Business to Business Marketing

I. Since its inception nearly 25 years ago, Dell has built a profitable direct-to-customer business model. Today, more than 80% of Dell’s sales are to commercial customers (e.g., business, government, and not-for-profit organizations). In 2007, Dell added a significant commercial customer segment – retailers. You can read more about this development on Dell’s blog at http://dellshares.dell.com/archive/tags/Retail/default.aspx .

a) Is adding this new market segment consistent with or a departure from Dell’s strategy? Explain your answer.

Let me first explain what I know about Dell’s operations from the perspective of distribution and warehousing operations according to my direct experience working for them in Mexico City.

I used to work at a Logistic (warehouse and distribution) company name “Kuehne & Nagel” in Mexico City in which one of our biggest an profitable customer was DELL.

I used to be the warehouse and distribution supervisor for DELL at Kuehne & Nagel. We were in charge of the warehousing and distribution off all their products all over Mexico. They explained us that all the PDA’s and laptops are manufactured in Taiwan and Singapore and shipped by air to Nashville. The monitors and flat panels they are also manufactured overseas, Asia and Brazil. The Desktops and servers are manufactured at Austin Tx, where it is also their headquarters. This is amazing for me to know that Dell, being one of the world leader seller of computers and computer accessories, its manufacturing activities are all over the world with their suppliers and business partners.

In average Kuehne & Nagel has a shipped complete time of 15 calendar days. Shipped complete means the time since the order is on status ready to go. This is after all the manufacturing processes finished, until the final customer receives the product.

Dell’s disadvantage according to their actual competitors (HP, Gateway, Sony, E-machines, IBM, Accer) and market segmentation, home and small business, of course is the time the final customer receives the product. We all know that if a customer wants a computer they only need to go to any retail or electronic store and by just swiping their credit card or paying with cash at the same time they are receiving their computer, but not with Dell. So, by that time Dell was very ambitious with K&N to push them hard to achieve a 7 calendar days deliveries since the order was place ready to go until the customer receives the product. Imagine the distribution chain, Asia or Brazil, then Texas, (here we received the status ready to go) then Laredo border, then K&N split operation at San Luis Potosi Mexico and finally all the states in Mexico. All this logistic process to deliver the computers in only 7 days, this is amazing!, but it’s happening. K&N priority is the customer satisfaction with the track and trace system in which they can monitor in real time the status of their orders shipped and of course to deliver the product to the correct person in the correct address, no matter where their addresses are, mountains, alleys, cities, suburbs, factories, offices etc.

So, I think that this is a following strategy now for Dell, since competitors seem to start having more market share all over. Open now this retail segment, never considered before due to their unique business scheme, just because at some point they were the only ones delivering low cost and high quality customized equipments and computers directly to customer no matter where they are located, today is necessary to move on where the competitors are moving. What I learn from the market place simulation was this; you will believe that you are producing the best computer (quality and low cost), but then in just a blink of an eye, your competitor is growing as fast as you probably might think do, so it is better to have an strategy to lead on the market before your competitor does and if he does it before you, you better follow him and start thinking in the next strategy. This is business world.

According to B2B marketing strategy, Dell needs now to create a new segment for continue selling their products, in this case would be the retail stores. Then, target assigning resources to profitable segments. As the article says, Dell will not be as profit as they are right now with the direct customer relation because they say they will have more costs and others to share with the retailers and to take care of, but even though they will expect to have a little profit that can help in some case their actual financial situation. Then positioning, are they going to sell the same computers and accessories at the same price? More? Less? Combination? They better start thinking about making a new product with the same characteristics the actual consumers needs and wants