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Dell Computer Corporation has been a leader in the personal computer industry for decades. The success of the corporation has led to rival companies re-engineering their operations to overcome competition. Rivkin et al. (1999) claim that Dell remains a company to beat in the personal computer industry despite the initiatives the rival companies have taken. Numerous factors have contributed to the success of the Dell Computer Corporation. They include the company’s distribution model as well as sales and marketing strategy. This paper will discuss Dell’s competitive advantages, its resources and capabilities, competitors’ effort, and the reasons it has been difficult for rivals to outdo the company.
One of Dell’s competitive advantages is its mastery of the “direct model” strategy. Dell Computer Corporation deals directly with corporate clients. A majority of the rival companies like Compaq, Hewlett-Packard (HP), and International Business Machine (IBM) sell their products through retail stores, resellers, and distributors (Rivkin et al., 1999). The ability to contact customers directly allows Dell to manufacture computers that meet the needs of individual clients. According to Rivkin et al. (1999), Dell’s sales and marketing strategy enable it to identify potential clients. The company has divided its customers into two categories: transaction buyers and relationship buyers. The approach allows the company to have a personal touch with each group of clients.
Resources and Capabilities
The success of Dell Computer Corporation lies in its capacity to manufacture personal computers that meet consumer needs within a short period. The company can process customers’ orders and deliver products within one and a half days. Besides, Dell can handle large orders. The ability to respond to customers’ demands within a short period ensures that the corporation establishes a good rapport with clients. The company has a pool of suppliers who ensure that it receives raw materials on time. Effective communication with suppliers has helped Dell to reduce inventory days. The company can quickly direct supplies to appropriate locations. For instance, if its customers require monitors, Dell can instruct Sony to deliver them to clients directly without passing via its facilities. According to Rivkin et al. (1999), Dell has a customized website that enables it to liaise with suppliers. The company uses the site to share manufacturing and ordering information with vendors.
Rivkin et al. (1999) argue that Dell has encouraged its suppliers to establish production and storage facilities near its assembly plant. As a result, Dell can easily access all the raw materials that it requires to manufacture personal computers. The products and services that Dell Computer Corporation offers contribute to its success. The company produces two brands of desktop computers. It targets both individual and corporate clients. Besides selling hardware, the company provides numerous services to customers. It installs proprietary and off-the-shelf software. The company also provides financial and asset management services. Rivkin et al. (1999) cite firm infrastructure as one of the resources that contribute to the success of Dell Computer Corporation. The company has a team of seasoned managers sourced from renowned technological companies. They help to streamline operations within the company and monitor market trends.
The domination of Dell Computer Corporation in the personal computer industry has led to rival companies reviewing their strategies. IBM, Gateway, HP, and Compaq have come up with initiatives aimed at competing with Dell. Rivkin et al. (1999) claim that IBM embarked on a strategy to change its distribution channel. The company came up with an Authorized Assembly Program (AAP) that aimed at cutting down on the level of inventory. Eventually, the company managed to enhance the delivery speed of customized personal computers. Besides, the program eliminated the “need for resellers to “tear down” new personal computers to meet customer needs” (Rivkin et al., 1999, p.10). Apart from working with partners, IBM came up with ways to sell personal computers directly to customers. The company established an independent division called “Ambra” that manufactured and sold low-end personal computers. Later, the company opened a website that enabled it to sell standardized computers directly to customers.
Compaq established an optimized distribution model (ODM) aimed at enhancing its relationship with distributors (Rivkin et al., 1999). The model helped the company to reduce the duration of price protection from seven to two weeks. Additionally, Compaq was able to minimize inventory. Later, the company launched the DirectPlus program that enabled it to market customized computers directly to companies. Even though the program helped Compaq to sell directly to small and medium enterprises, it affected the company’s relationship with resellers. The company had to entice dealers by promising commissions for referrals.
HP launched the Extended Solutions Partnership Program (ESPP) to counter competition that Dell Computer Corporation waged (Rivkin et al., 1999). The program enabled the company to increase the production and sales of personal computers. Additionally, HP established a website that allowed customers to order products directly. However, the company did not sell directly to customers. Instead, it relied on resellers. ESPP helped HP to cut down on the duration of price protection and defects. In 1998, the company established a website dubbed HP Shopping Village. It aimed at using the site to sell refurbished computers directly to clients. However, it continued to sell new personal computers via resellers; a move that did not augur well with many business customers.
Gateway came up with numerous initiatives to overcome competition from Dell and slow growth. The company established Gateway Major Accounts, Inc. that targeted educational, corporate, and government institutions (Rivkin et al., 1999). It also created multiple stores across the United States. The move helped to increase its sales volume. Besides, clients could view the company’s goods and place orders.
Challenges in Matching Dell
Despite the efforts that the rival companies have made, it is hard for them to match Dell Computer Corporation. The companies have managed to overcome the issue of the price differential. However, inventory turnover remains a significant competitive advantage for Dell. One of the reasons why competitors are unable to match Dell is the inability to sell directly to customers. Compaq, IBM, HP, and Gateway have to depend on resellers. Even though companies like Compaq and IBM have tried to reduce their inventories, they have not managed to ensure that products are readily available. In some cases, customers have complained that they could not find particular makes of Compaq and IBM personal computers. Besides, the companies have been forced to reconsider their decisions to remain in good terms with retailers, resellers, and distributors. Some dealers have threatened to terminate relations with the companies if they do not change their strategies. In some instances, the rival companies have ended up popularizing Dell Company indirectly. For example, in 1997, the media headlines regarding the effort by Compaq and Gateway signified the success of Dell Computer Corporation. The indirect popularization of Dell has made it difficult for rivals to match the company.
Rivkin, J., Porter, M., Bruin, C., Chappel, M., Galizia, T., & Worrell, L. (1999). Matching Dell. Boston, MA: Harvard Business School Publishing.