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The challange of Dell:
In April 1997, BusinessWeek reported that Dell was selling increasingly well via the Internet.
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1
2
3
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Q2 1997Q4 1997Q2 1998Q4 1998
DellInternetSales/Dayin MUSD
Producing a computer at…..
components forecastbatch assemblystorage at factory/
centralwareh./resellercustomer ordercustomised at resellerdelivered to end-user
components forecastcustomer ordercustomised
assembly stocks on the ”road”delivered to end-
user
Compaq: Dell:
Compaq numbers:
0
5000
10000
15000
20000
25000
30000
1994 1995 1996 1997
Sales in MUSD
Income in MUSDEmployees
Compaq´s story (1982-1997):
used external partners whenever possible to obtain leverage
relied on EDI for integration backwardincreased the distance between itself
and end-customers introduced BTO and CTO capability latenow: tries to build relationships with
end-customers
Compaq´s key capabilities:
product-development (quality and compatability)
manufacturing (BTS based on forecasting)
procurement (economies of scale)distribution savy (well-managed
partnerships)
Dell´s numbers:
0
2000
4000
6000
8000
10000
12000
14000
1994 1995 1996 1997
Sales in MUSD
Income in MUSDEmployees
Dell´story (1985-1997):
offered BTO and CTO from the outsettried to sell indirect - failedserious problems in logistics and qualitystarted to focus on large enterprisesstarted to work closely with Intelpioneered Internet salesnow: tries to personalise the customer
experience
The evolution of www.dell.com:
1989: TFP-downloading service 1993: Intranet called Dellnet1994: Internet1996: Extranet (Boeing and Ford)
www.dell.com/se
On-linecommerce
Serviceand support
Marketing
UniqueRelationsips
Structure
Targeted commercecapability at eachcustomer segment
Function Benefit
Transaction cost reductionIncremental revenue
Internal supportcapability directlyto customers
Customer satisfactionCall avoidanceEnhanced/new services
Convert browsersto buyers
Extending frequencyand dept in contact
Demand generationReduced acqusition costs
Increasing volumesLower defection rate
Customisation of customer contact:
FEW
MANY
All customers
Registered customers
Contractedcustomers Goldcustomers
Product info, order info, ordering,configuration, investor relations, support and forums
Newsletters, e-mail services, white papers
Price discounts, order history detail,statistics, premier pages,
Customisation of all services above, EDI links, and product and model schedules
Dell´s key capabilities:
relationships with demanding end-customers
BTO and CTO manufacturing capability
lean logisticsrapid technology dessimination
The latest news from Compaq:
In November 1998 Compaq announced that they would start selling directly (again)
Compaq had replanned and retooled their plants - offering BTO and CTO (almost)
Compaq launched the new Prosignia-line designed for BTO/CTO production
Compaq created a new organisational unit for SMBs
Compaq services for SMBs:
online.commerce - turn-key electronic commerce solution
online.delivery - secure online delivery of business files
online.briefcase - remote access to PC and servers
online.connectivity - basic internet access
online.backup - off site backup facility
online.library - online reference library
The latest news from Dell:
DellTalk Online Forum (virtual community)
DirectEffect (software sales) Dell-Excite alliance (personalised
pages)Dell-AT&T alliance (Internet access)E-value (instant lead to konfiguration)
What can we learn?
how it is bought changes what is sold
and what is sold changes who buys
and who buys changes how it is bought
How doesthe Internettransform businessmodels?
Transformation in practice:
Compaq starts to sell directly, but need to design a new line of computers to make it possible (how-what)
Compaq´s new computers appeal to new categories of customers (what-who)
Compaq´s new customers demand online back-up, software, library etc tied in with the computer (who-how)
What can we learn? Cont.
integrationaddressabilityinteractivitycustomisationpersonalisationpostponement
What firm capabilites are needed to support business model transformationinduced by theInternet?