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Has the use of the Internet (www.dell.com) as a selling channel been successful for Dell and furthered their direct business model?

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Introduction

Has the use of the Internet (www.dell.com) as a selling channel been successful for Dell and furthered their direct business model? Dell are currently the worlds number one PC supplier, a position in the market they took from Compaq in April 2001. In short, the company's success story is mainly down to their innovative direct business model, which pays particular attention to the selling process where Dell completely bypasses all intermediaries and/or middlemen. This is because Michael Dell believed they add little if no value to the end product, instead just gaining a considerable mark-up for selling the product. Hence, they became the first PC manufacturer to completely cut out retailers and instead sold customised computers directly to customers based on their exact specifications. This selling process began over the telephone and via catalogues but in 1996 Dell embarked on Internet based selling on their official website, Dell.com, providing customers the opportunity to buy desktops, notebooks and servers directly from them. In order to power online commerce successfully for any business, the basic technology required is the installation of servers and data-storage systems. The website Dell.com runs on industry standard Dell PowerEdge servers. These powerful servers are backed up by Dell/EMC Fibre Channel storage. Dell is therefore equipped with backup strategies in case any problems with the servers or software occur and are experienced. ...read more.

Middle

As mentioned in the introduction, Dell's approach to the computer industry is to sell computers directly to consumers, without them having to be purchased through retailers. This can be seen from the 'Dell model' under this paragraph also known as their direct business model. The key management issue here is whether selling over the Internet remains in line with their direct selling policy (the Dell Model), which is an integral part of their business strategy, as it is the pathway they use to achieve company goals. The Internet is a direct channel and therefore ideal for Dell, as they do not wish to involve any intermediaries in the selling process. Furthermore the fact that they do not use retailers makes the implementation of e-commerce much easier and continues to give them complete control over their business actions. Another major issue management faced is one concerning any business selling over the Internet, this is relating to the consumer's confidence in buying products or services online. Security is particularly important for Dell because the price of purchasing PCs is higher than other popular Internet purchases such as CDs, books and clothes. In other words the general public view PC's as high-risk goods and will only consider purchasing them once they begin to trust the Internet, probably after several low risk purchases such as CDs and books. ...read more.

Conclusion

This has improved their stock control efficiency and also lowered invoice accounting costs. Hence, there are considerable cost savings, which are passed onto the customer in the form of cheaper prices. Customers clearly benefit from this and the website format fact where they can select exactly what they want within their budget. Furthermore e-commerce has given them the opportunity to satisfy the needs of new markets they were not previously dominant in. In particular the small and medium sized business market. This market now accounts for a high percentage of daily online sales and has consequently become an important part in their web-based strategy. Applying the Internet to the direct business model has given Dell an additional information edge in terms of better advertising performance and customer service. Each advertisement has a unique URL that allows Dell to know within 24 - 48 hours how effective they are. As mentioned, customer service has also improved from an already high standard even further. Dell has created many services online that enables the customer to see the whole purchasing process clearly once they have made an order. It gives the customer the ability to track the progress of their order as it is produced and delivered, providing them with constant feedback of delivery dates and product information. This 24-hour customer service and fast response time helps Dell build a strong relationship with customers. ...read more.

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