Dell Inc Case Study

When Dell started his business with the simple concept of built-to-order personal computers sold directly to customers. Michael Dell believed his approach to the personal computer business had two advantages. Firs, in bypassing distributors and retailers, he eliminated the markups of resellers. There by improving his profits. In addition, by building computers only when ordered, Michael Dell greatly reduced the costs and riss associated with carrying large stocks of parts, components, and especially finished goods.

When Dell shifted to large-scale operations, the company initially retained the direct-to-consumer strategy. However, between 1990 and 1994, Dell Computer did distribute its computer products through such retail outlets as Wal-Mart, Staples, and in several Latin American countries, Xerox. However, by 1994 Michael Dell had realized that the profit margins associated with selling through retail distribution channels were too tight. Therefore, the company discontinued retail sales to refocus on its direct selling efforts.

Dell initially started direct sales via mail and phone orders. However, in 1988 the same year Dell had its initial public stock issuance Del added a sales force to focus on the sales and service relationships with the company’s large corporate and government customers. In 1994, Dell became the firs computer company to list a Web site. Initially, Dell’s Web site merely listed price and product information. However, Dell quickly recognized the advantages of direct sales via the company’s Web site. Due mostly to the difficulties and lower profits of selling to single house-holds and consumers, Dell largely ignored the consumer market. However, direct sales to consumers via the company’s Web site began to increase dramatically in 1996. By 1999 Dell Computer was the largest retailer then on the Internet.

Dell’s direct- to-consumer strategy has given the company a substantial cost and profit margin advantage over its rivals. Companies such as Compaq, IBM, and Hewlett-Packard manufacture personal computers in large volumes and keep their distributors and retailers stocked with ample inventories. In contrast, Dell manufactures computers only when an order is received. In doing so, Dell has virtually eliminated finished product and component parts. These cost and profit advantages have allowed Dell to prosper and grow during the past several years, while many of its competitors have weakened or gone out of business.

In March 2004, Gateway completed its acquisition of eMachines, Inc., a privately-held computer manufacturer and distributor. Ted Wait, CEO of Gateway, hoped the merger would allow Gateway to better compete with Hewlett-Packard and Dell. In December 2004, it was announced that Lenovo Group Limited, the largest information technology company in China, would acquire IBM’s Personal Computing Division. While its rivals have continued to struggle, Dell has grown to be the largest PC suppler in the world with just under 18 percent of the global market.

Management Issues ( Vision Statement )

It’s the way we do business. It’s the way we interact with the community. It’s the way we interpret the world around us our customers’ needs, the future of technology, and the global business climate. Whatever changes that future may bring, our vision Dell Vision will be our guiding force.

Mission Statement

Dell’s mission is to be the most successful Computer Company in the world at delivering the best customer experience in markets we serve. In doing so, Dell will meet customer expectations of:

Highest quality
Leading technology
Competitive pricing
Individual and company accountability
Best-in-class service and support
Flexible customization capability
Superior corporate citizenship
Financial stability

Organizational Structure

Michael Dell is the chairman of the board of directors of Dell Inc. He has held this position since he founded the company in 1984, In July 2004, Kevin Rollins assumed the titles of president and chief executive officer. Kevin Rollins has been with Dell since accepting the position of senior vice president, corporate strategy, in 1996. Headquartered in Round Rock, Texas, Dell Inc. is managed on a geographic basis. The three geographic segments are the Americas, Europe, and Asia-Pacific.

Dell Inc. maintains more than 7 million square feet of office, research, manufacturing, and distribution space in the United States. In addition, a new half-million square-feet manufacturing facility is under construction in North Carolina and is expected to begin operations in late 2006.

Dell’s sales in America are reported in two different categories, Business and U.S. Consumer. The net revenue for business sales of $25,339 million in the Americas segment is by far the company’s largest segment, accounting for almost 52 percent of total net revenue for 2004. With $2,579 million in operating income, business sales in the Americas segment accounted for almost 61 percent of total operating income for 2005. The net revenue for consumer sales in the Americas segment was $7,601 million, accounting for just over 15 percent of total net revenue for 2004. Consumer sales in the Americas segment generated $399 million and accounted for just over 9 percent fo total operating income for 2004. Dell holds 29.1 percent of the total markets for personal computer sales n the Americas, easily placing Dell ahead of its competitors. With total sales of $32.940 million, the Americas segment accounts for almost 67 percent of Dell’s total net revenue. Combined operating income for the Americans segment of $2,978 million accounted for almost exactly 70 percent of Dell’s total operating income for 2004.In addition to its Americas-based operations, Dell maintains almost 4.5 million square feet of office, research, manufacturing, and distribution space in 43 locations around the glob. The European segment based in Blackwell, England, covers the European countries and also some countries in the Middle East and Africa. In 2004, sales in the European segment generated $10,787 million in net revenue, accounting for almost 22 percent of total net revenue. In 2004, sales in the European segment generated $818 million in operating income, accounting for just over percent of total operating income. Dell’s11.7 percent market share for sales of personal computer sales in Europe means that Dell is the second-largest supplier of personal computers in the segment.

The Asia-Pacific segment, based in Singapore, covers the Pacific Rim, including Japan, Australia, and New Zealand. In 2004, sales in the Asia-Pacific segment generated $5,478 million in net revenue, accounting for just over 11 percent of total net revenue, In 2004, sales in the Asian-Pacific segment generated $458 million in operating income, accounting for almost 11 percent of total operating income. Dell’s 8.3 percent market share for sales of personal computer sales in the Asia-Pacific segment means that Dell is the third-largest supplier of personal computers in this segment.

Manufacturing

Dell manufactures its computer systems in six locations: Austin, Texas; Nashville, Tennessee; EL dorado do Sul, Brazil (Americas):Limerick, Ireland (Europe, Middle East, and Africa); Penang, Malaysia Asia-Pacific and Japan; and Xiamenm China. The manufacturing process at Dell’s worldwide manufacturing facilities comprises assembly, testing, and quality control of its computer systems. Parts, components, and subassemblies purchased form suppliers are tested and held to quality standards. Because of its build-to order manufacturing process, Dell quickly produces customized computer systems while achieving rapid inventory turnover and reduced inventory levels. These attributes lessen Dell’s exposure to the risk of declining inventory values. Another advantage of this flexible manufacturing process is that Dell can quickly incorporate new technologies or components into its product offerings. To ensure a defect-free product, testing is performed at various points during the assembly process and on the final products.