Businessmodel of Dell

Customer Segments

Dell has a segmented business model, with customers who have slightly different needs:

• Large Enterprise: Includes large national and global corporate firms. They primarily utilize data center and cloud computing solutions.
• Public: Includes government and healthcare entities, as well as educational institutions and law enforcement agencies. They utilize a wide range of information technology solutions.
• Small and Medium Business: Includes small and medium-sized businesses. They primarily utilize cloud computing, workforce mobility, and server/storage virtualization solutions.
• Consumer: Includes individual customers. They primarily utilize solutions in the areas of entertainment, gaming, design, and mobility. ### Value Proposition

Dell offers three primary value propositions: customization, price, and brand/status.

The company offers customization by enabling customers to select various features of their computers. These elements include form factor, processor, operating system, memory size, hard drive size, video card, and optical drive. This personalization helps ensure buyers get exactly what they want, a privilege they are not afforded when shopping in retail stores.

The company is able to compete on low prices due to several operational characteristics. It spends little on research and development relative to revenues (differing from HP, IBM, and Apple), and has a lean manufacturing process, allowing it to keep costs low. It also does not maintain any physical retail stores, allowing it to minimize overhead expenses.

The company has built up a strong brand over time. It is well-established, being the first mass producer of mail-order computers. Also, its strong performance eventually led to its status as the top PC manufacturer in the world; while it no longer retains that position, it is the #1 shipper of PC monitors globally. Further, it is the second biggest non-oil company in Texas.

Channels

Dell’s main channel is its website, through which it sells its computers and other products. The company also markets its offerings through other channels such as direct sales forces, third-party retail stores, third-party solution providers, third-party resellers, and system integrators.

Further, Dell promotes its solutions through advertising and social media efforts and attendance at conferences.

Customer Relationships

Dell’s customer relationship with consumers is primarily of a self-service, automated nature. Customers utilize its products while having limited interaction with employees. There is a Customer Service center on its website with detailed answers to numerous potential questions. There is also a community component in the form of site forums and a personal assistance one in the form of phone, e-mail, and chat support.

Dell’s customer relationship with its business and institutional customers is mostly of a personal assistance nature. The company assigns these users dedicated account teams who provide a single point of contact and offer personalized solutions and service. Team members include field-based enterprise solution specialists and global account specialists.

Key Activities

Dell’s business model entails designing and developing its products and services.

It outsources the actual production of its offerings to third-party contract manufacturers with the aim of minimizing costs and delivering products more quickly. The manufacturing facilities are located in Texas, Malaysia, China, Brazil, India, and Poland.

Key Partners

Dell operates the Commercial Partner Program, which provides training, sales, and marketing tools and resources to members. It includes the following six sub-programs:

• Dell Partner Direct Program – This involves value-added resellers (VARs) who sell Dell products. One of the partners is Avalon Technologies.
• Technology Partner Programs – This involves independent software vendors (ISVs), independent hardware vendors (IHVs), solution providers, and system integrators. Members use Dell platforms to build solutions ranging from tablets to enterprise products. Specific partners include Atlantis Computing, BMC Software, Citrix, Dialog Group, and GameLoft.
• OEM Partner Program – This involves firms that assist OEM customers in bringing products to market effectively. OEM Channel Partners configure and resell Dell offerings for OEM customers. OEM Technology Partners offer IP and technology for integration into Dell hardware for OEM customers. Specific partners include Blue Chip Tek, Datatrend, Iron Systems, and NCS Technologies.
• Global Alliances – This involves partners who integrate Dell software, hardware, and service capabilities into their planned and existing offerings to create optimized solutions. Specific partners include Intel, Microsoft, Oracle, VMware, and SanDisk.
• Service Providers – This involves companies utilizing Dell’s service solutions for their customers. Specific services include systems management, information management, and data protection.
• Global System Integrators – This involves companies with whom Dell jointly develops services. Specific partners include Atos, CGI, Deloitte, and Tata Consulting Services. ### Key Resources

Dell’s main resource is its research and development staff. The company maintains 17 R&D centers globally, including the Silicon Valley R&D Center.

Another key resource is its intellectual property; it has over 4,000 patents with over 2,000 pending.

Lastly, Dell relies heavily on its sales/marketing and customer service staff, particularly for its business and institutional customers.

Cost Structure

Dell has a cost-driven structure, aiming to limit expenses through significant automation and low-price value propositions. Its biggest cost driver is sales/administration expenses, a fixed cost.

Another major driver is research/development/engineering, a fixed cost; the company has increased its investment in these activities as part of its goal of being more of an end-to-end solution provider.

Revenue Streams

Dell has two revenue streams:

• Product Revenues: The company sells hardware and software products.
• Service Revenues: The company sells services to assist customers with use of its products; these include software-related support services.