Until now the companyhas sold mainly to corporate

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test of the Dell way of doing business. Until now, the companyhas sold mainly to corporate customers : only a fifth of its sales in the US are to consumers, and much less than that elsewhere. 40 MS-11 P.T.O.
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...Dell's simple but effective idea has been to sell standardised electronic products direct to customers, usually over the internet. That removes most of the research and development that is normally required, while also cutting out retailers and other middlemen. Armed with the information it gets from taking orders directly from customers. Dell has gained two other powerful advantages. One is the ability to build products to match orders as they come in, slashing its inventory costs. The second is a highly efficient marketing machine that can adapt its message based on real-time results as orders arrive.' With its lower costs, Dell sets out to undermine profits in the markets it enters and destroy the margins that sustain its more entrenched competitors. 'Our goal is to shrink the profit pool and take the biggest slice,' says Mr Rollins. Consumer electronics companies, often with gross profit margins of more than 30 per cent, make an obvious target for this ruthless approach. 'Our gross marigins are in the L8-19 per cent range : we don't need 40 per cent' he says. A former partner from Bain (management consultants), the Dell president applies the cool analystics and familiar jargon of the strategy consultant to this relentless expansion : search out the markets with the biggest 'profit pools' to MS-11
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be plundered; pick ones with close 'adjacencies' to those DeIl already servesto reduce the risk of wandering into unknown territory; and apply its .'core competences' to conquering new ground. As a textbook case of applying a proven and repeatable formula, Dell takes some beating. It used the formula to move from selling PCs to businesses to selling them to consumers. Next it followed its businesses customerc into seraers, then into storage hardware. Nozu it wants to foltow consumers into other areas of electronics as taell. lt has started with products closely linked to the PC. Such as MP3 digital music players and l-7-inch flat-panel television sets that resemble computer monitors. According to Delfs rivals, success in the PC businesbin the US has disguised the fact that the company has found it harder to break into other products and new geogaphic regions.
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