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Dell deserves to do it tough

Dell deserves to do it tough

If you’ve had the misfortune to buy a computer from Dell in the last few years, you won’t be surprised to hear the world’s largest computer maker is struggling to remain competitive.

Dell’s strategy is to offer one or two headline products each week or so, pitched at prices considerably lower than any rival. The company rarely advertises in conventional print media as such; instead it uses inserted flyers promoting the latest offer.

Although the headline deals are heavily discounted, the company’s other products are roughly in line with the rest of the market, give or take a percentage point or two.

Customers can buy over the telephone, but Dell’s marketing generally pushes them to a website. At the site, they can select a model and are able to modify the specification paying a bit more here for some extra RAM or a little less there for a slower processor and so on. Once a customer departs from the standard configuration, prices, and presumably Dell’s margins, rise considerably.

Dell won’t accept a consumer’s order without getting the money up front. That sounds fair enough, but in reality it can take the company a month or so to assemble the components and deliver the machine from its factory — usually in Malaysia. This can be a nail-biting time for customers.

Consumer sales and after-sales support are handled by a call centre somewhere on the Indian subcontinent. Many of the operatives have, let’s say, questionable English and equally dodgy knowledge. During one recent purchase call, a salesperson said the combo drive could both read and write CDs and DVDs; in fact it does not write DVDs.

If anything goes seriously wrong with a Dell machine, and things often do go wrong, it has to be returned to the factory. Fault finding is extremely expensive. It can cost hundreds of dollars. The whole business is extremely frustrating and unsatisfactory. Those of us who’ve been burnt by Dell won’t go back for more punishment.

Keep all this in mind when you read reports saying the world’s biggest computer maker is now threatened by brands like Hewlett-Packard, Acer and Lenovo.

According to IDC figures, the company’s share of worldwide PC sales fell from 18.6% to 18.1% in the first three months of 2006. Both Hewlett-Packard and Acer saw their market share increase over the same period. Even a revitalised Apple, long regarded as the sick man of the industry, is eating into Dell’s business.

Dell’s rivals are getting traction partly because they’ve finally learnt how to match, or even beat, Dell’s prices.

Until now, price has always been the company’s competitive advantage. Push that aside and it has nothing. Dell doesn’t innovate. It builds boring, shoddy products. It fails to support its customers and it ignores the channel. Dell deserves to fail.


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