Dell's Direct Sales Model
Case 11.1: The direct sales model or a ‘dual system’ model: Dell’s distribution strategy in China.
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 tradi tional channel strategy in the computer business?
Dell’s main FSA is its well designed and integrated supply chain based on its direct sales model. Dell successfully controls its own distribution, bypassing conventional distribution channels and selling directly to consumers. By bypassing the retailers, Dell could sell PCs at lower prices, and because of its direct contact with it customers they are also able to better understand customers’ needs and forthcoming customize its products, creating big purchasing advantages compared to the traditional model.
Dell could benefit to large extent of its direct sales model, because of the availability of large macro-level opportunities beneficial for Dell. In the 1980s, corporate customers and individuals were becoming very sophisticated and experienced technology users. Because they knew exactly what they wanted, they did not necessarily need intense personal selling. They could buy directly from Dell and benefit from their low prices.
This macro-level sociological trend was thus beneficial for Dell.
The other macro level trend is a technological one because of the standardization of components in the computer industry. This made mass customization viable and because Dell used the built -by-order concept, they were better capable to meet the customization requirements of consumers compared to the traditional model with retailers with more standardized PCs in stock.
Compared to the traditional supply chain, the direct model had two major advantages . First, the closeness to end users helped Dell better understand users’ needs, forecast demand more accurately and build long -term relationships with end users. Second, the
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 tradi tional channel strategy in the computer business?
Dell’s main FSA is its well designed and integrated supply chain based on its direct sales model. Dell successfully controls its own distribution, bypassing conventional distribution channels and selling directly to consumers. By bypassing the retailers, Dell could sell PCs at lower prices, and because of its direct contact with it customers they are also able to better understand customers’ needs and forthcoming customize its products, creating big purchasing advantages compared to the traditional model.
Dell could benefit to large extent of its direct sales model, because of the availability of large macro-level opportunities beneficial for Dell. In the 1980s, corporate customers and individuals were becoming very sophisticated and experienced technology users. Because they knew exactly what they wanted, they did not necessarily need intense personal selling. They could buy directly from Dell and benefit from their low prices.
This macro-level sociological trend was thus beneficial for Dell.
The other macro level trend is a technological one because of the standardization of components in the computer industry. This made mass customization viable and because Dell used the built -by-order concept, they were better capable to meet the customization requirements of consumers compared to the traditional model with retailers with more standardized PCs in stock.
Compared to the traditional supply chain, the direct model had two major advantages . First, the closeness to end users helped Dell better understand users’ needs, forecast demand more accurately and build long -term relationships with end users. Second, the
References: Verbeke, A. (2009) International Business Strategy, 151-173, Cambridge, UK: Cambridge University Press Page 5 van 5 Strategy & International Process Assignment 5: Case 11.1 & 14.1 | 15 October 2012