What Makes Michael Dell so Successful?

Essay by kingjames March 2006

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"Among technology tycoons he stands just behind the world's richest man, Microsoft's Bill Gates (valuation $US46 billion) and Oracle Founder Larry Ellison ($US18.7 billion). The difference is that Dell ($US13 billion) is only 39, whereas Gates is 48 and Ellison is 59." (Kirby, BRW, April 1-7 2004, pp33)

Michael Dell is one of the world's most successful IT entrepreneurs. There are numerous reasons for Michael Dell's success. Michael Dell uses direct selling to sell its computer. Dell once said inventory should have the shelf life of lettuce. This means that Dell holds just three days' inventory supply. Dell was indeed the first company in the IT sector to ordain that no computer should be built without first being sold in advance. This also ensures that Dell holds no extra surpluses. The stock in the company does not stick at a place for a long time. Dell best understands consumer needs and efficiently provides the most effective computing solutions to meet those needs by selling computer system directly to the customer.

This direct business models eliminate retailers, who added unnecessary time and cost, and also allowed the company to build every system to order, offering customers powerful, richly configured systems at competitive prices. Dell introduced the latest relevant technology much more quickly than companies with slow-moving, indirect distribution channels, turning over inventory an average of every four days. In less than two decades, Dell became the number-one retailer of personal computers, outselling IBM, Hewlett-Packard, and Compaq. According to Michael A. Verespej, Michael Dell feels that to have high levels of raw materials or finished goods in a warehouse can be very dangerous in a business where the value of these materials is going down about 1% a week. That inventory obsession has reduced the dollar volume of inventories at...