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Category: Business and Industry

Date Submitted: 02/01/2013 09:36 PM

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1.0 Introduction

Dell Incorporation is an American multinational computer technology corporation which is founded by Michael Dell since year 1984 in Texas, U.S. It innovates, sells and supports computers and related products and services. Besides, Dell is the third largest PC vendor in the world and it was ranked at the place number 44 in Fortune 500 lists.

2.0 Porter’s Generic Strategies

2.0.1 Cost Leadership Strategies

A cost leadership strategy seeks to achieve the position of lowest-cost producer in the industry as a whole. By producing at the lowest cost, the manufacturer can compete on price with every other producer in the industry and earn the higher unit profits.

Dell’s competitive strategy was built based on the Direct Business Model. Their main emphasis is on the low cost strategy, selling their products at lower prices by following a direct business model which removes the middlemen, which add on to the time and cost and offer high level of customer service, by meeting the customer’s expectations. Dell’s direct business model intended to maintain direct relationship with the customers with no intermediaries to add confusion and cost. By cutting out the retail seller as a distributor, Dell Inc. has remarkably low operating cost compared to other PC vendors and has made it possible for buyers to shop online rather than visiting the retail sellers for other brands. Selling directly to customers gave Dell firsthand intelligence about their customer preferences and needs, as well as immediate feedback on design problems and quality glitches; this is to avoid any failure costs. Meanwhile, Dell only produce products when customers order, so Dell had no in house stock of finished goods inventories and Dell does not have to wait for resellers to clear out their own inventories before it could push new models into the marketplace. Through the direct model, sales performance is maintained up to the maximum level in order to save costs and to maximize profits...