How Dell Started its Business
Founded in 1984 by Michael Dell, the technology company is one of the few examples of efficiency in modern technology (Kraemer et al., 2000). It started the sale of upgraded compatible PCs using telephones. Dell developed a strictly customer-centered business model, with a 24-hour customer care service on the phone. This model ensured they sold directly to the consumer at any one given time. They received demand before manufacturing and delivering the specific quantities demanded. These provided limited or no extra costs were incurred in products that were not certain of their sales; hence return on investment was guaranteed. This model made contact with the consumer much more comfortable. The consumer’s future expectations were guaranteed since, with numerous contacts, Dell could ascertain what the consumers expected in terms of improvement. That notwithstanding, Dell had to wait for the consumers to order before manufacturing took place, (Damon, 2007) This ensured Dell did not go beyond its expectations in the market, and there were enough controls to ensure the return on investment was ultimately guaranteed.
Value Chain Model
The model addresses the need for various activities in the quest to attain efficiency in product manufacturing or service delivery. These are essential to ensure demand meets the correct supply in the market. In this model, each production procedure is vital in contributing to the product or service’s value. The value chain encompasses the idea of market place where demand and supply are met by the different factors to enable the process of production to consumption be a success (McGee, 2014). These involve the consideration of raw materials, the production process, human resources, logistics, the marketing strategies, and the sales in itself to attain profits.
Dell Value Chain Analysis
Both the primary and support activities have played essential roles in Dell success. They include; Inbound Logistics. With manufacturing facilities across the world and chains of warehouses, Dell has managed to operate efficiently. They acquire raw materials from around the globe and ensure supply is done through external logistics partners. Additionally, they use the Just in Time model in the inventory management and allocation of supplies to the dealers.
Outbound Logistics. Vendors who can be considered as third parties are used in the distribution process with a multi-channel means of transportation. It can reach a broader range of consumers in a short time cutting on excess storage and transportation costs
Operations. Dell has a more comprehensive coverage in the developed countries. However, with the advancements in technology in developing countries, Dell is making inroads and exploring the possibilities of trade in the new markets
Sales and Marketing. Selling directly to consumers has been the main channel for Dell. Further improvements were made to enhance sales through its website and advertising
Service. Competition has increasingly caused the after-sales service necessary. Consumers are always seeking products that have warranty and purchase conditions that ascertain software repairs. Dell, through the carry-in service, ensure product quality and customer satisfaction.
Dell offers cloud computing services which is highly supported by various IT improvements and state of the art manufacturing infrastructure. Additionally, with an employee range of over 160,000, Dell has contributed immensely to the world’s economy.
The value chain theory emphasizes on the process in the marketplace. Considering Dell’s current position, it was equally vital for them to come back to the basics of demand and supply to woe the consumers once again. However, with new competition and market structure changing daily, improvements have to be made. These improvements include ascertaining demand in the market, developing new retail channels, improving the product’s quality, and dealing directly with the consumer. The following factors contributed to dell’s decision to come back to retailing;
Competition in the market. With a decrease in sales due to the adaptation of a different model, the market changes left Dell with no controls. Dell initially used the demand to create the supplies, but as time went by, the caved into the market demands and started production with limited knowledge of where the amount will be done. These actions were taken to ensure the company remained competitive but seemingly worked against them. The process of production is essential in the value chain. Significant emphasis is on how the commodity reaches the market and finally, the consumer, which Dell had failed to achieve due to the product demand in the market.
Technological advancements. These are attributed to more improvements in technology and products in the market. The consumer’s expectations are relatively high, and hence the need to keep tabs with their ideas. These enhances quality production since the process will factor in consumers preferences thus making Dell product appealing to the market once again
The need to be consumer-centered. Any successful business will want to keep the consumers as the main pillars or driving force. Dell’s return to retailing was further instituted by the need to understand the market better, which calls for consumer preference. This way they can determine what is necessary and vital for production at any given time in the economy
Cost reduction measures. When demand is matched by supply, no extra cost is experienced apart from the budgeted. Unlike when supply is done without knowledge of the market. It is always a gamble that might or might not pay. The returns on investments are still low, meaning the profitability margins are not sustainable. Dell experienced these operations when they adopted the supply before demand policy and could have contributed to its dwindling fortunes.
They are changing market dynamics. Although it can be related to competition, changing market dynamics have forced many companies to shut down. Dell’s approach will be centered on establishing electronic retailers and settling on the best in terms of market knowledge, thereby ensuring their products are relevant.
Need for expansion. With the development of new manufacturing and distribution models in the USA and different spheres of the world, the need to take control was vital. Expansion can only be guaranteed by increasing demand in the market. For Dell to be able to remain relevant, they will need the consumer support, and that can only be achieved if they satisfy the market demands.
Considering the success, Dell enjoyed in the previous years; it was equally important to change strategy when things were not working out. Coming back to retailing was one of the best options that had worked perfectly well in the previous occasion it was adapted. However, additional improvements should be detailed to improve efficiency since the market is changing with a shift in consumer demands.
References
Damon, Darlin (2007). Dell’s Founder is Rethinking Direct Sales; The New York Times
Kraemer, Kenneth & Dedrick, Jason & Yamashiro, S (2000). Dell Computer: Refining and
extending the business model with IT. The Information Society – TIS.
McGee, John. (2014). Value chain.