Dell Inc: Moving Beyond Direct Sales Model

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Case Details:

Case Code : BSTR280
Case Length : 26 Pages
Period : 2006-2008
Pub Date : 2008
Teaching Note :Not Available
Organization : Dell Inc.
Industry : Computers
Countries : Global

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A Gatling-Gun Approach? Contd...

On January 31, 2007, Dell's founder Michael Dell (Michael) took over the position of the CEO replacing Kevin Rollins (Rollins). Soon after taking over, Michael revamped the top executive order and followed this up with various changes in strategy in a bid to turn around the company.

One of the most significant changes brought about was its willingness to move beyond its direct-only business model. On the one hand, Dell formed alliances with leading retailers such as Wal-Mart Stores, Inc.⁸ (Wal-Mart), Carrefour SA⁹ (Carrefour), etc., while on the other, it also started a formal channel partner program for value added resellers¹⁰ (VARs).

Analysts pointed out that Dell had worked tirelessly to cut out middlemen for many years but was now being forced to rely on middlemen.

They also noted that the company had been secretly working with some channel partners even before 2007. Dell had also made limited forays into retail in the past which had not been too successful. Analysts expected the company to indulge in a lot of activity through all the channels: stores, kiosks, and VARs, in addition to its direct selling channel. "Call it the Gatling-gun approach,"¹¹,¹² said Roger Kay, principal at Endpoint Technologies Associates.¹³

While some analysts welcomed Dell's decision to move beyond its direct selling model, others felt that the company was taking a huge risk by straying from what had made it so successful in the PC industry...

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8] Wal-Mart Stores, Inc., headquartered in Bentonville, Arkansas, USA, is a discount store chain and is the largest retail stores in the world in terms of revenues.

9] Carrefour SA, headquartered in Levallois-Perret, France, is an international hypermarket chain and is the second largest retail stores in the world in terms of revenues.

10] A value-added reseller (VAR) is a company that adds some feature(s) to an existing product(s), then resells it (usually to end-users) as an integrated product or complete 'turn-key' solution. This practice is common in the electronics industry, where, for instance, a software application might be added to existing hardware.

11] Bryan Gardiner, "Dell Dips Deeper into Retail with Wal-Mart 'Experiment',"www.pcmag.com, May 2007.

12] Gatling gun is one of the first mechanical guns that hit the market in the 1800s. It has many firings pins and breeches that are connected to a multiple rotating barrel.

13] Endpoint Technologies Associates, based in Albany, New York, USA, is a market research firm.