Will the availability of the Internet as a marketing channel for competitors quickly erode Dells competitive advantage Essay Example

Will the availability of the Internet as a marketing channel for competitors quickly erode Dells competitive advantage Paper Riding with the technology wave, many firms invested in the internet and related technologies in an attempt to try to gain competitive advantage over rivals by being the first to offer their products or services online. Many firms although have found serious problems with pursuing this. The profitability of the industry was often undermined as companies competed on price in order to try to build up their market share. Many firms also saw the development of internet capabilities as a separate strategy and not an integrated part of the firms strategy, often resulting in failure of its online operations. Over the last years Dell, as a company, has proved that the increase in product variety offers the possibility of customisation, when this is combined with modern production techniques, using the internet to take customised orders, it can prove to be a very serious competitive advantage, for the company that cannot erode easily. The sales numbers for Dells web-site are enormous, at March 1997 Dell was selling $1 million per day through the web-site and by March 1998 this number doubled to $2 million sales per day, but while much of the internet market is untapped there is still potential for this number to grow even more. 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Another important aspect for Dell is the service they offer, as they have created an excellent service capability based on the Dell Vision which states that a customer must have a quality experience and must be pleased, not just satisfied and further on this gives them an even larger advantage over their competitors as they have created a very strong relationship between the company and their most profitable customers. The monetizing concept argues that online businesses must first capture large audiences of users or shoppers, and then later monetize those audiences through subscription fees, advertising and e-commerce (Rayport 1999). Following from the above, it is obvious that Dell has an advantage over any new company that enters the market, as new entries will have to attract large number of customers first and then be able to play an important role in the market, while Dell already has captured a very large and also satisfied and dedicated audience. There is also a widely held belief that once a customer starts working with a vendor, it is much easier to keep that customer than it is to bring in new customers. So if you can build brand loyalty for a web-site early, it gives you an advantage over other vendors who try to enter the market later. Dell implemented its web-site very early and that presumably also gives them an advantage over the competition. Further on the internet can be a very useful tool for other companies that already trade in the pc market. At this point it is useful to mention Dells main competitors in the market, which are IBM, Apple, Wall-Mart, Gateway, Hewlett-Packard-Compaq and also many small local manufacturers in every region separately but there is no reason to probe on each one separately as each company follows their own strategy and different to Dells strategy, in order to gain larger market share and it is not fair to compare. The following points summarize Dell Computers marketing strategy for product and place, their target market and differentiations from competitors: Product Primary focus is built-to-order servers, storage, and personal computers * Secondary focus is computer peripherals, handheld devices, computer accessories and software Place * Internet * Primary approach is direct to customer * Secondary approach is indirect, utilizing channel partners * No physical location for consumers to shop * Considered a click and click company Target * Primary target audience has been large companies, education and government agencies * Secondary target is the consumer * Recent shift to larger focus on consumer market with the Dell Dude campaign Consumer psychographic targets emphasize workers, seekers, pioneers and surfers Differentiations * Internet only, click and click company * Focus on customer service from end to end * Built-to-order computer products rather than pre-packaged * Offers user empowerment in ordering product Dell Computers is an excellent example of a manufacturer that has successfully used the Internet to manage many of the channe l activities and it is difficult for any other company to achieve the establishment that Dell has achieved. Dell has resulted positive brand recognition by consistently building and servicing its low-cost, customized computers to customers. It fosters brand loyalty by continually providing superior customer service and technical support along with continuously incorporating the latest technology in its products. Dell has achieved market focus and competitive advantage by assembling purchased components from suppliers, thereby becoming one of the most successful companies in the global computer systems industry, as it must be noticed that in 2000 it was the No. 1 computer company in the United States and No. world-wide. Dells potential for continued growth is enormous and at the same time the possibility to erode is minimised, because of its capability of providing up-to-the-minute pc technology customized for and sold directly to individual customers. The internet as a marketing channel can become a very strong advantage for any company, although at the same time Dell has been able to buil d up a very strong competitive advantage for the company, something that makes it very difficult for any other company in the pc market to compete and attract customers from Dell.