Michael Dell and the PC Market He Created Essay Example

Michael Dell and the PC Market He Created Essay Example Michael Dell and the PC Market He Created Paper Michael Dell and the PC Market He Created Paper Essay Topic: Marketing Michael S. Dell founded Dell Computer Corporation in1984. Michael Dell started the company with a thousand dollars and a vision. Today Dell Computer Corporation is one of the main manufactures of computers and computer related services in the world. In 17 years, the companys sales have grown from $6 million to $31.8 billion for the past four quarters.1 Dell Corporation employs approximately 34,400 people globally, and has operations worldwide. Within the short duration of the company, Dell Computer Corporation has created strategic competitive advantages over its competitors in the PC market. Dell has also created respect from other industry leaders. By reviewing the history of Dell, the inventory systems it uses, the importance of its brand recognition, and Dells SWOT, it is clear that Dell has a competitive advantage and that the company has great growth potential. History of Dell Computer Corporation In 1983, when Michael Dell was eighteen years old he was faced with a question. Why does IBM sell its computers for $3000 a piece and the parts that make up the computer cost only $600? This fact help set in motion Michael Dells ambition to build customized made PCs for lower price. Michael Dell began building and selling computers from his dorm room. In the following year Michael Dell started Dell Computer Corporation. Despite objections from his parents, Dell quit collage that May. His parents probably never thought that this decision would create a billion dollar company and make Michael Dell one the most respected CEOs of the Internet Age. Dell Computer Corporation became the first company to sell custom made computers. By 1988 Dell Computer Corporation went public, raising $30 Million in its initial public offering. For a brief period of time Dell Computer Corporation sold computers in consumer retail stores, such as Best Buy. Then, as quickly as Dell entered this market, Dell exited this segment to begin selling computers directly to consumers. By 1992 Dell increased its sales by 127% to $2 billion. See Exhibit 1 for financial graphs on net income, net revenue, and diluted earning per share for the past five years (2000-1996). By 1994 Dell had operations in the United Kingdom, Asia-Pacific region, and in Japan. In 1996, Dell introduced its PowerEdge server line. Dell began selling servers to enter a new and rapidly growing market. Within the first 2 years of its release, the PowerEdge server line, become the third largest server line in the world. By 1998, Dell expanded operations into the China market. Within the pa st seventeen years, Michael Dell has developed a small business idea that was envisioned and started in his dorm room to a global, billion dollar corporation. Just in Time Supply Chain Management The proper use of a supply chain can become a cost saving tool for a company. During the recent downturn of the economy, many companies are looking for cost saving solutions within their business. Dell is an excellent example of a company that has worked to continually improve their supply chain management to reduce the costs of their products. Dell deployed a new supply chain system that works in real time. By using software from both Microsoft and i2 Technology, Dell has developed a supply chain that is practical, cost effective, and has room for growth. Implementation of i2 supply chain software has allowed Dell to connect to its suppliers in real time via the web, and has allowed them to pulled materials to Dells manufacturing plants. The i2 supply chain software was deployed with the consideration of two steps of the supply chain process. The two steps are, planning and execution. Planning involves gathering the needed materials from the suppliers hubs near the appropriate Dell factories. Execution requires Dell to have the right materials on hand at the appropriate factory to build the customers order. By using these two steps, Dell deployed the software to create a more efficient supply chain. The planning process involves having suppliers connected to Dells supply chain via valuechain.dell.com. Valuechain.dell.com is a secure extranet that acts as a portal for Dells suppliers. The site offers suppliers a customized view of their materials at Dell, including reports on material quality, performance management scorecards, negotiated and forecasting cost reports, engineering change orders, supply/demand forecasting tools and views of material demand.2 By connecting the suppliers within there extranet, Dell has created a more efficient communication tool between the suppliers and Dell. Suppliers are allowed to view these reports to find out if any materials are needed, and Dell can send reports to the suppliers if they need materials. This gives both Dell and their suppliers freedom to order or deliver products without dealing with sales personnel. This saves everyone time and money. Thus, Dell has begun pulling its inventory, instead of having the suppliers push the inventor y. This has become a cost saving tool for Dell, and Dell has pasted these cost savings to the customer. Dell has required that its suppliers have materials within close range of its manufacturing plants. This allows for the reordering of parts within a two-hour window. With the new system, a computer is usually loaded onto a truck within 15 hours after the order has been taken. In order for components to be used in Dell computers, suppliers must agree to use the value.dell.com portal, and have supplies within a close proximity of their plants. This is a very fast and convenient process for Dell, allowing the consumer to receive their custom made computer within a very short amount of time. By using features such as Factory Planner, Rhythm Collaboration Planner, i2 Trade Matrix Supply Chain Planner, and i2 TradeMatrix Buy Solution, Dell can use the value.dell.com portal in a more successful manner. Factory Planner prioritizes the reordering of supplies based on the availability of the supplier. Rhythm Collaboration Planner generates reports every two hours. These reports represent the customers orders that have taken place within the two-hour window. Within the system Dell can tell the supplier the amount of a particular part that is needed and to which delivery area of the factory they need to be delivered. I2 Trade Matrix Supply Chain Planner and i2 TradeMatrix Buy Solution work together as a communication tool to the suppliers. They update the material requirements to suppliers. By having these additional features work with the value.dell.com portal, Dell can reach operational effectiveness within the supply chain. By improving the inventory system at Dell, there has been a snowball effect thought the whole supply chain. According to Mike MacKenty, a supply-chain chief at Nypro, a laptop component manufacture, Once a few remaining wrinkles have been ironed out, Nypro should be able to cut the inventory it keeps on hand for Dell by 70% from two weeks worth to three days.3 The use of the value.dell.com has benefited the suppliers as well as dell, and an additional cost savings is seen at the supplier end. In theory, if the suppliers to Dell can lower prices, then this price savings can be past on down to the consumers. Dell is also using Microsoft Systems Management Server 2.0 for the majority of the internal management of its IT infrastructure, as well as for its hardware and software inventory. Dells reputation across industries and among consumers is due not only to the products that ship from its warehouses, but also to the internal controls and processes that keep the company running smoothly.4 The use of this software has created cost savings within the company. For example, this software allows help desk employees to remotely install and management computer systems. This is more efficient for the help desk and is a time saving tool. This translates into a cost saving tool by having less people doing the same job as before. In the development of the supply chain, Dell has formed several partnerships with its suppliers. By reducing the inventory costs for the supplier Dell has established relationships that reputations are not able to. These partnerships have also created loyalty and trust. The supply chain could not be as successful as currently is today with out these partnerships. Supply chain management is an affective management skill for reducing costs. Technology can aid in the process. Technology can give a company a competitive advantage. The competitive advantage that is created is only temporary. However, if the company that is using the technology deploys it in manner that is more efficient and effective then the competitors, then a competitive advantage is likely to last longer. According to Eric Michlowitz, Dells director of supply chain e-business solutions, Our supply chain process was very well-executed, but we had an opportunity to increase our efficiency, make the process paperless and provide a single system of record that we and our suppliers could share.5 Anyone with a credit card can purchase a piece of software, but not everyone can install and use that software to its greatest potential. Brand Recognition When asking Joe Blow what type of computer he has, the answer will not be, I have a 1.5 Ghz Athlon processor, with a 20 GB hard drive, with a 3COM 5980B network card and it also has 256 mgs of RAM in a mini tower. The answer to the question will be a computer brand name. For example, I have a Dell. The significance of a brand name is highly important within the technology industry. Many experts look ahead to the next millennium and predict that brands will become even more important to businesses, especially as more of the economy moves to the Internet.6 Dells strives to have a strong, positive brand name which represents a dependable, customer oriented, and innovative company image. When Michael Dell first started selling computers, he realized that customers were looking for more in a computer company then just a company that manufactures computers. Customers wanted support for their computers. One of the reasons Dell began selling directly to the customer is that he wanted to develop a relationship with them. Dell has continually evolved the way that the company provides support to their customers, with each new opportunity the company has taken. For example, customers were reluctant to purchase new servers from Dell because they felt the service they needed would be meet better by IBM. So, Dell partner with Avanade Inc. to help provide support for servers running Microsoft Windows 2000 Datacenter operating systems in all of their markets around the world. This agreement will add to the support Dell already has, to help create a more dependable customers service to its consumers. Dells constant improvement on customer support has helped create their positive b rand name and company image. Dell has always tried to be an innovator in the PC market. Dell was one of the first companies to reach dot.com stardom. CEOs from Ford Motor Co., Eastman Chemical, and Ernie Deavenport have asked Michael Dell for council to improve their business on the Internet and to find out how Dell Computer Corporation managed to reach its stardom. Consumers and industry analysis saw this young company and young CEO making headways in the global market. As of June of 2000, Dell completed 90% of its purchases entirely online.7 Many companies would like to have the majority of its business done online. When purchases are done online, a company does not have to pay for the sales personal, or the normal labor that is involved in regular brick and mortar companies. Thus, Dell is able to offer a lower price to its customers. Being the first mover to sell PCs directly on the Internet benefited dell greatly. By being a first mover to sell PC over the Internet, Dell set the standards for this process. Another way that Dell has created a positive brand name is that Dell uses only Dell computers and parts in there company. Not even Microsoft can claim that they use only their products. For example, Microsoft has AS/400s running OS operating systems within their company. By using only products that they produce, Dell can truly say their products can be used for any aspect of a global company. SWOT of Dell The SWOT analysis reveals that Dell has several strong core competencies and strong leadership within the company. Dells supply chain management is one of the main strengths the company has. Many companies have tried to imamate Dells just-in-time supply chain, but the have not developed the success that Dell has. Dell has the benefit on having close ties with its suppliers, and the supplier compliance in the supply chain process. Michael Dell is a strength to the company. His enthusiasm and vision have guided Dell to becoming one of the main computer manufactures in the world. As mentioned above, Dells brand recognition has benefited the company greatly. Dells use of the opportunities that the market opens is also a strength. Michael Dell was the first person to realize and act on the customized built, direct marketing of computers in the 1980s. He and the company have continued to tap into technology markets and found ways to lower costs to this day. These are the main strengths tha t Dell has. Along with strengths, Dell does have a few weaknesses. Dell does not currently have the consulting or product line of IBM. Dell still has not developed a server that can match the AS/400. Furthermore, IBM began its consulting business several years ago, and is one of the first movers in this area. Also, direct selling is not the preferred approach to selling PCs in Europe. Europe has a very large market, and Dell needs to be able to sell to the customers in a manner that they approve of. These are Dells main weaknesses. Dells opportunities are as far reaching as a six year olds imagination. Dell has the opportunity to take part in the wireless technology, especially within the United States. Dell can find new way to sell their products in developing areas around the world. There are many innovations that are possible in this arena. Dell needs to be opened minded and take part in the next revolution within the tech world. Dell does have one serious threat. In order for Dell to stay competitive in the corporate world, they need to develop consulting services that IBM offers. Michael Dell has always considered IBM his main competitor. In 1983 Michael Dell declared he ultimately wanted to beat IBM.8 In order to beat IBM, Dell needs to work on its consulting and services to corporations and large buyers. There is also the possible that a new person, like Michael Dell will have a revolutionary idea and change the whole industry once again. It has happened before. Conclusion Dell is a revolutionary company. Michael Dell had a dream and he helped create a successful, global, billion dollar company in a very short amount of time from that dream. The direct selling approach was considered at one time as a niche market. Now Dell is one of the main computer companies in the world, selling custom made computers all over the world. Its not just that Dell is reshaping its industry by selling made-to-order computers directly to customers, thus bypassing the middleman and their markups. Its that Dell is leading this revolution with a run of execution and innovation that no competitor has matched.9 Along with building a global company, Dell has also created a brand image that is irreplaceable. Dell has the respect of corporate America as well as the world. Not just for its products and services, but for it business model, as well. Dell has a competitive advantage with its just-in-time supply chain, and its brand name. The company has several strengths and opportunities for the road ahead.