Dell Case Study

In: Business and Management

Submitted By dhgaafar
Words 5002
Pages 21
Introduction
Dell company was found in 1984 by Michael Dell at age 19, he was a student living in a dormitory at the university of local retailers, added features such as more memory and disk drivers , and sold them out of the trunk of his car
He withdrew 1000$ from his personal savings, used his car as collateral for a bank loan, hired a few friends, and placed ads in the local newspaper offering computers at 10% -15% below retail price. Soon he was selling 50.000$ worth of PCs a month to local businesses. Sales during the first year reached up to 600,000$ and doubled almost every year thereafter. Dell left school in his freshman year to run the business in full time.
Dell began assembling his own computers in 1985 and marketed them through ads in the computer trade publications. In 1987 his company witnessed tremendous change it launched its first catalog, initiated a field sales force to reach large corporate accounts, went public , changed its name from PCs limited to Dell Computer Corporate , and established its first international subsidiary in Britain . Dell was selected as the entrepreneur of the year by Inc. in 1989, man of the year in 1992 by PC Magazine, and CEO of the year by Financial World in 1993.

In 1992 the company was included for the first time among the Fortune 500 roster of the world's largest companies. By 1995 with sales nearly 3.5billion dollars , the company was the world's leading direct marketer of personal computers and one of the top 5 PC vendors in the world . In 1996, Dell supplemented its direct mail and telephone sales by offering PCs via the internet at Dell.com.

By 2001, Dell ranked first in global market share and number 1 in the United States for shipments of standard Intel architecture servers. The company changed its name to Dell Inc. In 2003 as a way of reflecting the evolution of the company into a diverse…...

Similar Documents

Dell Case Study

... minimum level of inventory. From Dells perspective, there is a competitive advantage to maintaining a low level of inventory in case of a technology change. Because they have less WIP and FG inventory, Dell is better positioned to take advantage of quickly changing technology (processors, for example). If technology were to reduce 30% of the inventory value, Dell would be better off with a lower quantity of inventory which has to be written down. If the inventory were based on Compaq’s DSI number ($668m in inventory), then the write off would need to be $112 more. (30% of $668-$293). On the other hand, there are some disadvantages to having a low level of inventory on hand, as was shown by Dell in 1996 when they indicated that sales could have been higher if they would have had additional inventory in stock. Sometimes you might have to forfeit sales if you keep your inventory level too low, and can not deliver quick enough to your customers...

Words: 423 - Pages: 2

Dell Case Study and Solution

...Case Study of Dell : Inspiring the leadership In 1984, at the age of 19, Michael Dell founded Dell Computer with a simple vision and business concept—that personal computers could be built to order and sold directly to customers. Michael Dell believed his approach to the PC business had two advantages: (1) bypassing distributors and retail dealers eliminated the markups of resellers and (2) building to order greatly reduced the costs and risks associated with carrying large stocks of parts, components, and finished goods. While the company sometimes struggled during the 1986-1993 period trying to refine its strategy, build an adequate infrastructure, and establish market credibility against better-known rivals, Dell’s strategy started to click into full gear in the late 1990s. Going into 2003, Dell’s sell-direct and build-to-order business model and strategy had provided the company with the most efficient procurement, manufacturing, and distribution capabilities in the global PC industry and given Dell a substantial cost and profit margin advantage over rival PC vendors. Dell’s operating costs ran about 10 percent of revenues in 2002, compared to 21 percent of revenues at Hewlett Packard, 25 percent at Gateway, and 46 percent at Cisco Systems (considered the world’s most efficient producer of networking equipment). Dell’s low-cost provider status was powering its drive for market leadership in a growing number of product categories. Dell Computer was solidly...

Words: 1435 - Pages: 6

Dell Case Study

...1. Ststement of Problem Dell is anticipating growth of 50% in 1997 and expects to beat the industry growth forecast. With this in mind we need to analyse how best we can arrange funding to support this growth. 2. Statement of Facts and assumptions: A few facts - Dell has been successful in sustaining competitive advantage and maintaining profitability for the following reasons: 1.    It maintains the lowest inventory of FGI and WIP as it makes computers only on order. 2.    As a result of item 1) it has substantial cost savings in terms of low inventory stocking costs and the fact that it can adopt new technology a lot more rapidly with minimal wastage of redundant outdated stock. 3.    Another advantage of manufacturing just in time computers (other than configuration flexibility to match customer needs) Dell could keep its working capital in check. As can be seen from exhibit 2 in the dells working capital financial ratio. There is a steady decline of "Days sales of inventory". 4. Dell has witnessed a growth of 52.4% in 95-96 and has a gross margin of 20.5 percent. Assumptions: 1. The gross margin on sales would continue to remain 20.5 percent. 2. Dell will continue to operate with same efficiencies in operation. 3. Inventory levels of wip and FGI will continue at 10 to 20 percent of sales. 4. The average CCC will be at 41 days. 5. AR remains at 14% of sales and AP at 9 percent of sales. 6. Cash and short term investment remains at...

Words: 1838 - Pages: 8

Dell Case Study

...Marketing | Dell | New Horizons Case Study | | | 7/1/2012 | | Executive Summary In 1984, at the age of 19, Michael Dell founded Dell Computer with a simple vision and business concept; that personal computers could be built to order and sold directly to customers. Michael Dell believed his approach to PC manufacturing had two advantages: (1) bypassing distributors and retail dealers eliminated the markups of resellers, and (2) building to order greatly reduced the costs and risks associated with carrying large stocks of parts, components, and finished goods. Now, that concept picked up and arrived at Dell being the multi-billion dollar leading computer manufacturer in the world with 2001 revenues reaching $32 Billion and return on investment of 335%. However, things started to plummet by 2001 and Dell experienced, for the first time, a -10% decline in sales and unprecedented cutthroat competition from HP and IBM. Dell Corp. had to make difficult decisions on how to sustain its profitability in light of its broad product portfolio - PCs, workstations, servers and storage products for a broad cross-section of customers in the United States and worldwide. Fueled with ambition and determination, Michael Dell is set to maintain his company's leading position in these tough times. Dell, facing a predicament of whether they should maintain their strategic course or fundamentally change it in order to achieve the targeted growth rates, managed to acquire three...

Words: 3208 - Pages: 13

Dell Case Study

...Dell as the publicly traded company on PC industry, it used the direct-sells model by the network servers. Porter’s 5 forces gave the big helps on Dell’s strategy management. At the sight of relationship between supplier and buyer, Dell got the successful management method on supply-chain. On one hand, Dell company conformity the external resources by the supply-chain management, the direct operate model make Dell built a fictitious platform and provided the business flawless. On the other hand, Dell cored the optimizing of channel flows to help the operation of supply chain. And the competition advantage is also from the supply-chain strategy and that contain 3 aspects. First is direct business model principle, it showed on the customers’ final requirements and that is a channel between customer and company, it made the corporate efficiency higher than the competitors. Second is substitution the stock by information that means no stocks in trade on the sells and purchase. Dell make profit by the information managing, it’s also the reason of keeping high profit when the PC industry decline. Third is creating the whole values, make alliance with the customer and keeping interaction, do the order by customer’s need and feedback. PC is a high technology industry and it’s not very difficult to entry, the product process demand high exact buy the high profit attracted developer, Dell have the threat of potential new entrants but very small. And at present, there is no big......

Words: 298 - Pages: 2

Dell Case Study

... enabled Dell to reduce costs and minimise inventories and so it has been able to pass these savings to customers in the form of lower prices. 10 c) Price: Price is the amount of money charged for a product or service, or the sum of the values consumers exchange for the benefits of having or using the product or service. (Kotler et al., Principles of marketing, fifth European edition, p. 639, Pearson 2008) In this case Dell provides high quality computer systems at the lowest price to match the customer's expectation of value for money. It is also able to supply products at low price by cutting out all costs of manufacturing parts as well as costs associated with retailers and distributors. As pricing remains a major factor in the customer's buying decision, Dell uses the internet to get a reasonably accurate idea of the market's supply and demand, hence reflecting on its price changes and promotions. d) Promotion: Promotion is the most important component of the four P's so it is crucial to understand and be able to promote a product. Here it can be seen how Dell uses many different promotional methods to market their products, such as advertising on television, on the internet, in magazines and newspapers as well as direct mail ad campaigns. It even uses sponsorships in professional sports as well as product placements in films and television in the marketing techniques. Perreault et al suggest that direct sales channels and direct customer relationship......

Words: 5002 - Pages: 21

Dell Case Study

...Prelude case Dell Corporation FT What if a manufacturing company didn’t need to have any inventory? Imagine the reduction to cost structure that could be achieved by simply getting rid of the need to carry huge amounts of finished goods on its books – and eliminating the nail-biting stress of waiting until those goods are sold. For Michael Dell, founder and CEO of Austin, Texas-based Dell Corporation, very little imagination is required. He has built a company with annual revenues in excess of $40bn entirely around a vision whereby manufacturing of an individual item does not begin until it has been ordered by a customer. Every single Dell product has an end user’s name on it before it even leaves the factory. Visiting a Dell factory gives you an idea of just how effective Michael Dell has been in executing this supply chain management philosophy. At the company’s Irish factory near Limerick, for example, there are 40 doors at one end of the factory that deliver the parts needed to build a variety of products – including desktop computers and servers – and 40 doors at the other end of the factory where the finished goods are dispatched to be delivered to customers. The company never holds more than four hours’ worth of parts inventory at any time – and Dell is not even considered to have acquired the parts until the moment they are offloaded from a truck and brought into the factory. The same process is used in Dell operations throughout the world, including the company’s...

Words: 978 - Pages: 4

Dell Case Study

... arena. * Internal organization assessment and training is vital to maintain the high spirit of employees and increase their productivity. * Management support and funding is a key element in the success of any information system implementation. CASE STUDY FOR DELL LOGISTICS Submitted to: Professor Maria Nimfa Rivera-Diaz Submitted by: Argana, Anna Dominique T. BSBA-Operations Management February 12, 2014 ARGANA,. Anna Dominique T. BSBA-Operations Management Murphy's law is an adage or epigram that is typically stated as: Anything that can go wrong — will go wrong. Murphy’s Law Origin Murphy's Law ("If anything can go wrong, it will") was born at Edwards Air Force Base in 1949 at North Base. It was named after Capt. Edward A. Murphy, an engineer working on Air Force Project MX981, (a project) designed to see how much sudden deceleration a person can stand in a crash. One day, after finding that a transducer was wired wrong, he cursed the technician responsible and said, "If there is any way to do it wrong, he'll find it." The contractor's project manager kept a list of "laws" and added this one, which he called Murphy's Law. Actually, what he did was take an old law that had been around for years in a more basic form and give it a name. Shortly afterwards, the Air Force doctor (Dr. John Paul Stapp) who rode a sled on the deceleration track to a stop, pulling 40 Gs, gave a press conference. He said that their good safety......

Words: 2983 - Pages: 12

Dell Computer Case Study

...| Managerial Marketing | | Case Study: DELL New Horizons | Case Study: DELL New Horizons Questions 1- What has made Dell Succeed to date? Up to 2002 The key to Dell’s success to date was its innovative direct business model, which focused on selling Dell products directly to customers rather than through intermediaries. Dell believed so called “middlemen” added little to no value to the end product and that their associated fees were essentially unnecessary mark-ups for customers. By completely cutting out intermediaries, Dell not only reduced its customers’ costs, but also enabled the company to customize computers and focus on meeting customers’ needs and providing superior customer service. So doing ultimately helped Dell establish itself as one of the most customer-centric information technology companies in operation. When it came to product development technology, Dell did not aspire to be the industry pioneer. Instead, Dell left product innovation to its competitors and relied on its unique marketing distribution formula to generate sales. The intuition of Dell’s top management, especially Dell’s namesake and CEO, Michael Dell, contributed significantly to the effectiveness of this formula. As noted in the case, Dell had the “uncanny ability to reach out into the market and identify the next high-margin technology product that could be driven to scale with lower priced products driven by its direct model.” This foresight basically eliminated Dell’s...

Words: 2108 - Pages: 9

Dell Case Study

... Dell and its competitors changed from competing based on costs, which is why when Dell tried to drop its prices, the market did not respond in the way the company expected. 3. Profit is the difference between revenues and costs for a company. In order for Michael Dell to improve its company’s profitability, it has to either decrease its cost or increase its revenues. Ways for the firm to decrease its costs - Dell can outsource its production facilities to lower countries, such as India. Of course, the company has to be cautious since they already faced criticism from the public for customer issues. - The company also needs to analyze its operations and facilities to find out which facilities were unfit. Any facilities that are deemed unfit should be closed down. Ways for the firm to increase its revenues - Dell, Inc. could increase its revenue by diversifying its business and products. If Dell were to successfully acquire Perot, an IT services company, the company could easily fulfill its customer’s demands for cloud networks and datacenters. - Additionally, the company could try entering into the retail channel, even though it initially failed in 1990. If Dell broadened its products base by offering its computers and related products in different colors, it could greatly increase its revenue. 4. Dell, Inc. has been recovering well since the case in 2010. Revenues slowly increased to $3,433 million in 2011 over $2,635 million in 2010. In addition, the company has...

Words: 1214 - Pages: 5

Dell Case Study

...Dell’s Working Capital In 1996, Dell’s net working capital, which is total current assets minus total current liabilities, was in a positive position with $1,018 million. For the past three years from 1994 to 1996, net working capital has been increasing significantly each year. Looking at the information on Table 1, it is very simple to detect this increase. The trend starts at $510 million in 1994 to $718 million in 1995 to $1,018 million in 1996 of net working capital. That makes a 40.78% increase from 1994 to 1995 and a 41.78% increase from 1995 to 1996. This increase can be perceived as either a good or a bad thing depending on the situation at hand. On one hand, it shows a measure of the Dell’s efficiency and its short-term financial health is in a good place. One the other hand, it could indicate that there is too much inventory. In this case, the inventory is never kept at a high volume, so we can say that the increase in working capital is a good thing. Now, we need to look at the percentage change for each current asset and each current liability in comparison with the increase in the working capital trend. We may notice that each one plays a part in it. One asset that may stick out more than any of the others is the percentage change in inventory. If we take a look at Table 2, we will notice that, for the most part, the percentage change decreased from 1995 to 1996 compared to 1994 to 1995. For inventories, this percentage jumped from 33.18% to 46.42%. This big...

Words: 527 - Pages: 3

Dell Case Study

... direct business model from vertical integration are A.No high risk and costs of development and the ownership of assets in a volatile industry. B.Build good suppliers and customer relationship C.Eliminate the cost of inventory and the reselling expenses. 4. How is inventory value measured? Inventory value is measured by the reciprocal of the average amount of time a product spends in inventory is called Inventory velocity.In dell, each component is marked with a date stamp. Accumulating inventory in the fast¬ moving PC industry is a high-risk proposition since the components can become obsolete very quickly. 5. Can other traditional firms adopt the Dell model? Why? Why not? While Compaq, IBM, and Hewlett-Packard all announced plans in late 1998 to emulate portions of Dell's business model, with various build-to-order plans, all have had difficulty in making the transition. Most are mov¬ing to a target inventory level of four weeks, while Dell maintains just eight days of inventory, allowing and it to turn over inventory 46 times a year. So traditional companies find difficulty in achieving dell deliverability, customer &supplier relationship, inventory management....

Words: 384 - Pages: 2

Dell Case Study

...INTRODUCTION: Although Dell (“Dell” or the “Company”) is one of the medium size players, the Company is one of the most profitable and fastest growing Companies in the industry. The industry is characterized by several different products such as computers, imaging, printing systems, information technology and services and solutions. The industry has seen double digit growth for the last 10 years but as 2001 came to an end, the industry is softening. Amongst its competitors, Dell has been very profitable with its 2001 ROE of 38.72% and growth in earnings of 31% compared to the next fasting growth Competitor, IBM with earnings growth of 5.0%. The rising ROE was driven by increased profitability, higher asset turnover and increased leverage in the business. Dells cash conversion ratio was also superior to its competitors allowing them to generate cash faster than their competitors to reinvest in the business. The Company has a healthy balance sheet with little debt and sizable cash amounts (largest % to assets in the industry with 40.48% in 2001). Dell is an outperformer in the industry due to its direct sales business model. This report will review the financials of Dell Computers in relation to its competitors and discuss the competitive position of Dell in the market place. It will also detail how the Company has changed from 2000 compared to 2013. As Dells most direct competitor IBM’s performance was compared to Dell to understand the reason for Dell’s outperformance...

Words: 982 - Pages: 4

Dell Case Study

... the management to regain control of customers. At the core of Dell’s business was the build-to-order strategy. Customers ordered PCs directly, and their order was routed through a credit check, then directly to the manufacturing floor. The order was then built, tested, and shipped to the customer, who received it 5-7 days after placing their order. This strategy afforded Dell some impressive results. First, Dell eliminated middlementhe resellers, who were part of the traditional distribution model. As such, Dell not only passed the savings to the customers in the form of lower costs, but was also able to understand customer needs first hand and adapt to market changes faster than competitors. Second, Dell built computers directly for customers, not for inventory. This meant that the company did not waste resources building systems that may not reach a customer, need staffing positions to move inventory around the world, or spend time managing and tracking inventory, and reworking systems that become obsolete before purchased. Third, Dell Computer practiced just-in-time manufacturing, where trucks with vendor parts pulled up to one side of the plant, and unloaded © 1999 by Dr Keri Pearlson and Dr. Raymond Yeh of the University of Texas at Austin. This case may not be duplicated without permission. Any use, either electronic or paper-based, must have written permission of Dr. Pearlson or Dr. Yeh. The material contained in this case is from company documents...

Words: 9948 - Pages: 40

Dell Case Study

... its net income. Dell in the recent years has always financed its operations internally; and using the analysis and the results of the forecasted financial statements, the company will internally generate excess funds which can be attributed it to its efficient management of working capital. These excess funds can be allocated in investments in research and development to keep up with today’s technology and to pay off the company’s long-term debt Other options that the company can look at are investing in short-term securities, investing new property, plant and equipment, and reacquiring stocks. Lastly, this paper also recommends how Dell can utilize its excess cash and how it can sustain its growth internally by implementing information management of supply and demand, maintaining the efficiency of its operations by effective credit and inventory management and keeping the stability of the company as it grows faster than the industry. I. POINT OF VIEW In the discussion and analysis of this case, the group assumed the role of the top management of Dell Computer Corporation. II. CASE CONTEXT Then nineteen-year-old Michael Dell founded Dell Computer Companies in 1984, which designed, manufactured, sold and serviced high performance personal computers compatible with the industry standards. Selling directly to customers was Dell’s core strategy. Its build-to-order model enabled Dell to deliver a customized order within a few days, while keeping low work-in...

Words: 2721 - Pages: 11