Changing the Business Model

Dell Inc: Changing the Business Model (Mini Case)

Synopsis:

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. 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.

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.

Resources:

Dell Inc.'s most valuable resource has been Michael Dell and its ability to sell computers at 10-15% below market value. Another huge resource is the executive team that Dell formed for guidance.

Capabilities:

Dell's capability at producing products at a lower cost to its consumers is key. By adding services such as laptops, software/peripherals, servers/networking, services, and storage Dell expanded its capabilities. With the added services Dell can keep pace with its competitors.

Core Competencies:

Dell's core competencies are the ability to offer quality products at cheaper prices, personalized orders, and the ability to keep their inventory relatively low. These competencies have helped Dell become a leader in the computer industry.

Finding of Fact:

Dell is currently at a crossroads; 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

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