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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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Background Note
Michael, a freshman at the University of Texas, Austin, incorporated PC Ltd. in May 1984 with a modest sum of US$ 1000. The company built IBM compatible computers from stock components and sold them at low prices. It ran on a simple yet innovative low-cost direct selling concept where the customers' needs were understood and valuable computing solutions were provided to suit their needs...
Dell's Direct Business Model
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Dell entered the PC makers market during the 1990s with the
exceptional business model of direct selling, which revolutionized the global IT
industry. Earlier, PC makers used to sell PCs through middlemen like retailers
and wholesalers and there was very little possibility of customizing the
products...
Direct-Only Model not Working for Dell Any More?
Analysts felt that the innovative sales model developed by
Dell had made it the industry's favorite and also a high technology initiator
with good sales growth. However, industry insiders observed that those upbeat
days appeared to be over for Dell as the company's profits and share prices had
dropped considerably in the mid-2000s...
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Dell's New Strategy
Shortly after replacing Rollins as CEO, Michael put
together a new executive team at Dell. To reconstruct its PC business,
Dell announced that it would lay off around 1,000 employees. A memo
issued to Dell employees by Michael that was leaked to the media, hinted
that the company was now open to moving away from its direct-only model...
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Testing Retail Waters
On May 24, 2007, Dell disclosed its plans to sell PCs in the US, Canada,
and Puerto Rico through Wal-Mart and Sam's Club stores...
Embracing the Channel
Dell's new channel strategy was not just about retailing, it also
focused on VARs. Since 2006, Dell had been secretly developing some
business with channel partners. These VARs integrated the hardware
components provided by Dell and sometimes also installed software to
offer customized products to their clients who were indirect customers
of Dell...
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Excerpts Contd...>>
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