Dell's Internet Objectives: Differentiating Dell and Building Customer Connections

1. Dell’s Internet Objectives Why Dell & the Internet 1 2 3 • Differentiate Dell • Dell is building more customer connections than its competitors • Opportunity for industry leadership • Extend the Direct Model • Dell can offer more services and information than indirect/channel • Opportunity for increased customer loyalty and penetration • Compelling Economics • Greater leverage of investments in staff, marketing, and infrastructure • Make it easier to do business with Dell • Reduce the cost of doing business for both parties • Enhance customer relationships`

2. The Power of Virtual Integration Dell Suppliers Customers Integrated Electronic Commerce • Enhanced velocity throughout supply chain • Advantaged relationships • Trading inventory for information • Cost reduction for all parties

3. Dell Online History Late ‘96 Early ‘97 Late ‘97 1994 Current ‘99 Late 1980 1995 Early ‘96 REVENUE • Q1=$5M/day • Q2=$6M/day • Q3=$10M/day • E-commerce is launched on www.dell.com • Q3=$3M/day • Q4=$4M/day • Q1=$1M/day • Q2=$2M/day • 80,000onlinevisitsper week • 225,000 online • visits • per week • 400,000online • visitsper week • 2,000,000online • visitsper week TRAFFIC MILESTONES • www.dell.com launched including tech support content • Dell launches an FTP site for file downloads • Configurator generating online quotes is launched • Marketing content; Premier Pages (SM) Service begins • Online store launched • Over 200 Premier Pages (SM) Service Over 10,000 Premier Pages • Asia/Europe launch websites • Dell Tech launched in UK; 30% online revenue int’l • Websites in 36 countries; Japan store launches INTERNATIONAL

4. The Turning of Dell’s Business eSupport B2B Commerce Customer Care Premier Pages Value Chain B2C Commerce Share data and develop common applications to eliminate redundancy and ensure consistent experience Recruiting Internet Data/Common Services Intranet Role Specific Applications • Purchasing - supply chain management • Marketing - product site content management • Sales - order management and customer specific content • SCM - configuration management • Product Engineering - tech support content • Customer Care - service content • HR - job postings Manage the Business Applications Intranet applications, including: • Financial reporting • Pay and Performance Mgmt. • Benefits changes • Corp. Director

5. Dell’s Activity System Relationship marketing Knowledge- able Clientele Direct Sales Model Reduced parts & finished goods inventories Transactional marketing Monitors shipped directly Dell Online Cost Structure Advantage Customized Service Just in time ordering Build-to order computers Few ‘touches’ per machine Training and education campaign Fewer suppliers One Stop Shopping Newer parts than competitors High quality products

6. Lessons LearnedDell On-Line Case • A good example of maintaining competitive advantage through the entire system of activities. • Provides an exploration into a company whose strategy is dependent on IT and the Internet. • Provides insight into the strategic development of systems of activities, rather than individual activities to achieve sustainability and a unique Business model that is hard to duplicate.

7. Building the Virtual Value Chain Physical Value Chain Inbound Production Outbound Marketing Sales Virtual Value Chain

8. Exploiting the Virtual Value Chain Physical Value Chain Inbound Production Outbound Marketing Sales Virtual Value Chain Inbound Production Outbound Marketing Sales

9. Value Matrix: Building Relationships Physical Value Chain Gather Organize Select Synthesize Distribute Virtual Value Chain New Markets New Markets New Markets

10. Implications for Managers The Law of Digital Assets New Economies of Scale New Economies of Scope Transaction-Cost Compression Rebalancing Supply and Demand