The impact on Dell's business is great and it becomes ever more important for Dell to restore its competitive advantage. Dell has to catch up with the rapid changes in technology and it was not able to gain a sustained competitive advantage due to its reliance on the traditional business strategies which take away innovation from them. It should also evolve its global strategy such as responding to local needs and adopting other transnational strategies.
Customer relationship management. Dell conducts three strategies on manage their customer relationship. Dell is the first company to use phone service to reach small customers, which enables them to build better relationship with customers. Dell clarifies customer segments to meet their different needs. They set up comprehensive database to save time, to predict demands, and to offer appropriate discount information to the right customers.
Direct selling business model. Customers can order directly online, and it saves sales force for Dell. It encourages customers to design what they want for computers, and it significantly saves Dell’s R&D cost. Also, it meets the diversified needs, especially goods for SMEs which are traditionally hard to satisfy. It also brings health cash flow as well, since they receive payment from customers swiftly.
On the other hand, this model is not perfect. Suppliers and educated customers are the secrets of Dell’s success. Build-order basis can be risky if suppliers are not be able to meet the shipment on time. The flexibility of selecting requiring computer units relies on customers’ knowledge. This requirement is unfriendly to first-time users.
Commodity products. Dell is good at commodification, but it also means there is the lack of innovation since Dell is basically following the first-movers.
Low investments in R&D. The company spends a much lower percentage of its income on R&D, missed an opportunity to develop strong products.
Too few retail locations. Selling products online provides less visibility for the products. It can be a lack trust for customers.
Expand services, storage and enterprise solutions divisions. These are the most profitable options Dell’s business after PC market shrank.
Slowing growth rate. Growth rate of the computer market is slowing down.
Intense competition. It competes in terms of price, quality, brand, technology, reputation, distribution and range of products.
Dell can’t keep the same growth once they stay with same strategy. They need to find the new sweet spot and move away from comfortable zone. Also, they will lose their market share gradually, since more and more low pricing computers are growing now, and the high-end competitors are still there. It will decrease profit margins. In my opinion, there are two discussion aspects for potential solutions.
Enter new market in APPC, Latin America,