Dell's Foray into Consumer Electronics

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Case Details:

Case Code : BSTR253
Case Length : 21 Pages
Period : 2003-2007
Pub Date : 2007
Teaching Note :Not Available
Organization : Dell
Themes: Business Strategy
Industry : Information Technology and Related Services
Countries : US

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Introduction Contd...

However, many analysts were skeptical about Dell's chances of succeeding in the CE market, which had several strong players.

They reasoned that CE, which required a combination of factors like design, technology, and branding, to succeed, was different from computers, where productivity and service counted for more.

By the end of 2004, Dell revealed that it was not doing well in its CE business and that its revenues from the business remained insignificant. Later, in November 2005, Dell made the CE division, which till then was a stand-alone unit, a part of the Software and Peripherals business.

However, Dell confirmed that it did not intend to abandon its CE business. In fact, it even introduced new products. Even so, it seemed that the company had failed to successfully replicate its highly cost-efficient business model in the CE market.

Analysts felt that Dell's failure to make headway in the CE market was a victory for other CE companies (Sony, Panasonic, etc) and CE retailers (Best Buy, Circuit City, etc). Toward the end of 2006, it looked as though Dell's computer business was also under threat with the company reporting falling sales, even as most of its competitors were seeing good growth rates.

Background Note

Dell Computer Corporation (Dell Corp.) was set up in 1984 by Michael Dell (Michael) with a capital of US$ 1,000. The firm sold computers based on the direct marketing business model, eliminating retailers. It offered customers, mainly large corporations, systems that were built to order, were powerful and richly-configured, and were priced competitively. In 1985, Dell Corp. introduced the Turbo, its first computer system designed in-house. By 1987, Dell Corp. had become the only computer company that offered next-day on-site product service.

In this period, the company opened a subsidiary in the UK. In 1988, Dell Corp. went public with an IPO of 3.5 million shares at US$ 8.50 each. In 1990, in order to serve the European, Middle Eastern, and African markets, Dell Corp. opened a manufacturing center at Limerick, Ireland. In 1991, it introduced the Latitude, a notebook computer...

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