Matching Dell

In comparing Dell and Compaq including its resellers, we found out, that Dell has a competitive advantage in terms of operations, channel management, delivery times and customer relationship management. This creates a gap between Dell and its competitors such as Compaq. In the following we will see how they created this gap and quantify their competitive advantage. We will conclude by showing why customers are happy with Dells products.

There are several different areas and aspects where Dell generates a competitive advantage, such as its direct selling model and its production on demand. When talking about competitive advantage in this case we do not refer to differences in quality but rather differences in price as we assume that Dell’s product and that of its competitors are comparable. An important assumption made is that prices in Exhibit 10.b refer to end business customer prices. The results of this analysis can be seen in the table below, for detailed calculations and further comments relating to the individual amounts please refer to the attached excel sheet.

Dell advantage due to… | In USD |

Inventory purchased later | 21 |

Lower inventory carrying costs | 17.8 |

No channel related costs | 135 |

No channel markup | 162 |

Total Dell advantage | 335.8 |

Dell advantage as a percent of revenue | 15% |

If we further analyze the costs occurring between production and delivery, Compaq needs 4-5 weeks whereas Dell delivers immediately. This results in an additional advantage of USD 215 and increases the total advantage to USD 551 and 23.8%.

Now looking at the customers willingness to pay, Dell has increased this gap even further by taking into account the key requirements of business customers, such as high technological standards, high after-sale support, additional services and good customer relationship management. These requirements are taken care of by Dell in the following ways: 1) delivery within 36 hours, 2) direct customer...