Introduction Dell Computer Corporation continues to have successful growth due to its innovative “built to order” business model and customer service focus which includes direct selling. Dell’s ability to maintain low levels of finished goods inventory minimized the cash conversion cycle to a high extent, thus minimizing the need for costly working capital. In past years, Dell has mainly financed its operations internally and secondly through the issuance of shareholder equity and small amounts
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Dell Working Capital 1. How was Dell’s working capital policy a competitive advantage? Dell’s core strategy in the 90’s, build to order business model, allowed the firm to work with minimum finished goods and work-in-process (WIP) inventory. As a result, Dell maintained low inventory costs and permitted the company to adjust to technological innovations in the market. Dell’s WIP and finished goods inventory as a percent of total inventory was about 10%-20%, compared to the industry rate
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Q1) How was Dell's working capital policy a competitive advantage? * Dell’s built-to-order manufacturing process yielded low finished goods inventory balances * By the mid-1990s Dell’s WIP and finished goods inventory as percent of total inventory ranged from 10% to 20% in contrast to its competitor’s range was from 50% to 70%. * Supply of inventory of Dell was significantly lower than its competitors. * Manufactured PCs with latest OS and processor much before its competitiors
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Dell’s Working Capital Question1 Understand that this was a paradigm shift in this industry. A customer who is used to walking into a store, buying, and walking out is looking for instant gratification. What did Dell offer which other players were not offering to counter this? Answer 1 The most important thing that Dell offered was a “customized systems” within a few days. This was something that other competitors were not able to offer as they had already built systems in inventory with them
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ciclo de conversión de efectivo cortos (cerca a 6 semanas) permitió a del financiar su crecimiento con recursos propios (reinvertir efectivo o utilidades para necesidades de capital de trabajo). Además hay que mencionar que el precio de los componentes de un PC iba bajando 30% a medida que aparecían nuevas tecnologías y como Dell tenia un sistema de fabricación a pedido, no acumulaba inventario de componentes de la misma manera que la industria, de esta forma sus costos incurridos en componentes individuales
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how Dell’s working capital policy is a competitive advantage for the company? Dell uses a just in time order fulfillment policy and accurate forecasting of sales to minimize inventories. This allowed Dell to hold inventory of finished products far below levels of their competitors (10-20% compared to 50-70% industry level) and furthermore allowed them to quickly implement changes to their product lines as new technologies became available. This quick inventory turnover also allowed Dell to retain
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Michael Dell * First, Dell company purchased IBM compatible personal computers, upgraded rgem, then sold the upgraded PCs directly to business by main order. * Subsequently, Dell began to market and sell its own brand personal computer, taking orders over a toll free telephone line, and shipping directly to customers. 2. DELL’S WORKING CAPITAL POLICY AS A COMPETITIVE ADVANTAGE * Industry Strategy Assembled to forecast, retaining a substantial finished goods inventory. (Dell ordered
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Finanzas I; Caso 2: Dell”s Working Capital 1. ¿De qué manera la política de capital de trabajo fue una ventaja competitiva para Dell? En primer lugar, la política de capital de trabajo que implementó Dell le permitió tener menos niveles de inventario, y por ende, menos capital de trabajo inmovilizado. Estos bajos niveles de inventario que presentaba Dell se debían a que en esta compañía se vende cuándo y cómo los clientes quieren (sistema pre-venta). No así su competencia, como vemos a continuación
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CASO DELL WORKING CAPITAL 1. Representa el manejo de capital de trabajo una ventaja competitiva? En qué sentido? Tiene algún problema la forma en que Dell administra su capital de trabajo? Representa el manejo de capital de trabajo una ventaja competitiva? En qué sentido? Representa una ventaja competitiva el manejo de capital de trabajo en los siguientes aspectos: La manera en que Dell Working Capital manejaba su inventario hacia que los saldos de inventarios de bienes en proceso
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Dell´s Working Capital – Richard Ruback 1- Briefly explain DELL´s strategy. Do you consider this strategy reasonable? 2- What is your assessment of DELL´s performance? Please refer to the financial statements and calculate the financial ratios used in class to strengthen your analysis. 3- Calculate DELL´s Free Cash Flows. What is your assessment of the quality of these cash flows? ------------------------------------------------- 1- Dell, one of the best worldwide computer producer
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