The Dell Direct Model: What it means for customers(users) PROS: –Perceived customization...
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![Page 1: The Dell Direct Model: What it means for customers(users) PROS: –Perceived customization –Convenience –No sales pressure –No price comparisons/objections.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649f045503460f94c18d43/html5/thumbnails/1.jpg)
The Dell Direct Model:What it means for customers(users)
• PROS:– Perceived customization– Convenience– No sales pressure– No price comparisons/objections
• CONS– No immediate delivery– No touch and feel
![Page 2: The Dell Direct Model: What it means for customers(users) PROS: –Perceived customization –Convenience –No sales pressure –No price comparisons/objections.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649f045503460f94c18d43/html5/thumbnails/2.jpg)
The Dell Direct Model:What it means for (corporate) customers
• PROS:– Premier pages: approved configurations only– Reduces procurement cost– Reduced overshipment costs– E-support
• CONS:– No immediate delivery
![Page 3: The Dell Direct Model: What it means for customers(users) PROS: –Perceived customization –Convenience –No sales pressure –No price comparisons/objections.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649f045503460f94c18d43/html5/thumbnails/3.jpg)
The Dell Direct Model:... for suppliers and complementors
• PROS:– Rapid introduction of new technology– Rapid feedback on product problems– Good data for forecasting– Increased switching costs
• CONS:– ?
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The Dell Direct Model:... for Dell itself
• PROS– Lower inventory and little product
obsolescence– New technology to market faster– Quick feedback on problems– Ability to manage product shortage and
demand by advertising and pricing– Dell gets paid early
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The Dell Direct Model:... for Dell itself (2)
• PROS (continued)– Lower component cost than indirect competitors
– Creates real switching barriers for large customers
– Customer database>>customer information, lowers cost of followup services and support
• CONS– may not appeal to all segments
![Page 6: The Dell Direct Model: What it means for customers(users) PROS: –Perceived customization –Convenience –No sales pressure –No price comparisons/objections.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649f045503460f94c18d43/html5/thumbnails/6.jpg)
Dell’s core competencies
• Core competencies are skills, knowledge, and collective learning that allow a company to execute some critical processes better than any of its competitors
• Supply Chain Management (SCM)
• Customer Relationship Management (CRM)
• E-service
• Demand Management
![Page 7: The Dell Direct Model: What it means for customers(users) PROS: –Perceived customization –Convenience –No sales pressure –No price comparisons/objections.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649f045503460f94c18d43/html5/thumbnails/7.jpg)
1: Indirect channel (with e-efficiency; pooling of inventory, etc.)
• PROS:– Current strength
– Ally with major retailers (CompUSA, Staples, etc.)
– Touch and feel; local service and support
– Many competitors withdrawing
• CONS– Declining market
– High costs
– Lack of customization (for customer; for channel)
– Will channel members cooperate?
![Page 8: The Dell Direct Model: What it means for customers(users) PROS: –Perceived customization –Convenience –No sales pressure –No price comparisons/objections.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649f045503460f94c18d43/html5/thumbnails/8.jpg)
2: Direct Model
• PROS:– Overall market trend– Lowest cost (commoditization of market;
importance of price)
• CONS:– Lack the core competencies (Lagger forever?)– Loss of channel support?– More competition in the direct model?
![Page 9: The Dell Direct Model: What it means for customers(users) PROS: –Perceived customization –Convenience –No sales pressure –No price comparisons/objections.](https://reader036.fdocuments.us/reader036/viewer/2022082611/56649f045503460f94c18d43/html5/thumbnails/9.jpg)
3:Harvest the PC Market(move to next generation products/ or to enterprise )
• PROS:– Higher margin segments
– Leverage their strong service capability (through DEC) or their server/storage product line in corporate market
• CONS:– not a product innovator
– integration problems
– Strong competitors
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What resources and capabilities does Compaq have that it can leverage?
• RESOURCES– High speed enterprise computing hardware– Server and storage design, manufacturing,
sales, and service– Millions of users of Compaq products
• CAPABILITIES– Fault tolerance– Can handle large customers/ complex needs
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LESSONS
• Value of quantitative and qualitative analysis• Value of customer relationships• Value of market segmentation• Don’t rely on past successes• Maturing of IT/PC market: special requirements• A standard global model has several benefits
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WHAT HAPPENED?
• Compaq aimed at global leadership in internet infrastructure, access services, and solutions
• Acquired Inacom: to boost direct capabilities• IBM> moving away from retail• Hewlett Packard>early 2000; grabbed leadership in US
retail market• Dell has slowed down slightly; Compaq picked up
• Hewlett Packard purchased Compaq ($19b); HWP, CPQ HPQ
• Dell continues to outperform others (2005)