Nearly two decades o f o bserving dell had allo wed

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Unformatted text preview: mber 19, 2007, http:/ / www.f astco mpany.co m/ magazine/ 88/ dell.html. And since Dell P Cs were usually cheaper, to o , the f irm co uld o f ten start a price war and still have better o verall margins than rivals. It was a brilliant mo del that f o r years pro ved resistant to imitatio n. While Dell so ld direct to co nsumers, rivals had to share a cut o f sales with the less ef f icient retail chains respo nsible f o r the majo rity o f their sales. Dell’s rivals struggled in mo ving to ward direct sales because any retailer sensing its suppliers were co mpeting with it thro ugh a direct-sales ef f o rt co uld easily cho se ano ther supplier that so ld a nearly identical pro duct. It wasn’t that HP , IBM, So ny, and so many o thers didn’t see the advantage o f Dell’s mo del—these f irms were wedded to mo dels that made it dif f icult f o r them to imitate their rival witho ut the inef f icient burden o f straddling two dif f erent mo dels o f do ing business. But then Dell’s killer mo del, o ne that had beco me a staple case study in business scho o ls wo rldwide, began to lo se steam. Nearly two decades o f o bserving Dell had allo wed the co ntract manuf acturers serving Dell’s rivals to impro ve manuf acturing ef f iciency.T. Friscia, K. O’Marah, D. Ho f man, and J. So uza, “The AMR Research Supply Chain To p 25 f o r 2009,” AMR Research, May 28, 2009, http:/ / www.amrresearch.co m/ Co ntent/ View.aspx?co mpURI=tcm:7-43469. Co mpo nent suppliers lo cated near co ntract manuf acturers, and assembly times f ell dramatically. And as the co st o f co mputing f ell, the price advantage Dell enjo yed o ver rivals also shrank in abso lute terms. That meant savings f ro m buying a Dell weren’t as big as they o nce were. On to p o f that, the direct-to -co nsumer mo del also suf f ered when sales o f no tebo o k P Cs o utpaced the mo re co mmo ditized deskto p market. No tebo o ks can be co nsidered to be mo re dif f erentiated than deskto ps, and custo mers o f ten want to co mpare pro ducts in perso n— lif t them, type o n keybo ards, and view screens—bef o re making a purchase decisio n. In time, these shif ts created an o ppo rtunity f o r rivals to kno ck Dell f ro m its ranking as the wo rld’s number o ne P C manuf acturer. Dell has even abando ned its direct-o nly business mo del and no w also sells pro ducts thro ugh third-party brick-and-mo rtar retailers. Dell’s struggles as co mputers, custo mers, and the pro duct mix changed all undersco re the impo rtance o f co ntinually assessing a f irm’s strategic po sitio n amo ng changing market co nditio ns. There is no guarantee that to day’s winning strategy will do minate f o rever. Brand A f irm’s brand is the symbo lic embo diment o f all the inf o rmatio n co nnected with a pro duct o r service, and a stro ng brand can also be an exceptio nally po werf ul reso urce f o r co mpetitive advantage. Co nsumers use brands to lo w er search co sts, so having a stro ng brand is particularly vital f o r f irms ho ping to be the f irst o nline sto p f o r co nsumers. Want to buy a bo o k o nline? Auctio n a pro duct? Search f o r inf o rmatio n? Which f irm wo uld yo u visit f irst? Almo st certainly Amazo n, eBay, o r Go o gle. But ho w do yo u build a stro ng brand? It’s no t just abo ut advertising and pro mo tio n. First and f o remo st, custo mer experience co unts. A stro ng brand pro xies quality and inspires trust, so if co nsumers can’t rely o n a f irm to deliver as pro mised, they’ll go elsewhere. As an upside, tech can play a critical ro le in rapidly and co st-ef f ectively strengthening a brand. If a f irm perf o rms well, co nsumers can o f ten be enlisted to pro mo te a pro duct o r service (so -called viral market ing). Co nsider that while sco res o f do t-co ms burned thro ugh mo ney o n Super Bo wl ads and o ther co stly pro mo tio nal ef f o rts, Go o gle, Ho tmail, Skype, eBay, Facebo o k, LinkedIn, Twitter, Yo uTube, and so many o ther do minant o nline pro perties built multimillio n member f o llo wings bef o re co mmitting any signif icant spending to advertising. Figure 2. 3 Icons accomp anying s t ories on t he New York Times Web s it e enlis t cus t omers t o s p read t he word about p roduct s and s ervices , us er t o us er, like a virus . Early custo mer acco lades f o r a no vel service o f ten mean that po sitive press (a kind o f f ree advertising) will also likely f o llo w. But sho w up late and yo u may end up paying much mo re to co unter an incumbent’s place in the co nsumer psyche. In recent years, Amazo n has spent no mo ney o n televisio n advertising, while rivals Buy.co m and Oversto ck.co m spent millio ns. Go o gle, ano ther stro ng brand, has beco me a verb, and the co st to challenge it is asto nishingly high. Yaho o ! and Micro so f t’s Bing each spent $ 100 millio n o n Go o gle-challenging branding campaigns, but the early results o f these ef f o rts seemed to do little to gro w share at Go o gle’s expense.J. Edwards, “JWT’s $ 100 Millio n Campa...
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This document was uploaded on 01/31/2014.

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