Currently e-commerce has expanded as a major part of business plans and strategies. E-commerce can be described as the process of buying and selling, or exchanging services, products, or information through web and Internet. Nowadays, almost any business involves e-commerce for dealings with their customers and consumers. This processed was started using in early 1990s. One of the pioneers in that sector is the company Dell.
Dell is one of the principal technology companies, that offers a wide variety of products, including desktop PCs, servers, networking products, storage, mobility products, software and peripherals, and services. The company mostly works in the US as its main office is situated in Round Rock, Texas and it employs 96,000 people including 1,700 temporary employees. During the financial year ended January 2010 (FY2010), the company recorded revenues of $52,902 million, which shows a decrease of 13.4% over FY2009. The operating profit of the company was $2,172 million in FY2010, a decrease of 31.9% over FY2009. Its net profit was $1,433 million in FY2010, a decrease of 42.2% over FY2009.
Question 1: Identify and describe the business models used by Dell.
Dell has implemented its own unique business model which includes the combination of several effective business strategies that has contributed enormously to company's success.
The prime and most important model is the Dell's direct model made through the solid value chain which avoided the use of the usual distribution way. According to Marc Schniederjans and Qing Cao (2002) "if any normal company uses the 4-step supply chain, Dell uses the 2-step".
By contacting the consumers directly, Dell succeeded to undercut resellers' prices. The company sought to contact customers directly through the uses of:
a) Phone: There are phone-lines to accept orders from clients and also to provide a 24/7 help desk.
b) Physical stores, which were first created in 2006 all over the world as an attempt to end users' concern.
c) Internet: The World Wide Web gives Dell the ability to offer online-shopping catalogs for both individuals and big organizations and to have the auction site, where products are renovated and sold for cheaper price. Moreover, Dell is able to instruct company's product users on its www.learndell.com website. Additionally, Dell offers customer-services such as self-diagnosis, download updates and software, and so on. Also, company has live chat, which also gives customers the chance to interact with the company's employees to have more information about the product they are concerned with. Providing all of those services to consumers was the main reason why Dell was able to decrease the direct costs of construction, purchasing, recording and maintainance for its transactional purposes. Most prominently, using Internet - the E-commerce - ensures that Dell avoids inventory spending and other costs related to that activity.
Additionally, Dell offers its customers the build-to-order manufacturing with just-in-time system. This strategy gives consumers the chance to make their own desired computer and have it in practically no time. Build-to-order in combination of just-in-time service has ever since been the main key to the success of the company.