DELL USES PRICE AS A

COMPETITIVE WEAPON

Submitted By:
Chintu Dadhaniya(12)
Hemil Shah(15)
Nirag Shah(25)

Submitted To:
Mr. Ravi Vaidhya.
Ms. Roopal Khambhati.
SUMMARY

 Michael dell, just a student at the university of texas, had a huge

ambition of taking on IBM . in 1984.
 Dell’s computer’s share in the domestic PC market had crossed
that of IBM by the end of 1996.
 Dell’s meteoric rise has revolution the industry. Dell create a new
business model. Dell’s approach focused on keeping the price low
and delivery tims short.
 Dells buys components directly from manufacturers, assembles
them to meet individuals customer’s specifications. And then
deliver the product in record time. Dell relies on direct sales
approach and catalogues.
 1) The main objective of Dell is to produce the low price and
profitable laptop for the customer.
 2) To gain market share by increasing the sales at lower price.
CONTINUE….


Michael Dell adopted the direct sales model and was able to
eliminate middlemen. keep price low. And make product
delivered faster than its competitors. Dell was one of the first
companies to sell its products over the internet in 1996.

The advent of the internet facilities the direct sales approach of

Dell computer also had given it means of reaching customer and
supplier. Dell maintain stocks for just four days of operations,
while Compaq carries stock or 24 days.

In 2001, the market share of Compaq, Hewlett-Packard and

Gateway had dropped and dell’s share increased by almost 1/3.

Because of the price strategy of dell competitors are not able to

survive in the market.
CONTINUE….

 Both IBM and HP declared price war ‘irrational’, they elected to

lose market share rather than reduced prices and harm
profitability and at the same time the economy and share market
for a declined still dell was profitable with earning of $1.8
billion for the year and rest of the players loss $2 billion.

 Dell computer is always interested in expanding its share of PC

market. it had nearly 25% of the domestic market and 16% or the
global market. Michael Dell even started personally promoting
company’s product on OVC, the home-shopping channel.

 Dell has recently acquires selling space within the stores of major
retailer such sears.
1) STUDY THE CASE AND IDENTIFY DELL’S
PRICING OBJECTIVES. WHAT IS LIKELY TO BE
THE IMPACT OF DELL’S PRICING APPROACH
ON THE COMPUTER INDUSTRY
Pricing Objectives
 Low Price.

 To Gain Market Share.

 Exit of Competitors.

 Mass Customization.

- High Performance Product.

- Direct Relationship with Customers.
- Efficient and Flexible Mfg.

Impact on Computer Industry.

 Layoff employees.

 Market Share.
2) HOW SHOULD THE COMPETITIORS
RESPOND TO DELL’S PRICING POLICY?
 Dell adopted direct sale model and was able to eliminate
middle man, keep prices low, and make product deliveries
faster than its competitors, through this strategies dell was
became the top seller of PCs in 2001.

 Dell was one of the first company to sell its product over the
internet

 Compaq was the market leader and had been aggressively

slashing the prices as well as cutting down inventory and
increasing direct sell efforts. Dell had enormous cost
advantage and Compaq was unable to keep up with dell and
was acquired by HP in September 2001.
 Gateway return to profitability by focusing on higher
margin product and decided to recapture the market
share, it had lost in PC sector. It announced another
round of price cut on its brand of PCs. It did sell more
units but because of the lower prices generated less
revenue and incurred a big loss.

 IBM and HP were not able to cope up with dell’s pricing

policies and could not focus on their prices and lost their
market share.
THANK YOU