Dell Computer Organization of a Global Production Network AUTHORS.pdfVIP

CENTER FOR RESEARCH Dell Computer: Organization ON INFORMATION of a Global Production Network TECHNOLOGY AND ORGANIZATIONS AUTHORS: University of Kenneth L. Kraemer and Jason Dedrick California, Irvine Center for Research on Information 3200 Berkeley Place Technology and Organizations Irvine, CA, 92697-4650 University of California, Irvine This research is supported by a grant from the Alfred P. Sloan Foundation. INTRODUCTION In 2001, Dell Computer became the world’s largest personal computer vendor, continuing to gain market share and post profits in an industry struggling with slumping sales and billions of dollars in losses. Dell sells 90% of its PCs directly to the final customer, largely bypassing the reseller channel that accounts for most of the world’s PC sales. This direct customer relationship is the key to Dell’s business model, and provides distinct advantages over the indirect sales model. Dell’s direct relationship with the customer allows it to tailor its offerings to customer needs, offer add-on products and services, and use the Internet to offer a variety of customer services. In addition, Dell’s PCs are built to customers’ specifications upon receipt of an order, giving Dell additional advantages over indirect PC vendors who must try to forecast demand and ship products based on those forecasts. Dell’s direct sales and build-to-order model has achieved superior performance in the PC industry in terms of inventory turnover, reduced overhead, cash conversion, and return on investment (Kraemer, et al., 2000). Dell’s business model is simple in concept, but