dell computer inc product concept

Dell did something else other PC companies were not doing; strategically targeting only the customers they wanted. By defining their customer as a ‘knowledgeable PC user’ Dell made their task of providing a PC easier. Their customers did not need to go to a retail store to gain knowledge about their product. This enabled the ‘Direct Model’ for purchasing PC’s to work.

Dell further expanded its ability to meet customers needs by classify customers into specific categories. Customers were categorized into Relationship buyers, large businesses and institutions, and Transaction buyers, small business and home PC users. The Relational buyers made up a significantly larger portion of Dell’s business but also had different needs than Transaction buyers. Every relational buyer was assigned a representative who guided the business and institution through each stage of the buying experience. By integrating both Relational and Transaction buyers into their business system repeat purchases were quick and easy, purchasing history could be consulted, and follow up customer service was able to be more effective.

Dell’s business structure of “virtual integration” allowed it to excel in an incredibly competitive industry. It's competitiveness in the industry resulted from a highly efficient business model that sought out every opportunity to work more productively without compromising the quality of their product. Production efficiency lowered cost which in turn provided Dell with larger profit margins. As Porters Five Forces demonstrates, when bargaining power of buyers is high, the potential for price battles increases. Dell combated failing into the trap of a price battle by making a PC that was a better product than the competitors, yet near their competitor’s price. There costs were able to stay competitive while delivering an exceptional product because their business kept internal costs low, thus showing the effectiveness of “virtual integration.” Like Honda, Dell was able to provide a technologically superior product at a reasonable price. As well, Dell was able to evade a price war because its customers were aware of the technological value in a Dell PC.