Why has Dell been so successful despite the low average profitability in the PC industry?
Being highly competitive, the PC industry is plagued by low average profits. Customers
can easily switch from company to company with little loyalty to any organization. Dell,
however, has been able to maintain profitability in this competitive industry. This ability
for success stems from Dell’s capacity for taking innovative risks to disrupt the PC
industry and also the company’s attitude of going against traditional processes.
One of the main differences between Dell and it’s competitors was the process in which
the company sold to customers. Initially, they went against tradition and took a Direct
Model concept in which computers were ordered online and then delivered straight to a
designated address. This strategy was beneficial because it saved the company a lot of
costs. For example, Dell, unlike its competitors, did not have to pay fee for retail space or
distributors. Furthermore, the company provide a sense of convenience to its consumers, in
which the company provided the opportunity to order computers from the comfort of their
home or office. Although, Dell did eventually enter the retail space, they were a leading
organization that was at the forefront of direct model sales.
Dell’s defining factor for profitability stems from the company’s focus on the customer.
Nearly every aspect of the company from production to shipment was customer orientated.
Before Dell, for example, consumers had to order PCs that had pre-set standards and were
only available through retail distribution channels. Dell, disrupted this model by allowing
their consumers and corporate clients to customize their PCs to any specification. This act
of personalization ultimately disrupted market, and helped lead Dell to success. Soon after,
however, competitors followed in Dell’s footsteps allowing their clients to customize as
well.
The importance of the customer can further be displayed through the company’s
categorization of their clientele. As Dell grew, it divided is customer base into more
detailed categories. By 1996, Dell’s customer base was separated into “large companies,
midsize companies, and government and educational institutions.” In addition, Dell put
effort into developing relationships with their customers by allowing customers to contact
Dell through their website (www.dell.com) in addition to their telephone line. With this
website, transaction buyers could get product information, check pricing, configure their
order, and track shipment. This initiative and act of focusing on customer needs effectively
took Dell to the next level, which is exemplified by the company’s previous daily revenue
