Stock Bull,
What do you think would happen to Dell if the other pc makers were to implement the model?
Those that implement the model will initially lose market share because a significant portion of the marketing is due to the channel, and there is a learning curve on direct distribution. Within a year or so they will make it up. The result is that companies adhering to their current models, either direct or indirect, will gain market share over the short run. Thus, Dell ought to see a spurt in sales extending for a few quarters. But as this effect wears off, Dell and other direct sellers will see a decrease in growth with an increase in growth for the new entrant.
But this overlooks the significant barrier that prevents the corporation from bridging the chasm. If Compaq, for example, attempted this strategy it would incur significant restructuring costs, and yet another year of losses. Since much of management's compensation is derived from stock options, and given the fact that management tends to act in its own best interests rather than the interests of either the corporation or the stockholders, greed will prevent this kind of revolutionary change.
TTFN,
CTC |
