This is the case study about the Micheal Dell's direct business model. Also SWOT analysis about the Dells' direct business model

1. Dulan Mahendra

2. • Started by Michael Dell (19 at that time) in his dorm room at the University of
Texas in 1984 with $1000.
• Company headquartered in Round Rock, Texas, U.S.A.
• Its revenue is around US$ 63.07 billion in 2012.
• In 2001, became the No. 1 computer systems company in the world.
• At present (2013), it is the third largest PC vendor in the world after HP and
Lenovo.

3. PRODUCT LINE
• Desktop computers
• Notebook computers
• Network servers
• Workstations
• Storage products
• Dell offers a total of 1.6 million
different possible product
configurations for all its product lines
SUPPLIERS
• MICROSOFT - for Windows
• INTEL - for micro
processors
• NVIDIA - for Graphic chips
• SONY - for monitors

4. Customer places
an Order
(By phone or through
the Internet on
www.dell.com)
Dell
processes
the order
Financial
evaluation
(credit
checking)
Configuration
evaluations
(checking the feasibility of
a specific technical
configuration)
Sends the order
to assembly
plant
(any one in Austin, or
any other)
Plants build,
test & package
the product
(about eight hours)
Dell typically ship
all orders
(no later than five days
after receipt)
2-3
days
SUPPLIERS REVOLVERS
CUSTOMERS

5. Dell’s success is a combination of:
• Direct Sales.
• Inventory Management
• Supplier Integration
Together these allow for maximum effectiveness with
minimum cost.

6. • Mass customization (end result: Delivers
exactly what the customer wants)
• Partnerships with suppliers
• Just-in-time components inventories (Quick
Introduction of Latest Technology)
• Direct sales
• Market segmentation
• Customer service
• Extensive data and information sharing with both supply partners and customers.

7. • New Value Chain: Dell had no in-house stock of finished goods inventories unlike
competitors using the traditional value chain model
• Pull Mechanism: It did not have to wait for resellers to clear out their own
inventories before it could push new models into the marketplace (typically operated
with 60-70 days stock)
• Personalization: Customers got the satisfaction of having their computers
customized to their particular liking

8. Component
Manuf.
PC
Manufactu
rer
Distributor
/Reseller
Order
ProductProduct
Forecast
Component
Components
MicroAge,
CompuCom
Corporate
customer

9. Component
manufacturer
DELL Comp
Corp
Distributor
Final
customer
Components
Order
Product

10. • Dell Computer’s direct model departed from the industry’s historical rules on
several fronts:
 The company outsourced all components but performed assembly.
 It eliminated retailers and shipped directly from its factories to end customers.
 It took customized orders for hardware and software over the phone or via the
Internet.
 It designed an integrated supply chain linking Dell’s suppliers very closely to
its assembly factories and order-intake system

11. • BUILD-TO-ORDER MODEL
• DIRECT TO SELL
• INVENTORYMANAGEMENT is primarily about specifying the size and
placement of stocked goods.
1. Just-in time inventory management - 3 days.
2. Focus on speed of inventory delivery process.

13. BUILD TO ORDER
• In contrast to others who produce –to stock, dell first receives the order and
the money and only then starts to build, using that money to purchase from
supplier
• Therefore there is customization of products for each and every customer.
• While other companies had to guess, DELL knew exactly what its customers
wanted before manufacturing the product
• Others had to maintain inventory as there existed middlemen, so to support
reseller and retail channels.

14. • Returns grew disproportionately as the carrying costs and
obsolete stock is avoided.
• Reduces handling cost. Common factors that drive up
holding costs include opportunity costs, increased rent
required for the space of the inventory, and cost of
obsolete goods.

15. • Service became a feature of Dell's strategy in 1986
• It provided free on-site service for a year after sale
• Contracted with local service providers to handle customer requests for repairs
• Technical support via a toll-free number, fax, and e-mail

16. Disadvantage
• High Risk
• Cost of development & the ownership of assets in a
volatile industry

17. Limitation of direct sell model in
emerging market
 Buying habit
 Not access to internet
 Lack of online payment (i.e. credit card)

18. Strength:
1. Direct Model Approach, it provides Dell a
way to interact to customers directly
2. Customization of products
3. Reliability, Service and Support
4. Latest Technology
Weakness:
1.Market share growth is slow due to
competition; Fake products/ imitations affect
sales
2. Overdependence on Suppliers.
3. Lack of Dell Stores, can be an issue for some
customers.
Opportunity:
1. With increase in e-commerce the online retail
stores of Dell provide them better framework to
tap new business
2. The Direct approach Model of Dell would
help them there existing to sell the other IT
products, so new product development
opportunity is for Dell
3. Tablet and Smart phone Market.
Threats:
1. With the increase in innovation in the market
the computer systems are becoming outdated, so
Dell should constantly come out with new
products
2. People need the quality products at low price
which was Dell strength due to it’s customize
solution, but now its competitors are coming up
with products in same price range