´Company I admireµ

Rohit Vishwakarma
$2.0B

DELL Inc - TIMELINE
1983-Michael Dell starts business of pre-formatting IBM PC HD¶s on weekends $6 million sales, upgrading IBM compatibles for local businesses $70 million sales; focus on assembling own line of PC¶s 1985-1986--

1990--

$500 million sales; with an extensive line of products

1996-1997--

Dell goes online; $1 million per day in online sales; $5.3B in annual sales Dell online sales at $3 million per day; 50% growth rate for 3rd consecutive year, $7.8B in total annual sales.

2005--

$49.2B in sales

www.dell.com

2

Dell Computer Corporation
A Fortune 200 company in just 14 years Dell is the World's largest PC maker having Build To Order model. No 1 in profitability for the computer systems industry As of 2006 it employs more than 63,700 people. Customers in 170+ countries. For the last couple of years it has held its position as market leader (it took it from rivals Hewlett-Packard). According to the Forbes 50 2005 list, Dell ranks as the 28thlargest company in the United States by revenue. In 2006, Fortune magazine ranked Dell as No. 8 on its annual list of the most-admired companies in the United States. Major competitors are IBM, APPLE, HP.

www.dell.com

3

DELL s SUCCESS

www.dell.com

4

Dell s Competitive Advantage Dell s Direct Business Model Commitment to Open Standards Order Velocity/Build to Order Supply Chain Optimisation Continuous Process Improvement

www.dell.com

5

Dell s Direct Approach: A Fundamentally Different Model
Dell Direct Model Suppliers Customers
Ownership of the value chain

Competitor Model Suppliers Outsourcing Competitor
Channel

Customers

Loss of control over product & information flow & customer relationships

www.dell.com

6

Dell s Direct vs. Industry Indirect model
Strengths of the direct model Most efficient method of distribution Extremely low inventories. Rapid response to customer changes. Strong relationship with customers and suppliers. Weaknesses of indirect model Time = money (rapid innovation by parts suppliers send value of newly built PCs plummeting quickly). Have to discount old technology. Retailer sends unsold units back to manufacturer.

Results: Direct vendor Dell has best performance. Dell has forced other vendors to go direct. Industry as a whole has improved performance.
www.dell.com

7

How the Model drives Market Share
Pass cost savings on to customer
Industry's most efficient procurement, manufacturing and distribution process
Help Drive Supplier Business

Efficient Model with lowest Cost Structure

Competitive Pricing

Improved Customer Experience

Competitive pricing ignites demand
www.dell.com

Drives Market Share

Lower cost drives Increased demand
8

Dell Growth
55 5 5
n

FY 5 re enue of 9. billion Market Share FY05 = 17.8 %

e enue

35 3 5 15 1 5

e enue

t hr

% 18% 1 % 1 % 1 % 1 % 8% % % % %
FY 3 FY FY 5

FY9 FY93 FY9 FY95 FY9 FY9 FY98 FY99 FY

FY 1 FY

(Annualized)
www.dell.com ource: IDC All Form Factor

Unit
9

ar et hare %

DELL Growth Highlights

Growth Highlights

www.dell.com

10

PROFITABILITY COMPARISON
Sun Microsys tems Industry Median Market Median2

Profitability

Dell

Hewlett-Packard

IBM

Gross Profit Margin Pre-Tax Profit Margin Net Profit Margin Return on Equity

17.50%

23.90%

41.40%

42.70%

33.90%

51.90%

7.60%

5.40%

28.10%

(4.10%)

4.00%

6.20%

6.00%

4.10%

9.50%

(4.40%)

2.90%

4.80%

75.6%

9.6%

26.5%

(8.3%)

10.4%

9.4%

Return on Assets Return on Invested Capital

14.9%

4.7%

8.2%

(3.8%)

3.6%

1.6%

45.8%

7.4%

10.9%

(5.7%)

6.3%

4.1%

www.dell.com

11

Customer Lessons Learned

Form a direct model that specializes on market segments or customer types. Know EXACTLY what the customer wants and then provide it. Price is not a sustainable competitive advantage. Sustain loyalty through customers and employees Response Time Quality Products Valuable Features Make the Experiencing of Products EASY

www.dell.com

12

DELL Inc

The Success Secret

Internet coupled with Direct Business Model - sell directly to end customers instead of intermediate distributors, resellers. Virtual Integration - using sophisticated CRM, SCM systems. - integrated with 38 procurement and ERP systems. Mass catalog mailings. Do not Just sell Products sell Values. - client asked to put tags on their computers. Internet required much less effort to adapt its systems to Internet technologies. Dell s expertise was in assembling and catering to business needs.
www.dell.com

13

Three golden rules at Dell : `Disdain inventory' `Listen to the customer' `Never sell indirect'

Thank You
www.dell.com

14

Sign up to vote on this title
UsefulNot useful