Page 25 - merged.pdf

•Nine Greatest Selling Innovations 5

By 1984 the relationship between a computer supplier and any of its customers,

apart from the very biggest, was through third parties. The next pioneering move

belonged to Michael Dell who formed his company in that year.

The aim was to re-establish the supplier/customer link by selling personal com-

puter systems directly to corporate customers. The argument was simple. If you

remove retailers and resellers you remove time delays and costs, and most

importantly you have a direct link between the supplier and customers’ If you remove

problems and expectations. You order your computer by telephone or on retailers and

the Internet and you get what you need, no more and no less. It was a resellers you

hugely successful selling innovation and the company has grown to a turn- remove time

over of around $31 billion per year. delays and

Always willing to change its strategy to meet new market conditions, costs and, most

Dell has by no means stood still. Using expensive premises as owned by importantly,

Wal-Mart, for example, was discontinued in favour of further concentra- you have a

tion on the Internet. The Web medium for sales is now approaching $8 direct link

billion per year. This is my estimate starting from a number I got from between the

Dell covering the period to 1999. Orders from the Internet go directly to supplier and

the factory and the company boasts it can assemble and pack a custom- customers’

built PC in less than four hours. problems and

Falling component costs plus its own efficiencies offer Dell yet more expectations.

ways to expand. At present Dell claims some 60% of the consumer PC

market where the price tag is between $2500 and $3000. It has only 1% of the

market for PCs below $1500. This is their new target. Relying on its brand name

and manufacturing efficiency, it expects to compete well in this arena without suf-

fering a body blow from the squeezed margins, the bugbear of the current players.

The company’s intention is to continue to develop its direct to customer business

model and calendar 2001 was the first full year in which Dell led the global computer-

systems industry, with nearly 14 per cent market share. The company tells us to expect

further growth, as it believes that the best days for Dell and the whole industry are still

ahead. Dell used a useful comparison to illustrate why this growth is likely to be true.