Subject : Strategic Management Please solve the case study.

Discuss how these companies deployed their market strategy. Was there anything unique or different in their strategy that caught your attention? (10 Marks)

Compaq and Dell Go Head-to-Head in Distribution

As new developments to technology alter the nature of competition in the personal computer industry, the distribution strategies of its major players are also changing. These changes are evident in the struggle between Dell Computer and Compaq Computer for domination of the personal computer market. Founded by a team of engineers, Compaq has from the start emphasized the engineering and research side of the PC business. For example, it was the first company to bring out a computer using Intels new 486 chip. Its differentiation strategy was to produce high-end PCs based on the newest technology, which would command a premium price. Compaq specialized in the business market, and it developed a sophisticated, 2000-strong dealer network to distribute, sell, and service its expensive PCs. Dell, on the other hand, focused from the beginning on the marketing and distribution end of the PC business. Its low-cost strategy was to assemble a PC and then sell it directly to consumers through mail-order outlets, cutting out the dealer in order to offer a rock-bottom price. The company was viewed by its managers primarily as a distribution or mail-order company, not as an engineering one.

As computers increasingly became commodity products and prices fell drastically, Compaq realized that its strategy of selling only through high-priced dealers would mean disaster. It changed its strategy to produce a low cost computer, and in the 1990s began its own mail- order distribution, offering its machines directly to consumers, and more recently to business. However, Compaq has not been as successful as Dell in its on-line distribution strategy, both because Dell was first to engage in such distribution and established a first-mover advantage, and because Dell has established a more customer friendly Web site and enjoys the record for fewest customer complaints. Moreover, while each company offers next-day delivery and installation of computers, as well as extended warranties Dell has reached ahead in providing the best on-line customer service, and indeed is making quality customer service, as well as price, a main focus of its competitive advantage. In 1999, Compaqs new CEO, Michael Capellas, announced a bold new Internet distribution and sales strategy to make Compaq the leader in on-line selling to businesses and consumers. Clearly, the battle between these companies is not over.