1. Dell Selling Directly, Globally

2. History  Founded in 1983 by Michael Dell at age 18  Began selling upgraded PCs and add-on components from a dorm room at the University of Texas  In its 15 th year of operation  Ranked 2 nd in the US and worldwide PC market in 1999

3. History (continued)  In 1985, Dell was a $6.2 million business  In 1996, Dell began its Internet approach  Dell expanded to $21.7 billion in 1999

4. Dell Profile  Dell Computer Corporation became official in May 1984.  It was founded on the Direct Business-to-Consumer Model.  It is the fastest growing among all major computer systems companies worldwide.  Michael Dell is the youngest CEO of a Fortune 500 company  In July 1999, Dell became the #1 PC Vendor to businesses in the US

5. General Environment  Demographic  Target Consumers: small to medium sized businesses in the US market  Location: In the US, UK and 14 international subsidiaries by 1999

6. General Environment  Global  Operated sales offices in 33 countries  Served customers in more than 170 countries and territories around the world  Technological  Internet presented a medium which Dell used to enhance its direct sales approach  24 hour on-line technical support, order status information, and downloading of software

7. Industry Analysis  Intensity of rivalry  Legend remains #1 in China  Product Substitutes  Legend is adopting the just-in-time delivery mode  Power of Suppliers  IBM, HP, and Compaq establish plants in China  Power of Buyers  Chinese were uncomfortable using credit cards online thus hurting online sales

8. Competitive Environment  Shipping in US and worldwide: Compaq, IBM, HP, and NEC  Competition in China’s PC industry in 1999: 1. Legend 2. IBM 3. HP 4. Founder 5. Great Wall 6. … 7. Dell

9. SWOT Analysis  Great Customer Service  Customers can call or access Dell’s website and order a customized computer in less than 10 minutes.  A customer then has a number of methods to contact Dell’s technical support such as the phone, online and on-site repairs should a problem arise. Strengths

10. SWOT Analysis  Unfamiliarity with the Chinese socioeconomic situation  The price of a PC was the equivalent of two years of a person’s savings.  Retail buyers only accounted for 10% of sales. Weaknesses

11. SWOT Analysis  To increase market presence in China, the second largest PC market in the world  China’s PC Industry had seen extraordinary growth between 1990 and 1996.  Dell had a good chance of increasing its presence in the Chinese market by introducing the Direct Model. Opportunities

12. SWOT Analysis  Red Tape with the Chinese Government  China’s nationalistic policies made US companies operating in China vulnerable to the ups and downs of Sino-American relations.  The Chinese government made no secret than national PC vendors would be promoted. Threats

13. Capabilities  Direct sales operations  Customer service  Just-In-Time inventory usage

14. Core Competencies  Tangible Resources  Intangible Resources

15. Strategic Analysis  Current Strategies  Business-level strategy  Differentiation from competitors.  Corporate-level strategy  Financial position

16. Performance Appraisal  Success in niche market  Fast service  Current value  Consistent sales growth

17. Strategic Alternatives  Direct  Direct business-to-customer model  Cutting out the cost of distribution  Indirect  Selling through distributors and adding value resellers Channels

18. Strategic Alternatives  Build-to-Order direct sales approach  Knowing exactly what customer wants  Free installation of applications software  Timely delivery of orders  Comprehensive on-line purchasing tool  On-line technical support  Order status information  On-line downloading of software Products and Service

19. Strategic Alternatives  Pricing advantage Building a business solely on pricing

20. Epilogue  Does Dell succeed?  Partially yes, and partially no.  Dell could not succeed its business compared to the other markets  The factors affecting Dell’s direct-business model in China  Uncomfortable with credit card sales  Costs of enforcing the direct model took a sizable chunk away from Dell’s earnings  Future potential for Internet growth was huge  Uncertain