About Revitalizing Dell case study. Answer the following questions:

• What is their organizational structure?
• Who are the competitors?
• What is their position in the market? Who is the target market?
• What are their core competencies?
• Does the connect-and-develop strategy make sense?

Revitalizing Dell From the early 1990s until the mid-2000s, Michael Dell and his company thrived in the tumultuous personal computer industry. Revenue of Dell Inc rose from $3.5 billion in 1993 to 555 en in 2005 making Dell the world's largest producer of PCs while net income climbed from $149 million to $3.6 builonIn many of those years, Dell earned more on PCs than all of its main rivals combined, and among top vendors, only Dell consistently reported positive margins on PC Dell owed much of its success to its wanted Direct Model": While competitors sold primarily through distributors, resellers, and retailers, Dell took onder directly from customers, built computers to customers' specifications, and shipped machines straight to customers. Rivals studied the Direct Model and copied many of its elements, leading one observe to comment that everyone in ICs wants to be like Mike. Yet to the pulement of industry experts, including Michael Dell himsel na competitor egualed Dell's performance through the mid 2000. In July 2004, at age 39 and with a net worth of more than $14 billion, Michael Dell stepped down as CEO, handed day to day operations of the company to his hand picked successor, and became chairman In subsequent years, Dell Inc. largely continued to follow its traditional strategy, but its growth stalled its net margins dropped sharply, and Hewlett-Packard (HP) eclipsed Dell's global market share in PC. In January 2007, with the value of Dell's common stock off by 40% since the management shift. Michael Dell returned as CEO. Additional moves, including an effort to sell sindirectly through retailers and a major acquisition of an IT services company, met a mixed reception. By December 2009, Dell's stock value was down an additional 60% How might Michael Dell revitalize a company that had long defined Success in its industry? The Personal Computer Industry History The personal computer industry was born in the late 1970, with startups such as Apple Computer offering consumers the first PCs. Established firms, including Texas Instruments, Hewlett Packard, Zenith, NEC, Xerox, Sony, Olivetti, and DEC. soon joined the entrepreneurs and began to produce PCs. IBM arrived relatively late to the market, launching its first in 1981. With a world renowned sales force, 13M commanded 61% of the market for mainframe computers and produced many of the components for its maintrames. In launching its PC, however, IBM purchased many components It commissioned a young software firm, Microsoft, to write the operating system for its and adopted a microprocessor architecture designed by Intel Publishing the main specifications for its PC system, 13M established an "open architecture to encourage rottware developers to write programs for the 13MPC and to spur other firms to make compatible peripherals such as printers. Most of the industry rallied around 13M's standards. By 1983, IBM held 12% of the PC market, and IBM-compatible products accounted for most of the rest of the market. IBM used its huge sales force to sell PCs to large corporate accounts. To serve small businesses and individuals, IBM turned to retailers such as Sears. It also encouraged the development of a network of distributors and dealers known as added resellers, who not only sold to customers, but also guided them through the purchase of an unfamiliar product. Resellers commonly handled installation configured software, pieced together networks, and serviced PC As demand for IBM's exploded, other firms began to offer " V done Compagned the market with a low priced done in 1982 and booked $100 million of revenue in its first year. A host of other startups soon followed. Among them was Dell, incorporated in 1984. Like makers of 13 denes relied on resellers and retail stories to reach customers. While IBM initially seened runs away from the largest corporate accounts, startups without internal sales forces encouraged resellers to cater to large customers. In time, even IBM relied heavily on resellers to service large accounts. By 1956, M ained that it had set a standard, but in doing so had spawned imitators and seded the rights to the most valuable components of the PC the microprocessor and the operating system to Intel and Microsoft. In 1986, IBM declined to adopt Intel's newest microprocessor, the 386 chip and tried to make the more proprietary. Compaq adopted the 386 chip and led a group of done makers in affirming the existing industry standards. IBM subsequently accepted the 356 hip but its market share fell from 37% in 1995 to 17 in 1999 Microsoft released its operating system Windows 30 in 1990 and over the next four years, the friendly Windows became ubiquitous on PCS configured to the IBM standard. Indeed, the standard soon became known as "Wintelreflecting the combination of the Windows operating system and Intel's microprocesor architecture Winter's share of the market remained greater than 90% into the late 2000s, with Apple's and Linux's standards serving the rest of the market. TC performance improved steadily, and prices fell rapidly. The performance available for a given price doubled roughly every 15 months, implying a 100 fold increase cach decade Demand for surged to an initial crest in 1990: receded briefly as a recession gripped much of the world, surged again with the proliferation of email and the Internet in the 1990s: fell with the bursting of the Internet bubble in 2001: grew again through much of the 2000s, and fell off especially among corporate buyers with the economic crisis of 2005-09. Periods of low growth were characterized by intense price wars, while times of high growth saw entry by innovator. Exhibits 1 and 2 show the evolution of market size and shares Components and products in 2009 PC maken, following well established standards, combined modular components of hardware and software to make a vast array of products. Hardware Most hardware components, including housing, keyboards, motherboard memory chips disk drives, monitors, modems, and connector, could be purchased in highly competitive global markets served by many companies. In contrast, few companies supplied microprocessors, Intel dominated this market, providing 80% of microprocessors, Intel ordinarily sold its microprocessors to all major purchasers at a standard price. Other semiconductor makers such as AMD offered low-priced microproceson that competed with Intel's and used a similar architecture Software. The core piece of software on a PC was the operating system, typically Microsoft's Windows, A number of vendors offered "application software such as word processors, spreadsheets, database systems, financial organizers, Web browsers, and email software Microsoft also held a preeminent position in this market, accounting for roughly 90% of the market for so-called "office productivity applications les word processo, spreadsheets). The hardware and software that comprised a PC were usually sold as an integrated bundle C makers such as HP and Dell would deliver computers with Windows already installed and, in turn, would pay Microsoft a fee. Increasingly, PCs were delivered with applications also already installed. Products. The machines assembled from this hardware and software differed widely in their processing speeds, memory capacities, portability, software configurations, and screen sizes, for example. The range of related products had expanded from traditional desktop PCs to include laptops, workstations server, netbooks, and tablets. From 2004 to 2008, the ratio of desktops sold to laptops sold had shifted from 2.7:1 to 1:1. In addition, devices such as personal digital assistants and ell phones, whose uses overlapped with PC, had grown highly popular. Exhibit 3 shows the cost structure of a representative FC in 2009. The input prices of a PC's high-tech hardware components, including memory chips, disk drives, motherboards, and microprocessors of a specific vintage declined about 256 in a typical year, and the price of a PC with a given level of functionality fell at roughly the same rate. Offsetting this decline, customers often bought PCs with greater functionality over time. Analysts questioned, however, whether customers would continue to upgrade since, by 2009, even low-end PCs could perform nearly all of the functions that most users required. Customers buyers were often divided into four categories large business government small and midsize businesses individual consumers and educational institutions. Exhibit shows the portion of FC units and sales revenue accounted for by each set of customers. Large businesses and government institutions usually had major, knowledgeable MS departments that purchased, maintained, and supported PG. Staff members aimed to provide a reliable network of high performance computers while also controlling system costs. The capital cost of a PC was only a portion of the total cost asociated with the machine. Once a PC was purchased, MIS staff had to tag it for identification purposes, configure software, install the machine, train the use, and help users when they chcountered problems. By one estimate corporations paid about $1,400 on hardware and software to buy a new PC and subsequently spent $5.500 on related administration, training and repairs. Most large Organizations had a motley collection of PCs of various brands and vintages, making maintenance support and reliability of machines problematic Small and midsize businesses typically lacked MIS staffs. Reliability, performance, support service, price, brand, and channel recommendations (see below) all affected the choice of a PC by such an organization Individual consumers purchased PCs for home or home-office use. In choosing among brands individuals relied heavily on retail salespeople, prior experience, online information, and the evaluations of publications such as Consumer Reports. Individual buyers were a diverse lot buttended to be more sensitive to price and more interested in a computer's brand name than were business buyers. Some Consumers also paid attention to the brand of microprocessor. Since 1990, Intel had spent billions on an Intel Inside ad campaign for its microprocessors Channels Personal computers flowed from manufacturers to customers via four channel brick and mortar retail stores, distributors ( working with small resellers), integrated resellers, and direct distribution. Exhibits 5 and 6 show the market shares and average PC prices of each channel Brick and mortar retailers took delivery of PCs from manufacturers and moved Is through their own distribution centers on their way to store shelves. In stores, retail displays and sale people helped customer select among models and makers, Retail shelf space was limited, leading most stores to carry only a few brands of IC. The nature of computer retailing had shifted in recent years. After surviving on very thin margins for years, many computer specialty stores had failed or retreated, and broader-based stores such as Best Buy and Wal-Mart in the U.S. had grown to dominate the storefront channel. A few PC makers had opened their own retail stores. Most notably, Apple had opened a widely acclaimed chain of nearly 300 stores A handful of large distributors such as Ingram Micro (with 2009 sales of 534 billion) and Tech Data (524 billion) supplied a full range of computer hardware and software to more than 100.000 resellers. These resellers, often small owner managed firms, worked with business customers to design, buy, configure, install and support computer networks. According to a 1998 survey, 936 of end users accepted reseller recommendations for computer purchases. Distributors and resellers typically marked up hardware by a total of 3-4%. Distributors themselves earned very thin margins Ingram Micro and Tech Data consistently reported ne margins below 196 Some resellers were large enough to deal directly with manufacturers rather than buy through distributors. Integrated resellers operated their own distribution centers, fielded extensive sales and service organization, and in some cases, managed the PC networks of clients on an ongoing bus. They typically came modest gross margins on procurement and installation of corporate networks and much higher margins on ongoing support A fourth and final channel led directly from the manufacturer to the end customer. PC makers with direct channels took onders from customers via the Internet, by telephone, or through sales forces. They then delivered products via third party shippers such as UPS. For indirect channels, PC maken had historically agreed to buy back channel inventory that did not well They also provided price protections to resellers and distributors. If the price of a computer fell while it was in the distribution channel, the manufacturer would reimburse the reseller or distributor accordingly. By en estimate, inventory buy backes and price protection cost manufacturers 25% of revenue in the late 1990s. Manufacturers spent another 2.55 advertising to resellers and distributors funding the market development activities of channel players, and managing product returns Manufacturing Computer makers used basic assembly line techniques to assemble PCs from standard parts. Contract manufacturers, many in Asia also stood ready to makes on behalf of other forms. In the late 1990s, C makers had begun to outsource not only assembly but also design to large companies based in China and Taiwan, whene labor costs were 50-90% lower than in the US and Turope Some of these original design manufacturers focused on designing and manufacturing for other, while others marketed products under their own brands, too. R&D Research & development expenditures in the PC industry had declined steadily, from 10% of industry sales in the 1990s to less than 5 in the 2000 Increasingly, Microsoft and Intel tak leading roles in R&D related to hardware. In 2001, for instance, Intel devoted a third of its R&D hudget to types of projects that PC makers had undertaken in the past. Marketing and sales makers took a variety of approaches to marketing and sales. HP and Apple spent $1 billion and 5500 million, respectively, on advertising in 2005,"Other company produced unbranded "white bax" PCs and did not advertise to end users at all. HP fielded a sales force of 5,000 in the U.S. alone, while many white box PC makers had virtually no sales personnel Dell's Approach Through the Mid-2000s It was too late to challenge the technical standard and the dealer her had been done a nd we already Dery strong in retail. A new marketing and distribution strategy is something nee, however Michael Dell in 1996 While a freshman at the University of Texas at Austin, 18 year old Michael Delt started a part-time business in his dorm room, he formatted hard disks for personal computers and added extra memory disk drives, and modems to IBM clanes, selling them for much less than comparable IBM machines. Reluctant to reveal this distraction from his studies, Dell hid PCs in his roommate's bathtub when his parents came to visit. When revenue reached $80,000 per month in 1994, Dell dropped out of college and founded Dell Computer Corporation. Already, companies such as Exxon were clamoring for 50 to 100 of Dell's machines at a time. In 1985, Dell shifted from upgrading the machines of other manufacturers to assembling Dell branded PCs. Revenue rose each subsequent year until 2001 (Exhibit The basic elements of Dell's Direct Model came together early in the company's development and remained in place in the mid 2000s. The company dealt directly with end customers. It served primarily corporate customers and offered the high performance is a relatively low prices. Dell customised Is to buyer specifications and commenced wembly only after receiving an order Sales and marketing Prior to Dell's ascendance, most PC makers supplied machines based on orders from distributors, resellers, and retailers. In contrast, Dell book onders from end customers. Business and governments accounted for 66% of Dell's sales, consumers 27, and educational institutions 7. Dell was unusually focused on very large customers. In 1998, for instance, customers with annual PC purchases of more than $1 million provided 70% of the firm's revenue, while no single customer represented more than 25 of Dell's sales. Dell divided customers into two groups: Relationship buyers and Transaction buyers. "Relationship buyers were large organizations that placed repeated orders for multiple PC. Del assigned a team of outside sales reps and inside sales reps to each Relationship account Thousands of outside sales reps spent their time in the field, courting customer personnel, helping customers configure their information systems, and promoting Dell's products and services, Inside sales reps, located in call centers, received telephone calls from assigned customers. Because Relationship customers typically specified particular FC configurations that their employees could order, the inside reps simply took orders and provided product and delivery information Sales reps had access to online information about a customer's entire purchase history and worked closely with bell personnel responsible for after sale service and technical support. For thousands of Relationship customers, Del had designed Premier Pages sentially customized online computer stores. On these secure web pages, an employee of a customer could view computer configurations approved by the customer's purchasing manager order a PC find contact information for the customer's account team, and so on. Dell tended to realize its highest gross margins among Relationship buyers Transaction buyers included small-to-medium businesses and home computer . These customers could order a Dell online or by calling an inside sales rep. Dell's online site allowed Transaction customers to obtain product information, customize a computer system, check pricing place an order, and track an order's progress Reps for Transaction customers provided product information and actively encouraged customers to purchase more advanced PCs Traditionally. Dell had avoided the inexperienced Transaction buyer. Morton Topter, formerly Dell's vice chairman, explained: "Consumers at retail don't know what they're looking for other than price. We, on the other hand, like to sell to the educated consumer." Sales and marketing efforts were organized not only around the Relationship / Transaction distinction but also around market segmentser, large corporations, educational institutions, individual consumers). Dell subdivided segments over time, increasing the number of recognized segments from twe in 1994 to 15 by 2002. In addition, sales efforts were divided by region and, within region, by country. Michael Dell explained that such divisions were undertaken for a lot of reasons. One is to identify unique opportunities and economies. The other la purely a managerial issue: you can't possibly manage something well if it's too big." Dell's sales efforts relied on Symphony, a custom-built software application that used ED links with suppliers to monitor inventory. Symphony gave salespeople an estimate of how long it would take to build each machine and how profitable it would be. The system would show, for instance, how upgrading a laptop carrying case from the standard model to a Kenneth Cole leather edition would affect delivery dates and profit margins. Dell had departed from its Direct Model only rarely. In 1990, it had entered the retail channel. The move, Michael Dell said, would provide us with the opportunity to generate significant new business and increase Dell's market penetration, especially among "PC customer particularly at the entry level who want to physically touch and feel a unit before they buy. Accordingly, Deli produced two lines of standard PCs and reached distribution agreements with computer superstores and warehouse clubs Sales through retailers were brisk, but Dell soon found that it was losing money on retail sales Exhibits compare the margins Dell earned in the direct and retail channels. Retail l es contributed to poor financial results in 1993. In 1994, with the help of then-Bain consultant Kevin Rollins, Dell withdrew from retail stores Istorically. Dell's pricing had been competitive Exhibit 9 compare prices among competitors Production, logistics, and procurement Dell manufactured machines that were within the guidelines of a broad me tailored to customer needs. Through the mid-2000s, the company made customized is based on actual orders and held mo finished goods inventory of standardized machines Dell operated manufacturing facilities in Texas, North Carolina Tennessee, Brazil Ireland, Malaysia and China Daily meetings matched production schedules with sales flows. Keith Maxwell Ders vige president for worldwide operations, commented The system requires that the whole organization be integrated. You've eliminated buffers. When you have no buffers and you have no inventory, the whole organization has to work together. There is no way to let things pile up, because you have no piles Once received, an order was sent electronically to the appropriate manufacturing facility. Then, a computer generated a parts list for the order and assigned the order a harcode for tracking purposes. The hardware of the ordered computer was assembled, and then the machine moved to a software loading zone where a very high speed computer network installed software specified by the customer an operating system, application software, and diagnostic software. For some corporate customers, Dell also loaded proprietary software. The fully equipped machine proceeded to a "hum. in area, where it was tested for several hours. Finally, it was boned along with accessories and shipped to the customer via a third-party shipper The production process, from ceder entry to shipping, took mee hours. By 2003, Dell manufactured more than 50.000 computers every day. It carried four days of inventory while most of its competitors had between 20 and 30 days. Its Texas based Tapter Manufacturing Center was big enough to enclose five and a half football fields, could produce more than 1,000 customized desktop PCs every hour and relied on seven hours of inventory. Dell worked closely with suppliers to arrange just in time delivery of parts and to reduce suppliers' own inventory levels. Suppliers could monitor online what parts Dell needed immediately and in coming weeks. Electronic links allowed Dell to direct some suppliers' shipments straight to its customers. Computer monitors supplied by Sony, for instance, never passed through Dell's facilit Rather, Dell communicated the order for a monitor to Sony and to its shipper. The shipper picked up the computer at Dell's site, picked up the monitor at Sony's brought the boxes together, and delivered them simultaneously to the customer. Michael Dell explained: what's the point in having a monitor put on a truck to Austin, Texas, and then taken off the truck and sent on a little tour around the warehouse, only to be put back on another truck? That's just a big waste of time and money, unless we get our jollies from touching monitors, which we don't Support After a sale, Dell supported its PCs in a tiered manner, with business customers, buyers of higher end INC, and those paying for support receiving the best care. Online, Dell offered tons of thousands of pages of support information for free. A customer with a problem could also call a large technical support staff, which had access to details of the customer's computer, from the original order through all subsequent service calls. Using diagnostic software installed in the factory, the customer and the support specialist could resolve the problem over the telephone or, with additional software, the technician could gain access to the directly and tackle the problem. For problems requiring an on-site visit, additional personnel often employed by a third party such as Unisys were available. Dell technicians could repair or replace high-end servers of corporate customers within hours, and personnel in five control centers around the world were prepared to respond quickly to IT emergencies of major customers. For such emergencies, Dell had positioned roughly 100 caches of spare parts around the world. Customers' ratings of Dell's products and support had varied over time. Exhibits 10 and 11 report the results from surveys of corporate IC buyers and individual consumers, respectively. Products and services Desktop and laptop computers accounted for the bulk of Det's revenue about 73% of 2005 sales. Dell offered four lines of desktops and four similar lines of laptops one reliable, stable line targeted at large organizations a second line focused on the productivity needs of small businesses and basic home use a third catering to customers interested in high-end gaming or entertainment, and a fourth providing powerful workstations for sophisticated applications such as 3D animation Competits had not expected Dell to succeed in markets for products much more complex than conventional PCs Starting in 1996, however, the company began to enter markets for enterprise products such as high-end servers, network switches, and storage devices. Dell entered these markets at the low end, often by offering a more powerful product at the same price as a rival's less powerful product. By 2005, thene markets provided 13% of Dell's revenue. Dell had also applied its Direct Model to markets for print digital cameras, MP3 ple t en monitors, software titles, and other products. In most of these cases, Dell put its brand name on products made by others. In 2001, "Dell Computer Corporation changed its name to "Dell Inc. to reflect the evolution of the company from a computer manufacturer to a company that provides a wide array of technology-related services. By 2005, peripherals and software accounted for 15% of Det's revenue. The semaining 96 of Dell's 2005 revenue came from services that helped corporate customers design, deploy. support and maintain their computer networks and train their employees Firm infrastructure Early on Dell was managed as an entrepreneurial start up with few formal control systems. In 1993. growth pains culminated in a net loss, and Dell's supply of cash fell to $20 million, a thin cushion for a company with annual sales of nearly $3 billion. Subsequently, Michael Dell hired seasoned managers from Motorola, Apple, Sun Microsystems, and Intel, and the company became known for disciplined execution and close attention to performance metrics. The company monitored days of inventory by product component. It measured and managed receivables and payables such that, an average, it received payment for its products 6 days before it had to pay suppliers in 2005. Managers examined margins, selling price, and overhead by customer segment, product, and country. As an overall indicator of company performance, senior managers had historically focused on return on invested capital Competitors' Efforts Dell's success through the mid 2000s caused its rivals to take both notice and action. Txhibit 12 compares Dell's characteristics to competitors!) Dell faced a diverse set of competitive dynamics, typified by (a) the IBM IC division's struggles and eventual sale to Lenovo, (b) the merger of Compag and HP. (c) Gateway's decline, (d) Acer's rise, and e) Apple's resurgence. IBM and Lenovo After parking the growth of the PC market in the early 1980 IBM Weadily last market share. Though its strong salesforce gave it access to corporate MIS managers, IBM came to rely on distributors, resellers and retailers for roughly 90% of its PC sales by the 1990s IBM was among the first PC makers to recognize the challenge posed by Dell's Direct Modelis response to the direct distribution challenge was typical of the actions taken by many PC makers that relied on channel partners. Starting in the early 1990, IBM launched a string of initiatives to reproduce some aspects of direct distribution by coordinating better with distributors and revellers in nhanced Integration programs, IBM shipped "heavily contiguned" PCs to authorized distributors and resellers, who then completed the configuration of the machines to customer specifications and forwarded them on to the customer In 1995, IBM moved to an Authorized Assembly Program (AAP) that shipped lightly configured FC containing only a motherboard, a floppy drive, and a video card to downstream partners. Partners in the channel then completed the assembly to customer specifications using components purchased from DM. Indeed, a number of major distributors and resellers invested tens of millions of dollars to build plants that completed IBM PCs and soon after with other brand name Until 190 components were always shipped from 13M facilities, so a microprocessor might travel from Inbel's warehouse in Arizona to 13 's facility in North Carolina and back to a partner's assembly plant in Arizona. IBM set component prices such that total costs, including assembly costs were the same for a channel assembled and Mwembled PC. IBM hoped that AAP would enable it and its partners to deliver customized Is Taricly without holding large amounts of inventory. Indeed, one partner reported that the program improved the inventory turnover rate of its IBM stock from 10-12x to 20%. The program also reduced the need for revellers to take new PCs apart and reconfigure them to meet customer needs. Such tear downs were costly and were reported to quadruple quality problems As the 1990s ended, IBM cautiously explored ways to expand its own direct sales. In 1998, 13M opened a website that allowed individual consumers to buy standardized directly from IBM, without going through retailers, but referred business customers to resellers, who then set prices and fulfilled orders Later in 1998, IBM introduced its first program to enable businesses to buy a few products a particular line of servers without going through resellers. In 1999, the company announced its plans to sell over the web directly to small and midsize businesses, with the goal of s ing direct to all customer segments by the end of the year. 13. however, planned to use resellers to fulfill some of the orders. An IBM executive explained that we're not going to be Dell and we're not going to be the old ISM. As these corts unfolded, IBM's PC division reported that it was losing money $70 million in 1996, S16! million in 1997, and $992 million in 1998. Subsequently, IBM halted retail sales of desktop PCs in the US focused on its relatively strong line of ThinkPad laptops, cut costs aggressively, and tried to boost direct sales. Nonetheless, IBM's PC division last another $965 million between 2001 and mid-2004. "In December 2004, IBM announced that it would sell the division to Lenova, China's leading PC maker, for $1.25 billion. Lenovo would have rights to use the IBM brand for five years, and IBM would temporarily provide sales, service, and financing support. Lenovo's CFO declared that the combined entity "will make money, but I really cannot tell you how much and how Subsequent years proved rocky as the company operated with a headquarters in North Carolina but most of its operations in China, with an American CEO and a Chinese chairman with a largely unprofitable. low-growth U.S. business selling mostly Thinkpad, laptops indirectly to corporations and a profitable high growth Chinese business selling mainly to consumers through retailers with U.S. executives on fixed salaries carning more than Chinese peers who relied on bonuses; with culture clashes (sports metaphors were banned from conference calls); with several rounds of cost cutting and with a supply chain that, according to one executive, "looked like spaghetti. Compaq and HP Compaq and HP followed distinct paths that intersected in a 2001 merger. After a difficult start, the merger produced a company that many analysts considered Dell's most important rival, Cow before the merger, Founded in 1982. Campag surgawd IM in 1994 to become the world's largest maker of 'Cs. By 1998, Compaq offered a broad range of computers, from sub-$1,000 PCs to $2 million fail-safe servers. The company employed the full range of PC channels, selling 67% of its as through 14.000 distributors and resellers, 25% at retail, and 4% direct in the words of Compaq's CEO at the time "We want to do it all, and we want to do it now." Compaq served individual consumers and business customers in quite different ways through the 1990 For consumers, Compaq built standard P ostock and distributed mainly through retailers. Compaq launched an online catalog in 1993, but abandoned it in the face of channel resistance. In 1996, Compaq opened a telephone line that allowed consumers to order PCs directly, but the results, said one analyst were "tepid.Compaq kept its prices high to avoid angering retailers1.** Compaq's production and distribution system for business customers had evolved over time. In late 1995 Compaq moved from a production system in which it built business PCs according to its own forecast to one in which it built according to forecasts made by channel members. This permitted Compaq to reduce the inventory it held for ICs from 60 days to 30 days. Because e ers and distributors held 35 more days of inventory, a Compaq computer delivered in mid-1997 was typically 65 days old before it reached a customer through the reseller channel In 1987. Compaq launched a new initiative to coordinate efforts with the channel: Under the Optimized Distribution Model (ODMIG were built only after an order was received, and orders and deliveries continued to go through distributors and resens. Relatively standard machines were built to order in