9.16 Dell, Inc.

Dell's is a legendary business success story. A student who builds computers in his college dorm in 1984, invests $300,000 supplied by his family to start selling his own line of computers direct to consumers, creating a company grossing over $73 million in its first year of trading. Expansion to Ireland and elsewhere brings a market capitalization to $80 million by 1988, with Fortune magazine including Dell Computer Corporation in its 1992 list of the world's 500 largest companies. By 2011, Michael Dell is the 44th richest person in the world, with a net worth of US$14.6 billion.

Dell, Inc. today is an American multinational information technology corporation based in Texas that develops, sells and supports computers and related products and services. By organic growth and acquisitions ( notably Alienware in 2006 and Perot Systems in 2009) Dell has become one of the world's largest technological corporations, employing over 103,300 people. Dell sells personal computers, servers, data storage devices, network switches, software, computer peripherals, HDTVs, cameras, printers, MP3 players and electronics built by other manufacturers. From the first, the company was forward-looking, one of the first to sell computers over the Internet and invest heavily in supply chain management. {4} and IT technology. {1} {2}

2005 to 2009

Dell was the worldwide market share leader by 2005, its mastery of logistics enabling the company to ship PCs, laptops and servers at delivery speeds and prices no rival could match. So successful was this business model that the company remained unaware of changes in the market. As the computer market matured, relational value became more important, particularly as Dell customers could face overseas call center support and an Internet ordering system that left them uncertain of what they'd purchased. The best price became less important than the personalized service, as HP and Apple began to realize. Dell lost its market share leadership to HP in 2006, and its share of the US personal computer market fell from 31.4% to 26.3% between 2Q 2008 and 2Q 2009. {3}

2009 to Present

Michael Dell, who relinquished the helm in 2004, returned in 2007, but improvements were not immediate. Dell widened its marketing base, selling computers through Wal-mart in 2008. {5} Nonetheless, year on year, 2009 sales were down in most sectors: to large companies 23%, to SMEs 19%, and to government 7%. Innovation and efficiency were still Dell's prime concern: the CEO spoke of Windows 7 acceptance, and a commitment to a 4 billion reduction in operating expenses by 2011.

It was only a year later that there came a change, from an inside-out model to a more outside-in business model. Dell used Facebook, LinkedIn, Twitter {8} and its own community to listen to customers and solve problems before they became critical. {9} The website featured a newsroom, case studies, financial analyst's reports, webcasts, statements on corporate responsibilities and details on its directors.

Whether this change is more than skin-deep only results will tell, as more immediately important are: {7}

1. The $3.9 billion purchase of Perot Systems, which made Dell the leading provider of IT services for health care.
2. Its investment in cloud computing technologies: Dell now counts 21 of the world's 25 biggest web-driven firms as its clients.

The company outlined its 2010 approach as to: {7}

1. Fully leverage enthusiasm for Microsoft Windows 7.
2. Continue maximizing overseas manufacturing and shipping efficiencies.
3. Populate the lower end of the catalog with cost-effective pre-configured products and bundles.
4. Develop new high-value client-focused software, peripherals and services.

Dell further expanded as an enterprise solutions and services provider in 2011, and turned in a cash flow of $5.5 billion from a revenue of $62.1 billion. {7} For 2012 the corresponding figures were $3.3 billion from $56.9 billion revenues. {16} Enterprise services now account for 30% of business, a doubling over 5 years. The company is indeed more customer-centric, and has included over 450 ideas from its IdeaStorm into Dell solutions. {15}

Points to Note

1. Innovative marketing, selling direct to customers over the Internet.
2. Investment in supply chain management (probably more a private industrial network) increases efficiencies.
3. Increasing focus on technology, speedy delivery and lowest prices to become market leader.
4. Appearance of a more friendly, 'customer first' website to meet changing market expectations.

Questions

1. Explain the early success of Dell, Inc.
2. How did HP and Apple computers erode Dell's market?
3. What new customer channels did Dell try after 2005, and with what success?
4. Imagine you were a potential computer purchaser visiting the Dell ordering site. What would you encourage you to make a purchase, and what would not?

Sources and Further Reading

Need the references and resources for further study? Consider our affordable (US $ 4.95)  pdf ebook. It includes extensive (3,000) references, plus text, tables and illustrations you can copy, and is formatted to provide comfortable sequential reading on screens as small as 7 inches.

   Get your eBook here.