Value Chain

1
Value Chain
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Margin
Inbound Logistics
Operations
Outbound Logistics
Marketing
Service
Porter
2
Industry Value Chain(aka Industry Supply
Chain)Personal Computer Industry (B2B)
Components
Raw Materials
Production
Retailer
Business
3
Dell Computer Corporation

• Delivers extreme value
• The best performing US stock in the 90s.
• 1995 - (1-1-95) 10,000
• 1999 - (12-31-99) 711,000

4
The Dell Model (circa 1984, Michaels Dorm Room)
Chip
Dell
Customer
Housing
Retailer
5
The Dell Model Today(aka The Direct Model)
Intel
Dell
Exxon
Sony
Data Linkage (EDI, Extranet)
6
Lowering the bundle of costs

• captures retailers margin
• reduced inventory (JIT, work-in-progress)
• lowers sales costs
• lowers transaction costs simplifies customer
  purchasing
• no inspection of components (Sony drop- ships to
  Dell customers no inventory)
• Helps suppliers with their inventories

7
Increasing the bundle of benefits

• consultative selling (30 _at_ Boeing)
• pre-loaded software (mass customization)
• electronic register of customer computers
  (i.e.,extensive customer database - service)
• Online help
• customized extranets at Dell for top customers
• Becomes the customers IT department for PCs! (A
  powerful 11 relationship)

8
How can I create value for my customers?

• Consultative selling - examine customers value
  chain
• Create data linkages with customers (extranets or
  Electronic Data Interchange EDI) that provide
  real-time sharing
• 11 relationships - customize your marketing mix
• Virtually integrate
• Bypass intermediaries channel conflict