1. The Dell Direct Model: What it means for customers(users) PROS: –Perceived customization –Convenience –No sales pressure –No price comparisons/objections CONS –No immediate delivery –No touch and feel

2. The Dell Direct Model: What it means for (corporate) customers PROS: –Premier pages: approved configurations only –Reduces procurement cost –Reduced overshipment costs –E-support CONS: –No immediate delivery

3. The Dell Direct Model:... for suppliers and complementors PROS: –Rapid introduction of new technology –Rapid feedback on product problems –Good data for forecasting –Increased switching costs CONS: –?

4. The Dell Direct Model:... for Dell itself PROS –Lower inventory and little product obsolescence –New technology to market faster –Quick feedback on problems –Ability to manage product shortage and demand by advertising and pricing –Dell gets paid early

5. The Dell Direct Model:... for Dell itself (2) PROS (continued) –Lower component cost than indirect competitors –Creates real switching barriers for large customers –Customer database>>customer information, lowers cost of followup services and support CONS –may not appeal to all segments

6. Dell’s core competencies Core competencies are skills, knowledge, and collective learning that allow a company to execute some critical processes better than any of its competitors Supply Chain Management (SCM) Customer Relationship Management (CRM) E-service Demand Management

7. 1: Indirect channel (with e-efficiency; pooling of inventory, etc.) PROS: –Current strength –Ally with major retailers (CompUSA, Staples, etc.) –Touch and feel; local service and support –Many competitors withdrawing CONS –Declining market –High costs –Lack of customization (for customer; for channel) –Will channel members cooperate?

8. 2: Direct Model PROS: –Overall market trend –Lowest cost (commoditization of market; importance of price) CONS: –Lack the core competencies (Lagger forever?) –Loss of channel support? –More competition in the direct model?

9. 3:Harvest the PC Market (move to next generation products/ or to enterprise ) PROS: –Higher margin segments –Leverage their strong service capability (through DEC) or their server/storage product line in corporate market CONS: –not a product innovator –integration problems –Strong competitors

10. What resources and capabilities does Compaq have that it can leverage? RESOURCES –High speed enterprise computing hardware –Server and storage design, manufacturing, sales, and service –Millions of users of Compaq products CAPABILITIES –Fault tolerance –Can handle large customers/ complex needs

11. LESSONS Value of quantitative and qualitative analysis Value of customer relationships Value of market segmentation Don’t rely on past successes Maturing of IT/PC market: special requirements A standard global model has several benefits

12. WHAT HAPPENED? Compaq aimed at global leadership in internet infrastructure, access services, and solutions Acquired Inacom: to boost direct capabilities IBM> moving away from retail Hewlett Packard>early 2000; grabbed leadership in US retail market Dell has slowed down slightly; Compaq picked up Hewlett Packard purchased Compaq ($19b); HWP, CPQ  HPQ Dell continues to outperform others (2005)