Dell Case

This article quickly guide us to go through the history of Dell and raise a question that whether Dell’s business model is still efficient? The income decline from FY2007 to FY2009 really implies the failure of this model or is it just a fluctuation influenced by the global PC market?

First, let us summarize the 3 reasons of Dell’s rags-to-riches story:

1, PC industry grew very quickly from 1990 to 2005. In the early time of 1990, most of PC are manufactured by IBM or Apple, but then Windows quickly dominated the PC’s OS market and the alliance between Win-Intel made the standards of each PC components open to all suppliers. Components can be gathered together to create a “DIY” (do it yourself) PC. As a “DIY” expert, Michael Dell smartly used his knowledge and started business earlier than other competitors.

2, Before 2000, most of PC buyer were large buyers like government, big company and other institutions, and the traditional PC manufacturers like IBM, HP, or Apple used a traditional agency model to sale their products, therefore , the profit were shared by distributors and retailers. Dell use an innovative online-direct sale model to lower down the cost and made their product have a better performance/price ratio than these traditional manufactures.

3, Dell’s online sales model gave Dell a promise to the demand, and Dell can use an order-until-book strategy with its suppliers and lower down the stock level. Dell’s dedication to improve the efficiency of the operation made this strategy extraordinary successful.

From about 2006 to 2010, there are several changes. First, many competitors copy Dell’s model and use online directly sales, they also managed to improve their operation efficiency. Second, Asia companies, took the advantage of lower cost, occupied a large share of market. Third, traditional desktop was replaced by laptop PC step by step, compared with the desktop PC, laptop has less customized options with a much smaller inside space....