Dell- Distribution & Supply Chain Strategy
PC World- Distribution & Supply Chain Strategy
Dell- Marketing Strategies
Dell- Promotion Strategies
PC World- Marketing Strategies
PC World- Promotion Strategies
Comparison of DELL and PC World distribution and promotion
- Dell- Distribution & Supply Chain strategy:
Dell has, over a relative short period of time, become the world’s largest personal computer manufacturers. This has to be contributed to the visionary approach of its founder, Michael Dell. According to him; “The only constant thing about business is that every-thing is changing “. We have to take advantage of change and not let it take advantage of us.” The company has attributed a significant part of its success to the way it manages flows-product information and fund within its supply chain, and to its unique distribution strategy of direct marketing.
Dell entered the PC industry at a time when most companies sold through small, specialized, high-cost dealers which provided customers with support on both how to purchase and how to use computers. This high-cost channel was quickly obsolete and most PC suppliers switched to large, megastore retail chains .While the other suppliers were struggling with retail channel evolution, Dell took a radically different path by finding a means to sell products which normally required both significant customer assistance and local stocking without a dealer or distributor network.
Dell uses a direct marketing channel i.e. there are no intermediaries. In this distribution system, the goods go from the producer directly to the consumer. Therefore bypassing distributors and retailers, Dell directly sells it to the customer, to further improve the match between supply and demand. Dell makes an active effort to steer customers in real time, on the phone or via the internet, toward PC configurations that can be built given the components available.
Meindl P (2006) summarises that this new channel gave Dell an option by bringing new technology to traditional roles played by the distribution channel. Dell takes orders over the telephone, it allows purchasers to customize products to their own needs, it assembles products largely to order, and it achieves rapid delivery i.e. a Close contact with its customers and understanding of customers needs allow Dell to develop better forecasts. The combination provides a high degree of customer service at a previously unattainable cost structure. With this distribution change as a major element of its strategy, Dell grew to a profitable business at the time when many larger computer companies were giving up on the PC market. Dell shows how a company can meet most of the same end customer needs as its competitors through a radically different distribution approach. As enabling technologies (telephone communications, call centres, shipping logistics, etc.) evolve, more suppliers will supplant traditional sales and distribution approaches and, therefore, gain competitive advantage. However, simply copying a model which has worked once is not a guaranteed path to success. No other “mail order” computer company has managed to match Dell’s growth in sales and profits. Dell built a strong overall business model and established its position before others had a chance to copy the model. On the operational side, Dell centralizes manufacturing and inventories in a few locations and postpones final assembly until orders arrive. As a result, Dell is able to provide a large variety of PC configurations while keeping very low levels of inventory i.e. Dell is keeping inventory for seven days making their inventory turnover as 52 times a year. In contrast; the competitors who sells through retailers, keep several weeks’ worth of inventory. This helps Dell to obtain updated goods for cheap cost and keeps them ahead in the competition. For example, If Intel introduces a new chip; the low level of inventory allows Dell to go to the market with a PC containing the chip faster than the competition. If prices drop suddenly, as they often do, Dell has fewer inventories that lose value relative to its competitors. Dell even maintains zero inventory for certain products such as monitors. Their efficient transportation simply picks it up from the manufacturers’ plant. This procedure allows Dell to save time and money associated with the extra handling of monitor’s.
The success of the Dell’s supply chain is facilitated by sophisticated information exchange. Dell provides real-time data to suppliers on the current state of demand. Suppliers are able to access their components inventory levels at the factories along with daily production requirements. Dell has created customized web pages for its major suppliers to view demand forecasts and other customer-sensitive information, thus helping suppliers to get a better idea of customer demand and better match their production schedules to that of Dell. Dells low levels of inventory also help ensure that defects are not introduced into a large quantity of products. When a new product is launched, supplier engineers are stationed right in the plant. If a customer calls in with a problem, production can be stopped and flaws fixed in real time. As there is no finished product in inventory, the amount of defective merchandise produced is minimised. Dell also manages its cash flows very effectively. Thus Dells distribution design and its management of product, information, and cash flows play a key role in the company’s success.
- PC World- Distribution & Supply Chain Strategy:
PC World is one of the largest chains of mass market computer superstores in United Kingdom. It is a company which is a part of DSG International plc. PC World also operates in Spain, Italy and Sweden under the brand name PC City.
PC World was founded in 1991 and it is head quartered in Hemel Hempstead, United Kingdom. PC World offer ranges of consumer-oriented PC’s laptops and peripherals. It also sells DSG stores’ own-brand Advent and PC Line. They have separate division’s in their stores – “PC Clinic” which focuses on service part of PC’s , “Component Area” which offers basic PC components such as motherboards, hard drives and cases and another division which offers consultation to business customers.
PC World uses multi-channel distribution for selling PC’s and accessories. They sell their products through their PC World outlets and through online. Through their retail wing, they sell products of Sony, HP, Dell, Packard Bell, Advent etc and computer related accessories. Pixmania, sister concern of PC World is used for selling their products online. As a result of this, PC World is able to cater both the retail and online customers. PC World is catering to B2B customers for PC’s and OEM’s.
PC Worlds buying strategy includes getting aggregate volumes across agreed ranges so that their inventory levels are planned according to the demand and supply. Therefore they have low inventory levels and their cost is minimised. The selections of suppliers are done, such that they can cater their need for entire range of computer related demands. They focus on information sharing with the suppliers and build trust with them. This helps the company to communicate about the demands in the market to the suppliers thereby reducing the chance of mismatch between the customer demand and the supply.
PC World’s supply chain strategies itself as a platform which provides the factory goods directly to the customers. They buy the goods directly from the factory to obtain this objective. In this case, the absence of intermediaries gives them a cost advantage which in turn is passed on to the customer. As a result they are considered as a Wholesalers of PC’s.
Their retail outlet holds all the goods from branded OEMs to the Exclusives. Their retail outlet caters the value added services and product such as services for all brands, Service contracts and PC Clinic etc at the point of collection; hence aligning its strategies for giving utmost customer satisfaction.
- Dell- Marketing Strategy:
Dells marketing strategy is made according to their belief; should invest a lot of thought and planning to truly reap the rewards. Their marketing strategies are;
Dell’s marketing strategy’s main objective is to attract people to their website. For this objective, Dell is using various techniques such as Pay per Click, Search Engine Optimization, web-linking etc. They make use of popular search engines such as Google, Alta Vista etc for increasing the visibility of the website. Keeping an eye on the conversion ratio is significant aspect in internet marketing. Now Dell uses a web analytics for analysing factors such as conversion ratio, quality of the visitors etc. Conversion ratio means the percentage of visitors who buy something compared to those who just visit the website. Analysing the quality of the visitors in their website help them to identify, whether their marketing strategy is reaching their intended customers. Navigation through the Dell website is convenient to users, thereby getting the customers acceptance. There website also provides an option of mass customisation in easy and convenient manner. Dells website is informative to cater the customers query. Now Dells has changed their targeted customers in Developing countries to small and medium level enterprise ,this change in strategy is done by understanding the pulse of the developing countries i.e. the growth in the number of SME’s and the need for the new technologies for these SME”s in these countries. Their website focuses on these sectors and is informative for them.
They believe in keeping the most important information visible by placing it in the right place of the website. They also use a concept called ‘breadcrumb navigation’ which let the lets users know their where-about in the site hierarchy. This concept also helps them to make their ecommerce function easy to use. These strategies mentioned above help Dell to differentiate themselves from their competitors and to make their customers loyal by making it a unique website.
In addition to online marketing Dell also uses media for its promotions. The growing ascension of media both printed and electronic, forces firms like Dell to devote a certain proportion of advertising to be pushed in these mediums. Dells advertisements communicate their ability to help people by providing them new technologies. This is in-sync with the needs of the targeted customers. The combination of convenience, quality customer service and continuous improvement in the Dells overall strategy makes them help to be in the pinnacle of competition.
Product: Dell’s unique strategy of manufacturing differentiates its each process so that Dell need not rely on single production line or any group of supplier’s for equipment production. Though there is no segregation of the different products and services but nevertheless in separating the components enabled it to target the customers based on the regions in which the products are manufactured. On assigning each regionalized production centre for a particular component for production it has helped Dell to diversify its risk i.e. of accumulation of the labour and cost of production at any region.
Price: Dell’s pricing reflect the affordability for the local consumers. Price reasonability and the availability of parts, accessories, and after sales services have augmented the Dell’s position from others.
Place: Dell has formulated its marketing campaign according tto the location and the customers. The product of Dell are available at the nearest dealers hence developing a trust among its customers for the idea of “local Dell” thereby achieving the objective of utmost customer satisfaction for its products and services, and hence giving it the highest and the largest market reach in this segment of business
Promotion: Dell has revolutionised its marketing campaign since 1999 when it entered the direct marketing mode. This direct marketing mode of “Be Direct” has changed the way the customers view Dell i.e. as a local producer.
- Dell- Promotion Strategy:
Dell’s sales promotion is done in the following two strategies;
1．Broken down market
It has positioned itself in accordance to its product range, in different areas of application or market classification, respectively altogether a different strategy.
Through direct sales, it has been able to remove the additional cost incurred to the intermediary and thereby giving this cost advantage to its customers in terms of lower cost.
Dell has a unique promotion strategy which uses direct marketing i.e. directly from the manufacturer to the customer. Dell’s roots are in the mail-order business, which did not include outside. It relied instead on PR, advertising, and direct-mail; targeted individuals and small companies; and was all about getting the phone to ring.
Dell does its advertising in all the media i.e. TV, Print, Online etc. Dell website contains a wide range of multimedia pictures, and many more performance charts, and some advertising in the form of slides. These strategies can influence purchase pattern by fully stimulating customers’ desire.
Dell uses a spectacular range of promotional strategies through the medium of internet, it believes on the objective of reaching higher customer satisfaction. According to one of the management scholar Customer relationship management (CRM) is used to define the process of creating and maintaining relationships with business customers or consumers (Klinker S, Terrel, Mahfouz 2006). A long-term and a strategic relationship with the customer ensure their repeat business constantly and regularly. It incurs more money to find and acquire new customers than it does to retain existing current ones.
There are different types of software that help Dell’s CRM process they are as follows: The first type of among it is the marketing automation software; the second one is of custom designed Web pages containing purchase data; and final type is of a system that benefits the sales, marketing, financial and management segments of Dell.
Dell pioneered this concept of interacting marketing strategy while dealing with the customer on many mass communication tools such as by phone or by way of the Internet to avail products to Dell. This helped Dell to understand customer need for each aspect ,which made possible to custom-build a computer specific to that customer’s needs and delivering it in a very timely matter or it can said as a made to order system where, to deliver good is crucial, hence making a achieving its strategy of JIT or (Just In Time ). Dell created a supply chain management (SCM) system that ensured that the right computer parts were always available when and where needed i.e. the orders are placed whenever there is an order placed by a customer Dell starts it assembling process simultaneously so that customer gets the order in Just a week or above i.e. maximum of 15 days of the order placed.
In order to achieve this coordination in the Supply chain Dell has developed a strong relationship with both its suppliers and customers that allow it to ensure that computer components are available from suppliers to meet customer demands i.e. each supplier is asked to hold a particular level of inventory so that the lead time can be minimized to least possible. It also make sure that that logistical system is in place to get the product shipped and delivered to the customer effectively i.e. they use an effective third party logistic system to make sure the transportation part is right and effective in its own. This direct relationship with the customer focuses helped Dell’s to achieve its competitive advantage.
Dell utilizes database software. These particular databases stores tables of data that can be used to recover information about clients and thus can be used to generate promotional campaigns. The database holds the information of the customers, their interests, and products. The customer database helps increases profits because the database contains customer information that helps determine the most effective and efficient ways to target and segment the customers so that the most apt marketing tool can be used.
The Dell’s business strategy focuses on creating one of the most effective and efficient supply chain management systems this it manages with a software known as the i2, which would lean the supply chain process by linking Dell’s suppliers and planners together to meet demand an cater the customer requirements in a most efficient way. The software that Dell uses to increase relationship marketing is developed by the Hotlink. It is a marketing automation software program which is used to support e-marketers in “effective targeting, efficient marketing communications, and constant and regular monitoring of customer and the current market trends” (Klinker S, Terrel, Mahfouz 2006). This program strengthens the sales-customer relationship. These strategy aides Dells free advertising – word of mouth. The bottom line to CRM systems is to directly impact the customer base, ensuring that better service is offered.
Dell also uses custom designed software which is a transparent online system called “Premier Pages,” In these the web pages contain purchase data also. This system also consists of a process which is paper-less and it has already captured with the customer’s existing technology configurations. According to Levey (1999), Dell is creating a real win-win situation by this system. The idea behind Premier Pages was to “gain less information about customers – they already know about them – and thus creating this real win-win situation. Dell begins to understand a customer as early as they place their orders for their products. According to the Dell’s production model, they begin the production of a PC only after an order is placed by the customer. This is to accommodate the customization that the customer wants. This in turn helps Dell to have a direct relationship with the customer.
Dell is also using an enhanced CRM system with the help of IS Partners, an information systems company to maximise the effectiveness of their CRM. As stated in (http://www.itweb.co.za), “ProClarity offers in-depth analytical abilities, resulting in positive and negative areas of business being clearly highlighted. Sales are also broken down by region, with an overview of each sales team, enabling Dell to measure trends and successes”. Almost all the vital segments in the company such as sales, marketing, financial and management has significant benefits from this software. The employees of Dell have easy access to the detailed demographic information about customers, customer sales history and trade relationships with the help of the proper implementation of CRM. Sales management has been made easy by tracking activity within accounts, and the quotes which are lapsed can be revived. The marketing department of the company also benefitted from this software; they could improve their decisions because of the availability of information’s regarding customer activity, product sales, and marketing mixes.
In addition of all these, Dell also deployed the e-Business software which are called the “ i2 Supply Chain Planner”, “i2 Collaboration Planner”, and “i2 Factory Planner” to meet its supply chain needs. This new i2 technology helped them to simplify the complex supply chain decisions and to make informative decisions regarding supply chains. It was used to coordinate the build-to-order processes from order placement to customer support. The high customer satisfaction rating of Dell can be attributed to the efficient CRM of them. Their high quality CRM system, Dell is not only ranked No. 28 by Fortune 500, they have a persistent focus on servicing the customer in the best possible way by giving the customers a better experience than anyone else in the market. According to the company website (http://www.dell.com), “Dell introduces the latest relevant technology much more quickly than companies with slow-moving, indirect distribution channels, turning over inventory every four days on average”. From the performance of Dell, one can understand that this is not just a claim, but it is true in the case of Dell. The new supply chain software helped Dell in reducing the cost and also helped them to maintain only lower levels of inventory. The efficiency of this system helped them for real-time scheduling and just-in-time inventory. This resulted in efficient inventory turnovers and deliveries thereby giving an upper-hand for Dell among their competitors.
Dell uses personal selling in the market of business to business. They use personal selling especially for small and medium industries and government bodies. Dell is targeting mainly on these industries and they have a dedicated team for doing personal selling. Their continuous effort and hard-work are paying back to them in the business to business market.
Dell is a company which believes in strong public relations. It will help them to build a reputation in the society. Dell is doing various programs one of its kinds is the Dell and the National Recycling Coalition kicking off a program to teach universities and other institutions how to run computer recycling programs. The program in large part is aimed at making PC recycling more commonplace. When PCs die or become aged, most people don’t know what to with them. Dell hopes to instruct these organizations on how to hold events that let people can turn in old equipment. Later, a recycling company determines whether a PC can be refurbished, given to charity or recycled.
- PC World- Marketing strategy:
PC World continues to experience high levels of deflation in core hardware products; however, this was offset by strong sales growth, in particular in laptops. PC World continues to deliver leading levels of attachments to its hardware sales; however, with laptops becoming a larger part of the sales mix, there has been a negative effect on the gross margin.
The entire UK computer hardware market is had a growth rate of 7 percent in the financial year 2006-07 .PC World also increased its market share with this. They added seven new stores opened in this period. PC World topped among the group companies of DSGi with new initiatives such as collect@store providing customers the “Best of Both Worlds”. They also introduced team bonuses based on the good performance of their stores and they also removed the individual commissions. In order to move up in the value chain, they also launched a new concept called TechGuys which helped them to deliver high levels of customer satisfaction. PC World also moves aggressively by rebranding all 157 PC advice clinics to The TechGuys by the end of the first quarter of this financial year. As a part of this strategy, all the PC World stores underwent a comprehensive service transformation. This transformation included new training and actions for the new and existing employees for an improvement in customer service. PC World also underwent change in their business operations strategy. For this PC Worlds business operations were brought under their parent company’s unit, DSGi business. This integration allowed DSGi Business to reduce its operational costs substantially and better align its operations with its customer base.
PC World is also focussing higher on the customer service concept. PC World took a number of actions to improve the shopping experience during the financial year 2006-07 thereby making the life easier for their customers.
They reduced complexity, improved the range of services, simplified the information it provides and changed the way in which store employees are rewarded. They also focus on employee involvement in increasing customer satisfaction by giving them performance bonuses and extensive training. This program improved the motivation, spread the workload equitably, delivered measurable improvements in customer satisfaction and moreover it gave them a sense of ownership. . The initiative has also been implemented in the Group’s national distribution operation in the UK. PC World also removed the individual commissions from its stores replacing the traditional scheme with a new team bonus, which is based on total performance and customer service. This dramatic change in the strategy in reward and store culture was welcomed by t he employees and resulted in delivered measurable improvements in customer satisfaction. Their rebranding helped them in creating an opportunity to introduce new training programs for in store employees. This helped DSGi as a group to increase their customer satisfaction. They are also planning to extend The TechGuys brand outside the UK and to provide The TechGuys branded services to business customers. PC World made major progress with the development of its international buying operations. Their strategy behind this is to combine their buying power and standardise their terms for products on a pan-European basis. This strategy helps them to obtain competitive retail price position in all the countries in which it is present, thereby passing on this benefit to their customers. PC World had launched trials of their new format in south east England as a part of their expansion strategy. The focus of this is to give customers an understanding of the potential of the products sold by them. This in turn gives customers a practical demonstration of the product’s features and benefits. PC World is also focusing on new investments so that they can improve stock availability and maximise the customer-facing time available to the store employees. This strategic focus of PC World is helping them to revive their brand name and regain the customer confidence.
Product: PC World’s multi channel approach helps them to sell their products. Their product portfolio includes PC’s, accessories of different manufacturers such as Sony, HP, Packard Bill, Dell etc and their own products such as Advent and PC Line. Their multi channel approach helps them to reach targeted customers through their retail outlets and through online. PC Worlds strong concentration in their buying strategies makes their inventory levels and the costs minimal.
Price: PC Worlds pricing makes everyone reliable and affordable. Their venture into refurbished PC’s created a new segment of customers. For those customers, PC World is giving a computer which is affordable for their prices and also with a guarantee. PC World is providing other brand products also in low prices. Direct purchase from the factories makes them a wholesaler and thereby they are able to cut their middleman cost. The role of a wholesaler is allowing them to provide branded PC’s at low cost. Price reasonability and the availability of support, after sales services and parts have given PC World a good name in the market.
Place: PC World with its wide presence in the UK, they have an image of a nearby store. This gives customers accessibility and confidence in terms of buying and also for after sales service. Moreover the presence of PC World products online helps them to tap the customers who want to buy computers at their fingertip.
- PC World- Promotion Strategy:
Promotion strategies of PC World include a combination of all the six components of the promotion mix but with main concentrations on advertising, e-marketing and sales promotion. They are adding value products and services at point of collection.
They are advertising PC World as a brand which is “Best of Both Worlds”. This is an advertising campaign which meant to say that they are the best in both retail selling and online selling. According to the advice of the Institute of Practitioners in Advertising (IPA), PC World announced that it will launch brand-led, rather than price-led campaign. PC World claims it planned its brand campaign before the recession began to bite, as part of a long-term strategy.
PC World also concentrates on sales promotion by distributing discount vouchers through websites and various other means. PC World was having pricing strategy earlier. But later they understood that just being a low cost player would not give them any competitive advantage in the future. Then they changed their strategy to a new combined strategy of both pricing and branding.
In 2008, PC World rebranded themselves with a uniform store design and giving uniforms to their employees. They also upgraded the stores and invested in re-training its staff. This was in tune with their new strategy i.e. branding strategy. It will continue to run price-focused ads, but the multi-media brand campaign represents its biggest single advertising investment.
PC World is using personal selling as a part of their traditional brick-and-mortar sales. Even though they have an e-marketing channel for sales, they believe in personal selling through their stores. The competitors of PC World are focusing purely on price. But even with that, PC World’s marketing director, Niall O’Keefe, insists that there is more to a purchase than simply price for consumers. ‘Price is clearly a key driver for people at the moment, but it always has been, and I certainly don’t think it’s the only consideration, even with the economy as it is,’ he says. He also adds that the ‘People still want the peace of mind that they’re buying the right product for their individual needs and lifestyle, and for the right price. This requires good advice from people who know what they’re talking about.’
PC Worlds objective in store design and development are;
• One platform/chassis with same layout principle, specifications and POS templates
• Play with colours to work with local brand
• Range and category mix to be locally adapted to create identity
• Buy jointly from 1-2 suppliers fittings & equipment
• Low cost mobile project & building teams
(Source: presentation DSG International Plc)
PC World also utilises the opportunity of e-commerce. They use this as their direct marketing channel. They are using activities such as direct mailers, telephone, e-mails, etc.
PC world is actively involved in various public relation activities so as to have active communication with the community around .It frequently conducts press releases with media so as to communicates its regular activities ,new activities and various social events it performs in the market and well as in the society. When the corporate social responsibility or (CSR) activities are performed it is through this medium the firm communicates. Pc world has a section in its website which is solely dedicated for this activity i.e. recently the firm has joined hands with the British Retail Consortium, CBI, ERRT and Euro Commerce.
Brand-led advertising is not a guaranteed success strategy. For e.g. Holland and Barrett is the duo which burnt their feet’s after changing their strategy from price-led to brand-led strategy. Considering this move from PC World as a long term strategy, it will pay back in the long term especially when competitors such as Best Buy comes to the market.
- Comparison of DELL and PC WORLD distribution and promotion:
Dell’s commitment to consumer value, to the team, to being direct, to operating responsibly and, ultimately to winning, continues to differentiate Dell from other companies. Dell’s dynamic organizational structure allows it to achieve diversified targets. By allowing the components to directly become integrated in the manufacturing process of Dell, it has been able to reduce middle channel costs.
On the other hand directly purchasing from the factory and selling it to the customers PC World is also able to remove the intermediary costs and thereby transferring this cost advantage to the end customer. Since Dell’s manufacturing plant is spread across the world making the information transfer more complex. They need to continuously update and improve the processes to keep up with their pace of development.
PC World is not dealing with all the available brands making them exclusive for some brands. PC World on the retailing front has also got limitations in the floor space making them as a store for selective brands. Hence customer preferences and choices are forced to be limited. This can result in low levels of customer satisfaction and migration of customers to competitors. Advertisement strategy of PC World needs to be carefully balanced in terms of interpretation of messages because previously their advertisements were complained for over- promises.
The established value web corporate model has also allowed Dell to have global wide access to customers and market. Reaching any niche market in any continent is therefore not a problem for Dell’s marketers.
PC World on the other hand is present only in a small market which is mainly concentrated in the UK and Europe. They need to tap opportunities in other developed and developing nations. Their brand-led advertising campaign and stores providing exclusives and OEM’s will also help them to position themselves better in these markets.
Due to the integration of components in Dell’s organization structure, Dell competes not only at the final product level but also at the supplier’s level. Third party software for example has great competition for price and product categorization which could eventually affect Dell’s position in the market.
Success of Dell’s model has invited other players in the industry to enter into this direct marketing model. These copycats (IBM, HP etc) can a pose a great threat to PC World because these giants may remove the indirect distribution channel i.e. retailers. Thus PC World in order to counter this threat needs to build as a brand which provides exclusives.
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