Dell

Dell has low relative costs that came from lower operating costs and from using its working capital efficiently

Dell sold direct, building computers to customer orders using outsourced components and a tightly managed supply chain.

Dell’s model required little capital since the company did not design or make components, nor did it carry much inventory.

Deell had a substantial advantage in days of inventory carried because component costs were then dropping so fast, buying components weeks later, as Dell effectively did, translated into lower relative costs per PC

Dell’s customers actually paid for their PCs before Dell has to pay its suppliers. They finance the working capital they need to run their business.

Dell’s strategy resulted in negative working capital enhanced Dell’s cost advantage.

Dell’s direct business model was based on the fact that some customers didn’t want, or didn’t need, a retailer or an intermediary such as a reseller to give them advice and information.

Dell was positioned in a strategy that was likely to have more growth opportunity than other strategies. Dell made an implicit forecast that proved to be correct at least up until a few years ago

The core of Dell’s strategy crystallized early around selling direct (aoid the reseller’s margin) and building to order using purchased components (avoiding the cost of internal technology development and component manufacturing).

Large customers ordered in quantities large enough for Dell to efficiencies in serving them. Dell focused its early efforts on larger corporate customers, leaving what was at the time an unprofitablie consumer market for other computer makers

Selling direct and building to customers’ orders resulted in faster cycle times and lower inventor y level, which gave Dell a relative cost advatange at a time when the price of components was falling rapidly. That is, Dell’s rivals, having to stock channels, had computers with older, more expensive...