dell inc case study

How Dell’s strategy transformed it from a doomed player to leading the data revolution

Table of contents, here’s what you’ll learn from dell's strategy study:.

• How to sustain your company’s growth beyond its initial success.
• How a sober bet for the future fuels your conviction to win.
• How to think long-term and not sacrifice your future for short-term benefits.

Dell Technologies is a multinational technology company that designs, develops, and sells a wide range of products and services, including personal computers (PCs), servers, data storage devices, network switches, software, and cloud solutions.

The general public owns 58% of Dell Technologies, while private equity firms and institutions own the rest. Michael Dell is the founder, chairman, and current CEO.

Dell's market share and key statistics:

• Brand value of $26,5 billion
• Net Worth of $28.7 billion as of Jan 13, 2023
• Annual revenue of $105.3 billion for 2022
• Total number of employees: 133.000
• Total assets worldwide: $93 billion in 2022

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Humble beginnings: How did Dell start?

The story of every company starts with the story of its founder.

Usually, a great company has a great founder story behind it. And Dell Technologies certainly has one. Michael Dell’s story goes hand in hand with the story of the company he founded. By understanding the story of Michael, we can understand the company’s initial advantages and opportunities it pursued.

And like every great tech company story, Dell’s story starts in a college dorm room.

From stamps to startups: Michael Dell's early years and the birth of Dell

Michael Dell founded the company in college, but his entrepreneurial journey started much earlier.

He had an early interest in technology and business, and by the age of 12, he was already buying and selling stamps and coins to make extra money. As a teenager, he worked summer jobs where he learned by trial and error how demand and supply worked, how to be efficient, how to segment the market, and determine the most profitable persona to sell.

By the time he graduated from high school, he had saved up enough money to buy his own BMW and his first personal computer, an Apple and later an IBM.

But he was curious about the inner workings of these machines and, to his parents' horror, he took them apart, learning about the different components and how they worked together. He soon made a crucial discovery. IBM DIDN’T manufacture its own parts. Instead, it sourced them from other companies. This sparked an idea in Michael's mind - he could build his own PCs using the same components but at a lower cost and higher quality.

That idea didn’t come out of the blue.

Michael Dell was constantly educating himself on computers, how to build them, how they worked, and how to code. He followed all computer magazines at the time and attended every event in his neighborhood to network and learn the latest about the industry. In high school, he was already an expert, modifying his own PC and, once the word spread, customizing the PCs of professionals.

His first customers were friends and acquaintances who were impressed by his knowledge and expertise. Michael quickly realized that there was a demand for customized computers that were not available in the market. He began assembling machines with increased storage capacity and memory at a fraction of the cost of buying from big brands like IBM.

Doctors and lawyers were among his early customers, and word-of-mouth about Michael's high-quality and affordable PCs spread quickly.

He eliminated the middleman by buying components directly and assembling the machines himself, which allowed him to offer lower prices and better performance. By the end of his first year in college, Michael had a vendor's license, he was winning bids against established companies in the industry, and he incorporated his first company, “ Dell Computer Corporation .”

Dell’s direct-to-consumer strategy & how its corporate culture was formed

The company was growing frightfully fast, forcing the team to constantly change and evolve its processes.

Before the company had its second birthday, they had moved to bigger offices three times to accommodate its increased inventory, growing telephone needs, and physical or electronic systems. However, the company was still a high-risk venture and had a small capacity for expensive mistakes.

In those early days, the challenges Dell faced formed its processes and the core traits of its culture that are present to this day:

• Practicality and reduced bureaucracy. They did some things unconventionally, like having salespeople set up their own computers. That way, they gained first-hand knowledge of the technology and the customer’s pain problems (customers and salespeople were uneducated on the technology, so they shared the same problems).
• A “can-do” and “I’ll-pitch-in” attitude. Employees took substantial liberties with their “responsibilities.” Engineers would help with the overloaded manufacturing line, everyone would answer phone calls, salespeople would fulfill orders while taking new ones, etc.
• A sense of making a difference. Money was tight, so Dell employees wouldn’t mind solving secondary “needs” with cheap solutions like using cardboard boxes to throw their trash because they didn’t have trash cans.
• Direct relationships with the customers. Maybe one of the most important aspects of Dell’s culture and strategy. The company was talking at the same time with prospects and current customers on the phone. That way, it got first-hand feedback on what the market was currently asking for and was enjoying or not enjoying. That gave birth to Dell’s  “Direct Model.”

The company went to great lengths to build and maintain the direct model because it was one of its most important sources of competitive advantage. Where other companies had to guess what to build next, Dell was already on it because their customers were telling them.

There were clear advantages to the Direct model:

• Closed feedback loop. Dell was talking directly to prospects – no dealer costs – and had no need for inventory. Lower costs = lower prices = more customers. And with every new customer, Dell had another finger on the pulse of the market.
• A single salesforce. Focused solely on the end customer. There was no need to have salespeople to sell to dealers and then additional salespeople to sell to the customer.
• Specialization in sales. Dell sold to large corporations, and smaller customers, like SMBs, educational institutions, and individual consumers. But selling to these two different buyers, large corporations and SMBs, was incomparable. So, the company had different salespeople for different customer segments and thus offering the best customer support and experience.

But the model wasn’t without its disadvantages:

• The model wasn’t irreplicable. Dell was making IBM-compatible PCs and selling them directly to customers. This model wasn’t hard to replicate, and the market’s conditions favored the birth of competitors with the same model.
• Lack of credibility. It’s hard to make a $5,000 sale when the customer has never heard of you and you lack a physical store.
• Incompatibility. Dell’s PC had to be compatible with IBM’s. But they had multiple suppliers for their components and sometimes those components were incompatible. Designing high-quality machines that were outperforming and compatible with IBM’s was a challenge.

But these disadvantages didn’t stop the team. The company doubled down on customer support and service and developed a strong reputation around them. It advertised a 30-day money-back guarantee and educated its suppliers to make components based on Dell designs. They even started their first R&D attempts that gave them a  12-MHz  that was faster than IBM’s latest model, cheaper, and got them on the cover of the most prestigious magazine in the industry, the  PC Week .

Dell’s strategy was so effective that phone calls started coming in, urging them to accept capital and go public.

Only three years after the company’s birth in a college dorm room, Dell went public, raising $30 million with a market valuation of $85 million.

Key Takeaway #1: Build a coherent strategy beyond your initial differentiator to sustain growth

Most companies enjoy initial success due to an untapped opportunity in the market, from addressing a niche market to exploiting the weaknesses of major players.

But no company succeeds at growing beyond the limits of the initial opportunity if it doesn’t evolve and expand its competitive advantage. So when evaluating your next move, ask yourself:

• What is our current competitive advantage?
• How easily can our competition replicate it?
• How can we make it harder (if we can)?
• How can we expand our capabilities to strengthen our current competitive advantage?
• How can we develop new competitive advantages?
• What are the market trends and how can we adapt/take advantage of them before others?

The occasional bold move doesn’t hurt, either.

Recommended reading:   6 Competitive Analysis Frameworks: How to Leave Your Competition In the Dust

How Dell’s privatization led to a strategic triumph

In the first decade of the new millennium, the PC business was growing rapidly.

Computing power followed  Moore’s Law  and innovation cycles in hardware were less than 12 months long. At the same time, a new generation of software was spreading and the World Wide Web was expanding globally. Being a part of a growing industry, like the PC business back then, was lucrative. So naturally, many companies did well.

Dell was one of them. In 2000, the company became the world’s largest seller of PCs, having enjoyed a decade of skyrocketing sales.

However, in 2011, things changed. The PC global sales reached their peak and the next year was the first of an 8-year streak of decline that lasted until the pandemic hit.

That decline impacted Dell severely.

Navigating decline: Dell's strategy for a shrinking market

Dell was in deep trouble at the start of the previous decade:

• It had lost its position as a top PC seller in the US to its main competitor, HP.
• It came third in the global PC market share, behind HP and ACER.

Many believed that it was a dying company that would perish like Kodak or Motorola.

The PC market was shrinking and some experts were saying it was the beginning of its end. Dell was expected to be among the first casualties. The truth was that the PC industry wasn’t dying, but it was evolving – it was losing some of its traits and gaining new ones. The difference is subtle but also key. In a competitive arena, every alert player is aware of the market changes: declining sales, emerging trends, and other important facts. But how each player interprets them determines whether they’ll  formulate a winning strategy  or not.

The more substantial the changes, the more important the interpretation.

In 2012, the fact was that the PC business was declining. Every major player could see it with a single glance at their balance sheet. In Dell's case, the decline was even direr since its PC sales were down by double digits. The company desperately needed to turn things around. And only a bold strategic move could do that.

The company tried to bounce back up with some obvious but desperate moves:

• The introduction of the Streak “phablet.” An embarrassing attempt at creating a new product category between tablets and smartphones. Its design was bulky and its Android software unsuitable for the device, while its purpose was unclear to the consumer.
• Making Windows 8 its default operating system. Dell and Microsoft have been longtime partners, to the benefit of both companies. Unfortunately, their growing interdependence meant that when one failed, it dragged the other one down. Windows 8 failure dragged down Dell and further decreased its PC market share.
• Attempts to enter the tablet and smartphone markets: the “Venue” debacle. Dell was always viewed as a PC company, not a technology company, making it harder to expand to new categories. Its first smartphone, the  Venue , ran on Windows Mobile and it never got any traction. As a result, the company abandoned the categories and, even today, it has less than negligible presence in these markets.

But where people saw a vulnerable company, Michael Dell saw an opportunity.

He had an assumption, a vision attached to it, and a plan to make it a reality. But he had no way to execute it with the company’s organizational structure at the time.

The obstacles to implementing Dell's competitive strategy

Dell’s strategy was to go on the offensive. He wanted the company to be highly aggressive by:

• Becoming competitive in the PC business again.
• Expanding its services and software solutions.
• Increasing its sales capacity.

Dell aimed to achieve these goals by investing heavily in R&D, gaining tighter control over its PC and server prices, and expanding its sales workforce. The idea was to fund new business capabilities in the software and services space from Dell's PC segment. That was a bold plan that involved a lot of changes and, thus, a lot of risks.

Dell’s strategy was essentially a  business transformation  proposal.

And although a lot of public companies have successfully gone through a transformation, none did it in such a short period of time without sacrificing the short-term faith of its shareholders. And that was exactly the problem.

The strategy was inherently risky – like every  good strategy  is – as it promised capital expenditure and an immediate decrease in profitability due to increased operating expenses. Things shareholders hate. And if shareholders aren’t happy with the company’s near-term returns, they start selling their shares, and the company loses its value and a good portion of its funding capabilities. 

Short-term risk = lower share prices = less funding for the company

Thus, the strategy was impossible to execute without the support of the shareholders. So the company had only two options: gain the support of the shareholders or go private.

Dell chose to go private.

Dell's game-changing decision was based on a strategic bet

For a gigantic public company with a market cap of nearly $20 billion, going private is a tough decision and a complicated process.

But it was an unavoidable preliminary for the successful execution of Michael Dell’s plan. And the first step was to convince the board of the necessity of the transformation. After announcing his idea, the board started discussions with experts to evaluate the move, i.e. top consulting agencies and other independent third parties.

JP Morgan , Boston Consulting Group, Evercore, and Debevoise were some of the names involved. And they all shared the same view:

• The PC is dying.
• Funding a business transformation from a declining business is a bad idea (despite such successful attempts from  IBM  and  BMW  in the past).

The experts had a lot of facts and strong arguments to support their case. However, all of them were based on a single assumption:  tablets and smartphones will replace the dying PC . The growth in those categories would entail a decline in the PC business. They believed the PC was about to be cannibalized.

Dell’s CEO disagreed. What was his assumption?

He believed that tablets and smartphones wouldn’t take away from PCs but rather add to it. He believed that the PC’s central role in productivity and business wasn’t going to be dethroned by the new shiny toys. People would buy and use tablets and smartphones, but PCs would remain their primary productivity tool.

And he would bet Dell’s future on it.

But he had to convince the board of directors first. At the start, conversations were happening in secret and things were moving slowly but steadily. But when the idea was leaked, two new problems presented themselves.

The first was Carl Icahn, who contested for the ownership of Dell.  Carl Icahn is a self-proclaimed “activist investor” but others call him a “corporate raider.” The closer the go-private initiative was to happen, the more Carl Icahn fought for it. And he used every improper tool and method he could muster. The battle that followed between Carl and Michael delayed the deal and almost derailed it.

The second was Dell’s customers’ hesitation in doing business with the company.  The rumors about the go-private initiative left the customers wondering about the future of Dell and doubted whether any kind of investment in it was worth it. They were suspending purchases and all Dell’s leadership could say was, “We don’t comment on rumors and speculations.”

The press had also concluded that the go-private initiative was a declaration of Michael Dell’s incompetence and a desperate attempt to keep Wall Street’s eyes away from its demise.

History would prove them wrong and crown Michael Dell victorious.

A new chapter: How Dell's go-private move set the stage for future success

The deal happened.

In February 2013, Michael Dell and the investment firm of Silver Lake took Dell private in a leveraged buyout of $24.4 billion, at $13.65 a share.

Despite all the time that passed until Dell could fully execute its strategy, the company didn’t remain idle. It had made several calculated moves to significantly reduce its dependence on the declining PC market before the deal conversations ever happened.

From 2007 to 2012, Dell spent north of $12.40 billion in key acquisitions to increase its enterprise software and hardware solutions, including cloud data storage and management. The acquisitions focused on areas like:

• Data storage
• Systems management
• Data management in healthcare
• Cutting edge software

The company had already started severing the connection between its financial health and its PC market share many years ahead of its privatization.

But after the buyout, it went all in. Speed and agility became its prominent advantages. Dell became, nearly overnight, a hungry, quick, and ready-to-attack-its-prey jackal. Whenever a new opportunity arose and people asked for resources to pursue it, leadership committed double the resources and said, "Go faster!"

For example, SMBs (small and medium businesses) presented a gigantic opportunity. So the company increased its sales workforce, retrained its existing salespeople, and hit endless SMB doors. They would enter a business selling their low-margin PCs and simultaneously become their trusted advisor on all things tech. Then they sold their whole portfolio of solutions.

And the morale of employees was off the charts. Leadership kept their promises on the changes and provided all the support their people needed to execute the plan.

In addition, people started viewing PC and smartphones as complementary, just as Dell expected.

Was Michael Dell’s bet a good one? Well…

45% of Dell’s revenue was generated from PC sales, but 80% or more of its profits were generated by its new solutions. Eight years after the privatization, the value of their equity had increased more than 625% and their enterprise value reached $100 billion.

We’re pretty confident that’s a yes.

Key Takeaway #2: Successful strategic bets require a sober conviction

Markets change and evolve all the time. The difference between players that emerge prosperous and those that struggle to fit in the new order of things isn’t the unique access to data.

No. Every alert player in your competitive zone has more or less the same access to market trends and changes. The difference lies in what you envision the future to be. That’s your bet.

That’s what a winning corporate strategy needs. And because bets are inherently risky, you require two things to place a successful bet:

• Sobriety to envision what the future of your industry will look like.
• Conviction to pursue that vision relentlessly.

Steering towards success: Dell's current strategy and the EMC merger

Michael Dell had foreseen the evolution of the technology industry since the 2000s.

Not the specifics, but the trend of PCs and hardware becoming less relevant – or at least less profitable – and software, the cloud, and back-end taking the front seat. He realized (from very early on) that servers and storage management would become a huge concern for large enterprises building (or upgrading) their IT infrastructure.

Dell anticipated the market’s needs by making a simple observation: the quantity of data in the world expanded exponentially and the traditional way of data management would require server performance that wasn’t physically possible to achieve. But he knew there was a solution underway: virtualization – software that mimics the computer, creating virtual mainframes within the physical mainframe.

That’s why the company had started investing in these technologies since 2001.

Achieving synergy: Dell's competitive strategy and the merger with EMC and VMware

Dell, EMC, and VMware are three major players in the technology industry with distinct but complementary offerings.

EMC  had a successful product in networked information storage systems, i.e. a database management system for enterprises.

VMware  was pioneering in virtualization, allowing users to run multiple operating systems on the same device.

Dell  had an established distribution network and a series of back-end solutions that could expand and fit well with the former technologies.

The relationship between these three companies started in 2001. Dell and EMC entered a strategic alliance to rule a market of $100 billion worth by 2005.

For EMC, the alliance was a one-stone-three-birds initiative.  First,  it offered a lucrative distribution channel to customers their competitors were already targeting.  Second,  it ensured Dell wouldn’t partner with a competitor.  And third,  it reduced its supply costs for components.

For Dell, it also had a threefold benefit.  First,  It added high-performing products to a rapidly growing business.  Second,  it gave it an important customer – EMC was using Dell’s servers.  And third,  it allowed Dell to infiltrate deeper into enterprise data centers.

A strategic alliance that gave both Dell and EMC a competitive edge.

Then EMC bought VMware. That gave the company massive capabilities around cloud infrastructure services ending up being a very lucrative move. Dell, which had invested in VMware back in 2002, saw a massive opportunity to acquire the new EMC.

So Dell and EMC first began discussions of a potential partnership back in 2008, but the idea was ultimately shelved due to the financial crisis. However, in 2014, Dell revisited the idea as both companies had grown and become leaders in their respective industries.

Dell saw the potential for a merger as the two companies' services would bring significant value to their customers when combined. EMC's CEO, Joe Tucci, agreed with this assessment, but they still had to convince EMC's board. EMC was publicly held while Dell was private, and as soon as the idea was on the table, Dell found itself competing with two other interested parties, Cisco Systems and HP. In fact, HP nearly succeeded in acquiring EMC.

It failed due to a financial disagreement. So Dell jumped on the opportunity.

By then, EMC had grown tremendously and had eliminated any short- to mid-term potential start-up disruptors by acquiring them. EMC’s three businesses were uniquely complementary to Dell’s solutions:

• EMC Information structure , a leader in the data storage system market.
• VMware , the undisputed leader in virtualization.
• Pivotal , a start-up with a platform to develop cloud software.

However, the acquisition was a tough process. EMC had grown to a market cap of over $60 billion. It was impossible for Dell to fund an acquisition. Instead, the two companies merged.

The merger happened through a complex but effective financial plan, and the synergies created by the combined company increased revenue significantly. A year after the merger was initiated, the added revenue was well above expectations. This allowed Dell to pay down a significant portion of its debt and improve its financial standing and investment rating. The success of the merger led the company to simplify its structure and align the interests of the stakeholders of the three companies.

In 2018, Dell went public again as a very different entity than its first IPO, uniquely equipped to lead the 5-S sectors:  services, software, storage, servers, and security.

What is Dell’s business strategy’s primary focus today?

Dell aspires to become a leading player in the data era by providing a wide range of solutions, products, and services.

Excluding VMware, Dell is divided into two main business segments supported by its financial subsidiary:

• The Infrastructure Solutions Group ISG helps customers with their  digital transformation  by providing multi-cloud and big data solutions that are built on modern data center infrastructure. These solutions are designed to work in multi-cloud environments and can handle workloads in public and private clouds as well as on-premise.
• The Client Solutions Group CSG focuses on providing solutions for clients such as laptops, desktops, and other end-user devices. ‍
• Dell Financial Services DFS supports Dell businesses by providing financial options and services to customers according to the company’s flexible consumption models. Through DFS, the company tries to tailor its financial options to each customer’s way of consuming Dell’s solutions.

Dell's core offerings include servers, storage solutions, virtualization software, and networking solutions. The company is constantly investing in research and development, sales and other key areas to improve its products and solutions and to drive long-term growth.

Its primary strategic priorities are:

• Improving and modernizing its current offerings in the markets it operates in.
• Expanding into new growth areas such as Edge computing, telecommunications, data management, and as-a-service consumption models.

And its plan involves several key  initiatives :

• Developing its flexible consumption models and as-a-Service options to customers to meet their financial needs and expectations.
• Building momentum in recurring revenue streams through multi-year agreements.
• Investing in R&D to develop scalable technology solutions and incorporating AI and machine-learning technology. Since its Fiscal year 2020, the R&D budget is consistently at least $2.5 billion. Most of it goes towards developing the software that powers its solutions.
• Collaborating with a global network of technology companies for product development and integration of new technologies.
• Investing in early-stage, privately-held companies through Dell Technologies Capital.

Although Dell has a coherent strategy to achieve its objectives, competition isn’t idle nor trivial in the core competitive arenas. The company faces a significant risk that includes:

• Failure to achieve intended benefits regarding the VMware spin-off.
• Competition providing products and services that are cheaper and perform better.
• Delays in products, components, or software deliveries from single-source or limited-source suppliers.
• Inability to effectively execute its  business strategy  (transitioning sales capabilities, expanding solutions capabilities through acquisitions, etc.) and implement its cost efficiency measures.

The technological advances are rapid, and players are in a constant race to innovate not only on the technologies they provide but on their business models and all of their services and solutions. Emerging players and strategic relationships between competitors could easily shift the competitive landscape before the company finds a way to react.

Key Takeaway #3: When making transformational decisions, prioritize thinking long-term

A major acquisition, or a merger, between industry leaders is a bet on the industry’s future.

If you believe in the bet long-term, don’t sacrifice a good move for short-term returns, as HP did with EMC. Instead, do your due diligence in the consideration phase:

• Consider real alternatives.
• Understand deeply how the capabilities of both companies will be improved.
• Validate your assumptions with current market needs and trends.
• Move faster than the competition.

Why is Dell so successful?

One of the key reasons Dell has been so successful is Michael Dell’s intuition and strategic instinct.

He demonstrated a consistent ability to take an accurate pulse of the market, make a winning bet and chase it relentlessly by performing a business transformation. Additionally, Dell never lost one of its core strategic strengths: building strong relationships with its customers by providing excellent customer support and tailored solutions to meet their unique needs. The company has also been successful in streamlining its  operations  and supply chain, which has allowed it to offer competitive prices and high-quality products.

Dell puts the customer first and makes strategic pivots with perfect timing.

How Dell’s vision guides its steps

According to Dell’s annual report, its vision is:

“To become the most essential technology company for the data era. We seek to address our customers’ evolving needs and their broader digital

transformation objectives as they embrace today’s hybrid multi-cloud environment.”

And their two strategic priorities, growing core offerings and pursuing new opportunities, are their roadmap to achieving it.

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Case study: Dell—Distribution and supply chain innovation

Read the highlights

• Cutting out the middleman can work very well.
• Forgoing the retail route can increase customer value.
• Re-examine & improve efficiency for process/operations.
• Use sales data and customer feedback to get ahead of the curve.

In 1983, 18-year-old Michael Dell left college to work full-time for the company he founded as a freshman, providing hard-drive upgrades to corporate customers. In a year’s time, Dell’s venture had $6 million in annual sales. In 1985, Dell changed his strategy to begin offering built-to-order computers. That year, the company generated $70 million in sales. Five years later, revenues had climbed to $500 million, and by the end of 2000, Dell’s revenues had topped an astounding $25 billion. The meteoric rise of Dell Computers was largely due to innovations in supply chain and manufacturing, but also due to the implementation of a novel distribution strategy. By carefully analyzing and making strategic changes in the personal computer value chain, and by seizing on emerging market trends, Dell Inc. grew to dominate the PC market in less time than it takes many companies to launch their first product.

No more middleman: Dell started out as a direct seller, first using a mail-order system, and then taking advantage of the Internet to develop an online sales platform. Well before use of the Internet went mainstream, Dell had begun integrating online order status updates and technical support into their customer-facing operations. By 1997, Dell’s Internet sales had reached an average of $4 million per day . While most other PCs were sold preconfigured and pre-assembled in retail stores, Dell offered superior customer choice in system configuration at a deeply discounted price, due to the cost-savings associated with cutting out the retail middleman. This move away from the traditional distribution model for PC sales played a large role in Dell’s formidable early growth. Additionally, an important side-benefit of the Internet-based direct sales model was that it generated a wealth of market data the company used to efficiently forecast demand trends and carry out effective segmentation strategies. This data drove the company’s product development efforts and allowed Dell to profit from information on the value drivers in each of its key customer segments.

Virtual integration: On the manufacturing side, the company pursued an aggressive strategy of “virtual integration.” Dell required a highly reliable supply of top-quality PC components, but management did not want to integrate backward to become its own parts manufacturer. Instead, the company sought to develop long-term relationships with select, name-brand PC component manufacturers. Dell also required its key suppliers to establish inventory hubs near its own assembly plants. This allowed the company to communicate with supplier inventory hubs in real time for the delivery of a precise number of required components on short notice. This “just-in-time,” low-inventory strategy reduced the time it took for Dell to bring new PC models to market and resulted in significant cost advantages over the traditional stored-inventory method. This was particularly powerful in a market where old inventory quickly fell into obsolescence. Dell openly shared its production schedules, sales forecasts and plans for new products with its suppliers. This strategic closeness with supplier partners allowed Dell to reap the benefits of vertical integration, without requiring the company to invest billions setting up its own manufacturing operations in-house.

Innovation on the assembly floor: In 1997, Dell reorganized its assembly processes. Rather than having long assembly lines with each worker repeatedly performing a single task, Dell instituted “manufacturing cells.” These “cells” grouped workers together around a workstation where they assembled entire PCs according to customer specifications. Cell manufacturing doubled the company’s manufacturing productivity per square foot of assembly space, and reduced assembly times by 75%. Dell combined operational and process innovation with a revolutionary distribution model to generate tremendous cost-savings and unprecedented customer value in the PC market. The following are some key lessons from the story of Dell’s incredible rise:

1. Disintermediation (cutting out the middleman): Deleting a player in the distribution chain is a risky move, but can result in a substantial reduction in operating costs and dramatically improved margins. Some companies that have surged ahead after they eliminated an element in the traditional industry distribution chain include:

• Expedia (the online travel site that can beat the rates of almost any travel agency, while giving customers more choice and more detailed information on their vacation destination)
• ModCloth (a trendy virtual boutique with no bricks-and-mortar retail outlets to drive up costs)
• PropertyGuys.com (offers a DIY kit for homeowners who want to sell their houses themselves)
• iTunes (an online music purchasing platform that won’t have you sifting through a jumble of jewel cases at your local HMV)
• Amazon.com (an online sales platform that allows small-scale buyers and sellers to access a broad audience without the need for an expensive storefront or a custom website)
• Netflix (the no-late-fees online video rental company that will ship your chosen video rentals right to your door)

2. Enhancing customer value: Forgoing the retail route allowed Dell to simultaneously improve margins while offering consumers a better price on their PCs. This move also gave customers a chance to configure PCs according to their specific computing needs. The dramatic improvement in customer value that resulted from Dell’s unique distribution strategy propelled the company to a leading market position.

3. Process and operations innovation: Michael Dell recognized that “the way things had always been done” wasn’t the best or most efficient way to run things at his company. There are countless examples where someone took a new look at a company process and realized that there was a much better way to get things done. It is always worth re-examining process-based work to see if a change could improve efficiency. This is equally true whether you’re a company of five or 500.

4. Let data do the driving: Harnessing the easily accessible sales and customer feedback data that resulted from online sales allowed Dell to stay ahead of the demand curve in the rapidly evolving PC market. Similarly, sales and feedback data were helpful in discovering new ways to enhance customer value in each of Dell’s key customer segments. Whether your company is large or small, it is essential to keep tabs on metrics that could reveal emerging trends, changing attitudes, and other important opportunities for your company.

See additional learning materials for distribution .

Summary: Dell combined operational and process innovation with a revolutionary distribution model to generate tremendous cost-savings and unprecedented customer value in the PC market.

Read next: customer discovery: identifying effective distribution channels for your startup.

Strickland, T. (1999). Strategic Management, Concepts and Cases . McGraw Hill College Division: New York.

Customer discovery: Identifying effective distribution channels for your startup

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24 Dell: The Business Case for a Sustainable Supply Chain

• Published: March 2021
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The computer manufacturer Dell runs the world’s largest electronics take-back programme. It has recovered more than 800,000 tonnes of electronics since 2008. In the case of individual consumers it partners with freight companies in retrieving equipment from consumers’ homes and partners with Goodwill, a not-for-profit organization that seeks to make people independent through education and training, in running 2,000 locations across the United States where consumers can drop off any brand of used electronics. The article points to the commercial as well as the environmental savings resulting from the recycling programme and describes the process by which Dell has been able to achieve this.

Introduction

Dell is one of the world’s largest computer manufacturers and technology companies. The company sells a wide range of IT hardware, software products, and services for enterprise, government, small business, and consumer markets. 1 As a privately held company, Dell has the freedom to pursue a longer time horizon and to commit to changing how it uses its resources. The principle of efficiency is central to the Dell business model and informs the company’s approach to resources, sourcing, and waste management.

Pain Points in the Ecosystem

Dell’s commitment to efficiency has prompted the company to take on the timely challenge of improving e-waste disposal throughout its business.

E-waste, that is, discarded electrical and electronic equipment, is the world’s fastest-growing waste stream. 2 Rapid technology innovation and ever-shortening product lifespans are contributing to the increase of e-waste. 3 According to a United Nations’ University report, the amount of global e-waste reached 41.8 million tonnes in 2014. 4 To compound matters, e-waste has a low overall recycling rate, which means that unwanted equipment remains unused.

Responsible e-waste disposal is not only important from an environmental perspective, but also makes good economic sense. 5 Vast amounts of gold, for example, exit the economy due to low recycling rates, but increasingly there is an opportunity to recapture that value, as a tonne of computer motherboards contains more gold in it than a tonne of gold ore. In terms of scale, the material value of global e-waste was estimated to be €48 billion in 2014 alone. 6 This underutilized resource has a vast ‘untapped potential to create a more sustainable, efficient product ecosystem’. 7

The circular economy takes the traditional, linear model of ‘take, make, and dispose’—which moves products from design to factory to consumer to landfill—and bends it into a more efficient closed-loop ecosystem. Unwanted used electronics can be taken back for refurbishment and then resold on the secondary market. Products beyond repair, or those that are no longer economical to repair, are recycled to allow for precious and scarce materials to be recovered. Recycled content can either be incorporated into the design and manufacturing of new products or sold for others to use.

Research shows that approximately 30 per cent of consumers have technology products lying around the house unused, and half of consumers are unsure about what to do with their old electronics. 8 According to Dell, similar situations exist with businesses warehousing old equipment. Take-back options make it easy for a wide variety of customers to dispose of their old electronic products in a responsible manner. This measure ensures that unwanted electronics get reused or, if at the end of life, properly recycled.

Plastic is one of the most useful and important materials in modern society. It is popular in computers due to its durability, ease of fabrication into complex shapes, and electrical insulation qualities. 9 However, plastic recycling remains challenging and, as a result, the material constitutes a major contributor to landfills and to nonpoint source pollution—pollution from many different sources. The production of traditional plastics also uses a substantial amount of fossil fuels. Manufacturing plastics from fuel is resource intensive, requires large amounts of energy, and releases relatively high levels of CO 2 emissions in the process. Recent research has shown that our current use of plastics will become unsustainable if we do not take steps to improve recycling and reduce plastics’ usage.

Using secondary, recycled plastic as feedstock for new computers presents one possible solution. With the fast pace of innovation and product upgrades in the ICT sector, recycled content can reduce the environmental toll of manufacturing with virgin materials. The circular economy and the development of secondary raw material markets are high on the European agenda. Nevertheless, it remains challenging to find a sufficient supply of high-quality post-consumer recycled plastics that meets the technical, economic, and aesthetic requirements of ICT products manufacturers. 10

In response, Dell is taking steps towards creating a ‘circular’ supply chain (see also Interface, Chapter 25 ). In addition to environmental concerns, the increased volatility in commodities and growing pressure on resources have alerted Dell to the business necessity of rethinking materials and energy use. 11 In 2013, Dell committed to putting a total of 50 million pounds weight of recycled materials back into its products by 2020. The company reached this goal at the beginning of 2017 and is continuing to scale its efforts.

For Dell, sourcing post-consumer recycled plastics from the market and building a new, stable closed-loop supply chain for plastics from used electronics collected through take-back programmes present viable and affordable alternatives to using virgin materials. Rather than focusing exclusively on individual challenges, Dell has taken steps to approach their supply chain from a broader, systemic perspective. Most recently, this has included expanding its efforts to also address precious metals, such as gold. Jennifer Allison, director of supply chain sustainability at Dell, summarizes the company’s current business strategy:

We’re talking about systems—not just products, programmes, or initiatives. Looking at the whole system is when change begins to make a significant difference. Technology is a great tool for measuring and analysing systems, understanding processes, and identifying inefficiencies. 12

In this way, Dell takes a whole ecosystem view of its product life cycles. This approach is transforming the design of products and services. Dell’s life-cycle approach aims to keep viable products and parts in circulation for longer periods of time. It also harnesses global efforts to reuse, refurbish, and resell products and parts to extend their lifetimes and to recycle them at the end of life.

Product design emphasizes ease of repair and recyclability from the beginning. Dell also looks continuously for ways to incorporate sustainable materials, such as recycled plastic and reclaimed carbon fibre, into products and packaging. 13

The Take-Back Programme

Dell has the world’s largest electronics take-back programme, which spans more than seventy-five countries and territories. The programme has recovered approximately 800,000 tonnes of electronics since 2008. For commercial customers, Dell offers a full-spectrum of logistics and disposal capabilities via the Asset Resale and Recycling Service. Current capabilities include data security, on-site shredding, recycling, and full traceability reporting. Dell also makes it easy for individual consumers to recycle by partnering with freight companies to provide free mail-back recycling of Dell-branded equipment. In many countries, the programme will even pick up used equipment from a customer’s home. 14

Another programme designed to make the recovery of obsolete electronics easier and more accessible is the Dell Reconnect Partnership with Goodwill, a not-for-profit organization committed to helping people become independent through education and training. The Reconnect Programme allows people to drop off any brand of used electronics to more than two thousand participating Goodwill locations across the United States. Dell Reconnect accepts any brand of computer equipment in any condition from consumers and provides free recycling services.

Dell returns all proceeds to Goodwill in order to help support Goodwill’s mission of putting people to work. 15 By participating in this initiative, customers simultaneously help protect the environment, benefit the community, and receive a receipt for tax purposes. In this way, the programme helps both the customers and the business.

The donated equipment has value as a whole system, as parts, and sometimes as raw materials such as metals, plastics, and glass. 16 If the equipment can be refurbished, Goodwill sells it. If not, the end-of-life product is sent to Wistron, one of Dell’s recycling partners, for asset recovery in the United States. Metals such as tin, gold, 17 and tungsten are re-sold in the commodities market. To complete the closed loop, plastics are sorted and shipped to China, turned into pellets, and mixed with virgin plastics for use in new Dell products. 18

Closed-Loop Recycled Plastic Supply Chain

Dell’s 2020 ‘Legacy of Good’ sustainability plan set the goal of incorporating 50 million pounds weight of post-consumer recycled-content plastics and other sustainable materials into Dell products by 2020. 19 Dell met this target ahead of schedule in early 2017.

It started with the launch of Dell’s closed-loop recycled plastics supply chain in 2014. Since then, the company has used more than 9,750 tonnes of closed-loop plastics in over 125 products. These products include flat-panel monitors, desktops, and all-in-one computers.

Run in conjunction with various supply chain partners, the programme consists of collecting, recycling, and using e-waste to make new Dell products. 20 It begins with sorting plastics out of the various take-back streams, further processing them, and then sending them to a manufacturing partner in Asia. The plastics are then melted down and moulded into new parts and computer components, thereby creating a closed-loop system. The whole process—from the time the equipment is received for recycling to the time the plastics are back in a customer’s hands as part of a new product—takes just under six months. The closed-loop system also provides businesses with a price more stable than the cost of virgin materials, which fluctuates with the price of oil. It also reduces the company’s dependence on those environmentally costly virgin materials. Furthermore, by reusing plastics already in circulation, Dell cuts down on e-waste, reduces carbon emissions, and helps drive a circular economy for IT. The closed-loop process yields an 11 per cent lower carbon footprint than a process using virgin materials, 21 and creates products that are better for the environment, which is increasingly what Dell customers demand. 22 Dell was also the first PC manufacturer (January 2018) to use recycled gold from e-waste in its products. Working with the data analyst TruCost, it found that this closed-loop process can cause 99 per cent less environmental damage and avoid $1.6 million in natural capital costs per kilogram processed (US$3.68 million for the pilot project alone) when compared to gold mining. The same study showed closed-loop process can avoid 41 times the social impacts of gold mining.

Dell’s leadership in recovering and reusing plastic from used computers constitutes an important step in moving the larger electronics industry towards a circular economy. Louise Koch, corporate sustainability director in EMEA for Dell, describes the impetus for initiating a closed-loop system:

Dell’s programme is driven by both an effort to improve efficiency—a principle that goes back to its founding ethos and business model—as well as a commitment to reducing environmental impact. 23

The use of closed-loop plastics may create a demand for plastic from used computers and thereby increase the level of plastic recycling from electronics. This, in turn, generates new jobs and opportunities for those in the nascent industry, all while staying true to Dell’s founding principles.

Challenges in Moving to a Closed-Loop Recycling System

In moving from the traditional take–make–dispose linear supply chain to a circular supply chain, Dell has had to overcome a number of hurdles.

One of the biggest challenges that Dell faced with the closed-loop recycling was identifying which types of plastic can be incorporated back into new products. As Scott O’Connell, director of environmental affairs for Dell, puts it, ‘When dealing with plastics, getting the properties equivalent or better to virgin materials isn’t easy…But this is a challenge we’ve been able to overcome with engineering know-how.’ 24 Dell worked with partners to test different approaches. Testing revealed that, due to mechanical and aesthetic considerations, a blend of recycled-content with virgin plastic produces the best outcomes.

Another challenge involves establishing a reliable closed-loop supply chain. As O’Connell describes, ‘We had to make sure that we had sufficient volume of product coming in to be able to yield enough plastics to put into a mainstream Dell product.’ 25 Supply of products and plastic derives from Dell’s own sources, which adds a greater degree of insight and security. However, for the closed-loop recycling to work and scale, Dell needs security of supply, which can be difficult to attain with fluctuating numbers of products collected through take-back. Shrinking form factors—the fact that there is less plastic per item recycled as electronics become smaller—further complicate the situation. Hence Dell needs to continue to drive increasing participation in take-back programmes, while at the same time exploring other means of acquiring recycled-content materials.

Transporting materials poses an additional challenge. Dell customers are all over the world, which means that take-back initiatives must accommodate the global scale. While Dell has a small closed-loop plastics supply chain in Europe already and is exploring ways to scale in other geographies, materials need to be collected in sufficiently large amounts to make shipping to a centralized processor worth the economic and environmental costs. This involves logistics, regulations, and other considerations. In some cases, even the definition of the material being moved can affect the viability of closed-loop efforts: is recycled plastic labelled as waste or a raw material, for example?

The final challenge for Dell is to demonstrate the benefits of closed-loop recycling to customers. Ultimately, the products look and perform exactly the same as those made from virgin materials. Dell must communicate the value proposition to customers by highlighting the amount of recycled content in the final product, the closed-loop nature of the materials, and the benefits to the customers’ own sustainability goals.

Performance

Since 2008, Dell has taken back more than 1.76 billion pounds (nearly 800,000 tonnes) of used electronics and since mid-2014, when Dell launched the closed-loop plastic recycling programme, it has created nearly 5,000 tonnes of plastics from recycled computer parts. Dell has saved more than $1.8 million from this process, and the carbon footprint of circular plastics is 11 per cent smaller than that associated with the manufacture of virgin plastics. Dell now uses circular plastics in approximately 125 products across millions of units globally.

Together with TruCost, Dell has completed an evaluation to understand the gains from moving away from virgin plastics. One of the most useful ways for companies to assess the risks associated with new initiatives is to quantify the environmental impacts generated by their activities—internal operations, upstream supply chain, and downstream product use and disposal—and then convert those impacts into monetary values. 26 The monetary value helps identify the value not captured in traditional financial markets and incorporates these considerations into decision-making. 27

Findings showed that Dell’s closed-loop plastic has a 44 per cent ($1.3 million annually) greater environmental benefit than virgin ABS plastic. 28 In particular, increased computer recycling lessened environmental impacts. The research found that recovering and recycling the used plastics from computers minimized ‘human health and ecotoxicity impacts’ and reduced the overall emission of hazardous substances. 29

Dell has also begun to incorporate social impact metrics into its valuation framework. 30 Emergent strategies such as analysing activities for their use of social and human capital are likely to be an area for further refinement and application in the future. 31 At present, Dell is combining both environmental and social impact metrics into its process in order to help tackle the challenge of responsible e-waste disposal.

On a global scale, there is still huge potential to scale up circular resource streams in the IT sector and beyond. Only 10 per cent of the plastics produced today are recovered—and more than 50 per cent end up in landfills.

Dell has increased the use of recycled materials (both closed-loop and traditional post-consumer recycled materials) in new products and plans to continue to scale the programme.

As Dell continues to scale the current programme, it will look to expand into reclaiming and reusing other materials. Dell has already had success with using reclaimed carbon fibre for products and is currently using recycled ocean plastics ink made from captured diesel emissions for packaging.

Dell will also look at how ocean plastics or other solutions can be used with products.

Dell will continue to measure social impact using the same methodology, updating models for collection totals to follow form-factor trends. It will report progress annually, building on this total toward a cumulative 2 billion pounds by 2020. 32

Dell continues to lead conversations with governments and industry partners about recycling and circular loops on a global scale. Dell is open to innovative collaborations with even more customers, partners, and governments in the coming years. Dell sees particular opportunities in creating partnerships in developing countries to strengthen this ecosystem.

Dell’s take-back programme presents a compelling example of the potential of circular economy and closed-loop systems to contribute to responsible, mutual business practices. Looking towards the future, creating closed-loop recycling programmes in developing countries represents a new frontier. Recycling products in the countries from which they are recovered brings skilled jobs, creates industry, and strengthens the local economy. 33 Using its proven abilities to leverage partnerships and government relationships to create the infrastructure needed for new programmes, Dell can continue driving a culture of recycling in communities around the world. 34 As Dell’s programme example highlights, collaborative approaches have the potential to create both financial and environmental savings for corporations and customers on a global scale.

‘Dell Inc. at a Glance,’ Company Profile, Vault.com, http://www.vault.com/company-profiles/computer-hardware/dell-inc/company-overview .

Center for Security Studies, http://isnblog.ethz.ch .

Baldé, C.P., Forti V., Gray, V., Kuehr, R., Stegmann, P. The Global E-waste Monitor – 2017, United Nations University (UNU), International Telecommunication Union (ITU) & International Solid Waste Association (ISWA), Bonn/Geneva/Vienna.

Rubin (2015).

Kitsara (2014).

Baldé et al. (date).

Anya Khalamayzer.(2017) “8 Ripple Effects of the Circular Economy in 2017”, Greenbiz, https://www.greenbiz.com/article/8-ripple-effects-circular-economy-2017 .

‘Switched on to Value,’ WRAP Report, November 2014, http://www.wrap.org.uk/sites/files/wrap/Switched%20on%20to%20Value%2012%202014.pdf .

‘Plastics: Key Materials for Innovation and Productivity in Major Appliances,’ American Plastics Council, http://infohouse.p2ric.org/ref/11/10437.pdf .

‘Best Practices in Recycled Plastic,’ DigitalEurope , August 2016, http://www.digitaleurope.org/DesktopModules/Bring2mind/DMX/Download.aspx?Command=CoreDownload&EntryId=2276&language=en-US&PortalId=0&TabId=353 .

‘Best Practices in Recycled Plastic,’ DigitalEurope .

‘Full Circle’, Institute for Supply Management, October 2016—Lisa Arnseth interview with Jennifer Allison.

‘Dell on the Circular Economy’, March 2016, http://i.dell.com/sites/content/corporate/corp-comm/en/Documents/circular-economy-0316.pdf .

‘Dell Recycling,’ Dell Inc., http://www.dell.com/learn/us/en/uscorp1/dell-environment-recycling .

‘About Us,’ Goodwill Industries International, Inc., http://www.goodwill.org/about-us/ .

‘Dell Reconnect—How It Works’, Dell Inc., http://www.dell.com/learn/us/en/uscorp1/corp-comm/how-it-works-reconnect .

www.dell.com/gold .

Hower (2015).

‘Dell 2020 Legacy of Good Plan’, Dell Inc., http://i.dell.com/sites/doccontent/corporate/corp-comm/en/Documents/2020-plan.pdf .

‘Dell’s Closed-Loop Recycling Process’, Dell Inc., https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjdkPqots7TAhXhKsAKHde7AF0QFggoMAE&url=http%3A%2F%2Fi.dell.com%2Fsites%2Fdoccontent%2Fcorporate%2Fsecure%2Fen%2FDocuments%2FClosed-LoopRecyclingfull.pdf&usg=AFQjCNHzBL-F4ooKUkKnDSbgyHG8CLRzQ&sig2=bKIXDKjRA1YoWSQgh4H5yg .

Louise Koch (Corporate Sustainability Lead for Europe, Middle East and Africa), personal communication.

Scott O’Connell (Dell, Director of Environmental Affairs), interviewed by Mike Hower (Hower 2015)

Dell, Dell Inc., http://www.dell.com/en-us/ .

‘Valuing the Net Benefit of Dell’s More Sustainable Plastic Use at an Industry-Wide Scale’, Trucost, September 2015, http://i.dell.com/sites/content/corporate/corp-comm/en/Documents/circular-economy-net-benefits.pdf .

‘Dell 2020 Legacy of Good Plan,’ Dell Inc., http://i.dell.com/sites/doccontent/corporate/corp-comm/en/Documents/2020-plan.pdf

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Dell, Inc. Case Study

Landing Dell confirmed what City leaders already knew. Oklahoma City was ready for prime time and had established itself as a hot location for tech jobs.

Provide an appropriate site, workforce plan, and incentives package to persuade a major technology firm to not only locate in Oklahoma City, but also broaden and develop their initial paradigm to allow for a greater vision and mutually beneficial end result.

Assemble a nimble, creative team with common goals and the ability to change focus quickly, providing a firm with not only their stated needs but the grounds and motivation for an even larger, more expansive operation.

• Greater economic impact
• “Anchor tenant” for riverfront redevelopment
• Creation of working model for future corporate location / site selection opportunities
• Validation / continuance of Oklahoma City’s economic and cultural renaissance

INTRODUCTION

When Dell, the world’s largest computer maker, announced plans in July 2004 to open a Customer Care Center in Oklahoma City, it caught many people by surprise. But it didn’t surprise anyone who had worked behind the scenes to make it happen.

“Frankly, internally the rumor was that Tampa had landed the deal, but Oklahoma City didn’t back down -- and the pride, true loyalty and commitment of everyone that we interacted with was material,” said Brenda Hudson, Director of SMB Services for Dell Inc. Hudson served on Dell’s North American Site Assessment team and later became the first director of the Oklahoma City operation.

“This wasn’t just an economic development initiative,” she said. “This was a joining of a corporation with real people and a real community and a real sense of partnership. The excitement around what Dell could do for the community was palpable and frankly, still is.”

Landing Dell confirmed what City leaders already knew. Oklahoma City was ready for prime time and had established itself as a hot location for tech jobs. In fact, Expansion Management magazine named Oklahoma City the eighth hottest city for business relocation in 2005, ahead of Dallas-Fort Worth.

“The Dell brand is very strong,” said Mayor Mick Cornett, “and Oklahoma City’s brand is rising.”

Today Dell serves as a gateway to the city’s downtown core and as an anchor for the new riverfront redevelopment. As drivers head north or south on Interstate 44 across the Oklahoma River, the two buildings of Dell’s Oklahoma City campus provide a striking visual symbol of what’s possible when a leading global company creates a lasting partnership with an unprecedented team of public and private partners.

SITE SELECTION PROCESS

According to Charles Kimbrough, then business recruiter with the Oklahoma Department of Commerce, Dell was first looking at who might staff their new operation. “They asked for specific information, largely surrounding labor statistics, and made it clear the project would be workforce-driven. One of the things they wanted in that first proposal was the wage rate for their proposed positions compared to the average household income and compared to the price of a 2000 square-foot home. Their goal was to hire people at a wage that would allow them to live comfortably.”

There were several unique aspects to the Dell site selection process, including Dell’s use of an internal site selection team, the changing scope of the project and the need for a seamless and effective local planning team.

“Dell had a good team of people,” said Gary Pence, senior business development manager with the Greater Oklahoma City Chamber. “Tom Menke, then Dell’s senior project strategist, and Charles Kimbrough bonded from the start. The teams were able to work through a lot of issues with Dell because of that trust.”

It was also unusual that the scope of the Dell project changed quite dramatically over a short amount of time. Almost overnight, Dell’s plans grew from a 250-person customer care center in an old retail site to a high profile campus with a workforce of over 1,000 persons. Workforce was the driver for the change, and city and state officials had always had a bigger vision for what was possible.

“We were confident from the start because we thought we were vying for a small customer care center, and those can be placed in practically any metropolitan area,” explained Roy Williams, President and CEO of the Greater Oklahoma City Chamber. “We just made up our minds to do everything we could to help Dell understand what our City really had to offer.”

In the end, sharing a bigger vision with Dell paid off. “Dell’s team recognized there was much more here than they initially thought and that there was potential for a different kind of business unit,” Williams said. “They figured out that we were capable of embracing just about anything they chose to do.”

In addition to the uniqueness of Dell’s in-house site selection team and the speed with which the project quickly morphed into something much bigger than anyone expected, the comprehensive team that the Greater Oklahoma City Chamber and the state of Oklahoma put together was integral to the ultimate success of the effort.

The caliber of team members, their ability to align programs and services across agencies, and their quick responses to Dell’s needs impressed Dell officials. “Oklahoma City was very creative in the negotiation phase and gave Dell every courtesy, and made it clear that the endeavor was a partnership, not just an economic development project,” said Hudson.

Once Dell officials made the decision to locate in Oklahoma City, the ramp up time was unusually short. In just two months the teams were able to hire the initial workforce and finalize the riverfront land deal with the City.

The quality of the greater Oklahoma City area workforce was a deciding factor in Dell’s site location decision. While there may have been doubters on the Dell team early on, city and state officials quickly proved that Oklahoma City could handle the employment needs of a major technology company.

So how did Oklahoma City prove to Dell officials that the region could support their employment needs?

Oklahoma City and state officials ran a blind employment ad to find out how many qualified responses they would get. People responding to the ad had to do a short online assessment and send in a resume. The results were impressive.

“At the next meeting with Dell, Richard Gilbertson, OESC director of employment services, brought in a stack of applications a foot deep and sat them on the table. ‘Here are a few prospective employees I think you will be interested in,’ he said. The visual image alone was spectacular.”

After Dell officials formally announced plans to locate in Oklahoma City in July 2004, the OESC, Career Tech and the Workforce Investment Board recruited, tested, screened, trained, and delivered applicants to Dell who were prepared and ready to go to work.

An agreement between Dell and Oklahoma’s Training for Industry Program (TIP) meant that the state paid for assessments, the training of new employees and top-notch classroom space, furnishings and equipment.

Dell began operations in Oklahoma City from a temporary location in the Hertz Financial Center in September 2004. At that time, according to Kimbrough, Dell was still looking at two different communities in Oklahoma for their permanent location.

“Oklahoma City put together a proposal that was incubated out of Cathy O’Connor’s office that simply blew Dell away,” Kimbrough said. “It was one of the most clever and creative proposals I have ever seen.”

O’Connor was Oklahoma City’s lead negotiator on the Dell project. She proposed the site along the Oklahoma River and explained that if Dell chose a site in a blighted area they could receive more incentives. Oklahoma City had already offered $2 million in incentives for one location, but Dell could qualify for at least $2 million more if they chose the River site.

Dell was also looking at Oklahoma City’s quality of life. “Without our knowledge, one of Dell’s top officials brought his entire family to Oklahoma City for Memorial Day Weekend to find out what living in Oklahoma City was like,” Kimbrough said. That informal, behind-the-scenes visit had a positive impact on Dell’s decision. One month later they announced plans to build their own facility on an approximately 55-acre site on the Oklahoma River.

By July 2005 Dell announced expansion of employment and a second building at its Oklahoma facility. Just a year after choosing Oklahoma City for its sixth customer care center, Dell expanded its work force twice and began building two 120,000 square foot offices along the Oklahoma River to house at least 1,000 employees each. Karen Quintos, then vice president and general manager of Dell Americas Contact Centers said, “The quality of the area work force made the decision to expand our operation an easy one. We have exceeded our performance expectations here for our customers since taking our fist call in September 2004.”

SITE AND INCENTIVES

When Dell decided to search for a larger site, the Greater Oklahoma City Chamber used a sophisticated, web-based, Geographic Information System (GIS) called The Oklahoma City Economic Development Information System (OKCEDIS) to obtain data about properties in the area, including availability, cost per square foot and amenities such as hotels, restaurants, and traffic conditions around specific sites. They were also able to look at work force availability at various mile radii simultaneously. Using OKCEDIS sped up the site location process and it was the first time Dell had used GIS.

O’Connor said that in addition to the City providing an initial $4 million in incentives, she developed the idea of providing additional monies for jobs that were created, and funded those grants from federal Community Development Block Grant dollars. That idea led to $5.5 million in job creation grants for Dell.

“TIF revenues were used to make site improvements,” O’Connor explained. “It would not have been possible for Oklahoma City to fund the incentives needed to attract Dell and create up to 3500 new jobs in Oklahoma City without TIF.”

In Dell’s case, the City created both a sales tax and a property tax increment district. The sales tax increment is based on new sales taxes generated by the jobs created by Dell.

Dell’s campus is located on a 62-acre site along the Oklahoma River in Oklahoma’s federally designated Empowerment Zone.

By locating in an Empowerment Zone, which is created in an area where average wages are low to promote public-private collaboration to stimulate job growth, Dell is able to take advantage of unique tax breaks and incentives.

Today Dell has a developable site for future growth, and could add a third building on their campus site, according to Batchelor. But because Dell took the initiative to develop and build on a brownfield site in an EZ, there is great potential to add new development in the area.

“Right now we are involved in several follow through pieces, including a Riverfront Redevelopment Plan that will develop an area adjacent to Dell on the east and west,” said Batchelor.

At the state level, Dell qualified for the Quality Jobs Program, which pays rebates of up to five percent of payroll each quarter in exchange for hiring new employees. Dell also received TIP funding from the state for employee recruitment and training.

Although incentives are always important, Hudson said the willingness of the Chamber team, Francis Tuttle Technology Center, Mayor Cornett, Governor Henry and others to “really understand our business, our candidate profile and our ramp, resonated throughout the site selection process and set Oklahoma City apart from the rest.”

“Dell wanted a really cool kind of campus to attract the kind of employees they wanted,” Williams said. “And we wanted a corporate anchor on the river to make a statement about where we are headed as a city. We knew it would be successful.”

RESULTS/ECONOMIC IMPACT

The results of Dell’s decision to locate in Oklahoma City have been phenomenal. Dell has hired and trained more than 2000 people since September 2004 and continues to find strong candidates for sales and technical support positions.

Dell’s Oklahoma City campus has exceeded expectations when compared to other Dell Centers, according to Hudson. “Oklahoma City has performed exceptionally well comparatively. The high-end technical group quickly became best of breed from both a delivery and customer satisfaction standpoint and the sales arms also ramped quickly and competitively.”

Oklahoma City’s Dell campus supports ten Dell business units and served over nine million customers in 2007. Since its inception, Dell’s Oklahoma City facility has had a total economic impact of $631 million in the region.

In addition to Dell’s financial impact, the company has given back to the community in many other ways. According to Kathy Oden-Hall, Dell Oklahoma’s corporate communications manager, employees donated about 5000 hours in community service in 2007 alone. They have supported events and projects for children through the Boys and Girls Club and Baptist Children’s Home, provided meals for the hungry through the Regional Food Bank, donated blood to the Oklahoma Blood Institute and garnered the “Most Spirited Award” three years running for the Dell water stop at the Oklahoma Memorial Marathon.

The Dell Foundation has also contributed more than $300,000 to area organizations. “Globally, Dell understands the importance of community service, and has made a commitment to support local communities where their employees live and work,” according to Oden-Hall.

“We will have a solid and lasting relationship with Dell as a company because we built personal relationships with the people involved,” said Williams. We continue to provide legislative and business support to Dell as well. I consider it a compliment that they call on us first for assistance.”

As a result of the entire Dell experience, the Oklahoma City recruitment team believes they have a competitive advantage because they know each other well and work well together.

“In other states people may come to the table not knowing each other and distrusting each other,” explained Dearing. “We know each other well. We know our roles and responsibilities, respect each other, and stay in touch with each other. It takes all of us to make something this wonderful work, and it is invaluable to a prospect.”

More Case Studies

Greater Oklahoma City excels in exceeding expectations. Read more about how our team helped deliver value and great working relationships to our customers.

The Greater Oklahoma City Chamber did more than figure out what to do. They came up with a big idea and brought all the necessary players together to make it happen.

For Oklahoma City, the cost of living, pro-business environment, incredible incentives offered, central location and quality of life combine to make OKC an ideal place to do business.

Throughout Tinker Air Force Base’s history dating back to the 1940s, Oklahoma City leaders have shown an ongoing willingness to support the U.S. military’s mission here however they can.

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Dell’s Turnaround Strategy in 2008

January 8, 2010

Business Management Article

Dell’s new retail business and supply chain approach

Dell is taking steps to turnaround its business and recovering from losses and decline in its profit margins. Dell had first announced cost-cutting measures as early as May last year. In 2007, Dell changed its direct-sales model to offer computers in retail outlets, after losing the title of top PC maker to Hewlett-Packard Co (HP). Dell is now beginning to supply similar products to retailers like Wal-Mart, but as a smaller percentage of its business. Dell is currently the second largest computer retailer in the world behind HP.

Dell’s well-established direct-sales model allowed buyers to custom-build and purchase computers online or by phone. Customers could choose custom PCs (almost 500,000 configuration options or combinations that were assembled) direct from its factory. On the other hand, competitor HP also sold configure-to-order models but also supplied fixed-configuration PCs direct to retail.

Dell’s new retail business is not profitable as of now. So Dell aims to make its retail computer business cost-effective by aligning (reducing) manufacturing costs (cost of goods sold) with its competitors. But this will be challenging since Dell does not have the same volume in retail globally (as competitors), and therefore a smaller fixed base to spread costs. Secondly, Dell’s supply chain had not exactly been designed for mass distribution. HP uses a diversified supply chain unlike Dell’s one supply chain approach. [Download Case Study on Dell’s Supply Chain Management Strategy (pdf file)]

The return of Michael Dell and the Turnaround Plan

Michael Dell, the founder of Dell returned as the CEO in January 2007, and the company has a turnaround plan which it promises will yield $3 billion in annual savings over the next three or four years. Dell’s plans include depending more on resellers and contract manufacturers to cut costs and boost sales of which the consumer personal computer business is expected to contribute more than the current 15 percent of total revenue. (At HP, consumer sales of PCs and printers account for about one-third of revenue. Industry-wide sales of consumer PCs are growing at about twice the rate of PCs for businesses.) Contract manufacturers who manage large volumes of orders for big PC makers like HP will be given more work. But apart from concentrating on designing and manufacturing to cut costs, supply chain and logistics (distributing PCs for retailers) are key focus areas as scale is less of an issue. The cost-cutting exercise would also include restructuring of its logistics network and outsourcing more of its manufacturing operations. Dell also announced its intentions to install a logistics hub in Dubai to cater to the emerging market regions and also into the east African regions. Developed economies like the US (though the biggest) are the slow in growth. Last year, the EMEA region made up less that 25 per cent of its total revenues (70 per cent growth) and is estimated to be $61 billion in 2008.

Dell’s Turnaround Plan:

Cutting costs : Cutting costs is very important because competitors like HP use the money from profitable printers operations and take more market risk with designing innovative products. Moreover the prices of computers keep going down. One can buy a Dell laptop now for less than $500.

Moving away from computers internally and outsourcing more of its manufacturing operations : Dell has manufacturing facilities in Texas, North Carolina, Tennessee, and in Malaysia, Penang, China and Poland. Its manufacturing operation in Austin, Texas will shut down. Also HP, IBM and Sun Microsystems already have long-standing partnerships with outside manufacturing partners. These partners offer customers bundles of computer hardware, software and services. Dell on the other hand is relatively a new player in this field and has traditionally depended on its own businesses to design and make computers.

Moving into indirect sales channels like computer resellers and retailers .

Introducing more products : New product introduction is vital since major PC manufacturers realistically only make money in the first three months (or six in some cases) of a new product.

Analysts predict that it will take Dell one more year for its PCs to be as cost-effective as its competitors and stage a recovery.

Dell Inc.’s Human Resource Management Problems Case Study

Problem statement, list of alternatives, analysis of the alternatives, recommendations, works cited.

The relationship between the managers and workers was not good at all, this led to mass layoffs which affected the company’s performance. The other problem was in the process of recruiting new employees in a bid to achieve sustainable growth and development for the Company.

The company did not have enough creative employees who could contribute new ideas on how to venture into new fields of investment. The chief Executive officer was very impatient with new products in the market; he expected quick returns which was not possible within short span of time (Lynch 433-437).

The relationship between top managers and the subordinates in any company must always be healthy for productivity purposes. From the case in Dell Company, the relationship between the top managers (the Chief Executive Officer Michael Dell and the President Kevin B. Rollins) with the subordinates was poor resulting to mass lay-off hence poor company performance (Lynch 433-437).

Any established company should always have training programs for new employees on issues related to company management; this includes marketing segmentation and sales strategies. This ensures that high level of productivity is realized.

The success of Dell relies on their improvement in the quality of goods they offer. This has to take place by incorporating new technology in the manufacturing process. This will require structuring of business plan that will incorporate new marketing and promotional strategies. There is need for patience whenever a new product is introduced into the market; this allows it time to catch up before any profit is realized (Bonoma 69-76).

Good interpersonal skills and relationship between workers is vital for effective management and running of any company. Communication is a very important factor that ensures smooth running of activities within the company. This must be encouraged amongst all employees regardless of the positions they hold.

This may as well act as a very important tool for designing communication marketing mix outside the Company. The scenario at Dell Inc clearly demonstrates the results of poor communication that ends up creating poor working environment (Ahmed 1177-1186).

It is very important for the firm to offer training to its own workforce than recruiting them from outside the company. This ensures that the new recruits are those who are very much familiar with the company’s production processes. This also encourages smooth transition when it comes to succession within various departments. Dell had a problem with workers from outside because they were unable to adapt with the required speed to the company’s codes and principles.

For a company to keep up with the ever changing demand and supply curve, they must be ready to invest on better ways of improving the quality of their products, this also includes stepping up their technology by initiating necessary modifications with regards to quality and quantity (Kohli 53-81).

Dell’s conservative ways could not enable the company to invest hence failing to compete favorably within the market. In the business world, it’s not easy for one to get quick returns from newly introduced products. It calls for patience and proper strategizing. Dells impatience and quest for quick profit slowed their productivity and consequently affected the end results (Cravens and Piercy 2009).

The management should work out modalities of creating good relationships amongst the workers at all levels (Johlke and Duhan 265-267). There must be harmony within the working environment. It’s inevitably necessary for the Company to have new recruits if it expects to expand its production and improves on the level of its skilled manpower.

This can be done through training and internship programs. The company should come up with good business plan that enables it to arrest the lucrative investment opportunities. By all standards, when a new product is launched in the market, it will take a while for it to command public confidence. As such the producers must be patient and use good sales and marketing strategies.

Ahmed, Pervaiz. “Internal Marketing Issues and Challenges”. European Journal of Marketing; London 37 (9), (2003):1177-1186.

Bonoma, Thomas. “Making Your Marketing Strategies Work”. Harvard Business Review. Harvard Business school USA (1984): 69-76.

Cravens, David and Piercy, Nigel. “Strategic Marketing”. McGraw Hill. 9 th edition. 2009.

Johlke, Mark and Dale, Duhan. “Testing Competing Models of Sales Force Communication,” Journal of Personal Selling & Sales Management , United States Vol. 21 (2000): 265-277.

Kohli, Jaworski. “Market orientation: Antecedents and consequences”. Journal of Marketing , New York 57, (3) ( 1993): 53-81.

Lynch, Merril. “Dell Inc”. Business week, New York Feb 6, (2006):433-437

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Dell Inc. Case Study

Apr 04, 2019

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By: Dan McLindon Kyle McDaniel Jeremy Smiley Tom Anderson Ray Moorman. Dell Inc. Case Study. Key Question for Dell . Can Dell overtake HP as the world leader in personal computers with its current strategies of Build to Order and Direct to Consumer sales?.

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Presentation Transcript

• By: Dan McLindon Kyle McDaniel Jeremy Smiley Tom Anderson Ray Moorman Dell Inc. Case Study
• Key Question for Dell Can Dell overtake HP as the world leader in personal computers with its current strategies of Build to Order and Direct to Consumer sales?
• Secondary Questions What contributed to Dell’s success and rapid growth in the late 1990’s? Why is Dell choosing to become more like HP? What does Dell do well and where does it struggle? Can Dell ever be successful in B2C market in developing countries with Direct to Consumer distribution? What is Dell? A computer manufacturer? A consumer electronics company? An IT service partner? What is their focus? What is Dell doing today to set itself apart from the competition in the highly competitive and rapidly evolving personal computer industry?
• Dell Computer Company Overview
• PEST Analysis for Dell

What is going on in the PC industry?

• Industry Overview (Supply) Porter’s five forces: Threat of substitute products High Rivalry among existing competitors High Bargaining power of buyers High Bargaining power of suppliers Low for generics High for key parts Threat of new entrants Low
• Porter’s Five Forces

What is HAPPENING WITH DEMAND?

• Currently A $1.5 Trillion IT Industry Explosion of the digital era World’s data doubles every 3 years Social networking craze Blogs, online video, My Space, Facebook Emerging markets with ½ the world’s population All working together to create DEMAND!
• Is There Further Growth Out There in the PC Market? Shipments of PC’s(millions) 1980 - 2012
• 2007 PC Vendor Market Share Dell’s PC business model has not translated into global leadership. But the growth opportunity is there!

What contributed to Dell’s success and rapid growth in the late 1990’s?

• Build to Order Conclusion – Dell has spent its time and money on innovation to become an efficient manufacturer of computer hardware. Was that an effective use of their resources?

Is Dell’s Build to Order model still a competitive advantage or has it become a liability?

• Build to Order

What has Dell done to separate itself from the competition?

• Dell Inc. Product Timeline Conclusion – Expanding product set into several highly competitive markets with well established players. Strategy is be the low cost leader.
• Internal Analysis – Core Competencies Red – Easy for competitors to develop Yellow – Possible for competitors to develop Green – Very difficult for competitors to develop
• What does Dell do well and where does it struggle?
• Dell's Geographic Performance(Operating Incomes) U.S. Business & EMEA markets showing strongest growth trends.
• Internal Analysis – Markets Served Conclusion – Dell is strong in the US B2B market, but that strategy does not translate to success in B2C. Only 39% of sales generated outside US, compared to 67% global sales by HP.
• Internal Analysis - Manufacturing Conclusion – Dell already starting to outsource its competitive advantage. Can it still compete with HP in the B2C market? Will outsourcing manufacturing impact their advantage in B2B market?
• SWOT Analysis for Dell
• Will dell’s strategy allow it to achieve the growth it desires? Which business models are dated and which can still prove a competitive advantage?
• Elements of Strategy Cost Efficient Build to Order Competition has tried to emulate with limited success ýAlthough other vendors have not replicated Dell’s strategy, they’ve done enough to close the cost advantage gap. ýDell’s lean manufacturing techniques work best in production of desktop PCs. Consumer tastes have shifted to laptops. Dell’s Strategy Contribution towards a future competitive advantage… Cooling Warming
• Elements of Strategy Partner with Suppliers ýIBM, HP, Sony, Toshiba, Fujitsu abandoned vertical integration for strategic outsourcing of components in the early 1990s. Partnering with suppliers to utilize their expertise is a given at this point, no contribution to competitive advantage. Dell’s Strategy Contribution towards a future competitive advantage… Cooling Warming
• Elements of Strategy þCompetitors have not been able to shorten their supply chain as effectively as Dell þCompetitors have had difficulty implementing the sell direct strategy because it cannibalizes other sales channels. ýDisadvantage in some foreign markets where small business and individual customers want more of a hands on shopping experience. Dell’s Strategy Direct Sales Contribution towards a future competitive advantage… Cooling Warming
• Elements of Strategy Industry is evolving with new products. Dell has demonstrated success in entering product segments and succeeding as the low cost provider. Examples are servers and networking equipment. Name recognition from desktops and notebooks gives consumers confidence to try other products. Opportunity for growth is large outside of PCs and servers where Dells market share is negligible. Market share is ≤5% in data storage, networking, printers, and IT services. Dell’s Strategy Expansion of products and services Contribution towards a future competitive advantage… Cooling Warming
• Elements of Strategy Dell’s growing pains with off shoring support services are behind them. Processes and best practices standardized world wide. Voice of the customer – regional forms, IdeaStorm Custom websites for large customers, product design services, value add services ýBelow customer satisfaction goal in Americas Dell’s Strategy Customer Service and Technical Support Contribution towards a future competitive advantage… Cooling Warming
• Elements of Strategy Advocate for customers needs – useful, cost effective technologies Quality Control streamlines the assembly process and reduces costs Growing budget -- $600M in 2008 Facilitates entry into new products and services Dell’s Strategy R&D focused on customer needs Contribution towards a future competitive advantage… Cooling Warming
• Elements of Strategy Use of Standardized Technologies More cost effective than proprietary technology Standardized technologies are upgradeable ýStrategy is easily replicated Dell’s Strategy Contribution towards a future competitive advantage… Cooling Warming
• Elements of Strategy Contribution towards a future competitive advantage… Cooling Warming
• How does dell’s current position compare to HP?
• US Market Share – Dell vs. HP Conclusion – From 2005, declining trend in Market Share for Dell. HP has gained market share during that time. Possible reason for HP’s success is acquisitions (Compaq 2002, EDS 2008)
• Contributors to HP's Operating Income HP acquires EDS Dell should continue focusing efforts on growing IT services business and look for acquisition of IT services company to continue to compete and hold market share against HP.
• Leading Providers of Information Technology (2007) Acquisition of CSC would give Dell increased IT services market share of 3.3% vs. HP’s 5.3% combined market share (with EDS)

What does Dell need to do in order to take the lead again?

• Recommendations Acquire a larger IT services company to supplement Dell's current IT services department - CSC is a possibility Gain immediate market share Focus on critical customers by creating dedicated department head's with authority to meet the demands of the following groups: Large Companies (larger than 400 employees) (already exists, continue current services) - Small-Med companies (less than 400 employees) - Government Agencies - Higher Education Universities - K-12 Primary School Systems Focus on speed of service, customization to meet needs of each organization, build loyalty with groups who have more frequent demand and servicing needs.
• Recommendations Hire product development specialists from product/branding focused companies. Helps Dell to get a fresh perspective on their product and new ideas for development. Redesign laptop and PC brands to make them more exciting for personal use consumers. Dell's competing with HP and Apple who are creating products customers desire. Financials indicate consumer products are struggling vs. competition. Increase R&D budget to create more exciting models.
• Recommendations Sell only a couple standard model PC's and laptops in retail centers like Wal-Mart and Best Buy – out of sight, out of mind mentality for consumers. Allows Dell to appeal to everyday customers who don't desire custom computers. Use suppliers/manufacturers to build these standard models with no changes to the specs – keep costs down. Continue to build PC’s and custom laptops in-house to take advantage of logistics and efficiencies This also builds brand awareness with consumers who may want custom computers. Allow current marketing programs to target higher-end users who desire personalized PC’s. Acquire Chinese PC/laptop maker to enter Chinese market – Increase revenues from Asia-Pacific/Japanese market.
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