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