Global Manufacturing - Dell
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I need to provide short, to the point answers for:
1) What are the consequences for Dell's cost structure and profitability of replacing inventories with information?
2) Do you think that Dell's business model can be imitated by other PC manufacturers and manufacturers in other industries? Why or why not?
3) What factors might make it difficult for other firms to adopt Dell's business model?
Info/key points to formulate my answers is required. Thank you.
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Solution Summary
Though addressing each question, this solution examines several key business issues related to Dell's business.
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RESPONSE:
1) What are the consequences for Dell's cost structure and profitability of replacing inventories with information?
Replacing inventories with information had a positive effect on Dell's cost structure and profitability.
· For example, with Dell's direct, build-to-order strategy, where the customer built their own computer (along with just in time strategy), Dell was able to steadily increase its inventory turnover to 60 times per year by 1999, while, for example, Compaq only turned its inventory over 14 times.
· This direct model lead to a large difference in cost and time-to-market with new products, which put Dell at a big advantage against its most less-aggressive competitor.
· Dell introduced successful notebook and server lines, competing in Compaq's most profitable market segments. (1)
· Dell Computer's direct sales, build-to-order model gave it a big advantage in both cost and speed and thus, profitability, and
· Model kept costs low, while improving both effectiveness and efficiency, so Dell achieved a sustained competitive advantage. Another important aspect of Dell's business model is a just-in-time supply chain, with purchases made in great quantities, allowing the firm to further reduce inventory, obsolescence, and cost of raw materials, adding to profitability (2)
2) Do you think that Dell's business model can be imitated by other PC manufacturers and ...
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