George S. Day and Christine Moorman

Is Dell Losing Its Way?

Friday Sep 17, 2010

This is a shocking question to ask the legions of admirers of Dell’s tightly run supply-chain that delivers computers and servers at a low price. Yet Dell is losing ground in laptops, its smart phone, the Aero, is considered a flop, and it has lost out to HP in a tug-of-war for a small developer of high-end data storage technology.

Dell’s plight is typical of companies who have succumbed to inside-out hubris. Dell’s single-minded focus on supply-chain efficiency made it the world-wide market share leader in 2005. Yet this inside-out emphasis on extracting the maximum returns from their business model also kept Dell from sensing and responding to a sea change in their market. More and more customers wanted to buy at retail and to select laptops and devices that conveyed a sense of personal style. Both Apple and HP were much faster at responding to this change in the market. Meanwhile the cost advantage that allowed Dell to deliver superior price value has dwindled, as competitors copied their supply chain. Now Dell is left to play catch-up—not an enviable role in the tech domain, and a poor fit for its brand.

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