGY CUSTOMIZATION PRICE HIGH CUSTOMIZATION LOW PRICE LOW HIGH Despite having a lower level of customization, HP has experienced more success, suggesting that consumers do not value customization as they once did, or Dell confused consumers by straying from its marketing message by perusing indirect sales.

Recommendations Create a hybrid sales system using indirect channels as a demonstration/sales/order taking force and custom make the item and ship direct to the consumer. This maintains the successful manufacturing system while allowing consumers to “test-drive” the product prior to buying. Redouble effort to position itself as “The Source” for large businesses. Include the after-sales support to bolster value of offering. This reinforces the idea for big businesses that Dell is overall best value. Refocus product lines to core groups, offering mass-customization and latest technology without the unnecessary “bling”. This gets Dell away from trying to compete on style with Apple (an expensive proposition) and back to providing the best performing computer for each customer.