How can Dell improve the value delivered to its customers

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Summary of the Assignment

The organization chosen for the purpose of this assignment is ‘Dell Computer Corporation. Dell with its Direct-to-Customer business model is unique in its own sense and because of this differentiation it was able to carve out a niche in the very competitive PC industry. The subsequent pages shall illustrate its direct business concept with its level of market orientation and a deep understanding of the marketing concept.

The customers selected are the end users with in the corporate segment. When dell entered the US PC market it sensed an issue/problem of dissatisfaction among customers in term of product and service delivery of PCs and related components. Dell successfully filled the gaps by going to the root cause of the issue/problem. The nature of the issue shall be analyzed with different models. The five performance objectives of quality, speed, dependability, flexibility and cost shall be judged in relation to their adding value to customers.  In the end recommendations to improve the relationship with the end user as well with the corporate client shall be illustrated.


Table of Contents

Introduction                                                                                             3

Dell- Customer focused & Market Oriented                                           4

Customer Segmentation                                                                          8

Root Cause Analysis                                                                               9

Operations Performance Objectives

  • Quality                                                                              12
  •  Speed                                                                               13
  •  Dependability                                                                  15
  •  Flexibility                                                                        16
  •  Cost                                                                                 18

In Retrospect

  • Importance Performance Matrix                                      20
  •  Gap Analysis                                                                   21
  •  Value Chain                                                                     23
  •  Customer Delivered Value                                              24

Conclusion                                                                                              25

Recommendations                                                                                  26

References                                                                                              27


Introduction

Dell with its direct business Model has heralded an entirely unique concept of customer focus. By engaging all of its channel partners Dell has successfully integrated the idea of customer need identification and its fulfillment. Dell has carefully segmented its business around customers and not around the product. Its largest customer segment is the corporate segment and the end users who are working there. In the ensuing pages a root cause analysis has been done to identify the key customer issue and the reasons behind it. The corporate segment is the one which drives maximum revenues and Dell had decide early on to provide the best support in the industry. Later Dell’s delivery of superior customer value shall be judged by five operations performance objectives in focus. Then in retrospect tools such as Importance-Performance Matrix, Gap Model, and Value Chain analysis shall be considered to prove the customer centric direction adopted by Dell. In the end recommendations based on current understanding shall be proposed.  


Dell- Customer Focused and Market Oriented

Dell is a perfect metaphor for a company which has embraced the concept of market orientation. The edifice of Dell was built on meeting customer needs by anticipating and satisfying them. Other organizations realized this late during their operational years, while Dell was born out of the idea of marketing concept and market orientation. Michael Dell started by realizing that there was a better way to sell computers. In the early 1980s when the computer business was in its early growth stages, he realized the inefficiencies in the computer distribution system. The traditional model was effective in distributing high volumes of PCs with multi configurations to a broad base of large customers. But some of the inherent weaknesses made it vulnerable to changing technological environment, increasing competition and rising demand levels which was closely linked to time based selling. This model was heavily relying on forecasting to run the production. With the fast changing market dynamics it was almost impossible to accurately forecast the demand due to shorter product cycles. Sometimes there was a shortage of high selling products which were then ultimately sold by the competition. At other times it was an oversupply of products which were later sold at a loss.


There was no direct relationship with the customer so nobody made any efforts to find out how he was being affected .Dell with its direct selling model accomplished this direct relationship and filled a gap which was left ignored by competitors like Apple, Compaq & IBM. Dell’s direct model surpassed the traditional one in the below ways-

  1. All the components were outsourced while the assembly was done at the Dell plants
  2. There were no retailers as the goods were shipped directly to customers from the factories
  3. The system took orders from the internet and the phone
  4. Component suppliers were located close to the assembly factory

Dell sold direct to the customers with its built-to-order (building a PC only when an order was received) concept. Thus it removed two links in the supply chain where inventory can clog. It helped Dell in three ways-

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  1. Customer knowledge- it helped dell in understanding customer needs which helped dell to forecast demand and that helped in maintaining low inventory without any problems of ‘stock out’.
  2. Cost advantage- low inventory cost; low component cost and low warehousing cost
  3. Technology advantage- Dell was able to reduce the time to market of its PCs with newer technologies

On the technical and supply front all the manufacturers had the same base. The only differentiating factor was the structure of distribution.  

The traditional distribution model and the Dell Direct model is as shown below-

Traditional Model ...

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