The value chain model of Dell is the differentiating factor from the other vendors. What differentiated Dell from other PC vendors in the value chain was that other vendors concentrated on establishing their brand image and set a network of resellers. The resellers again resorted to marketing activities to reach the final customer. However, Dell focused on building brand image and directly targeted the end user rather than the reseller. This helped them eliminate one step as seen in the value chain diagram. Another differentiating factor of Dell in the first three steps of the value chain was the close communication between the supplier of parts, the assembly line of the company and their marketing staff.
The marketing staff ensured real-time data communication about the customer’ s needs which helped the suppliers in providing only the relevant parts and thus reducing the inventory stocking of redundant parts. Dell faced problems in certain aspects. These are discussed below: - Dell’ s direct to customer sales strategy did not give the advantage in certain countries like China and Japan. This was because this strategy relied heavily on internet order booking which did not appeal to the customers there.
- Competition from HP and Apple ate into the sales of Dell both in America and outside. HP started giving better features at lower cost and Apple had introduced the iPod model and new iPhone which diverted consumer’ s focus on these new products. - The strategy of Compaq to keep PC prices low by diverting its huge profits from the server market into its PC segment. - Losses on account of unfavorable hedging position. - The company’ s revenues from their core product, PC, were decreasing.
They were at $21.6 billion in 2006 and $19.6 billion in 2008. This shows that they were losing ground. - The acquisition of EDS by HP made its position 2nd after IBM in terms of sales and world market share. Its market share was 5.3% at that time, making it a challenge for Dell to overtake it.
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