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COMPUTER MARKET (PERSONAL).   Term Paper ID:20491 Click to get this paper

Essay Subject: Marketing concepts, value-added-resellers, technology, major firms (Dell, IBM, Apple, Compaq) & their strategies, innovations & adaptability.... More...

24 Pages / 5400 Words 15 sources, 26 Citations, APA Format $96.00 Return to List of Papers

Paper Abstract: Marketing concepts, value-added-resellers, technology, major firms (Dell, IBM, Apple, Compaq) & their strategies, innovations & adaptability. Paper Introduction: Background For many years, IBM has been the leader in computer technology. They invented the personal computer (PC) and did much to standardize not only the hardware architecture but software architectures as well. However, all has not been that well for a long time for this struggling giant. In October of 1992, IBM stunned Wall Street with its earnings third quarter earnings report. They were, to say the least, disappointing. IBM's PC business unit was singled out as a "significant earnings drag!" The company blamed its PC unit for two-thirds of a six percentage point drop in its overall gross margins (Arnst, 1992). The Industry Environment Today Today the PC market is full of consumers who have bought Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. IBM hopes to recover this lost ground by offering to these users thenew ValuePoint product line. It is believed that competitors are focusing strictly ongraphics performance and thus IBM will be able to maintain or expand marketshare in this particular area. Dell provided a differentsolution as other retailers would see when Dell could rapidly deliver to acustomer as very specialized configuration in substantially less time thanit would take the same customer to place an order and wait for themanufacturer to ship it. Compared to Apple's approach, Dell and Gateway's notebooks are tooconservative (Linderholm, 1992, p. Compaq alsorenegotiated many agreements with its component vendors which resulted inmany parts being dualsourced. From a competitive standpoint, the ValuePoint systems are aimedspecifically at Compaq's ProLinea product line (Arnst). Compaq's Ability to Change Compaq has, in the past, been the victim of price wars. What the retailersfailed to realize that these consumers were very sophisticated and wereoften coming back into the market looking to pick up a second, third, oreven fourth machine. (1992, September). Electronic News: pp. Inshort, buyers are very smart and very sophisticated. Michael Dell realized, very astutely, that anyone could cut pricesone or two percentage points lower. TV advertising made good sense in the 198 's, but since PC's are nowa maturing product, print advertising is better for getting price andproduct details to the consumer. All of this increased activity on behalf of its competitors as wellas some recent price changes generally across the entire industry, hasmeant even more business for Dell. Key breakthroughs in technology are feedingthis process (Linderholm, 1992, p. For the traditionalist, Dell still maintains a direct (field) salesforce of 25 persons who are as unorthodox as is the company itself (Pitta,1992, p. The most commonly mentioned broadcast media in this scenario arepacket radio and cellular communications. Unfortunately the previous CEO (cofounder Rod Canion)had misread Compaq's problems and attributed them to the general globalrecession. However, soon other "look-alikes" were putting togetherclones that matched the performance of the IBM PC. In1988, for example, Toresi set up a toll-free order line at Businesslandwhich competed with Dell. Plans on the drawing board and/or nearing release at Dell includeinnovative approaches to providing support for such things as electronicdata interchange, peer-to-peer networks, and client server networks. Savvy consumers keep PC makershopping. All thatchanged in the early 199 's as the PC industry became more of a commoditymarketplace. The precursor to thistype of technology was the Casio Wizard but by comparison, is very far downon the evolutionary scale and is more like a simple calculator. Enablingtechnologies. 69. Two distinctively differentportable designs have emerged into the marketplace--full featured notebooksand personal data assistants or PDA'S. Today you can have in the size of a one-inch, three-ringnotebook, virtually all of the capability of a desktop unit including massmemory storage, fax/modem capability, and a color display. Greenberg, Adam. All of thismust have paid off because in 1991, Dell computer won the J.D. In addition to the above services, Dell is also offering servicesthat will complement those offered by some members of the VAR community.For example, Dell can do factory loading of software that will require nohuman interaction during the process of building the computers that areordered. Buyers werefor the most part uninformed and unwise to the intricacies of the personalcomputer. Dell's response to Compaq price cutstriggers industry shoot-out. Pfeiffer's work is far from being done. Now that they are seeming toreact, Dell is going to have to work harder. The way this is done (Dell style) is to work directly with thecustomer (over the telephone of course) to determine what is theappropriate system configuration. 152). Forest, Stephanie Anderson (et al). In the past, the dealer channel has been Compaq's primary channel.Now Compaq has moved into VAR channels and the integrator channel.Different programs have been set up to service each of these channelsbecause they serve their customers in very different ways than dotraditional dealers. Thismeans that on a capital base that has very little debt, Dell can deliver areturn on equity like that of IBM when it was in its heyday. For the consumer it is still a long way fromhappening (Nadeau, 1992, p. Dell's selling and administrative expenses consume approximately 14cents on every sales dollar against 24 cents for Apple Computer and 3 cents for IBM. Yet, still the bulk of Dell's business is derived from thetelephone. This equates to a loss in research anddevelopment dollars--a factor which has given Compaq an edge in the past(Forest, 1993, p. What is moreimportant, is that even this form factor is about to get smaller! Additional evidence of the growing importance of the service side ofthe business can be found in the recent marketplace moves of Dell. This iscertainly in the forefront of the marketplace. This compares to $2 for IBM and $7 for WalMart (Pitta, 1992,p. Unfortunately technologykeeps changing at such a rate that the picture is also continuallychanging. (1992, July). Compaq: Howit made its impressive move out of the doldrums. 63-64. The PS/2 family breaks into new technical ground in the graphicsarena. What remains is to develop a clear long term strategyfor success. In October of 1992, IBM stunned Wall Street with itsearnings third quarter earnings report. This represents a significant change in direction for IBM. 146) which set off anew round of price cuts within the industry. Therrien, Lois. IBM has finally begun to realize that they either changetheir way of doing business or get out of the business. This means the company is running more like a distribution center. The portable computers have themselves been a great boon toproductivity. Although they sell almost entirely bytelephone, Dell has been able to maintain a very high level of customersatisfaction that is at least equal to or superior to competitors that sellthrough stores. Several years ago Compaq was presenting aperformance-oriented advertising message. This represents $33 of sales for every dollar offixed assets. Byfocusing on PC performance, the company was losing significant pieces ofmarket which was quickly consumed by the smaller, more nimble competitors. This "request for assistance" has continued to evolve to the pointwhere many companies are either considering offloading all or a portion oftheir information systems burden, or have actually taken positive stepstowards having an outside company take over running their entire computeroperation (Yovovich, 1992, 67). Additionally, IBM will offer a "build toplan" option on the ValuePoint where it will pre-configure large customerorders. Even the Dell factory has changed. The new approach will beto create small market-driven groups within the company which will studyeach portion of the market and then develop, manufacture and distributeproducts that will respond to these specific needs. But all this isabout to change. Compaq and IBM have assumed that price is the problem. (1992, July).The PC gets more personal: Smaller, smarter systems from Apple, Dell andGateway 2 usher in a new era of portable computing. Compaq, however, remains a laggard in thisarea in that it still only sells through dealers. Like Charles Schwab, Michael Dell has very astutely positioned hiscompany at a mid-point on the cost vs. This represents a different orientation than that which Compaqhas previously experienced in its dealer channel where a dealer may havehad an ongoing relationship with a customer but rarely got involved inrunning a customer's systems. When Pfeiffer took over, all of that changed. Byte: pp. When Bill Gates brought out his ownversion of PCDOS (MSDOS), he did not make things that much easier, but hedid open up a competitive alternative to IBM's PCDOS. 1 -12. IBM has the ability to fabricate its own 486 CPU which is somewhatfaster than that available through Intel ("Hear IBM Readies 66Mhz 486 PC,RAID," 1992, p. As a result, Dell has gone to a complete, custom-built manufacturingprocess that allows them to build over 15, different systemconfigurations. The PCDOS operating system (originally conceived by IBM) was notparticularly simple and once loaded onto the PC did not make the systemparticularly user-friendly either. 82-91. With so many PCsuppliers available, consumers are relentless in their pursuit of value.Cost and warranty are now the top criteria amongst buyers--not brand nameand not bells and whistles (Therrien, 1992, p. IBM's PC business unit was singled out as a "significantearnings drag!" The company blamed its PC unit for two-thirds of a sixpercentage point drop in its overall gross margins (Arnst, 1992). Apple's pen-based system, Newton, is a much different approach fromeveryone else. Apple's goal is to let people be in "digitalcontact anywhere." In order to achieve this goal, Apple needs to implementwireless networking and eventually be able to make use of a globalcommunications infrastructure (Linderholm, 1992, p. This should eliminate the need forbureaucratic decision making a factor which has lead to IBM's sluggish pastrecent performance. The contribution Ray Kroc made to marketing was his ability to takethe uncertainty out of short-order cooking operations. The network consultant then callsthe customer and schedules a time to call and walk the customer through theprocess, step-by-step, on how to set up the system, how to structure files,how to structure directories, how to assign pointers, and how to doaddressing. Not all of the manufacturing cost cutting was placed on internalresources. The Kittyhawk has other features that make it an ideal storage devicefor very small computers. Linderholm, Owen, Apiki, Steve and Nadeau, Michael. One of these features is that it is very miserlyin terms of its power consumption--a factor critically important to battery-driven, portable applications. Once the customer orders the system he isthen assigned a Dell network consultant. Inthe past, Compaq filled up their machines with all sorts of technologicalgizmos and charged at or above the level of IBM. We all know thatSchwab & Company is not the cheapest brokerage company around, but it is alot cheaper than the old wire houses. Business Marketing: p. Powercustomer satisfaction award for a PC manufacturer serving small and mediumbusiness (Pitta, 1992, p. This was still an impressivegain. In the mid-198 's Dell's competitors wanted to believe that the Dellphenomenon was serving only a limited market--even though there was verystrong evidence to believe to the contrary. The Industry Environment Today Today the PC market is full of consumers who have bought PC's beforeand businesses that have placed orders for hundreds of PC's at a time. 1 ). In August, Compaq branchedout into laser printers and in late 1992 brought the ProLinea line toJapan. Thus we willprobably see Dell taking on the appearance of being a superstore or evenperhaps a super-integrator (Yovovich, August 1992, p. This change was in the main driven by Michael Dell who wasthe first one to be able to mass market reliable computer systems to theconsumer on a direct mail basis. Dell bets big on discount-priced 'super-integrator' channel. The driving force behind these new portables is the industry's needto expand the computer market. Forbes:pp. AppleComputer has recently announced that it will be soon distributing a similarcatalog (Pitta, 1992, p. 5. Once the parts were in place, the facility requirements forassembly were relatively simple and the actual assembly work could be doneusing simple tools. In those early days, and really up until very recently, the PCsuppliers focused on improving performance and attempting to fit morefunction into the existing package. According to Apple, only 15percent of the households in the United States have a personal computer.Studies performed by Apple show that most potential users of a portablecomputer want to be able to take notes, sketch, scribble, and make lists.They want to also be able to manipulate this information and organizedocuments as well as schedule items, keep track of people, makeappointments, fax information and print documents. Marketing Concepts in the mid-8 's In the mid-198 's the PC marketplace was in its infancy. Previously, mail-order computers offered the consumer alow price and a lot of risk. In particular, Dell's "flexible manufacturingoperation" was created in direct response to what Dell saw happening in themarketplace. By the early 199 's, Businessland, onceconsidered a top computer retail organization, was nearly bankrupt. The physical size of the hard drive is only one factor in reducingthe mass of the entire drive. 72. ---. By utilizingthis approach, Dell will effectively be able to deliver 9 percent of thefull custom solution to the marketplace at 5 percent of the cost ("DellBets Big On Discount-Priced 'SuperIntegrator' Channel," September 1992, p.69). IBM has recently, and very quietly, been selling three of its own PCmodels by means of the telephone. To get production costs down, the manufacturing plants hadto rethink their processes. The Newton is a pen-based system that combines a fast new CPU with amulti-tasking operating system which is designed to work effectively in alimited memory configuration. One impact of this outsourcing related change hasbeen a significant shift in Compaq's channel strategies ("Compaq VenturesFull Force into Value-Added Reseller Channels," 1992, p. 31). The ProLinea line is already under attack by the IBMValuePoint product line which utilizes more advanced microprocessortechnology than the Intel-based architecture resident in the ProLinea aswell as in most clones. Dell has gotten away from using retail outlets and chooses to useinstead, telephone lines and a fleet of trucks which have been provided byshippers like United Parcel Service. This directive reached not only into engineering but also intomanufacturing. It also helped that Michael Dell had a productthat was solid. Most retailers thought that the customer would pay a substantialretail markup in return for the ability to go to a store and "touch andfeel" the merchandise. Unfortunately, gross margins for Compaq are down to 28 percentand net margin is about 5 percent--about onehalf of what it was in itsheyday. (1992, October 12). Technology advanced, as it continuedto do, and more and more capability became resident on the desktop whichultimately gave rise to the current trend of decentralizing even the mostcomplex and sophisticated of mainframe computer operations. 72). It's competitors are no longer ignoring Dell, in fact by adoptingtheir direct-to-the-consumer marketing techniques, they are paying MichaelDell one of the most sincere forms of flattery. Its after tax net margin hasalready dropped from 6 percent in the fiscal year that ended in February1992 to a freckle under 5 percent for 3Q92. In the beginning it was easy for IBM andCompaq to dismiss Dell and its customer base as the "do-it-yourself,""nerd" business that both preferred not to deal with in the first place.IBM and Compaq both believed, erroneously, that the "non-techie" consumerwould want to visit a store first for "touch and feel" before making apurchase. The increasing complexity of the information systems that VARS,system integrators and outsourcing organizations are installing is alsohaving an impact on the market. Business Week: p. Consequently, IBM isnow targeting every possible combination of consumer and offering more PCrelated products which will include those most oriented to home, smallbusiness and large business applications. Compaq Computer was the first clone company credited with reallyhitting it big. The hard drive is currently available with 14 or 21.4 MBytestorage capabilities. and the Price Club. The plan is to continue to pursue the corporate PC market withtraditional products and to use the ProLineas to build a new high-volumeoriented business among small business owners and consumers. Unfortunately the "soon" is a little farther off than we mightimagine. Business Week: p. 84). Currently, thetwo most critical areas are mass storage and wireless communications. A growing number of companies are subcontracting outtheir computer operations. Inaddition to responding to Compaq's recent price cutting moves, Dell hasinitiated price cutting of its own as well as unveiling a new set ofofferings that aim to apply to the service side of the business. 132). For example, many system integrators and outsourcingorganizations tend to operate on much longer range time lines than does thetraditional dealer channel. 63). Perratore, Ed. 133). Coverage can vary greatlydepending upon which service provider you are using. Byte: pp. (1992, November 2). 91). This started by building an entire system on asingle assembly line instead of making the motherboard in one building andthe chassis in another. Thework force has been reduced by 25 percent which reduced payroll by $225million. Essentially, the manufacturer's force fed the marketplace and prettymuch established what the consumer would pay for the products. Yovovich, B.G. This sudden softeningof Dell's financial performance is seen to be due to both the departure oftheir Chief Financial officer and the fact that its competitors arecatching on to toll-free number selling. As part of this effort, companies have been engaging in outsourcingand subcontracting all sorts of operations that have been heretoforehandled in-house. The IBM PC could be easily duplicated in terms of its functionsimply by buying the same microprocessor used by IBM and other componentssuch as disk drives, off the shelf, from a wide assortment of willingmanufacturers. (1992, September). 152. (1993, November 2). (1992, July). Two principal forces have been combining to help drive theoutsourcing trend. (1992, September 14). In this way, Dellhopes to become the mail-order equivalent of a "computer superstore." Moreimportantly, as Dell keeps potential customers out of the computer stores,the catalog business will marry them even more fully to the company. While the operational and strategic implications of this type ofaction has received a lot of attention, not much has been done to evaluatethe marketing implications of this type of action. 86). Corporate buyershave other criteria but price is still a dominant consideration with themas well. Both of these technologies relyon base stations to receive and transmit signals. Business Week: pp. Many of these havechosen to seek less expensive solutions based on post PC-AT architecturesthat had been either abandoned or ignored by IBM. Born-again Compaq? Pricing strategy within Compaq is now very heavily market driven. In effect, Dell custom builds every single machinethat it sells. In short,Dell hopes to provide the marketplace with support in all areas related tothe personal computer--hardware, software, and systems. Hear IBM readies 66 MHz 486 PC, RAID."Electronic News: pp. First, increased corporate demand for more complexcomputer applications that involve use and installation of ever moresophisticated computer networking solutions. (1992, August). Following the reorganization announcementin September, IBM brought forward a new group of PS/1 computers designed tosupport the retail market. 128). Since most PC brands differ very little fromeach other, the competition is mainly based on price. If a customer calling Dell's technical supportline does not get assistance within five minutes, the company will mail thecaller a check for $25. Yovovich, B.G. For the computer manufacturers, the non-computer store channel ofdistribution has already proved itself to be a profitable avenue. 5). (1992, September 7). Mega-trend in the works: Infotech marketers respond to rise in outsourcing activity. 146). Dell believes that this approach will work for about 9 percent of the applications and they are willing to concede losing theremaining portion of this market niche. The recently announced Kittyhawk hard disk drive by Hewlett Packardis an example of this "enabling" technology. There also seems to be a group of large companies however that arenot as high on the PS/2 as IBM would like to think. Even if the company hits the revenue predictions it is forecasting($4 billion), its earnings will be less than half of what they were in 199 when sales were only $3.6 billion. The business has, from an operational standpoint, appeared to turnaround for Compaq. (1992, August 31). Within the new IBM structure, manufacturing, engineering, andmarketing team members are now being held much more highly accountablethroughout the product life cycle. Compaq is trading at 8 percent of annualsales, and Apple Computer is trading at 75 percent. Dell Computer has a marketing capitalization of $1 billion or 5 percent of forecasted sales. The business market for wireless data communications is onlybeginning to take off. The culture at Compaq had become so ingrained with their success thatwhen the market changed abruptly, the company and the culture could simplynot adjust. Compaq also leaned on its suppliers to cut prices. Soon it will start offering(through the mail) software and hardware peripherals. EDS considers a short-term contract to bethree to five years and they like to have "lifetime" customers.Consequently, EDS likes to know where a vendor's technology is headed inthe future. Electronic News: p. This was followed later in the month by arevamped PS/2 and server family, a number of notebooks and the introductionof a new line of products called PS/ValuePoint. By admitting that the PS/2 is not for everybody, IBM may finally bein a position to enhance its design without fear that the associatedpremium prices will kill the product in the marketplace. 128-136. Will all of this effort be enough to counter Compaq? In this last move they undercut Japanese market leader NEC's pricesby ten percent. These sales professionals do not have offices and work outtheir homes. 1-4. Wireless communication bonds everything together in our lives today.visions of the future suggest that your personal computer will soon be ableto pull information out of the ether, signal you that it has been received,and then allow you to respond, through the same medium in a very timelyfashion. (1992, November 2). By 199 , Michael Dell had set his sights on Compaq, which had by thenbecome the leader in the PC-clone industry. The planning and groundwork for the type of flexiblemanufacturing operation to handle this level of service was installed atDell about two years ago. 132). This induced competition and prevented anyone single component from increasing unit pricing (Perratore, 1992, p. The Kittyhawk is a 1.3 inchhard drive that measures 2 by 1.67 inches and is less than two-thirds of aninch high. 86). 132. This allows a VAR, system integrator (SI), or the endcustomer, to order precisely what they want and Dell builds it to order.It now takes about three days from the receipt of the purchase order to thedelivery of the system. To respond fully to the disruption of the nineties, Dell has begunpushing its telemarketing strategy further. Most people have erroneously assumed that Dell sells based on price--exclusively. Recent breakthroughs however will soon allow the computermanufacturers to build even smaller, more functional PCs. Business Marketing, p. The future strategy for Compaq is hardly radical (Forest, 1992, p.148). This productwill be sold by telephone and direct mail methods. It is surprisinghow long it took the industry to catch on. It has nowturned aggressor by introducing its ProLinea line of PCs in June 1992.These units were an immediate hit (Forest, 1993, p. He very vigorously advertisedhow consumers could go directly to the "source" instead of dealing throughsome distributor when it came time to get their PC repaired. Michael Dell very correctly saw that the only way toget an edge in this rapidly changing business arena, that would very soonbecome a commodity business, was going to be through innovations inmarketing. Simply stated, hardware will be less of acomponent giving way to adding value through service and system-orientedsolutions. (1992, September). People in those years weretrading up more than now. 146-151. Specifically IBM has recently introducedits "PS/ValuePoint" machine which sells for around $1, . IBM has re-engineered the PS/2's XGA graphics by concentrating onthe quality of the graphics processing and the ergonomics of the display.Thus each new PS/2 comes from the factory equipped with IBM's nextgeneration graphics which is designed to drive a new family of colormonitors. He chose "reliability." To support this choice, heoffered such amenities as unlimited calls to a toll-free technical supportcenter, a 3 -day money back guarantee, and next-day/on-site service throughindependent contractors. Enzo Torresi (co-founder ofBusinessland) admits that he and other people in the retail arena neverreally understood the Michael Dell phenomenon (Pitta, 1992, p. Dell's factory is now running overtimeand ships nearly 3, orders per day. This is not true. What isreally the issue is that the dealer channel has fundamentally fallen downon its ability to service the consumer (Pitta, 1992, p. This process of rethinking manufacturing alsomeant instead of testing every subassembly, only a sample would be tested--although all finished systems are still tested. Dell's Future Marketing Strategy The general trend for the future in the PC market will be to providemore service-oriented solutions. The ValuePoint machinesare aimed at the most price-sensitive buyers and those who do not need allof the state-of-the-art features resident in the PS/2 architecture. 91). This maintains capital expenselow and provides for flexibility in manufacturing. Also with retail prices as low as theyare, there is simply not the same amount of money available to support thebig media campaigns used in the 198 's. Similarly, as the market has moved from anemphasis on standalone PC's to a more complexly networked environment,Compaq has had to put a greater emphasis on system-management types ofproducts because it is not just a matter of the horsepower in the server,it is also a matter of can you manage the overall system and can youanticipate failures--just like in the mainframe and minicomputer world.Additionally, VARs and systems integrators are installing these mission-critical applications on networks where they simply cannot afford to havethings break down. This strategy was fineuntil competitors began to copy these features at lower prices. 147). Dell uses its capital to primarily finance its inventories which itis currently turning over at a rate which exceeds eight (8) times per year. From a pure marketing standpoint, Compaq recognizes that moreoutsourcing is taking place in the market and is currently attempting tounderstand how its major accounts are evolving and changing theirpurchasing behavior. Apple Computer intends tofollow suit sometime in 1993. Less facility requirements are necessary and the salesman does notneed as large an inventory (in relation to sales). While other PC makers (most notably Apple Computer) are racing tobuild futuristic versions of the PC, like handheld "personal digitalassistants" or PDA'S, Compaq is focusing its energies in those areas thatit knows. What Dell's people did then and still do today, is understand theneeds of the customer first. Nadeau, Michael and Perratore, Ed. Outsourcing does not relieve you of your managementresponsibility, but it does serve to relieve you of worrying so much aboutday-to-day resource allocation problems. The ValuePointsystems are price competitive with Compaq and appear to offer more inservice and support to say nothing of the value of being backed by "IBM"--afactor which still means a lot in some circles. As recently as a year ago,the analysts had written off Compaq as a player in this market (Arnst). Most people in the retail business really never did figure out whatMichael Dell was doing until it was too late. Curiously, he took hisinspiration not from Steve Jobs and/or Bill Gates, but from Ray Kroc andCharles Schwab. Personal computers are rapidly becoming a commodity market much likeVCR'S. Every effort has been made to refocusorganizational resources to be as tightly focused as possible on primarystrategic thrusts. Compaq ventures full force into value-addedreseller channels. The End of the IBM Mainframe Market The decade of the nineties, still relatively early on the scene, hasushered in much in the way of changing how we live and how we do business.Companies have very zealously scaled down their bureaucracies and havestreamlined their operations. What he reasoned that he needed wassome sort of an edge. 29). This may be a wise decision since manylarge corporations bought the PS/2 from the beginning and have invested alot of money into PS/2 systems and the associated Micro ChannelArchitecture (MCA). The interface to the rest of the computer isalso important and represents much of the volume displaced by the drive(Nadeau, 1992, p. Clearly Compaq is leading the industry, or at least appears to be atthis time. What IBM is doing is segment marketing and appears to be a newapproach for the PC marketplace. 19. The personal computer manufacturers are increasingly turning to massmerchandisers to sell their products. This line has also been expanded and comes with athree-year warranty as well as the OS/2 operating system already loaded onthe machine. 152. (1992, November 1). Why Dell is a survivor. As a super-integrator, the service-side analog of the computer superstore, Dell willfocus on providing extra-efficient high volume delivery of all kinds ofcomputer related services that have been traditionally provided by value-added-resellers (VARs) and systems integrators like EDS and AndersenConsulting. Can IBM resurge in PC's?Datamation: pp. Toresi's efforts were frustrated by IBM, Compaq,and Apple constantly offering discouragement at his concept of sellingcomputers over the telephone. The high-volume business sales ofthe past are slowing so PC manufacturers are literally courting home andsmall business customers every place that they can. Greenberg, Adam. This explains why wehave over the last few years seen computers for sale in such non-computeroutlets as Sears, Circuit City, etc. Thus the salesman instead of waitingfor a customer to come through the door, has his customers coming in tohim. He was replaced by Echard Pfeiffer who believed it was time toslash costs and stop losing market share to cheaper brands--like Dell. ---. Use of Computers in Everyday Life The impact of the personal computer on our lives has been to say theleast, pervasive. It is doubtful any of the clone makers will be able toduplicate this feat. Today there is little automationbut it still remains a job-shop approach. This was largely do to theoverabundance of success that the company had since its founding in 1982 bya group of engineers from Texas Instruments. Inorder to understand the Dell computer phenomenon one must first understandthat Michael Dell is not so much a computer entrepreneur as he is amarketing innovator (Pitta, 1992, p. The Conceiving of Dell Computers and How Dell is Changing Today Dell Computer Company did not exist as a company ten years ago. His orders wereto cut costs and to "Out-Dell" Dell. Many PS/2 customers would be happy if IBM simply continued to buildsystems that keep pushing the usual envelopes of faster processors, biggerhard drives, and improved software. While Apple is taking an entirelynew direction, Dell and Gateway are relying on conventional design todeliver their solution to personal computing. Similar things can be said aboutMichael Dell and his company--Dell Computers. For many years, people have been trying to define whatthe ultimate personal computer will look like. Pfeiffer has brought in a new order which dictated slashing costs,giving up on "gold-plated" technology, and getting engineering to design ahigh quality product which can be manufactured at a low cost. Like the VCR market, there are too many suppliers out therefighting for market share. IBM PC business break-awayseen chance for x86 vendors. It took only two years forCompaq to go from the top to being the goat (Forest, 1992, p. ---. This necessitated having to special order a system from thefactory which usually resulted in long delays. While its competitors are focused on trying to squeeze moreperformance out of the notebook form factor (specifically Dell and Gateway2 ), Apple is taking an entirely different direction. This manufacturing capability was driven bymarketing strategy. In thepast, IBM had built only a few basic models of PC's and then "force fed"them into the marketplace (Pinella, 1992, p. Background For many years, IBM has been the leader in computer technology. This will serve to offer users some additional speedcapability. Byusing telephone-based service (something that Dell does in the PC industrybetter than anyone else) that walks the customer through the set-up of a PCnetwork, Dell will be able to cut the cost of a network installation byperhaps 5 percent and do it better/faster than many dealers. Following this it extended the price battle in the UnitedStates with cut-rate servers for PC networks. Suddenly the "ease ofentry" into this market was being fully exploited both by domestic andoffshore suppliers. 84). The focus on core competencies is probably the most profoundin that companies know that they have to manage their resources in such away as to concentrate on the things that they do well and offload as muchas is practical those efforts that take resource energy away from focusingon core competencies. What reseller channels it supports,consists of outlets like Staples, Inc. Put quite simply, by the mid198 's, Dell Computer had become a very efficient mail-order business. Second, is the growingbusiness emphasis on strategies that call for the streamlining of corporateoperations and for the focusing of corporate resources on corecompetencies. They were, to say the least,disappointing. Dell, as did Kroc,has taken the fears and uncertainty out of buying a "mail-order" computer. Since the bulkof Dell's sales are directly to the consumer, when Dell needs to servicemore customers, it simply adds more telephone lines. By the mid-198 's, Michael Dell realized that while selling basedstrictly on price might be a good way to break into a market it wascertainly no way to build a company that was going to last, especiallysurvive what would become one of the most searing tests of any marketingplan--the decade of the nineties. " Business Marketing: p. Today, Dell supportsnearly $2 billion in sales revenue with only $55 million in land, property,plant and equipment. Pitta, Julie. The smaller, nimble competitors have been able to slash prices andbring new technology into the market faster than has IBM. How IBM Has to Change Over the last several years, the image of IBM has changed tosymbolize a sluggish giant in the cut-throat world of personal computers.Even though IBM is still the world's largest manufacturer of PCs (measuredin revenue dollars) and that it set the original standard for PCperformance, this means little to the cost conscious consumer of today. 66-67.----------------------- 6 quality curve. Further, rather than trying to further extend the PS/2 line to fitall markets (as was done previously), IBM has chosen instead to make thePS/2 its premium architecture. Theyinvented the personal computer (PC) and did much to standardize not onlythe hardware architecture but software architectures as well. Now forthe first time, consumers can go into a Circuit City store and have theirpick of three top PC brands. The continual march ofPC technology to ever more powerful computing solutions on the desktop (andeven at the notebook level) makes the question of outsourcing anddecentralizing computer operations even more profound. In September of 1992, IBM announced that its new hardware unit (IBMPersonal Computer Company) would be separate from the rest of the company.In reality, the reorganization went into effect several months before theformal announcement. What retailers also failed to realize was that customers often hadvery unique and specialized requirements which required a "custom"configuration. It is unknown at this point what this slight edge in speedwill have on the marketplace. 136). References Arnst, Catherine. At the time the industry was dominated by the IBM PC which setthe standard for performance and initially pricing. Apple Computer is pioneering the PDA which can be easily carriedanywhere and adapts to the user's style of working. Even after undergoing massive downsizing at the corporatelevel in 1991, Compaq's marketing and overhead costs are still taking 2 cents out of every sales dollar (Pitta, 1992, p. 28-32. In reality, manyof the large customers for the PS/2 have never been deterred by the priceof the unit (Pinella, 1992, p. Big blue has a clone of itsown. The signs of the trend to outsourcing computer operations could bewitnessed as early as the mid-198 's when value-addedresellers (VAR's)began to come forward as a very important resource to help corporatecomputer operations that were having difficulty handling the increasedinformation system demands that were being placed upon them. However, all has not been that well for a long time for thisstruggling giant. Dell movedthe in-store salesman to a telephone. Simply stated, by offloading, youare still managing the results but not the specific details of howsomething is being accomplished. Still, the areas where IBM pioneersnew territory with its latest PS/2 offerings (graphics and ergonomics) maybe not all that important to customers. Compaq has viewed its most serious competition as coming from Delland AST Research. To some extent this was true. Byte: p. The PC-clone business was ready made for someone like Michael Dell in1984. In short, Michael Dell had set up a process within his company, notjust a product, that could rapidly respond to small custom orders--this wassomething that the big retailers simply could not duplicate. New IBM PCs aim to changeprice image. Clearly, IBM has finallydiscovered that one size does not fit all consumers (Pinella, 1992, p.29). 86). Pinella, Paul. BusinessMarketing: pp. Apple believes that the personal computer has penetrated themarketplace on only a very limited basis. Clearly, Dell does not view itself as a manufacturer but as a serviceprovider that, in order to satisfy the needs of its customer and itsmarket, reshapes and reconfigures its internal operations as necessary tosatisfy these needs. Since its inception, Dell has cut out the middleman and relied onselling its computers directly to the consumer by means of heavyadvertising in the computer press and toll-free numbers. Unfortunately, the culture at Compaq did not see that their productshad become over-engineered and overpriced. 82). Similarly DigitalEquipment Corporation (DEC) and Bull's Zenith Data Systems subsidiary haverecently begun telephone sales operations. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.