Dell the PC maker, started by Michael Dell in his University of Texas dorm room, was one of the great success stories of the 1990s and early 2000s. Between the mid 1990s and 2007 Dell grew at an astonishing rate and was far more profitable than competing PC makers. However, from 2007 onward Dell’s profitability declined, while several of its competitors, including most notably Apple and HP, improved their performance. Why did Dell’s performance start to erode after 2007 and what actions is Dell taking to arrest the decline in its performance? 

Dell’s competence was based on selling PCs direct to customers and cutting out wholesalers and retailers so that it could give part of the value created back to customers in the form of lower prices that led to higher sales. Moreover, Dell’s website allowed customers to mix and match product features such as microprocessors, memory, monitors, internal hard drives, DVD drives, keyboard and mouse format, and so on to customize their own computer system. The ability to customize orders kept customers coming back to Dell. 

Another reason for Dell’s rapid growth was the way it found innovative ways to manage its supply chain to minimize the costs of holding inventory. Once again Dell took advantage of the WWW to feed real-time information about changes in its demand for inputs to its suppliers so they could alter their production of components to match Dell’s needs in the next weeks. Also, Dell’s suppliers used this information to adjust their own production schedules to obtain the gains from just-in-time production, which also allowed Dell to drive down costs and prices......

Questions for Discussion

1. What were the keys to Dell’s success as it grew? How did entrepreneurship help the company grow?

2. Why has innovation at Dell been falling in recent years? Search the WWW for information that discusses how Michael Dell is making innovative changes to strategy and structure to turn around his company’s performance.