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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"The Direct Model has been a revolution, but is not a religion. We will continue to improve our business model, and go beyond it, to give our customers what they need."¹

- Michael Dell, CEO, Dell, Inc., in 2007.

"We believe there is a high-level belief at Dell that customers in the consumer market need to experience (i.e. touch and feel) the products more than in the business segment. Retail is the next logical step."²

- Sam Bhavnani, Research Director of Current Analysis Inc.³, in 2007.

"Dell has really strayed from its original positioning. Is the refocusing going against what made Dell successful?"⁴

- Nicolaj Siggelkow, a Professor of Management at the Wharton School the University of Pennsylvania, in 2007.

A Gatling-Gun Approach?

In January 2007, Gartner Inc.⁵ and IDC⁶ stated that leading personal computer (PC) maker Dell Inc. (Dell) had for the first time since 2003, lost its No. 1 position in worldwide PC shipments to Hewlett-Packard Company⁷ (HP).

It was also reported that among the top five global PC vendors, Dell had reported the least global sales in the third quarter ending 2006. Dell's famed direct selling model, backed by an efficient supply chain, had helped the company gain an edge over its competitors, but from the mid-2000s, some analysts had been arguing that the model was no longer working for it.

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1] "New Supply Chain Chief at Dell to Revamp Manufacturing and Distribution, While the Company May End Direct-Only Model,"www.scdigest.com, May 1, 2007.

2] Tom Sanders, "Dell Urged to Abandon Direct Sales Model,"www.vunet.com, February 6, 2007.

3] Current Analysis Inc., based in Washington DC, USA, provides information services such as tactical competitive analysis.

4] "Can Dell's Turnaround Strategy Keep HP at Bay?"www.knowledge.wharton.upenn.edu, September 5, 2007

5] Gartner Inc., based in Connecticut, USA, is an information technology and advisory firm.

6] IDC, based in Massachussetts, USA, is a market research and analysis firm specializing in information technology, telecommunications and consumer technology markets.

7] Hewlett-Packard Company, headquartered in Palo Alto, California, USA, is one of the leading manufacturers of PCs, printers, network management software, servers, etc. For the fiscal year 2007, its revenue was US$104,286 million. (Source: www.finance.google.com).