DELL growing faster than a speeding bullet and then CPQ,HP & IBM too.
Marci:
Very kind of you post the link to the article,great article indeed
and just thing we are looking for,much obliged indeed.
Now Allow Me to Plug some excerpts from the article which I thought
shows what separates DELL from its peers.
Quote of the day.
(in reference to competition catching up by emulating Dell)
"says Kevin McCarthy, analyst at Donaldson, Lufkin & Jenrette. By then, he says, Dell may get so far ahead that HP and IBM would have to "reconsider their role in the PC business altogether."
A must read for all Dellheads,future investors,distractors,friends and foe.
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Source:Forbes
Dell is going gangbusters with its direct sales model. Why don't its competitors follow suit?
Games dealers play
By Daniel Lyons
Dell's direct hit
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Dell is growing faster than rivals HP, IBM and Compaq, thanks to its more efficient direct sales model and lower price points.
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The success of Dell's marketing model is well known and amply reflected in the price of its stock. Dell is gobbling up market share— 10.1% of desktop PCs worldwide, up from 6.9% at the end of 1997, according to Dataquest. Dell now outsells Hewlett-Packard and IBM and is gaining on Compaq.
Why don't Compaq, HP and IBM just copy the Dell model and sell direct? If it were that easy, Dell would never have gotten where it is.
IBM, HP and Compaq are vulnerable to dealer blackmail. Dell is not. Giving in to it, the big three have spent the past two years trying to make their three-step distribution model—manufacturer to distributor to reseller to customer—work as efficiently as the one-step model that Dell uses. But because they must leave something on the table for the dealers, the big three must either charge slightly more or accept lower profit margins themselves.
Now, by enlisting distributors to do part of the assembly of their computers, the PC makers may have put themselves even more at the mercy of their dealers.
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Many distributors are already in the PC-making business, with generic PCs to which local resellers affix their own label. Resellers in North America last year sold 6.4 million of these so-called white boxes—more PCs than Compaq sold, says Channel Information Services, a market researcher in Jericho, N.Y.
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The idea of having distributors build PCs—which seems to be backfiring on its author—originated at IBM. It figured it could compete with Dell and lower its costs by shipping PCs to distributors in component form. That way distributors could assemble customized PCs based on what customers were ordering, the way Dell does. Distributors would no longer get stuck with preconfigured PCs nobody wanted, and IBM wouldn't have to eat obsolete inventory.
Since then HP and Compaq have followed IBM's lead. But the system is far from sleek. Each manufacturer has a different set of rules and policies for distributors to follow, and some of the rules are counterproductive.
For example, distributors insist the joint manufacturing system could work better if PC makers would let them buy components on their own for assembling into a name brand product. But PC makers don't want to lose the profit they make on components. The result? Intel ships microprocessors from a warehouse in Phoenix to an IBM plant in Raleigh, N.C. Then IBM ships the processors back across the country to a MicroAge assembly plant in Tempe, Ariz., 10 miles from the Intel warehouse where they started. MicroAge would prefer to drive across town and pick up the chips—but that's against IBM's rules.
In these custom assemblers, the big three have created a potential Frankenstein's monster of huge size. Ingram Micro will do $22 billion in sales this year, Tech Data $12 billion, and MicroAge $6 billion. It would be quite easy for any of them to expand production of white boxes built to dealer order in competition with the big three.
Dell's leap
Dell's sales grew 48% in the first half of 1998, to $5.4 billion.
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The biggest threat to PC makers could come from Ingram Micro. The Santa Ana, Calif.-based company recently opened a 500,000-square-foot assembly plant in Memphis, Tenn. Ingram has struck a deal with Solectron Corp., a Milpitas, Calif.-based contract manufacturer that will provide manufacturing capabilities in 11 other locations worldwide.
The dealers have already made IBM and Compaq feel the lash. Both companies started experimenting with limited direct-selling initiatives this year. IBM's desktop PC revenues declined 24% in the first half of 1998, and Compaq's revenues were flat. HP, which so far has refused to sell direct, enjoyed a 26% sales gain and gained market share, according to Data-quest.
Is there then no way the big three PC makers can stop Dell? They will have to find a way. In some cases they are matching Dell's prices. Nevertheless, in its most recent quarter Dell's sales and earnings grew 54% and 72%, respectively.
forbes.com
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