Will the availability of the Internet as a marketing channel for competitors quickly erode Dell's competitive advantage?

  “The monetizing concept argues that online businesses must first capture large audiences of users or shoppers, and then later monetize those audiences through subscription fees, advertising and e-commerce” (Rayport – 1999).  Following from the above, it is obvious that Dell has an advantage over any new company that enters the market, as new entries will have to attract large number of customers first and then be able to play an important role in the market, while Dell already has captured a very large and also satisfied and dedicated audience.  There is also a widely held belief that once a customer starts working with a vendor, it is much easier to keep that customer than it is to bring in new customers.  So if you can build brand loyalty for a web-site early, it gives you an advantage over other vendors who try to enter the market later. Dell implemented its web-site very early and that presumably also gives them an advantage over the competition.  Further on the internet can be a very useful tool for other companies that already trade in the pc market.  At this point it is useful to mention Dells main competitors in the market, which are IBM, Apple, Wall-Mart, Gateway, Hewlett-Packard-Compaq and also many small local manufacturers in every region separately but there is no reason to probe on each one separately as each company follows their own strategy and different to Dell’s strategy, in order to gain larger market share and it is not fair to compare.  

   The following points summarize Dell Computers marketing strategy for product and place, their target market and differentiations from competitors:

Product

• Primary focus is “built-to-order” servers, storage, and personal computers
• Secondary focus is computer peripherals, handheld devices, computer accessories and software

Place

• Internet
• Primary approach is direct to customer
• Secondary approach is indirect, utilizing channel partners
• No physical location for consumers to shop
• Considered a “click and click” company

Target

• Primary target audience has been large companies, education and government agencies
• Secondary target is the consumer
• Recent shift to larger focus on consumer market with the Dell Dude campaign
• Consumer psychographic targets emphasize workers, seekers, pioneers and surfers

Differentiations

• Internet only, “click and click” company
• Focus on customer service from end to end
• “Built-to-order” computer products rather than pre-packaged
• Offers user empowerment in ordering product

Dell Computers is an excellent example of a manufacturer that has successfully used the Internet to manage many of the channel activities and it is difficult for any other company to achieve the establishment that Dell has achieved.

  Dell has resulted positive brand recognition by consistently building and servicing its low-cost, customized computers to customers.  It fosters brand loyalty by continually providing superior customer service and technical support along with continuously incorporating the latest technology in its products.  Dell has achieved market focus and competitive advantage by assembling purchased components from suppliers, thereby becoming one of the most successful companies in the global computer systems industry, as it must be noticed that in 2000 it was the No. 1 computer company in the United States and No. 2 world-wide.  Dell’s potential for continued growth is enormous and at the same time the possibility to erode is minimised, because of its capability of providing up-to-the-minute pc technology customized for and sold directly to individual customers.  The internet as a marketing channel can become a very strong advantage for any company, although at the same time Dell has been able to build up a very strong competitive advantage for the company, something that makes it very difficult for any other company in the pc market to compete and attract customers from Dell.