Dell - New Horizons Case
Question 1: What has made Dell successful to date (up to 2002)?
The key to Dell’s success to date was its innovative direct business model, which focused on selling Dell products directly to customers rather than through intermediaries. Dell believed so called “middlemen” added little to no value to the end product and that their associated fees were essentially unnecessary mark-ups for customers. By completely cutting out intermediaries, Dell not only reduced its customers’ costs, but also enabled the company to customize computers and focus on meeting customers’ needs and providing superior customer service. So doing ultimately helped Dell establish itself as one of the most customer-centric information technology companies in operation.
When it came to product development technology, Dell did not aspire to be the industry pioneer. Instead, Dell left product innovation to its competitors and relied on its unique marketing distribution formula to generate sales. The intuition of Dell’s top management, especially Dell’s namesake and CEO, Michael Dell, contributed significantly to the effectiveness of this formula. As noted in the case, Dell had the “uncanny ability to reach out into the market and identify the next high-margin technology product that could be driven to scale with lower priced products driven by its direct model.” This foresight basically eliminated Dell’s need for its own R&D efforts and allowed Dell to pass the corresponding cost savings onto its customers. Dell management also exercised good judgment with respect to the launch of new products: if new products were unpopular, Dell immediately purged them from its offerings. Finally, by being aware of changing industry trends and being flexible enough to adapt to them, Dell was able to horizontally integrate its business from personal computers into the server and storage markets.
Much of Dell’s success also stems from the company’s manufacturing...