Dell Inc Mini Case

Dell Inc- Changing Business Model

April Brozik

May 6, 2014

MGMT 479

Dell Inc: Changing the Business Model (Mini Case)

Background and Analysis:

In 1984 Dell Inc. was founded by University of Texas freshmen, Michael Dell. Dell would buy computers from the excess inventory of local retailers and revamp them to sell out of his trunk. Later on he hired a few friends to help, and began placing newspaper ads. Soon he was selling $50,000 in Pcs a month to local businesses. His sales reached 600,000 the first year and then doubled almost every year after. Dell was able to sell his computers at 10%-15% below retail price. After Dell’s freshmen year he dropped out to run his business full time. He knew that he had made something amazing.

By 1995 Dell had sales of nearly $3.5 billion and was one of the top five PC vendors in the world. Dell focused on customer support and service and became the master of process engineering and supply chain management. Dell has faced many challenges including distribution through US retail stores, management changes, and keeping up with its competitors. Since consumers aren’t willing to pay huge amounts of money for computers unless they were unique, Dell is at a crossroads. Which road Dell chooses to follow will determine its future. The company’s margins aren’t in a favorable position for the company. In 2010 yes their net income rose, but was still only 2.91% of net revenue. Dell’s consumers are no longer willing to pay top dollar for a computer, unless it was unique. Competitors are selling laptops for around $300. Tablets have pushed Dell’s laptop sales down as well. Many more competitors have stepped into the industry since Dell first was founded. Dell also spends about 1% of its sales on research and development, while other companies spend about 5%.

Current situation

Dell is no longer a publicly traded company. Even though profits have been steady, they did not do well in the stock market. But even though people...