Dell Changes Direction and Joins Forces with Retail Giant
Dell Inc., one of the world’s largest computer manufacturers, has developed its business in a unique way, having pioneered selling equipment directly to customers around the globe. Founded in 1984, the company has grown from its original base in Texas, USA, into a key international player in the computer industry. Revenue for the 2007 financial year totalled $57.5 billion, generating an operating income of $3.2 billion; the company employs approximately 88,000 team members around the world, serving a range of different markets with an integrated assortment of computer hardware and service packages.
Dell set up its first overseas subsidiary in the UK in 1987, and has followed this with further international expansion over the past 20 years. Its worldwide presence now includes three regional business units covering the Americas; Asia Pacific/Japan; and Europe/Middle East/Africa, serviced by manufacturing centres in the USA, Brazil, Malaysia, China and Ireland. In these regions Dell has made computing accessible to different customer segments, including businesses, institutional organisations and individual consumers, giving them the opportunity to take advantage of affordable information technology to improve their businesses and personal lives.
Its comprehensive range of products and services covers the full scope of modern computing needs for all types of customer, including not only desktop and notebook computers but also other hardware products, such as servers, data storage equipment, printing and imaging systems, networking products, workstations, and peripheral products like monitors and projectors; software; and service products that can be accessed throughout the lifetime of computer usage, which include deployment services, ongoing technical and warranty support services, IT management services, training and certification services, and professional technology solutions.
The company has always attributed its success to its policy of selling directly to customers, which best enables it to understand their needs and efficiently provide the most effective computing solutions to meet those needs. Taking orders over the phone or via its website, the company allows customers to choose their own specifications and then it assembles a custom-built PC for each user, an approach which offers supply chain efficiencies and storage and logistics costs far below those of its competitors. Dell has recognised that this model can reduce time and costs, increase its understanding of customer expectations, and allow it to build all its systems so that it can deliver to customers powerful, well-configured packages at competitive prices and introduce the latest relevant technology much more quickly than companies with slow-moving, indirect distribution channels.
Yet in May 2008 the computer world was taken by surprise when Dell announced that it was about to embark upon a new distribution strategy which will see it shifting away from its strict direct-to-customer sales approach, with a move towards selling PCs through third parties, including retail stores. It is hoped that the strategy will boost Dell’s chances against Hewlett-Packard, which overtook it last year as the world’s biggest PC maker.
This new strategy is highlighted by the decision to start selling a limited range of desk PCs through Wal-Mart stores, the world’s biggest low-cost retailer. Initially Dell plans to sell two models of its lowest-priced Dimension multimedia desktop computers in about 3,500 Wal-Mart and Sam’s Club stores in the USA, Canada and Puerto Rico, which will be sold bundled with accessories for less than $700. The models have been chosen as a good match for shoppers’ demands for value pricing and proven technology, and will compete directly on the retailers’ shelves with PCs, notebooks and other equipment from key rivals, including Hewlett-Packard, Acer and Gateway. Despite this direct competition, Dell has addressed one of its main problems by giving customers a chance to touch, feel and use its products before they buy them.
The above data has been based on a real life organisation, but details have been changed for assessment purposes and do not reflect the current management practices.
As a Marketing Assistant in the Distribution and Communications Division of Dell, you have been asked by your Manager to write a 1500 word report that:
a. explains the concept of market segmentation and identifies FIVE ways in which Dell can segment its markets, giving reasons for recommends
b. identifies and illustrates FIVE different marketing communications tools that could be used to promote the company’s products and services to its customers and intermediaries
c. evaluates the decision by Dell to enter into a relationship with retailers to distribute its PCs.
– Word Count : 1500 words
– You should incorporate theory and marketing models into your answers
– Remember to give reasons for your suggestions
– “Evaluate” means explain the advantages and disadvantages.