According to the Harvard Business School Article Competitor Analysis, Understanding Your Components, while formulating a competitive strategy, it is essential to identify the competitors, the strategies and objectives of the competitors, map the competitor positioning, analyze the strengths and weaknesses and the aggression factor.
Dell took over market leadership by persistent focus on delivering the best customer experience by selling computing products directly, services online and through catalogs. They had a clear understanding of their strength and weaknesses as Mort Topfer who helped revive Dell's fortunes in 1990s said "We know what we are and what we're not. We are a really superb product integrator. We're a tremendously good sales-and-logistics company. We're not the developer of innovative technology"
Dell started an innovation process by asking customers what they really want and whether they know of a different way to accomplish that. They then meet the suppliers and ask them for a different way and in the end they come up with a totally different approach that exceeds the original objectives. Feedback was acted upon very seriously and Michael Dell used a variety of innovative approaches. He said, "I also enjoy roaming around outside the company to see what people think of us. On the Web, nobody knows I'm a CEO. I'll hang out in chatrooms where actual users commonly chat about Dell and our competitors. I listen to their conversations as they discuss their purchases and their likes and dislikes. It's a tremendous learning opportunity.” Dell tailored manufacturing to a customer’s specific need allowed dell to integrate production schedules with sales force, assemble all parts of the PC on suite and install the specific software that the customer requested. This not only appealed to customers but also sped up the final product completion. Dell strategically targeted only customers they wanted. They classified into specific categories as Relationship buyers, large business and institutions and Transaction buyers, small business and home PC users.
Dell’s competiveness in the industry resulted from highly efficient business model that sort every opportunity to work more productively maintaining the quality standards. Efficiency in production led to high profit margins. As Porters Five Forces demonstrates, when bargaining power of buyers is high, the potential for price battles increases. Dell overcame this by making a PC that was a better product than the competitors, yet near their competitor’s price. Their costs were able to stay competitive while delivering an exceptional product because their business kept internal costs low. Dell was able to circumvent a price war because its customers were confident of the technological value in a Dell PC.
In what market situation do you see Dell’s strategy fail? Who do you think are the potential competitors of Dell?