“It’s not that Michael Dell leads by force of personality. He’s blessed with neither the tough-guy charisma of Jack Welch nor the folksy charm of the late Sam Walton.” So what makes Dell CEO of the year he believes the current situation is never good enough, when success is achieved “it’s greeted with five seconds of praise followed by five hours of postmortem on what could have been done better” says Dell, “Celebrate for a nanosecond. Then move on.” Most of all Dell expects everyone to watch each dime and turn it into at least a quarter, and that every product they produce is profitable from day one.
So how did he develop this management philosophy? It started 19 years ago when he was skipping classes to sell PCs out of his dorm room. “Dell was the scrappy underdog, fighting for his company’s life” against competitors like IBM, Compaq, HP, Gateway, and Toshiba. (What you don’t know about Dell, 2003) Now Michael Dell, who is worth $17.1 billion, has a 78,000 employee company that has made almost $56 billion in sales. (Dell Company Fact, 2007)
Dell Inc has become the most profitable PC company in the world and it has just about dominated every market they have entered. A big part of that is because of Dell Inc.’s direct-sales strategy by skipping the middleman it pushes the prices of products down and not one PC or server is built for inventory they are built-to-order. This idea was “a new model for doing business in the information age” it revolutionized the industry and other PC makers have tried to follow Dell Inc.’s footsteps but no one have been as successful. By direct selling it meant that no computer should be built without being sold first all PC’s were customized to each consumer’s specifications. Dell discovered that “he could get closer to customers and learn lots about them by cutting out the middle man.”
Direct sales gave Dell Inc. the knowledge about consumer’s wants and needs as well as immediate complaints and design glitches. This is something no other company had done and everything was mass produced and because of that many companies had a lot of overstock that became obsolete because technological advances were happening so fast that computer parts and components were useless within a matter of months, sometimes even quicker than that. To avoid this Dell Inc. has a just-in-time-inventory practice. This is the example Dell used to explain his inventory practice: (Dell Computer Corp, 1997)
“If I’ve got 11 days of inventory and my competitor has 80 and Intel comes out with a new 450-megahertz chip, that means I’m going to get to market 69 days sooner. In the computer industry, inventory can be a pretty massive risk because if the cost of materials is going down 50 percent a year and you have two or three months of inventory versus eleven days, you’ve got a big cost disadvantage. And you’re vulnerable to product transitions, when you can get stuck with obsolete inventory.” (Dell Computer Corp, 1997)
Another strategy that has helped make Dell Inc. successful is their partnerships with suppliers. Dell believed it made much more sense for Dell Inc. to partner with reputable suppliers from around the world of PC parts and components then Dell Inc. manufacturing its own. By using name brand processors, disk drives, modems, speakers, and multimedia components it enhanced the quality and performance of a Dell PC.
They did this because to most buyers the name brands that make up the PC are a lot more important of then the name of the overall system. An added bonus for Dell Inc. was by choosing to use suppliers is Dell had access to some of their engineers so when new products were launched and buyers called with complaints future assembly and shipments could be stopped until the problem was fixed with by the supplier’s engineers and Dell Inc.’s design teams.
Customer service is another strategy that has helped Dell Inc. get to where it is today. In 1986 Dell Inc. offered free on site service for a year with most of their PCs after numerous customer complaints about having to ship their PC back to Austin, TX for repairs. On site service was provided on a next-day basis. Dell Inc. contracted local service providers to handle customer’s service calls. Dell would ship the needed parts for the repair to the local providers, after the repairs were complete they would then send back the damaged parts to Dell Inc. where it would be diagnosed to see what went wrong, and what could be done so it wouldn’t happen again. Along with on site service Dell Inc. offered technical support through toll-free numbers, fax and email. Bundled service policies were a major selling point for Dell’s corporate customers. (Dell Computer Corp, 1997)
Dell Inc. has had its share of ups and downs just like any other small business or major corporation has. From laptops catching on fire in 1993 to loosing the lead in the PC market in the mid 90’s to Gateway. Dell Inc. now faces bigger issues with the recent disappointing earnings reports, numerous complaints about customer service, a stock chart that isn’t to pleasing to investors, and tons of talk and articles about where Dell Inc.’s future is headed. Makes you stop and think is Dell Inc. still a wonder of the modern business world, or is it in trouble.” Despite these setbacks Dell has set a model for all current and future PC makers to follow and for that he will always be remembered for revolutionizing the PC industry. (Is Dell Dying, 2005)
