Porters Five Forces in Dell Inc - Essay Example

However, no such limited monopoly exists in the computer marketplace. . Developed as a strategic response to the internet, Dell launched a business model which focused on 'build to order computers. Rather than guessing what its customers wanted, and building inventory which was then stored in warehouses until ordered, Dell developed an integrated supply chain management system, and then went to the consumer and allowed the end-user to drive manufacturing. The company focused on connecting with the consumer's immediate desires and then building just what was ordered.

For Dell, this decision cut costs and increased the velocity at which the company could operate. According to Bossidy and Charan (2002), Dell became the market leader with this business model. The company turned its inventory 80 times per year, rather than 20 times which is the typical inventory turnover rate of its competitors. Through this strategy, dell became known as the market leader in terms of getting the consumer exactly what he or she wanted, on time, accurately, and at low cost. This positioned Dell to experience the success which it is now struggling to hang onto.

However, this does not make Dell a strong buyer as a buyer of goods and services when compared to its competition. Dell, HP, IBM, and Sun Microsystems are all purchasers of similar products. While the companies may have their own idiosyncrasies in terms of what specific parts and pieces they purchase, they are all purchasing the same types of products, and therefore all have similar levels of power in the marketplace as a buyer. Dell may have a larger power in the marketplace than its competitors because of the higher level of volume it consumes.