Strategic Issues for Dell

Dell Computers

Strategic Issues for Dell

Dell: Major strategic issues

In contrast to its rivals Intel and HP, Dell pioneered a business model rather than a product that made it famous: the direct-to-consumer model. Instead of focusing on research and development and creating an innovative type of hardware, Dell sold computers directly to consumers, including businesses that purchased computers 'in bulk' as well as individual consumers. Marketing and sales were the strategic focus of the Dell organization. Inventory was closely monitored and kept at a minimum so it was tailored to consumer needs. Computers were custom-built, ensuring that there was no stockpile of unneeded or obsolete inventory. There was also a strong emphasis on customer support and service.

The critical nature of Dell's business model cannot be underestimated, given that Dell's success as a business was founded upon its business model more than its products, in contrast to its competitors. This is what made Dell so famous and ground-breaking. Dell's competitors strove to imitate its model, including IBM. Dell was also helped in its ascent by poor strategic business decisions like rivals Compaq and HP. However, criticism of Dell mounted after its promising start. Dell products were inferior because of foot-dragging about adopting new Intel chips into its infrastructure. Competitors like Acer were producing computers at even lower cost, and passing those cost savings onto consumers. To compete, Dell began to move into retail channels, which it had not done before, at Wal-Mart, trying to keep to its low-cost model. It also began to offer more stylish computers in bright colors, clearly hoping to compete with Apple's iMac.

Another problem is that Dell's famous customer support has been called into question. Consumers felt they saw a dramatic decline in quality after Dell outsourced its helpline to India, and complained about difficulties communicating with operators. While these complaints have dogged many companies, this criticism was particularly harmful for Dell, given that it had founded its reputation upon customer service.

The central problem is that Dell no longer has a clear market position to give itself an edge against its competitors. Once, it offered low-cost computers, but now Acer is succeeding in this realm as well. It cannot compete with Apple in terms of research and technology. Thus, it would seem that customer service would be the best way to get an edge upon its rivals. Apple is also noted for strong customer service, so Dell must market itself as a low-cost, yet customer-friendly alternative. Its venture with Wal-Mart seems to be an ideal way to accomplish this: it is strategically selecting retailers that can open up its market base, given that adopting a pure direct-to-consumer model is unlikely to guarantee it the strategic advantage it enjoyed in a less competitive marketplace.