dell's marketing strategy
TRANSCRIPT
Marketing Strategy Of DELL
By Ravi Prakash Singh
ITM College, Executive MBA, Batch 18
INDEX Introduction Background & Origin The Marketing Mix Reasons for Dell’s Growth Traditional Business Model Change in Strategy The New Strategy Dell’s Marketing Coups References
Introduction Founded by Michel dell in 1984, headquarter in
Round Rock Austin, Texas. 2nd largest computer seller, behind Hewlett-
Packard(HP). (Figures as of Apr,2010). Currently ranked 38th in Fortune 500 list of
companies. Ranked 33rd in year 2009.
Background & Origin
Founded in 1984 with a capital of 1000 dollars. In 1985 produced first computer of its own design. Changed its name from PCs Limited to Dell
computer corporation in 1988. In 1987 started the first international operations. In 1992, included in Forbes 500 list. In 1996, Dell started selling through website. 1999, Dell overtook Compaq to become the largest
seller of PC’s in US. In 2002, introduced Dell brand printers. In 2003, changed its named to Dell, Inc.
Background & Origin In 2004, Michael Dell stepped down as CEO and
Kevin Rollins was asked to take his seat. In 2005, Dell appeared on 1st place of “the most
admired companies” in Fortune 500’s list. In 2006, Dell Acquired Alienware. In 2007, Michael Dell replaced Kevin Rollins &
became the CEO once again, as Dell lost its 1st position to HP in a decade.
In 2008, Dell announced the closure of one of its biggest Canadian call-centers in Kanata, Ontario, terminating approximately 1100 employees.
In 2009, Dell announced the closure of its manufacturing plant in Limerick, Ireland with the loss of 1,900 jobs and the transfer of production to its plant in Poland.
The Marketing Mix
Product• Desktop Range• Customized Laptops• Computer Accessories• Printers• Technical Support
Price• Low-Cost Leadership• Promotional Pricing
Place• European Countries• APAC Nations
Promotion• Advertisements• Online Customer Support• Build-to-Order
Reasons for Dell’s Growth
Was a pioneer in “configure to order” approach to manufacturing.
Delivering individual PCs configured to customer specification.
In contrast, its competitors were delivering orders to intermediaries on a quarterly basis.
Reasons for Dell’s Growth
Implemented “JIT” (just in time) manufacturing approach.
To minimize the delay between purchase & delivery, it followed a strategy of manufacturing its products close to its customers.
This approach minimized the inventory costs.
Low inventory is another signature of the Dell Business Model- a critical consideration in an industry where components depreciate very rapidly.
Traditional Business Model
Used Direct Sales Model. Lean Inventory Model. Maintains a Negative cash conversion cycle. What-the-customer-wants manufacturing JIT helps in building the computers just after
the user places the order. Customized systems at affordable rate.
The Direct Sales Model
Dell’s model is based on build-to-order process, where company builds each PC on demand.
Customers can choose what components they want for their computer, Dell then assemble the order and ships it.
This strategy improves customer satisfaction and reduces costs and risks to the company.
Direct sales in conjunction with build-to-order is a powerful model for both Dell and its customers.
Customers get what they want, rather than be forced to choose among a fixed set of options.
What-the-customer-wants Manufacturing
This can be considered as one of the benefits of the direct model.
Developing and building only those systems that customers want.
Eliminates the excess cost of buying too many components having high storage and inventory costs
By doing this eliminates the possibilities of selling the surplus at a loss.
Negative Cash Conversion Cycle
Dell has a negative 45 days CCC (Cash Conversion
Cycle), which means that their sales are converted in hard cash 45 days BEFORE
the sale.
Lean Inventory Model
The key components of this model are: Value: Defined from the final customers’
perspective. Flow: Creating a continuous flow from
one business process to the other without interruption and in the most direct manner.
Pull: Producing a product only when the customer asks for it.
Change in Strategy
"The direct model has been a revolution, but it is not a religion”, the direct model may not be a panacea for all regions in all times. The similar statement to reassess the conventional IT services could be the same case. Of course, it should be great to see Dell innovate another surprise in the near future.”
-- Michael Dell
The New Strategy
For 2 decades, Dell was known as a company who manufactures and sells hardware.
Took drastic measures to increase the profitability.
Masterminded the change in entire product line-up.
The New Strategy
The new Product lineup:Power Edge servers Power Vault and Dell storage products
Power Connect switchesOptiPlex desktopsLatitude notebooks Dell Precision workstations Inspiron notebooks Dimension desktops Dell monitors Software and Peripherals Premier Services
The New Strategy
“Innovation is the key” Dell launched “all in one” printer, that
can scan, copy and fax are #2 (private label of Lexmark), behind Lexmark.
The Dell Printer software automatically detects when ink is running low and directs user to the Dell website.
Advertisement through its website http://www.dell.com providing offers like free shipping of orders.
The New Strategy
Simplify-IT strategy Educating the prospective customers about the
services which are provided by dell directly through its website http://www.dell.com
The New Strategy
Started extensive partnership with companies like Google.
Under the deal, millions of Dell PCs were loaded with the Google toolbar for Web and PC search, before they're shipped to consumers.
Changing its image from hardware manufacturer to a solutions sellers.
Replaced IBM in Q2(2008) to become a leader in storage and server segment.
The New Strategy
Dell has started CFI (Custom Factory Installation)
Not available with any other manufacturer.
Under CFI, Dell custom installs software and hardware not generally available on the Dell’s sales shelf.
The New Strategy
Launched Premier.Dell.com
Dell Marketing Coups
Low and Medium Size Server Market
Analysis 1: Servers have higher margins
Analysis 2: Competitors were treating servers as a cash cow for feeding the PC market.
Dell entered market at about 20% lower price and told customers “even if you don’t buy from Dell, ask your vendor to match Dell’s price.” Server Dropped 17 percent in one year and reduced the size of the cash cow for competitors.
Dell Marketing Coups
Analysis: Laptop owners want long life batteries.
Dell tied up whole channel by contracting SONY to manufacture.
Dell arranged a chartered plane for reporters and analysts, gave them a laptop and flew to Los Angles… 4 1/2 yours later, they still had power.
References
http://money.cnn.com/magazines/fortune/fortune500/2010/snapshots/1053.html
http://www.dell.com Direct from Dell: Strategies That
Revolutionized an Industry –By Michael Dell http://www.forbes.com http://moneycentral.msn.com http://news.cnet.com/Dells-new-goal-Double-in-
size/2100-1001_3-875117.html