Dell has been so successful with its customers for many reasons, while most of these are related to the effectiveness of the business model. The company emphasizes the areas of minimizing the costs related to any area of operation, maximizing the efficiency of delivery time, and the focus on client relationships. Michael Dell, the founder of the company, created the “direct model,” which was specifically designed for efficiency. This model and the efficient use of the internet have played the biggest roles in the success of the Dell company, both in the United States and internationally.
The ultra-efficient “direct model” can be applied to all areas of the company. While Dell is best known for areas other than customer service, it still prides itself on its service. The direct model applied to the area of customer service removes the ‘middle men,’ so the company can speak directly with clients. This process lets Dell have more control over their orders, which can thus be more easily based upon the needs of the clients. The direct model with regards to Dell’s suppliers shows that they do not keep a large inventory (unlike some competitors,) so the costs commonly associated with storing high volumes of products are not accrued on to Dell’s budget. Obsolete products are also not nearly as much of an issue with this model.
While Dell’s business model helped the company reach such high levels of success in the United States and overseas, the development of Internet technology helped to maintain the influxes of growth the company was experiencing. This allowed Dell to become even closer with its clientele, while it furthermore provided a medium for additional levels of customization. When Dell launched its website, it was able to reach a significantly larger number of people. The current customers were able to set up and purchase custom computers over the internet, while also having access to technical support and software updates through the website. Another major contributing factor towards Dell’s success with the E-Support Direct launching online, which allowed for a new kind of customer service and allowed for some processes to be fully automated. This sped up the service process. Overall, Dell’s use of internet mediums and its use of its “direct model” business model contributed to its current level of success. However, the disadvantages to its model (as will be elaborated upon in the following) included lack of specialized customer support, prioritizing efficiency over quality, disorganized customer service structure, and other problems related to neglect due to its high level of emphasis on efficiency (San Juan, 2009).
While Dell had performed optimally in the field for years, the strengths of its business model succeeded for only so long before they partially gave way to competition. Competitors, such as Hewlett-Packard, have been able to react as quickly as Dell to market changes while obtaining better bargains from part manufacturers. The popularity of the laptop has also given other companies an edge while Dell’s focus had been primarily on the desktop PC. Since these are normally sold as wholly assembled units from competitors, Dell had even more trouble attempting to be cost-efficient. The warranties Dell offered were once a significant source of income, however, the stiff competition from rivals and retail outlets have undermined previous sales levels. Dell’s customer service system has also been criticized by many, as such, it has caused Dell to pledge to spend over $150 million on improved customer service functionality (Kessler and Swartz, 2007).
Following the decrease in sales, Dell has moved to rekindle its previous levels of growth in the past couple of years. Their strategic efforts have been to blend long-run competitive prices with a steep investment in its service program. Initially making a $100 million investment towards improved customer relations, Dell decided to later invest a total of $150 million instead to meet the consumer demand. Dell admitted it had been caught off guard by such competitive prices being offered by multiple rival companies, however claims it will stomp the competition back down and regain its previous level of market share (Moltzen, 2006). Part of the heavy investment in customer service will include roughly 2,000 new employees to be hired and placed to aid in the removal of the growing level of complaints Dell has been receiving. If Dell can manage to eliminate or at least significantly reduce the level of complaints of its below-par service and client support, it will help to neutralize its reputation that has become increasingly tainted in the absence of such competent support. Dell CFO Jim Schneider reported to the media “I think it’s going to be the sustained, thoughtful application of where to grow, how to grow…We intend to take the goals of aggressive pricing, at the same time improving product quality, improving our overall service and support. We will be in better strategic shape in the long run. Our profitability will be better.” (Moltzen, 2006). Another effort employed by Dell to generally increase sales is to keep expanding overseas, despite its other issues. The investment and potential are so high that Dell has not been hesitant and further feels that continued expansion could accelerate its reclaiming of previous sales levels (Moltzen, 2006).
Over its years in business, Dell has thrived while taking a leading role in the industry. Its hard-wired efficiency and rapid expansion combined with competitive pricing have gained it a large portion of the market share. While its failure to perceive the actions of rivals to have their claim to market share has caused it to experience some sales drops and its lack of emphasis on customer service has tainted its reputation, Dell remains strong, successful, and is on a solid path to full recovery.
- Kessler, M. and Swartz, J. (2007). Dell earnings plunge 33% as sales drop. USA Today. Web.
- Moltzen, E. (2006). Dell Vows More Price Cuts To Regain Momentum. United Business Media.
- San Juan, R. (2009). Dell’s “Direct Model” to Success – Dell’s Business Plan. Gaebler.