The exceptional performance of Dell Computer in recent years demonstrates their direct sales and build-to-order model gave Dell a substantial competitive advantage. Customising their computer to their customers’ specifications and selling their items directly to their consumers has been successful in minimizing inventory to increase their market share and achieve higher returns on investment.
Timmers (1999) acknowledged that there are 11 types of business model that can generate revenue from the web. Dell fits into a category called e-shop because they do their marketing digitally through their website. Kraemer et al. (2000) stated that most PCs in the computer industry are sold in retail stores preconfigured and pre-assembled. Dell offered its consumers a variety of customisation options in system configuration at a discounted price.
Cutting out the middleman is a cost-efficient way to sell their computers directly to the customers through their website. Dell’s direct sales model includes Dell to end user (B2C) and Dell to corporate customers (B2B). Dell also reorganised its assembly process to increase their employer’s productivity by bringing all employers together with different components of building a customised computer rather than each of them working on and repeatedly performing a single task. By doing this, Dell gained a competitive advantage by providing their consumer with a differentiated product.
Dell’s strategies of direct sales and build-to-order production have proven successful in minimizing inventory and bringing new products to the market quickly as well as enabling it to increase its market share and achieve higher returns on investment.
Dell’s direct sales model has given it a big cost advantage, however, Dell has to take more responsibility and bear the cost on the support side. When the support experience cost increases the discount price won’t win customers.
Dell’s revenue model has mainly been based upon the income from sales of their products and services without a middleman as well as the comprehensive data system they build by doing direct sales to customers. Dell built an IdeaStorm crowdsourcing community where customer’s needs and expectations are voluntarily offered (Bayus, 2013, p.227). In addition, easy access for email marketing enhances customer value and understanding of their key customer segmentation.
Reference:
Bayus, B 2013, ‘Crowdsourcing New Product Ideas over Time: An Analysis of the Dell IdeaStorm Community’, Management science, vol. 59, no.1, pp. 226-244.
Chaffey, D & Ellis-Chadwick, F 2016, Digital Marketing, Pearson
Kraemer, K, Dedrick, J & Yamashiro, S 2000, ‘Refining and extending the business model with information technology: Dell computer corporation’, The Information society, vol. 1, no. 1, pp. 5-21.
Timmers, P 1999, Electronic Commerce Strategies and Models for Business-to-Business Trading Wiley, Chichester.
The Chanel Post 