Lecture 1 Case Study - Dell

1.

University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage

GSBS6410 Economics of Competitive Advantage

Lecture 1 Case StudyCompetitive Advantage

2.


Dell Founded in 1984, just 3 years after the introduction

of the IBM PC Became the undisputed leader in U.S. PC sales As the PC market has flattend, Dell has moved into

other areas such as servers, printers, LCD TVs.

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Michael Dells Philosophy of Competition

Understanding the profit pool of your industry. Dell took one of the biggest strengths of rivals, such

as Compaq their powerful distribution networks and used it to bring the competition down.

Direct from Dell - the companys biggest innovation.

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Direct from Dell Strategic Positioning A meaningful distinction for customers

Buying direct

A competitive difference from competitors Selling direct Bypassing traditional sales channels

A favourable competitive position Competitors are in a disadvantage position

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Dells Competitive Strategy(Your Focus Area to Compete)

Provide the Best ValueLow Cost with Substantial Quality

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Low Cost Primary Components of Dell Mix Dell puts significant pressure on suppliers for faster

and cheaper delivery. Specialises in making products built out of

standardised, commoditized parts. Maintains exceptionally strict control over inventory,

both inputs raw materials and finished goods. Going Direct

Saved 25% to 45% of markup Lower inventory Lower obsolescence

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Quality Dell Works Hard to Maintain Quality

Its technological innovations are not so muchin the areas of entirey new products, but rather in the next step up against competitors Higher CPU speeds More hard-drive capacity Greater screen resolution, etc

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Dell Computer

Simply going direct or adopting a low cost competitive strategy did not win Dell a lot of customers

A Number of Competitive Advantages Does

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Dell ComputerCompetitive Strategy- Winning Through Cost

Strategic Positioning - Selling Direct

Competitive Advantage- Going Direct- Built-to-order- Zero Inventory- Highly standardized, simplified and controlled operations- Standardisation products

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Dells Core Competency- Low Cost Manufacturing Dell has applied the capability to PC and move up the

chain into higher priced laptops, workstations, servers, switches and network storage machines, and including acquisitions such as Alienware Entering a market after standardisation and

before commoditization Zero inventory management Highly standardized and simplified operation

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Dell Execution is Vital

Selling Direct to customers is a relatively simple idea.

Execution and implementation of a great strategy is equal importance

Dell is a tight ship, agile and well-controlled.

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Compaq What are the choices ?1 Stick to what is was doing

- clearly was not going to work.

2 Copy Dell- would mean completely reconfiguring its engineering, manufacturing, sales and marketing

3 Try to do both- cost of maintaining two different models- Existing channel partners would felt betrayed.

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Lecture 1 Case Study - Dell