BUSINESS TO BUSINESS MARKETING PROJECT ON DELLIts amazing to me that our competitors think the customer is the dealer. -Michael Dell HARSHPREET BHATIA 501304021

Started by Michael Dell (19 at that time) in his dorm room at the University of Texas in 1984 with $1000

Company headquartered in Round Rock, Texas, U.S.A

Its revenue is around US$ 56.94 billionin 2013

In 2001, became the No. 1 computer systems company in the world

At present , it is the third largest PC vendor in the world after HP and LenovoMICHAEL DELL

Dell has grown by both increasing its customer base and through acquisitions since its inception; notable mergers and acquisitions including Alienware (2006) and Perot Systems (2009).

Notable Acquisitions: -2006 Alienware 2009 - Perot Systems2010 - KACE Networks2010 - SaaS2012 - Sonic Wall2012 - Wyse

ACQUISATION COMPETITORS

COMPETITIVE PROFILE MATRIXSource : www.hoovers.com

PRODUCT SEGMENTATION & TARGETING 1. CONSUMER TARGET: household customerLaptops , UltrabooksDesktops & all in onesElectronics & accessories-printers ,monitors etcNew touch PCs & tablets2. SMALL & MEDIUM CLASS BUSINESSDELL precision workstations and mobile workstationsVostro and latitude line of notekServers , storage and networking equipmentSERVICESE.g IT consulting , Data Protection3. PUBLIC SECTOR- TARGET : government & schoolsDigital forensics , e-govt , data centre efficiencyCivilian & defence agencies ,intelligence security, federal health , consulting and deployment servicesProfessional learning , connected classroom , private cloud computingLearning management system

PRODUCT SEGMENTATION & TARGETING 4. LARGE ENTERPRISES Target: Large cooperationsBlade server solution , server consolidation, client migration solution, virtual clientsRISK migration , storage consolidationBusiness consulting , managing IT infrastructureINTANGIBLE PRODUCTS Target: all segmentsWarrantiesRepair servicesSoftware services

PRICING STRATEGYDell is leader in using supply chain management.Dell sells mostly through Internet (D2C)Dell distributes by using Just-In-Time manufacturing system.DIRECT DISTRIBUTION MODELDirect distribution allows Dell to eliminate the middleman.Since 2007 restarted distribution through Retailers.DISTRIBUTION STRATEGYDell follows comparative Lower price to match the customer's expectation of value for money (Comparative Pricing) - Low inventory cost & Direct DistributionDepend on suppliers price (Cost plus Pricing)Customization (Optional feature Pricing) - No price tag effect - Pricing strategy based on customers needDIFFERENTIATION: Was Pioneer in Customize to order, Low cost with Good quality, Direct to customer (Channel differentiation)

Business model for dealing with large business entities.Server- to- server communication over internet integrating both supplier & buyer system.Shopping online with customers ERP Procurement Application with simultaneous upgradation.No duplicate information entry.Easy process, less cycle time, less errors. B2B MODEL OF DELLTo quickly integrate customers who are capable today.

Built a solution to integrate any customer who supports open industry standard of XML,EDI

To help customers built a B2B solution for rapid deployment & connectivity.

Providing hardware, software & consultation to help build a system which not only connects to Dell but even to other suppliers. B2B INTEGRATION

PRODUCT LINE

Desktop computersNotebook computersNetwork serversWorkstationsStorage products Dell offers a total of 1.6 million different possible product configurations for all its product linesSUPPLIERSMICROSOFT - for WindowsINTEL - for micro processorsNVIDIA - for Graphic chipsSONY - for monitors

Customer places an Order(By phone or through the Internet on www.dell.com)Dell processes the order Financial evaluation (credit checking) Configuration evaluations (checking the feasibility of a specific technical configuration) Sends the order to assembly plant (any one in Austin, or any other)Plants build, test & package the product (about eight hours)Dell typically ship all orders(no later than five days after receipt)2-3 daysSUPPLIERSREVOLVERSCUSTOMERSMade this after the discussion with Mr. Bhandair at DELL

Mass customization (end result: Delivers exactly what the customer wants)Partnerships with suppliers Just-in-time components inventories (Quick Introduction of Latest Technology)Direct sales Market segmentation Customer service Extensive data and information sharing with both supply partners and customers.

CORE ELEMENTS OF DELLS SUCCESS STRATEGY

New Value Chain: Dell had no in-house stock of finished goods inventories unlike competitors using the traditional value chain model

Pull Mechanism: It did not have to wait for resellers to clear out their own inventories before it could push new models into the marketplace (typically operated with 60-70 days stock)

Personalization: Customers got the satisfaction of having their computers customized to their particular liking

Order Product ProductForecast ComponentComponentsMicroAge,CompuComINDIRECT MODEL

ComponentsOrder Product Dell Computers direct model departed from the industrys historical rules on several fronts: The company outsourced all components but performed assembly. It eliminated retailers and shipped directly from its factories to end customers.It took customized orders for hardware and software over the phone or via the Internet. It designed an integrated supply chain linking Dells suppliers very closely to its assembly factories and order-intake system

Source : Watched video of DELL where CEO Michael Dell talked about three golden rules they follow

BUILD-TO-ORDER MODEL

DIRECT TO SELL

INVENTORYMANAGEMENT is primarily about specifying the size and placement of stocked goods. 1. Just-in time inventory management - 3 days.2. Focus on speed of inventory delivery process. MICHAEL DELL 8 days of inventory competitors 40 days, if Intel comes out with a new chip, I am going to get that to the market 32 days sooner

Build-To-Order ModelValue Chain ProgramRevolver or SLCs (Supplier Logistics Centers)

BUILD TO ORDERIn contrast to others who produce to stock, dell first receives the order and the money and only then starts to build, using that money to purchase from supplier

Therefore there is customization of products for each and every customer.

While other companies had to guess, DELL knew exactly what its customers wanted before manufacturing the product

Others had to maintain inventory as there existed middlemen, so to support reseller and retail channels.

To compensate for long lead times & buffer against demand variability, Dell requires its suppliers to keep inventory on hand in the revolvers.

Revolvers or supplier logistics centers (SLCs) are small warehouses located within a few miles of Dells assembly plants.

Each of the revolvers is shared by several suppliers who pay rents for using their revolver.

Dell does not own the inventory in its revolvers; this inventory is owned by suppliers & charged to Dell indirectly through component pricing.

Dell has a special vendor-managed-inventory (VMI) arrangement with its suppliers

Suppliers decide how much inventory to order & when to order while Dell sets target inventory levels & records suppliers deviations from the targets.

Dell withdraws inventory from the revolvers as needed -- on average every two hours.

It uses a quarterly supplier scorecard to evaluate how well each supplier does in maintaining this target inventory in the revolver.

CustomerLocal SuppliersDell FactoryRevolvers(SLCs)Suppliers 3 days of inventory - Inventory turns of 122 per year DeliverySupplier OwnedDell Owned

Value Chain is intended to extend Dells successful direct-sales approach back into the supply chain

The goal of it is increasing the speed and quality of the information flow between Dell and its supply base

The portal, valuechain.dell.com acts a secure extranet for Dell suppliers to collaborate in managing the supply chain

Dell envisions using this site to exchange with suppliers current data, forecasted data, new product ideas, and other dynamic information

SELECTIONQualityPriceDeliveryResponse to feedback.EVALUATION - to measure performance uses suppliers scoreCostDeliveryAvailability of technologyVelocity of inventoryWays in which they did business with dell over the internet.

Returns grew disproportionately as the carrying costs and obsolete stock is avoided.

Saves enormous amounts of money on purchasing components because the component prices drop by 3 percent per month.

Reduces handling cost. Common factors that drive up holding costs include opportunity costs, increased rent required for the space of the inventory, higher premiums to insure the inventory, and cost of obsolete goods.

Service became a feature of Dell's strategy in 1986

It provided free on-site service for a year after sale

Contracted with local service providers to handle customer requests for repairs

On-site service was provided on a next-day basis

Technical support via a toll-free number, fax, and e-mail

Limitation of direct sell model in emerging market

Buying habitNot access to internetLack of online payment (i.e. credit card)

The direct model has been a revolution, but its not a religion.- Michael Dell in April, 2007 memo to employee - In Jun 2007, Dell offered two PC models through Wal-Mart stores sell Inspiron notebook computers through Wal-Marts Sams Club outlets. In Oct 2007 Dell sold its PC through, Chinas largest electronics retailer fifty Gomez Electrical Appliances stores Later Dell also extended its international retail strategy by opening its first retail store in Russia

Strength: 1. Direct Model Approach, it provides Dell a way to interact to customers directly2. Customization of products3. Reliability, Service and Support4. Latest TechnologyWeakness:1.Market share growth is slow due to competition; Fake products/ imitations affect sales2. Overdependence on Suppliers.3. Lack of Dell Stores, can be an issue for some customers.Opportunity:1. With increase in e-commerce the online retail stores of Dell provide them better framework to tap new business2. The Direct approach Model of Dell would help them there existing to sell the other IT products, so new product development opportunity is for Dell3. Tablet and Smart phone Market.Threats:1. With the increase in innovation in the market the computer systems are becoming outdated, so Dell should constantly come out with new products 2. People need the quality products at low price which was Dell strength due to its customize solution, but now its competitors are coming up with products in same price range

Its bad news for a PC manufacturer (Particularly if it dont also produce tablets or mobile phones.) A new studypredicts that the rise in sales of tablets and cell phones will directly, and negatively, affect the sales of PCs, which have already been steadily slowing down.Many people attribute the decline of PC sales to various factors, like the growing popularity of smartphones and tablets.Last year, tablet sales totalled around 116 million units; this year its expected to jump up to 197 million, a nearly 70 percent increase. The reason for the increase is largely due to decreasing prices, love of the cloud, and addiction to apps. On the other end of the spectrum, while PCs sold 341 million units last year, anticipated sales will drop to 315 million this year.

DELL, literally has no market share in tablet and smartphone segment. It solely depends on Laptops and Desktops in consumer market for its revenue.Due to decline in PC sales, Dell Profits plunged by 47% in 2012.The much hyped Windows 8 didnt play any part in increasing the PC sales.

Dell in $24 Billion Deal to Go Private in 2013 (biggest by far since the days of the recession) Microsoft helped with up to $3 billion loan as part of the financing. (This is not the first time for Microsoft. In 1997, It rescued Apple with a $150 million investment from Bankruptcy)Reason - Dell's in the midst of a complex restructuring, realigning its focus to become more ofa full-featured, enterprise-oriented company. (By going private, it has NO stress from share holders to generate profits)

**Customers are willing to choose from a few standardized and smaller number of off-the-shelf PCs, and are less concerned with customization.The power of the direct channel to deliver customization is less relevant in todays more standardized market

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