Michael Dell-Dell Computer Corperaion

Michael Dell-Dell Computer Corporation

"If we all did the things we are capable of doing we would literally astound ourselves." -Thomas Edison

When Michael Dell was a high school student he came across the product that would change his life-the personal computer. He would take it apart, learn about how it worked, what was inside, and how to upgrade the machine. Even as a small child, he seemed to be a very astute and inquisitive child. As a second grader, he had his first business selling candy; at age 12 he washed dishes in a Chinese restaurant to save money for his stamp collection. Business issues and current events were always discussed at home around the dinner table. His mother was a financial advisor and his father an orthodontist.

How the Business Started: According to his bio, Michael Dell went to college intending to become a doctor. Meanwhile, his hobby was working with computers. His hobby got the best of him. Dell began selling computers out of his dorm room with IBM personal computers (PCs) that he upgraded. And as his new venture progressed, he developed an innovative approach to conducting business. His idea was to sell computers directly to the consumer without going through retailers, and in the process, design and deliver a computer based upon the customers' own specifications. Eventually, his mission grew to become "the most successful computer company in the world at delivering the best customer experience in the markets [they] serve". Thus in 1984, Dell founded the Dell Computer Corporation with $1,000 minimum as required by Texas law. In 1985, he then shifted to assembling and marketing his own brand of PCs. In Dell's first full year of operation, company sales hit $6 million. In fiscal 2000, company sales soared to more than $25 billion. So just how has Dell managed to distinguish his company from the rest?

According to the Census Bureau, in 1984, 8% of the household population had computers in their homes, by the year 2000, 51% of the household population had home computers.

Michael Dell's breakthrough idea was to bypass the middleman and sell custom-built PCs directly to the customers. No retailers, no bricks and mortar sales. To overcome consumer resistance to phone sales, Dell established a strong technical-support and service program. The strategy worked within the United States and abroad. Dell sells custom-ordered computers directly to consumers, enabling the company to keep costly inventory at a minimum. Though their business has not changed in 15 years, they have decided to refine rather than redefine the model.

The model was continuously refined through business process redesign and continuous process improvement. The direct model is simple in concept but involves great complexity and precision in actual execution. Dell's management believed that they have helped to improve and extend the business model by using Information Technology, rather than change it.

THE DELL BUSINESS MODEL

Refinement of the Dell model

Business Strategy Information links IT Applications Performance Effects

Direct Sales Customer orders are transmitted directly to Dell, where program does second check for technical and financial feasibility Call center automation, Premier Pages, Dell On-Line, Dell Product Services  Accurate forecasting of demand

 Segmentation of demand

 Early indication of shifts in demand

Build-to-order Order information travels with product through the build process, enabling inventory control, the meeting of special customer requirements, download of customer software, etc. Dell Order Management System, e-mail, Lotus Notes  Better control of operations

 Reduced inventory and transit points

 Better communication during build process

 Improved monitoring and evaluation of production and supplier quality

Direct Distribution Information sharing notifies supplier to ship monitors to arrive with PC

Aggregation of information includes orders, inventory turnover, production throughput, supplier quality, on-time distribution Dell Logistics System, Lotus Notes, e-mail

Information to Run the Business  Accelerated outbound Logistics

 No Inventory

 Optimization of production, quality, and distribution, globally and locally.

The Information Society

Dell said he got the idea to sell directly to consumers from a competitor. Actually, he got an idea of what not to do. In the business environment, the focus is on execution, getting things done. With a landscape wide open for renovation, Dell saw an obvious solution, and thus kicked off the "build to order" revolution. Dell Computer Corporation is now one of the top vendors of personal computers worldwide, with offices in 34 countries and more than 35,000 employees serving customers in 170 countries and territories. When Dell Computer Corporation joined the Fortune 500 list in 1992, Michael Dell became the youngest CEO of a company ever to earn a ranking on the list. Since 1995, the company has been included on Fortune's list of "Most Admired Companies." A key to his continued success is that he sticks to the fundamentals, people questioned his direct model approach, but he believed in it and stuck with it. At the same time, however, Dell is "man enough to know when something isn't working" and will retreat.

Organizational Potentials

The core competencies of this organization is that Dell makes the direct sales, build-to-order process and direct customer relations work individually and jointly with each other. The direct sales approach is built on two key elements: direct customer relationships and products and services targeted at distinct customer segments. Direct sales means that Dell must reach out to potential customers; either through its own sales force or through advertising and other marketing efforts. Dell does sell through resellers and integrators in some cases, especially outside the United States, but for the most part it does not use the services of the channel, nor does it support the profit margins of