Dell Direct Sales Model Case Study

This management case study briefly discusses Dell’s channel strategy and partner program introduced to recapture its lost market leader position. The case further highlights how Dell has successfully transformed itself from its direct-sales-only mantra to building a successful reseller network within three years.

Case Contents

  • Introduction
  • Dell’s unique ‘direct build-to-order’ sales model
  • Dell’s Transformation over the years
  • The 80s – PCs by mail
  • The 90s – Extending Direct sales, user-customized systems & JIT
  • The 2000s – Moving towards a broad-based IT company
  • Dell – Quick Facts
  • Michael Dell – Leading from the front
  • Dell’s Channel Strategy
  • White Box program
  • Partner Program – Dell PartnerDirect
  • Three tiers in Dell PartnerDirect
  • Bibliography
  • Exhibit 1 – How Dell’s direct build-to-order’ sales model worked
  • Exhibit 2 – Five key elements in Dell’s successful Direct Model
  • Exhibit 3 – Dell – Business Segments
  • Exhibit 4 – Dell Historical Timeline
  • Exhibit 5 – Requirements for Dell PartnerDirect program
  • Exhibit 6 – Dell PartnerDirect Timeline – Dec 2007 to 2008
  • Exhibit 7 – Dell – Product Lines and Brands
  • Exhibit 8 – Dell Inc. – Historical Stock Chart
  • Exhibit 9 – Dell Inc. – Historical Income Statement
  • Exhibit 10 – Dell’s market share in Q1 2009 versus other PC makers

Sample Page of case study

“We don’t think about the channel as a second thought – it’s integrated into everything we are doing. Every new offering and capability has partners in mind.”
– Michael Dell in September 2011.
“Our channel business continues to grow, continues to prosper, and we continue to attract new partners and grow our install base, and become a bigger and bigger part of the Dell portfolio.”
– Davis, Dell’s global channel chief in 2011.

Introduction

In January 2007, Dell had lost its No. 1 position in worldwide PC shipments to Hewlett-Packard Company (HP). In 2011, Dell reported the largest revenue increase in the company’s history when it reported its results for financial year 2011. Within three years, Dell had successfully transformed itself from its direct-sales-only mantra to building a successful reseller network.

Dell has probably witnessed more changes in its business model than many other companies have. Dell is now engaging more with channel strategy and is on a channel-hiring blitz seeking ways to improve working with channel partners. Dell is making bigger investments in the channel with new innovative channel sales initiatives. The Dell channel business now amounts to about 33 percent of the company’s $62 billion in annual sales in 2011.

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Product details

IBS Center for Management Research (2008)
This case is about one of the leading personal computer (PC) manufacturers, Dell Inc. The case discusses Dell's business model and distribution strategy. Dell, which was known for its direct selling model that was backed by strong supply chain management practices, lost its market leadership to HP (Hewlett Packard) in 2006. In the mid- 2000s, some analysts had criticised Dell for sticking to its direct-only business model. According to them, the business model that had made Dell so successful in the past was not as effective as before and the company was losing its competitive edge. In 2007, Dell announced its intention of moving beyond the direct-only model that it had zealously followed until then. Subsequently, the company rolled out its retail as well as channel partner initiatives. Though some analysts welcomed the move, others felt that significant challenges lay ahead for the company. The teaching objectives are to: (1) study Dell's direct-only business model and understand the advantages and disadvantages of such a business model; (2) understand the reasons behind Dell's decision to move beyond its direct-only model; (3) understand the issues and challenges faced by companies in managing the supply chain and in launching new channel strategies; (4) understand the issues and challenges faced by companies making a transition from a direct selling model to a multichannel model; and (5) gain insight into the fast changing global PC market and understand the competitive landscape. The case is meant for MBA / MS students as part of the business strategy / sales and distribution management / supply chain management curriculum. The teaching note includes the abstract, teaching objectives and target audience, teaching methodology, assignment questions, feedback of case discussion and suggested readings and references. It does not contain an analysis of the case.
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