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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
GSBS6410
Economics of Competitive Advantage
Lecture 1 Case Study
Competitive Advantage
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
Dell
Founded in 1984, just 3 years after the introduction
of the IBM PC
Became the undisputed leader in U.S. PC sales
As the PC market has flattend, Dell has moved into
other areas such as servers, printers, LCD TVs.
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
Michael Dells Philosophy of Competition
Understanding the profit pool of your industry.
Dell took one of the biggest strengths of rivals, such
as Compaq their powerful distribution networks
and used it to bring the competition down.
Direct from Dell - the companys biggest
innovation.
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
Direct from Dell Strategic Positioning
A meaningful distinction for customers
Buying direct
A competitive difference from competitors
Selling direct
Bypassing traditional sales channels
A favourable competitive position
Competitors are in a disadvantage position
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
Dells Competitive Strategy
(Your Focus Area to Compete)
Provide the Best Value
Low Cost with Substantial Quality
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
Low Cost Primary Components of Dell Mix
Dell puts significant pressure on suppliers for faster
and cheaper delivery.
Specialises in making products built out of
standardised, commoditized parts.
Maintains exceptionally strict control over inventory,
both inputs raw materials and finished goods.
Going Direct
Saved 25% to 45% of markup
Lower inventory
Lower obsolescence
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
Quality Dell Works Hard to Maintain Quality
Its technological innovations are not so muchin the
areas of entirey new products, but rather in the next
step up against competitors
Higher CPU speeds
More hard-drive capacity
Greater screen resolution, etc
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
Dell Computer
Simply going direct or adopting a low cost
competitive strategy did not win Dell a lot of customers
A Number of Competitive Advantages Does
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
Dell Computer
Competitive Strategy
- Winning Through Cost
Strategic Positioning
- Selling Direct
Competitive Advantage
- Going Direct
- Built-to-order
- Zero Inventory
- Highly standardized, simplified and controlled operations
- Standardisation products
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
Dells Core Competency
- Low Cost Manufacturing
Dell has applied the capability to PC and move up the
chain into higher priced laptops, workstations,
servers, switches and network storage machines, and
including acquisitions such as Alienware
Entering a market after standardisation and
before commoditization
Zero inventory management
Highly standardized and simplified operation
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
Dell Execution is Vital
Selling Direct to customers is a
relatively simple idea.
Execution and implementation of a
great strategy is equal importance
Dell is a tight ship, agile and well-
controlled.
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
Compaq What are the choices ?
1 Stick to what is was doing
- clearly was not going to work.
2 Copy Dell
- would mean completely reconfiguring its
engineering, manufacturing, sales and marketing
3 Try to do both
- cost of maintaining two different models
- Existing channel partners would felt betrayed.
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University of Newcastle Newcastle Business School GSBS6410 Economics of Competitive Advantage
End