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The Dell Direct Model: What it means for customers(users)

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. The Dell Direct Model: What it means for (corporate) customers. PROS:

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The Dell Direct Model: What it means for customers(users)

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  1. 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

  2. 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

  3. 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: • ?

  4. 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

  5. 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

  6. 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

  7. 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?

  8. 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?

  9. 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

  10. 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

  11. 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

  12. 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)

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