Case study: Michael Dell computers

Michael Dell, at $18$ years old, dropped out of college to work full$-$time for the business he started as a freshman, which offered hard$-$drive upgrades to businesses. Dell's venture generated $$6$ million in revenue in a year. In $1985,$ Dell made a strategic shift and started selling custom computers. Sales for the corporation in that year totaled $$70$ million. By the end of $2000,$ Dell's revenues had surpassed an amazing $$25$ billion. Five years earlier, revenues had increased to $$500$ million. The rapid growth of Dell Computers was largely attributed to improvements in the production and supply chain processes, as well as to the adoption of a cutting$-$edge distribution plan. By thoroughly examining the personal computer value chain, implementing strategic improvements, and capitalizing on developing market trends.In a fraction of the time it takes many businesses to introduce their first product, Dell Inc. has grown to dominate the PC market.The intermediary is gone: Dell began as a direct seller, first operating a mail$-$order system, then utilizing the Internet to create an online sales platform. Dell started incorporating online order progress updates and technical support into its customer$-$facing operations even before Internet use became commonplace. Dell's Internet sales in $1997$ averaged $$4$ million daily. Due to the financial advantages of eliminating the retail middleman, Dell offered superior customer choice in system configuration at a far lower price than most other PCs that were sold preconfigured and preassembled in retail locations.This departure from the conventional distribution approach for PC sales contributed significantly to Dell's impressive early growth. The Internet$-$based direct sales strategy also had the significant side benefit of generating a plethora of market data that the company used to accurately estimate demand trends and implement segmentation tactics. Dell was able to make money off of knowledge about the value drivers in each of its important client categories thanks to the data that drove the company's product development activities.On the production front, the business aggressively pursued a concept known as "virtual integration." Although management did not want to merge backward to become its own parts producer, Dell needed a highly dependable supply of premium PC components. Instead, the business aimed to create enduring connections with a few top$-$tier PC component suppliers. Additionally, Dell mandated that its major vendors build inventory hubs close to its own manufacturing facilities. As a result, the business was able to interact in real time with supplier inventory hubs to arrange for the prompt supply of a specific quantity of needed components. With this "just$-$in$-$time," low$-$inventory approach, Dell was able to launch new PC models faster and at a lower cost than with the more conventional stored$-$inventory approach.This was especially effective in a market where outdated merchandise was quickly rendered obsolete. Dell was transparent with its suppliers about its production schedules, revenue projections, and plans for new goods. Dell was able to take advantage of vertical integration because of its close strategic relationships with supplier partners without having to spend billions on internal manufacturing processes.Innovation on the production line: Dell modified their assembly procedures in $1997.$ Dell introduced "manufacturing cells" in place of lengthy assembly lines where each employee continually performed a single activity. These "cells" gathered workers around a workstation, where they put together complete PCs in accordance with client requirements. The company's production productivity per square foot of assembly area increased by $50\%$ thanks to cell manufacturing, which also cut assembly times by $75\%.$Dell created significant cost savings and unheard$-$of levels of consumer value in the PC market by fusing innovative operational and process design with a ground$-$breaking distribution model.The following are some key lessons from the story of Dells incredible riseI. Disintermediation $($removing the middleman$)$: Removing a participant from the distribution chain involves some risk, but the payoff can be significant operating cost savings and significantly higher profit margins. Expedia $($the online travel site that can match the rates of nearly any travel agency while giving customers more options and more detailed information on their vacation destination$)$ ModCloth $($a trendy online boutique without bricks$-$and$-$mortar retail outlets to drive up costs$)$ and PropertyGuys.com $($which offers a DIY kit for homeowners who want to do it themselves$)$ are some businesses that have prospered after eliminating an element in the traditional industry distribution chain, iTunes $($an online music store where you can buy music without having to rummage through a pile of jewel cases at your local HMV$).$ Amazon.com is an online marketplace that enables small$-$scale consumers and sellers to reach a wide audience without the expense of a costly storefront or a customized website. Netflix $($the online video rental service with no late fees that will deliver the movies you choose to your door$)$II$.$ Increasing customer value: By avoiding the retail channel, Dell was able to increase profits while giving customers a better deal on PCs$.$ Customers now have the option to configure PCs to meet their unique computing requirements, thanks to this change. Dell's innovative distribution strategy led to a substantial increase in customer value, which helped the business become an industry leader.III. Process and operational innovation: Michael Dell realized that his organization wasn't operating "the way things had always been done" in the best or most effective manner possible. There are innumerable instances where someone looked at a business procedure differently and discovered that there was a much better approach to completing the task at hand. Process$-$based work should always be reviewed to see if a change could increase effectiveness. This holds true whether your business has five employees or $500.$IV$.$ Let data take the wheel: Dell was able to remain ahead of the demand curve in the quickly changing PC industry by utilizing the readily available sales and customer feedback data that emerged from online sales. Similar to this, sales and feedback data were useful in identifying fresh strategies for boosting customer value across all of Dell's important clientele. Regardless of how big or small your business is$,$ it is crucial to monitor indicators that could indicate new trends, shifting social norms, and other significant business prospects.Case Study Questions $1$A$.$ What constitute Dell's model's fundamental elements of strategy?

B$.$ Conduct a SWOT analysis of Dell's model or approach.

C$.$ What benefits and drawbacks does Dell's model offer?