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Dells success is backward lookrng claims jeff clarke

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'Dell's success is backward-lookrng' , claims Jeff Clarke, head of global operations at Hewlett- Packard. According to Steve Milunovich, technology strategist at Merrill Lynch, not all markets are as susceptible to all aspects of the Dell approach as the PC business. Yet he adds that the company has shown great discipline in attacking only those areas where its strengths still give it a clear economic and operational advantage.
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Even most of the company's competitors concede that the shift in consumer electronics from analogue to digital technology plays to Dell's strengths. It is already the biggest purchaser of Iiquid crystal display screens and computer hard- drives, for instance, putting it in a strong position as these components come to play abigger role in television sets and other household items. When you combine monitors and LCD televisions, we will blow away the consumer electronics grys,'says Mike George, chief marketing officer. More importantly, Dell also benefits from the standardisation that brings down the cost of components and removes the advantage once enjoyed by companies that invest in their own technology. As more of a product's functions come to reside in standardised components such as microprocessors and hard drives, the differentiation that comes from making new versions declines The contrast with others is stark. Sony chief Nobuyuki ldei, for instance, told the FT that the Japanese company was putting a growing emphasis on proprietary components to differentiate its products. In the past four years, 70 per cent of Sony's investment has been in silicon chips. While the digitisation of consumer electronics may have played to Dell's core strengths, though, there are at least three things about the market that are likely to test its business model. One is the fact that it will rely, at least for now/ on manufacturing by other companies, MS-L1 6
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reducing its ability to drive down costs. Also, the consumer electronics business is based on comrnon products that are not configured individually for different customers : according to Mr Clarke, that removes one main advantages of Dell's build-to- order model, the ability to customise products for each buyer.
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