1 Despite its previous success of direct sales in the 1990s

1. Despite its previous success of direct sales in the 1990s, Dell decided to offer its PC/laptop models through Wal-Mart, Best Buy, and other retailers in 2007. Compare the trade-offs between a centralized direct sales model with the indirect sales model through retailers and discuss the current PC industry dynamics (i.e., life cycle, competition, opportunities and threats), do you think Dell made the right decision?

Solution

Dell stock price had fall 30% in 2006, while other competior like HP performed better in those year. Even then Dell enjoy competitive advantage by selling customize computer to customer through direct sales. But it had no longer maintain as market shrunk due to increase in customer needs with increase in supply chain cost. There are two major factors that cause Dell arrive at this condition :

1. Channel trade off`s

2. PC market dynamics

Dell direct sales channel have lower facility and inventory cost than retailers with transportation is high. In contrast, retailers have more comprehensive support and instantly available products.but they can not stock material as high as direct sellers do.

Product type and lifecycle stage will always influence customer needs and supply chain cost as companies can not reside on one channel and assume it to be always successful. For example a three year old computer is capable to full fill common business needs of Microsoft office. This technology trend clear shows the customer needs and computer sales model.Dell initially focus on customization and centralize storage but now customer willing to choose from small off shel PC`s and less focused on customization. As PC prices turns quickly and changes in models of inventory can lower the profits. These shifts lower the values of direct sales and focus more to increase profits.

In my point of view Dell made a right decision according to customer needs and current market trends. It helps them to increase profits and increase their market share. It also helps them to reach at roots level and better connectivity.