123 School Work

Dell Key Activites and Critical Factors of Success

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  Question #2 Key activities that Dell pursue:
  Sales: Dell supplies products directly to large and small consumers. Most competitors sell through different channels (distributors, resellers, retailers, and wholesalers). By selling directly to consumers, Dell does not have to give up margins to channel markups. Competitors must share their margins with different partners. Dell has more freedom for additional investment, a potential war price, and extra compensation for employees or stockholders. In addition, by selecting a direct sales model, Dell I) increases its negotiation power against a more fragmented group of buyers (consumers) and II) diversifies risk and sales dependency by not concentrating large sales to specific groups of distributors and resellers (No single customer represented more than 2% of Dell sales). On the other hand, its competitors are dealing with a more consolidated group of distributors and resellers, which is detrimental to its negotiating power. In addition, other competitors increase their dependency risk by dealing with a reduced number of buyers (channels) who do not have high switching costs and do not provide reliable information (forecast). The Direct Sales model affected the way Dell production system was deployed (manufacturing cells) and its sales oriented organization chart. By categorizing buyers, Dell was able to customize value added activities to extract the most added value based on the segment's willingness to pay...