Dell's Successful Use of the Internet as a Selling Channel Essay

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Dell's Successful Use of the Internet as a Selling Channel

Dell are currently the worlds number one PC supplier, a position in the market they took from Compaq in April 2001. In short, the company’s success story is mainly down to their innovative direct business model, which pays particular attention to the selling process where Dell completely bypasses all intermediaries and/or middlemen.
This is because Michael Dell believed they add little if no value to the end product, instead just gaining a considerable mark-up for selling the product. Hence, they became the first PC manufacturer to completely cut out retailers and instead sold customised computers directly to customers based on their exact specifications. This selling process
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Dell has used the Internet to coordinate a network of suppliers who carry out many of the processes involved in building, distributing and supporting computers. They refer to this network of suppliers as the “virtual company”.

Dells long-term edge over competitors (especially close rival Compaq) in their cost structure is mainly due how efficiently they manage inventory. Selling over the Internet allows them to continue operating the same inventory methods as beforehand. For example different suppliers provide different components for Dell to construct the final system, Hitachi supply the CD-ROMs for Dell PC’s and Samsung supply the monitors. So when a customer places an order for a computer over the Internet, stock control procedures have been implemented so these components will automatically be ordered from Dells suppliers.
Therefore the use of Internet selling in stock control at Dell allows for the irregular use of supplies that they require. This is done automatically by creating purchase orders for replacements based upon delivery cycles and its need for use.

As mentioned in the introduction, Dell’s approach to the computer industry is to sell computers directly to consumers, without them having to be purchased through retailers. This can be seen from the
‘Dell model’ under this paragraph also known as their direct business model. The key management issue here is whether selling over the
Internet remains in line with their direct selling

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