Though sometimes given to displays of impatience and a strong temper, Michael Dell usually spoke in a quiet, reflective manner and came across as a person with maturity and seasoned judgment far beyond his age. He became an accomplished public speaker. He delegated authority to subordinates, believing that the best results came from “loose talented people who can be relied upon to do what they’re supposed to do.” Business associates viewed Michael Dell as an aggressive personality, an extremely competitive risk-taker who had always played close to the edge. Moreover, the people he hired were aggressive and competitive, traits that translated into an aggressive, competitive, intense corporate culture with a strong sense of mission and dedication.
-Strategy-
Dell Computer’s strategy was built around a number of core elements: build to order manufacturing, mass customization, partnerships with suppliers, just in time components inventories, direct sales, market segmentation, customer service, and extensive data and information sharing with both supply partners and customers. Through this strategy, the company hoped to achieve what Michael Dell called “virtual integration” a stitching together of Dell’s business with its supply partners and customer in real time such that all three appeared to be part of the same organizational team.
-Mass Customization-
Dell built its computers, workstations, and servers to order; none were produced for inventory. Dell customers could order custom-built servers and workstations based on the needs of their applications. Desktop and laptop customers ordered whatever configuration of microprocessor speed, RAM, hard-disk, CD-ROM, monitor size, speakers, and other accessories they preferred. The order were directed to the nearest factory.
This sell-direct strategy meant, of course, that Dell had no in-hourse stock of finished goods inventories and that, unlike competitors using the traditional value chain model, it did not have to wait for resellers to clear out their own inventories before it could push new models into the marketplace. Equally important was the fact that customers who bought from Dell got the satisfaction of having their computers customized to their particular liking and pocketbook.
-Suppliers-
Michael Dell believed it made much better sense for Dell Computer to partner with reputable suppliers of PC parts and components rather than to integrate backward and get into parts and components manufacturing on its own. Management believed long-term partnerships with reputable suppliers yielded several advantages:
- Using name –brand processors, disk drives, modems, speakers, and multimedia components enhanced the quality and performance of Dell’s PCs.
- Because Dell committed to purchase a specified percentage of its requirements from a each of its long-term suppliers, Dell was assured of getting the volume of components it needed on a timely basis even when overall market demand for a particular component temporarily exceeded the overall market supply.
- Dell’s formal partnerships with key suppliers made it feasible to have some of their engineers assigned to Dell’s product design teams and for them to be treated as part of Dell.
-Just-In-Time Inventory-
Dell’s JIT emphasis yielded major cost advantages and shortened the time it took for Dell to get new generations of its computer models into the marketplace. Dell supplied data on inventories and replenishment needs to its suppliers at least once a day, hourly in the case of components being delivered several times daily from nearby sources.
-Customer Service-
Service became a feature of Dell’s strategy in 1986 when the company began providing a guarantee of free on-site service for a year with most of its PCs after users complained about having to ship their PCs back to Austin for repairs. Dell contracted with local service providers to handle customer requests for repairs; on-site service was provided on a next-day basis. Dell also provided its customers with technical support via a toll-free number, fax, and email. Dell received close to 40,000 email messages monthly requesting service and support and had 25 technicians to process the requests. Bundled service policies were a major selling point for winning corporate accounts. If a customer preferred to work with his or her own service provider, Dell gave that provider the training and spare parts needed to service the customer’s equipment.
-Research and Development-
Dell had about 1,600 engineers working on product development and spent about $250 million annually to improve users’ experience with its products, including incorporating the latest and best technologies, making its products easy to use, and devising ways to keep costs down. The company’s R&D unit also studied and implemented ways to control quality and to streamline the assembly process. Much time went into tracking all the new developments in components and software to ascertain how they would prove useful to computer users. For instance, it was critical to track vendor progress in making longer-lasting batteries because battery life was important to the buyers of portable computers. Dell was the first company to put lithium ion batteries with a life of 5.5 to 6 hours in all of its laptop models.
-Attempts from Competition to Clone Dell’s PC Strategy-
Dell’s competitors-Compaq, IBM, Packard Bell NEC, and HP-were shifting their business models to build-to-order manufacturing to reduce their inventories and speed new models to market. Compaq launched its build-to-order initiative in July 1997 and hoped to cut costs by 10to 12 percent. Packard Bell NEC’s program allowed customers to place orders by phone. But all three were finding that it was hard to duplicate Dell’s approach because of how long it took to develop JIT delivery schedules with suppliers, to coordinate their mutual production schedules, and to shift smoothly to next generation parts and components as they appeared on the market.
