Dell Has Been Successful Due to Its Differentiated Strategy Compared to Its Competitors

Dell has been successful due to its differentiated strategy compared to its competitors.

The ?Direct Model? that Dell adopted has been highly successful in reducing its bottom line costs. Comparing the margins in 1994, Dell retail had 7% gross margin and Dell direct 19%; despite higher operating expense in the direct channel overall income was higher through this channel. By reducing the costs of using resellers and distributors, Dell was able to sell at lower prices which were attractive consumers.

Through its direct interaction with customers, Dell was also able to understand the needs of its customers better than the competitors. With this key information Dell subdivided its customers into categories where it could target them with specific products and services which ultimately boosted sales. This market focused initiative with customized products differentiated Dell from its competitors. Dell also tied up contracts with large companies and institution which placed large orders, and through its relationship with Dell placed repeat orders as well. By investing heavily in technology, Dell further reduced its operational costs with the launch of its website where customized purchases could be done online.

The after sales support of Dell had built up an excellent reputation in the industry, as proven in the customer surveys done in 1998. Customer problems were solved using diagnostic software with 90% cases resolved over the telephone. This reputation increased the brand value of Dell which encouraged sales and repeat buyers through brand loyalty.

Dell?s unique capability was not only through its direct selling but also its efficient manufacturing line. Through collaboration with suppliers, Dell coordinated its supply chain and manufacturing line to reduce its days of inventory to 7 days in 1998. Co-location of suppliers? facilities to Dell manufacturing sites and electronic communication links made replenishment of inventory easy and quick. Limiting inventory and efficient manufacturing processes resulted direct cost advantages over its rivals. This efficient use of resources which Dell perfected over time meant that it was able to be much more profitable compared to the competition.

Dell?s extensive sales, service and support network as well as its superior supply chain and manufacturing process flow are critical factors in its success in a low profitability industry. This competitive advantage was unrivaled in the 1990s which was the basis for Dell?s profitability.

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