Matching Dell Essay

Words: 1901
Pages: 8


This analysis describes the case of computer and peripherals industry especially the successful management of Dell Computer Corporation which grew twice as fast as its major rivals like Compaq, Gateway, Hewlett Packard and IBM. The main reason for the success of Dell was their "Direct Model" of selling computers which eliminated all traditional channels like distributors, resellers and retailers. Traditionally all its competitors like IBM, HP, and Compaq etc. used reseller, retailers and distributors to sell their computers to end users. IBM was the first company to launch its PC in 1981 and soon held 42% of the market. But the growth of IBM proved to be short
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Competitors of Dell like IBM, Compaq and HP tried to imitate the direct sell strategy but faced a lot of issues to do so not only because of inefficiencies in their value chain but also because of deviations in their business strategies which they were following since many years. IBM which moved from a market leader to third position in the market tried to replicate the direct sell strategy in its own way by initiating programs like the joint manufacturing authorization programs and the enhanced integration and assembly programs with its distributors and resellers such as MicroAge, Ingram Micro and Tech Data thus shipping heavily configured PC's to these distributors who in turn completed the configuration according to customer specifications. Also to integrate the value chain, IBM set component prices such that total costs were same for channel-assembled and IBM assembled PC's. To combat clones, it launched division Ambra to produce low end PC's with direct selling available through phone, mail and later on website. IBM failed to show results because of inefficient customer service, higher operating costs. It was also not easy to replace suppliers to smoothen the flow of goods.
Compaq in 1994 became the world's largest manufacturer and had a large range of distribution networks. But in order to counter the direct sell strategy of Dell, it moved from a production system in which it relied on forecasts made by channel