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Technology Stocks : Dell Technologies Inc.
DELL 119.41-2.7%Nov 19 3:59 PM EST
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To: The Phoenix who wrote (63815)9/5/1998 11:50:00 AM
From: Chuzzlewit  Read Replies (1) of 176387
 
Gary, it occurs to me that we are talking around in circles. In thinking about what you have said I have come to the conclusion that you are correct -- barriers to entry are minimal in the PC business. After all, a barrier to entry is usually either regulatory hurdles or large capital outlays. There is nothing that precludes a competitor from setting up shop today and selling custom made computers tomorrow. The proof is in the myriad no-brand assemblers. So obviously, these kinds of barriers are non-existent.

But this observation in no way mitigates the argument that the major barrier is to competitiveness in the market niche in which Dell operates. The complexity of inventory management, assembly, sales and distribution in a JIT BTO environment cannot be duplicated in less than a few years. Michelle Harris has discussed at length the complexities involved in the successful installation of the automated functions required to make this thing work. Secondly, there must be some history between vendors and customers to facilitate the smooth integration of operations (what Michael Dell calls 'virtual integration'). So I am talking of barriers which consist of flexibility in meeting customers' needs at a competitive price while at the same time maintaining positive cash flows.

It is easy to talk in generalities of why barriers to entry do or do not exist. But only when you start thinking at the detail level do you begin to appreciate how formidable the barriers to competition with Dell really are.

TTFN,
CTC
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