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Business Essay
Published: 23, March 2015
This report analyses the value chain for Dell Inc. and goes on to identify the
sources of its competitive advantage. The diagrams supporting the analysis can
be found in appendices. Porter's Value Chain Model was used to evaluate the
business operations of Dell Inc. The value chain categorises the business
operations into Primary and Support Activities. The report looks at the
resources and capabilities of Dell Inc. that differentiates it from its competitors
by providing low cost solutions. In an effort to maintain their position as a low
cost provider of effective IT solutions, Dell's future strategies should consider
the impact of the rapidly changing global economic environment affecting the
way companies do business.
Introduction:
Dell Inc. was founded by Michael Dell in the early eighties. It has now grown to
become one of the largest players in the Information Technology sector. The
initial business model aimed selling PC's directly to customers however, now
they have diversified into other areas like printers and software that allows
management of IT assets. This helps provide efficient effective solutions to the
customers ever changing needs.
In the recent years they have faced stiff competition from other competitors like
HP, Apple, Toshiba and Sony to name a few. Unlike its competitors Dell Inc.
adopted a build-to-order, sell direct value chain which has proved successful
over the years.
Value Chain
Value Chain is the most conventional approach towards exploring career
opportunities. The concept was designed by Michael E. Porter to express the
customer value that builds up along the chain of activities that an organisation
performs to lead to the final product or service (BNet, 2010). A company's value
chain is categorised into two groups of activities namely Primary Activities and
Support Activities.
The constitution of the primary and secondary activities depends on the nature
of the business. The value chain of a company represents the business
operations, the technology, the operating procedures and the organisation
strategies. Since these factors are different for different companies, the value
chain for a company differs from the other, sometimes within the same industry
(Thomson Jr, Strickland III, & Gamble, 2010).
Primary Activities lead to generating a profit margin for an organisation and
help in creating value for customers. They are inbound logistics, operations,
outbound logistics, marketing and sale services (QuickMBA, 2010).
The primary activities illustrated are helped by support activities. These activities
are industry specific. They are procurement, technology development, human
resource management and general administration (QuickMBA, 2010).
Value chain activities are not different from one another; one value chain
activity affects the performance of the other (NetMBA, 2010). The value chain
diagram is listed in Appendix I.
Outbound Logistics:- After assembling, the PC's are transferred to the shipping
department through conveyer belts where they are packed and shipped to the
customers. The delivery of these PC's takes three to five business days. Major
output of the company is build to customer orders with only a small fraction of
inventory being produced to cater to the needs of retailers and whole sellers.
Marketing and Sales: - Dell sales are a mix of sell-direct-to-customer strategy
and selling through retailers. Dell Inc. sells its products through its website, toll
free lines and in case of corporate clients; it has special sales teams taking care
of them. In markets where the sell-direct-to-customer strategy failed Dell Inc.
installed Kiosks in leading electronic stores for the customer to physically check
the product and then place an order. In a response to its declining share in the
computer market, Dell inc. lately has formed partnerships with computer
retailers and has had success in doing so.
Unlike other manufactures whose marketing efforts are directed more towards
the retailers and wholesalers Dell Inc.'s marketing efforts are focused towards
the end users. Advertising is a major emphasis in Dell Inc.'s business strategy.
Dell Inc.'s advertising efforts include TV promotion, promotion in magazines,
inserts in news papers, newsletters, online promotion and periodic mailing of
Dell's latest product catalogue to existing Dell customers.
Service: - Dell Inc. has undertaken number of initiatives to provide after sale
service and support to its customers. Some of these initiatives are premier
pages, product design services, value-added services for customers and after
sale services.
The Resource Based View analyses the resources and capabilities of a firm to
identify those that assist in creating competitive advantage. For a list of
resources and capabilities identified, please refer to Appendix II
From the value-chain analysis carried out above, the following competitive
advantages have been identified.
Low Cost:
Their low cost structure allows cost savings to be passed to the customers. Since
its inception, Dell Inc. has delivered low cost effective solutions to meet their
customer's needs.
Customer Service:
Dell Inc. provides support to its customers through its 25 customer service
centres, online diagnostic tool and onsite support via contractors. Their asset
tag service, regional forums to listen to customers and enhanced support for
larger enterprises has further enhanced the relationship with customers. This
also adds to their brand value.
5.0 Conclusion:
In a dynamic ever changing IT industry, Dell Inc. should revisit its strategies in
order to keep up with its competitors. The company has maintained a 6% cost
advantage over the competitors by manufacturing products in-house however,
due to rising costs they have begun outsourcing notebook PC production to
Asian manufacturers. Dell's future strategy to reduce cost and further expand
should not negatively impact their market credibility.