Assignment: Dell’s Business Strategy
Market forces create the competitive context for the business. Some markets, such as those faced by package delivery firms, laptop computer manufacturers, and credit card issuers, face many competitors and a high level of competition, such that product differentiation becomes increasingly difficult. Other markets, such as those for airlines and automobiles, are similarly characterized by high competition, but product differentiation is better established. Customer demands comprise the wants and needs of the individuals and companies who purchase the products and services available in the marketplace. Organizational capabilities include the skills and experience that give the corporation a currency that can add value in the marketplace.
Consider Dell, originally a personal computer company. Initially Dell’s business strategy was to sell personal computers directly to the customer without going through an intermediary. Reaching customers in this way was less expensive and more responsive than selling the computers in retail stores. The Internet, combined with Dell’s well‐designed IS infrastructure, allowed customers to electronically contact Dell, which then designed a PC for a customer’s specific needs. Dell’s ordering system was integrated with its production system and shared information automatically with each supplier of PC components. This IS enabled the assembly of the most current computers without the expense of storing large inventories, and inventory uncertainties were pushed back to the vendors. Cost savings were passed on to the customer, and the direct‐to‐customer model allowed Dell to focus its production capacity on building only the most current products. With small profit margins and new products quickly able to replace existing products, IS aligned with Dell’s business strategy to provide low‐cost PCs. The cost savings from the IS was reflected in the price of systems. In addition, Dell executives achieved a strategic advantage in reducing response time, building custom computers that had one of the industry’s lowest costs, and eliminating inventories that could become obsolete before they are sold. Thus, this business strategy was consistent with Dell’s mission of delivering the best customer experience in the markets it serves.
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