The Dell Business Model

Introduction

In 2006, Dell Ranks No. 8 in Fortune magazine’s annual list of the most-admired companies in the United States1. Wired magazine in 2002 described Michael Dell as the “Internet-enabled Henry Ford figure for the new economy” 4 (Schrage M, Wired Magazine, Jul 2002). This is due for the most part to the superb integration and adaptation of Dell to the worldwide web.

Brief history of Dell

Dell was founded by Michael Dell in 1984 while he was still a student at The University of Texas. Initially Dell sold upgrades of IBM compatible PCs. In 1985 Dell produced it’s first PC, the ‘Turbo PC’2. Dell sold these PCs directly to the customer over the phone advertising via computer magazines. Dell entered the retail PC sector in 1990 but made an exit in 1993 in a market down turn. In 1994 the company had it’s first website and market share continued to grow rapidly2. In the second quarter of 2006, Dell had around a 19% share of the worldwide PC market with its nearest rival Hewlett-Packard with roughly 15%1. Dell is according to wikipedia.org in 2006 is the lowest-price major computer-manufacturer in the United States and the 25th-largest company in the US by revenue (Fortune 500 2006 list).

Dell’s initial set up had a lot of focus upon selling directly to large corporate accounts. Dell would build up a relationship with companies analysing needs and mould its service and support to the company2. These companies generally had trained operating staff who oversaw the accounts and had no need for the additional services and expertise of the reseller. Dell would effectively know the companies needs and build them computers to fill these needs2.

Dell soon realised the benefits that the internet could afford them