Dell Case Study

Dell Case Study:

Why can’t we be friends?

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Group 4

MGT 4199 W02

July 13, 2010

Part I:

History

Dell Computer got its start in 1984 when Michael Dell, a 19 year old University of Tennessee Freshman, began selling enhanced IBM compatible computers from his dorm room and trunk of his car. Michael Dell funded the start up cost by withdrawing $1,000 from his savings account, used his car as collateral for a bank loan and staffed the operation with friends. The funds were used to purchase overstock from local merchants. Dell then enhanced the personal computer with features such as additional memory and disk drives.1

Michael Dell placed ads in newspapers and computer magazines advertising his custom computers thinking that experienced computer users would recognize and appreciate an enhanced machine. This paid off and soon first year sales reached over $600,000. In 1985, Michael Dell started manufacturing his own computers and selling them over the phone through an 800 number. Dell shipped directly to the customer upon completion of the product. Michael Dell‘s direct sales model allowed the firm to sell computers at a significantly lower cost than competitors.2

Nature of Business

Dell computers are made to order and shipped directly to the customer. Using this simple business model, Dell is able to avoid the overhead cost associated with retail stores and distributors. The company did not maintain inventory, which provided cost savings. As a result, Dell is able to make computers cheaper and faster. Money flow is not a problem because the customers pay Dell before Dell has to pay its suppliers.

Customer satisfaction is a driving force for Dell to provide new and better solutions. Dell is a company that listens to its customers by gathering requirements through thousands of daily customer interactions, organized events, social media venues such as Facebook, and customer panels. Dell has also...