Case Study: DELL

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Case Study DELL Cisco Team 6 04/25/05

• Arsalan A. LodhiPankaj LuthraDaniel M. Li

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DELL Inc Company Profile

• 52wk range 32.71 42.57
• Historical Perspective established - 1984
• Total Employees 55,200

Splits10-Apr-92 32, 30-Oct-95 21,
09-Dec-96 21, 28-Jul-97 21, 09-Mar-98
21, 08-Sep-98 21, 08-Mar-99 21
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DELL Inc - TIMELINE

1983-- Michael Dell starts business of
pre-formatting IBM PC HDs on weekends 1985-- 6
million sales, upgrading IBM compatibles for
local businesses 1986-- 70 million sales focus
on assembling own line of PCs 1990-- 500
million sales with an extensive line of
products 1996-- Dell goes online 1 million
per day in online sales 5.3B in annual
sales 1997-- Dell online sales at 3 million per
day 50 growth rate for 3rd consecutive year,
7.8B in total annual sales. 2005-- 49.2B in
sales
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DELL Inc Company Comparison
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DELL Inc The Success Secret

• Internet coupled with Direct Business Model -
  sell directly to end customers instead of
  intermediate distributors, resellers.
• Virtual Integration - using sophisticated CRM,
  SCM systems at respective ends as well their
  integration - already integrated with 38
  procurement and ERP systems across all its
  clients - vendors Ariba, SAP, PeopleSoft, J.D.
  Edwards Dell integrated with their ERP (Source
  Rob Rosenthal, Dells B2B web site strategy,
  October 2003, IDC 30202)
• Selling Points - Internet, B2B (Premier Pages),
  Phone-calls, Mass catalog mailings
• Do not Just sell Products sell Values - client
  asked to put tags on their computers - proactive
  in solving clients pain points preloaded
  software
• Dell was much less mature compare to IBM and HP
  at time when Internet took off required much
  less effort to adapt its systems to Internet
  technologies.
• IBM and HPs core competency was product
  innovation and development, Dells expertise was
  in assembling and catering to business needs.

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Dell Inc The Success Secret

• Web Penetration rate- What percentage of users
  contacted Dell based on information on given
  pages
• Web failure rate- What percentage of users
  contacted Dell because users failed to find their
  information on web pages
• Outstanding Question what will matter most to
  customers moving forward ?In IDC opinion
• Introduce solution packages that focus on
  overall business goals instead of individual
  productsIntroduce configurators for high-end
  server and storage products
• Source Rob Rosenthal, Dells B2B web site
  strategy, October 2003, IDC 30202

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DELL INC Same Business Model applicable to
other Industries?

• Other Industries for example IT Services is not
  yet mature enough to provide this kind of
  capabilities i.e. built-to-order by direct
  customer
• IBM OnDemand initiative is a step towards that
  kind of mentality build-to-Order- rest of IT
  Services industry would take few years to provide
  this capability- IBM is the only one in position
  of providing such built-to-order services

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Dell Inc Key Questions

• Is the Direct Business Model a new model ?No,
  its not ! all the primitive businesses used to
  trade like this today hotdog stands all over
  Manhattan is an example of that model on small
  scale
• What new emerging technologies will push this
  further ?- SOA will help refine and innovate
  these and perhaps new similar kind of business
  models by reducing operational and transaction
  cost.- Web Services will remove human
  interaction further reducing cost for
  example - SLA will be negotiated by software
  agents - Vendors selection based on their
  expertise will be automated - Long life Lithium
  ion batteries increased sales- RFID tags can
  further streamline the supply chain, inventory
  and shipment tracking process

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Dell Inc Boundaries of Direct Business Model ?

• Have other manufacturers been able to do this? 
  Why or why not?  Is this model bounded in the PC
  industry?
• Presently HP is using the Direct Model.
  Supposedly Compaqs strong direct sales model
  helped HP after the merger. Prices are in
  comparison to Dell.
• Source - www.ecommercetimes.com/story/19385.html
• Compaq emulated the model before merger with HP.
• Dell had better profitability management.
• Source - http//www.findarticles.com/p/articles/mi
  _m0DTI/is_12_31/ai_111163644
• Local computer vendors
• B2B markets common meeting point for
  manufacturers and institutional consumers.
• Classical example Farmers market

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DELL Inc Information Orientation

• Strong commitment to IT Practices
• Pre-installing software for Eastman Chemical,
  maintaining a corporate asset database for
  innovational support.
• Integrating supply chain vendors with more
  precise demand forecast for business process
  support.
• Premier Pages customize, buy and track systems,
  resolve tech issues for operations support.
• Strong Information Management practices
• Restructuring delegates information resources
  management
• Central source of information for sales force,
  tech support and executive management
• Promoting Information Behavior and Values
• Internal evangelism campaign promote and
  increase awareness of Dell online
• Educating the sales force

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Cisco Systems, Inc Company Profile

• 52wk range 17.22 24.20
• Historical Perspective established - 1984
• Total Employees 34,000

Splits18-Mar-91 21, 23-Mar-92 21,
22-Mar-93 21, 21-Mar-94 21, 20-Feb-96
21, 17-Dec-97 32, 16-Sep-98 32,
22-Jun-99 21, 23-Mar-00 21
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Cisco Systems, Inc - Timeline

1984-- Founded by Len Bosack Sandy Lerner
(computer scientists from Stanford) 1989-- 27M
sales with only 3 products and 111
employees 1990-- 69M sales goes public with
market cap of 224M 1994-- 1.13B sales Cisco
goes online with its Cisco Connection Online and
becomes the first major
supplier of Multiprotocol internetworking
products to be awarded ISO
9001 certification 1997-- Cisco
reorganizes/aligns products and solutions into 3
customer segments enterprise,
small/medium business, and service
provider. 1998-- Cisco becomes the first company
in history to achieve a market capitalization of
100B in 14 years. 8.5B in
total annual sales. 2000-- 18.9B in
sales 2001-- 22.3B in sales 2005-- 23.6B in
sales
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Cisco Systems, Inc

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Cisco Systems, Inc Company Comparison
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Cisco Systems, Inc Success?

• Growth Strategy
• Outsource majority of production
• Strategic acquisitions and investments in other
  companies
• Cisco uses the web more effectively than any
  other big company in the world
• Internet sales (1995)
• Cisco Connection Online configure, price,
  order
• Customer support (600M in savings)
• Cisco Manufacturing Connection Online (B2B supply
  chain extranet)
• Cisco Employee Connection
• Supply Chain Management
• Remediation
• Misled by the system? (2001)

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Cisco Systems, Inc Information Orientation

• The Digital Firm
• Extensive Internet integration
• Close supply chain integration with suppliers
• Precise sales forecast system
• Strong Information Management practices
• Reorganization along technology groups
• Centralized engineering and marketing
• Future Strategies
• Growth through hot startup acquisitions
• New markets
• Expanded offerings in consulting and software