Dell case
24th of November, 2010
Introduction International Business
1. What are Dell’s FSAs? What are the macro-level requirements for the direct sales model to be successful? What are the major advantages of the direct model, compared with the traditional channel strategy in the computer business?
Dell’s most important FSA is its direct sales model. The traditional model startsed with manufacturers building computers, they distributed them to dealers who sellold them. Dell started with selling PCs directly to end users. In China they also used the ‘dual system’ model (using both direct sales and distributors). An important feature necessary for the direct sales model to be successful is an efficient supply chain. Dell had this efficient supply chain, you can call this another FSA was its efficient supply-chain.as well. The macro-level requirements for the direct sales model to be successful are a large market size, sophisticated potential customers that are willing to buy via telephone, a potential skilled sales force and capable suppliers and carriers to meet just-in-time management. The major advantages of the direct model are several. ‘First, the closeness to end users helped Dell better understand users’ needs, forecast demand more accurately and build long-term relationships with end users’1, second, ‘the elimination of distributors helped Dell reduce not only its selling cost, but also its inventory through both accurate forecasting and integration with components suppliers’2. The traditional model has to cope with lower revenues because there is an extra step in the chain; the dealers. If they would sell the computers to the dealers for the same price as they sell it now directly to the customer, the end price for the customers would be too high. Furthermore, when using the traditional model, it is hard to find out what customers exactly want, because all the contact goes via the dealers. The integration with component
Introduction International Business
1. What are Dell’s FSAs? What are the macro-level requirements for the direct sales model to be successful? What are the major advantages of the direct model, compared with the traditional channel strategy in the computer business?
Dell’s most important FSA is its direct sales model. The traditional model startsed with manufacturers building computers, they distributed them to dealers who sellold them. Dell started with selling PCs directly to end users. In China they also used the ‘dual system’ model (using both direct sales and distributors). An important feature necessary for the direct sales model to be successful is an efficient supply chain. Dell had this efficient supply chain, you can call this another FSA was its efficient supply-chain.as well. The macro-level requirements for the direct sales model to be successful are a large market size, sophisticated potential customers that are willing to buy via telephone, a potential skilled sales force and capable suppliers and carriers to meet just-in-time management. The major advantages of the direct model are several. ‘First, the closeness to end users helped Dell better understand users’ needs, forecast demand more accurately and build long-term relationships with end users’1, second, ‘the elimination of distributors helped Dell reduce not only its selling cost, but also its inventory through both accurate forecasting and integration with components suppliers’2. The traditional model has to cope with lower revenues because there is an extra step in the chain; the dealers. If they would sell the computers to the dealers for the same price as they sell it now directly to the customer, the end price for the customers would be too high. Furthermore, when using the traditional model, it is hard to find out what customers exactly want, because all the contact goes via the dealers. The integration with component