The Rise of Dell Computers
In 1984, at the age of 19, Michael Dell founded Dell Computer with a simple vision and business concept that personal computers could be built to order and sold directly to customers. Michael Dell believed his approach to PC manufacturing had two advantages: (1) bypassing distributors and retail dealers eliminated the markups of resellers, and (2) building to order greatly reduced the costs and risks associated with carrying large stocks of parts, components, and finished goods. While Dell Computer sometimes struggled during its early years in trying to refine its strategy, build an adequate infrastructure, and establish market credibility against better-known rivals, its build-to-order and sell-direct approach proved appealing to growing numbers of customers in the mid-1990s as global PC sales rose to record levels. And, just as important, the strategy gave the company a substantial cost and profit margin advantage over rivals that manufactured PCs in volume and kept their distributors and retailers stocked with ample inventories. Going into 1998, Dell Computer had a 12 percent share of the PC market in the United States, trailing only Compaq Computer and IBM, which held first and second
Internet Web site was averaging $5 million a day and was expected to reach $1.5 billion annually by year-end 1998. Since 1990, the company's stock price had exploded from a split-adjusted price of 23 cents per share to $83 per share in May 1998. Dell Computer was the top-performing big company stock so far during the 1990s and seemed poised to become the stock of the decade. Dell's principal products included desktop PCs, notebook computers, workstations, and servers. The company also marketed a number of products made by other manufacturers, including CD-ROM drives, modems, monitors, networking hardware, memory cards, storage devices, speakers, and printers. The company's products and services were sold in more than 140 countries. Sales of desktop PCs accounted for about 65 percent of Dell's total revenues; sales of notebook computers, servers, and workstations accounted for about 33 percent of revenue. In early 1998, the company had 16,000 employees. place in the market, respectively. Worldwide, Dell Computer had nearly a 6 percent market share. The company was gaining market share quickly in all of the world's markets. The company's fastest growing market for the past several quarters was Europe. Even though Asia's economic woes in the first quarter of 1998 resulted in a slight decline in Asian sales of PCs, Dell's sales in Asia rose 35 percent. Dell's sales at its At age 13, Michael Dell was running a mail-order stamp-trading business, complete with a national catalog, and grossing $2,000 per month. At 16, he was selling subscriptions to the Houston Post, and at 17 he bought his first BMW with money he had earned. He enrolled at the University of Texas in 1983 as a premed student (his parents wanted him to become a doctor) but soon became immersed in computers and started selling PC components out of his college dormitory room. He bought random-access memory (RAM) chips and disk drives for IBM PCs at cost from IBM dealers, who often had excess supplies on hand because they were required to order large monthly quotas from IBM. Dell resold the components through newspaper ads (and later through ads in national computer magazines) at 10-15 percent below the regular retail price. By April 1984 sales were running about $80,000 per month. Dell dropped out of college and formed a company, PCs Ltd., to sell both PC components and PCs under the brand name PCs Limited. He obtained his PCs by buying retailers' surplus stocks at cost, then powering them up with graphics cards, hard disks, and memory before reselling them. His strategy was to sell directly to end-users by eliminating the retail markup. Dell's new company was able to sell IBM clones at about 40 percent below the price of an IBM PC. The price discounting strategy was successful, attracting price-conscious buyers and pr
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Approximate Word count = 1892
Approximate Pages = 8 (250 words per page double spaced)
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