Dell Business Analysis: UK Distribution Channel Effectiveness

Summary

The research is about study of distribution channel management at Dell Computers, UK. My work is more practical in nature, studying the Distribution Channels of Dell, both at a strategic and an operational level. I would be analysing the business function on its efficiency and effectiveness, comparing with the other industry performers. I would mostly be comparing the function against Sony Electronics, the most respected name in multi-channel distribution network; Acer, pioneer of value computing products and proprietary brands like Advent.

The research aims to analyse and study the distribution channel of Dell in UK, distribution channel of its competitors, efficiency and effectiveness of Dell's Distribution channel as compared to its competitors. And based on the research and analysis propose recommendations to enhance its effectiveness.

The literature review section of the dissertation explores the definition of distribution, channel, and distribution channel and distribution channel management. Apart from that the section also examines the activities and the levels of distribution channel. The latter half of the section focuses on the distribution strategy adopted by Dell, Sony and Acer. Research is conducted by means of case study as well as survey. Case study analysis incorporates the study and effectiveness of the distribution strategy of Acer, Sony and Dell. Two set of questionnaires are designed to collect data from the end customer and the channel partners. Apart from that secondary data is used from from books, journals, company reports and documents, government websites whereas primary data is collected by means of survey questionnaire distributed channel partners and the end customers. In all 50 questionnaires are collected duly filled out of 60 questionnaires being sent out to the end customer whereas the questionnaire for the channel partners was send to 50 channel partners out of which only 30 responses were received. Questionnaires were sent out using survey distribution services of a web site. Care was taken to ensure that diverse demographic is covered for the survey.

The research has its own drawbacks such as the work limited to the English market. Financial and time constraints of my semester mean that I'm not able to conduct a global research that would be more apt in this case. Another limitation is most of my work is conducted through a personal observation method; as such it is prone to my personal bias. Thirdly distribution channel model is a sensitive piece of company information. As far as information on the competitors distribution channel is concerned its bit difficult.

CHAPTER 1: Introduction

This chapter will introduce the topic, specify the key aim and objectives of the dissertation, discuss the research approach and state the dissertation outline. The key aim of this chapter is to establish the foundation for the research topic by giving out basic information.

1.1 Introduction

The research is about study of distribution channel management at Dell Computers, UK. The dissertation is more practical in nature, studying the Distribution Channels of Dell, both at a strategic and an operational level. I would be analysing the business function on its efficiency and effectiveness, comparing with the other industry performers. I would mostly be comparing the function against Sony Electronics, the most respected name in multi-channel distribution network; Acer, pioneer of value computing products and proprietary brands like Advent.

Dell Inc. is a multibillion dollar, multinational technology firm that manufactures, develops, sells and supports personal computing and computer related products. Dell has seen a rapid growth to become one of the top three vendors in the PC manufacturing industry, and has seen a substantial increase in share price and market value.

While many other companies were unable to handle the demands of the competition, Dell has proved successful in such an environment.

The main key to success to Dell has been its two innovative practices that is direct sales and build-to-order business model. This model is simple as a concept but highly complex to execute, especially in the present conditions of rapid growth and change. Dell has continually renewed and extended its business model while striking a balance between control and edibility.

Dell made changes in its design, manufacturing, procurement, and logistics processes to reduce the costs, and to speed up the entire distribution system. It has expanded into International markets and it started making notebook and server product lines which has led to extraordinary profits for dell, and has given a great market value for the company. Dell has reached sales of $18.2 billion by the year 1998, with a profit of $1.46 billion, and Dell's market share in the PC market grew from 3% in 1995 to 9.2% in the year 1999 with stock price increasing by 40 times. Dell's market capitalization has reached $100 billion.

1.2 Research aim and Questions

The primary purpose of my research work is to analyse the role distribution channels play in the functioning of a business, both in the long run and in the short run. My study is to present a detailed description of the unique distribution channel adopted by Dell Inc., analyse its efficiency and effectiveness, identify possible loopholes and put forth recommendations for development.

My study is being undertaken with an aim to answer the following research questions:

• How are the various distribution channels organised within Dell Inc.?
• How does it compare with its competitors?
• How effective and efficient is this channel management at Dell?
• What can be done to make it better?

The four research questions are the guiding blocks of my entire research and all of the work would be done, keeping them in view.

Distribution Channels within Dell:

I would be looking at Dell's innovative distribution channel management which has literally revolutionised the importance of Direct Marketing in the consumer electronics space. Direct marketing is still the primary distribution mechanism within Dell. I would be documenting the evolution of this concept within Dell right from its customized sales regime during PC's Limited to the complex and sophisticated systems that it employs currently. I would be presenting a visual of the entire distribution network that it stands at today.

Comparison with its competitors:

I would be comparing the dynamic distribution systems of its arch rivals. Sony and Acer are the brands that I would be concentrating upon. I would be looking at the strategies adopted in different economies, though my primary concentration would be on the English markets.

Efficiency and Effectiveness:

I would be conducting an efficiency and effectiveness test of Dell's powerful distribution network against its competitors. This would be an empirical study. I would be concentrating on the parameters of Customer Satisfaction and Vendor relationship management.

Recommendations:

Finally, I would be putting forth recommendations for future developments along with the cost benefit analysis of such implementations.

1.3 Research approach

The study is conducted by collecting secondary data and primary data. Secondary data is collected from books, journals, government websites, company documents whereas primary data is collected by means of survey questionnaire distributed among channel partners and the end customers. Participants of research would be intermediaries in the distribution network and the end customer. In order to select the participants the study has made use of stratified random sampling method in order to make sure that major demographic segments are represented while selecting the samples (Rao & Skinner, 1996).

Questionnaire design consists of two parts. The first part contained the demographic information while the second part dwelled on each of the subjects perception on each variable using five point likert scales from 1 (“Strongly Agree”) to 5(“Strongly Disagree”).

The study did not require any assistance from a third party or any other institution. In order to collect data the study made use of web portal survey to distribute survey and get responses. The system was designed in such a way that the respondent have to submit all the answers. Out of 60 questionnaires, responses for 50 surveys were obtained. The duration for the survey was kept as two weeks, a reminder mail was being sent to the respondents at the end of week one to remind them.

1.4 Importance of the study

Organizations have been undergoing strategic changes over the past decade. More so in the past couple of years. The current recession has proved that risk management and strategic planning are most vital for an organization's long lasting and self-sustaining performance. My work will strive to highlight one such areas of strategic thinking and inform the senior management about the benefits involved.

1.5 Research Scope

My work would primarily be concentrated on the UK market. Though Dell is a global corporation with intermediaries present across the globe, all working towards forming an effective value chain to maximize business potential and ensure efficiency in operations; UK being the second biggest market after the US will be a general approximation of the entire organizational behaviour. Furthermore, the cosmopolitan nature of London and demographic diversity ensures that it would be a close estimate of the general population.

1.5 Limitation of Research

I intend to undertake my research as comprehensively as possible. As in any research work, inherent are some unavoidable drawbacks in my study. Few of them are:

Financial and Time Constraints: As outlined before, the scope of my work is limited to the English market. Financial and time constraints of my semester mean that I'm not able to conduct a global research that would be more apt in this case.

Personal bias: Most of my work is conducted through a personal observation method; as such it is prone to my personal bias. However as the person who is to do the entire research right from formulation of research questions to recommending solutions, I would be most qualified to comment on the topic.

Information Constraints: Distribution channel model is a sensitive piece of company information. Though I have secured access to Dell, wherein I could do all the data mining myself, the extent of information that I would be able to muster about the rivals' model is still to be seen.

1.5 Dissertation outline

The structure of the dissertation is as follows

Chapter 1: Chapter 1 encompass introduction to the topic, followed by brief background into the research topic. This beginning chapter also lays bare aims and objectives of the research followed by structure of the thesis. Apart from that this chapter also gives information on the research approach adopted and the limitations of the research.

Chapter 2: The literature review section of the dissertation explores the definition of distribution, channel, and distribution channel and distribution channel management. Apart from that the section also examines the activities and the levels of distribution channel. The latter half of the section focuses on the distribution strategy adopted by Dell, Sony and Acer. The final section compares the distribution strategy by all the three players.

Chapter 3: The thesis then moves on to methodology section wherein the research model, research framework and data collection methodology is discussed. Questionnaire method is used to collect the necessary data from the consumer.

Chapter 4: This chapter explores data findings

Chapter 5: This chapter presents the conclusion.

Chapter 6: This includes references using Harvard referencing style

Chapter 7: This includes the Appendix

1.6 Summary

The chapter introduced the topic of the dissertation, specified the key aims and objectives of the research. Discussed the research approach in form of secondary and primary data collection through the means of questionnaire and clearly stated the limitations of the research in brief. The chapter also outlines the research structure specifying the contents of each chapter.

Chapter 2: Literature Review

During my research, I would primarily be looking towards the concepts of Distribution Channel and its management. I would be guided by the various contributions in the field, though my work would primarily be influenced by the theories and suggestions of Philip Kotler in the area. A Professor of Business Studies at the Kellogg's Business School, Kotler is often regarded as the ‘Father of Modern Marketing'. My work also coincides with various other management thinking like Consumer Behaviour, Relationship Management, Marketing Mix and Optimization, among others.

2.1 Definition

2.1.1 Distribution

Kotler (1996) states that distribution is a key element in the marketing mix (place amongst the 4P's). It is the systems and practices in use which make a product or service available to the consumer of such a product or service.

2.1.2 Channel

Channel is defined as “a set of interdependent organizations involved in the process of making a product or service available for consumption or use” (Gorchels, West, & Marien, 2004). It can also encompass physical movement, warehousing, ownership of the product, presale transaction, post-sale activities; order processing, credit and collections; and other different types of support activities (Gorchels, West, & Marien, 2004).

2.1.3 Distribution Channel

The Distribution Channel is the chain of intermediaries, each of them passing on the product or service to another intermediary until it reaches the consumer.

The business dictionary defines it as,

“The route by which a product or service is moved from a producer or supplier to customers. A distribution channel usually consists of a chain of intermediaries, including wholesalers, retailers, and distributors, that is designed to transport goods from the point of production to the point of consumption in the most efficient way” (Dictionary, 2010)

Another definition of Distribution channel states,

“A group of independent and interdependent organizations involved in the sale and movement of goods and services to the end users may be called a distribution channel or network” (Gorchels, West, & Marien, 2004).

More specifically, a distribution channel is:

• The transfer of goods from manufacturer to the end user
• Route of a company for distributing the goods
• The process of moving goods from the manufacturer to the consumer
• A supply chain consisting of all parties in between production to the end user

2.2 Types of channel members

The activities in the distribution channel can be carried out by the marketer himself or it can be carried out by specialist organizations. The specialist organizations and the channel members can be categorized into two types.

1. Resellers
2. Specialty Service Firms

Resellers are the companies which usually buy and take the ownership of the products from the manufacturer with the intention of selling to end consumers. An organization can have one or more than one reseller in the chain. The network or chain of resellers is known as reseller network. The resellers can be further classified into:

Retailers: A retailer sells the product directly to the end customer.

Wholesalers: Wholesalers buy the products from manufacturer or other wholesalers and then they sell the products to the retailers.

Industrial Distributors: They are the ones who sell products from one business to other, they are suppliers who buy the goods and sell it to another firm.

Specialty service firms are organizations that do not take the ownership of the products. They also provide additional services along with the products. Specialty firms can be:

Agents and brokers: They are the firms which bring together the suppliers and buyers and mediate the sale and they charge a fee for this kind of service.

Distribution service firms: They provide services which help with the movement of goods in the distribution channels like transportation, processing and storage of goods and products.

Others: They are the firms which provide other services to the channels in distribution like insurance, routing assistance etc.

The distribution channels consist of many parties among which each of them is trying to meet their objectives. Relationships between channel members should be strong with each other's especially on which they are depending for the further distribution of product.

2.3 Levels

The arrangement of the distribution channels can be classified into two types:

1. Independent channel arrangements
2. Dependent channel arrangements

Independent channel arrangements:

In this type of arrangement the channel members negotiate deals with others which do not result in the binding of the relationships. Channel members are free to make arrangements which they feel is in their own and best interest. An individual member decides what is best for them and not the entire channel.

This is also called conventional distribution arrangement and often significant conflict as each member decides what is best for him and not in concern with the entire channel.

As shown in the figure 2 there are four levels of distribution channels. Channel 1 is called the direct marketing channel which is the distribution of products or services from the manufacturer to the customer. The best example for this channel is Dell which does not makes use of any intermediaries to distribute its products to end customers; there are no retailers, agents or wholesalers. The channel does not have any intermediaries. This type of channel helps to eradicate the excess cost and also helps to have good control over the quality and marketing.

The other three channels fall in the category of “indirect marketing channels”.

As shown in the figure 1, the second channel has one intermediary, if the market is a consumer market the one intermediary is basically a retailer. Electronic consumer goods market of UK is an example of second type of channel arrangement. In this type of distribution arrangement the companies sell good to large retail chains, example would be Sony, Canon, and HP selling their electronic goods to large retail chains such as Dixons. These retailers in return sell the goods to the end customer.

As shown in the figure Channel 3 consists of two levels which are the wholesaler and the retailer. The role of the wholesale in this channel is to buy the products at bulk from the manufacturer and then sell the same to retailer in smaller quantities. This model works best for retailers on small scale and not for big chains such as Dixons. This type of distribution channel is best when there are large number of small retailers and not big companies. Example in this case would be the medical drugs distribution market in the UK.

The fourth channel has added level to it in the form of agents who work as intermediary between manufacturer and wholesaler. The agent acts as representative for both the sides. This works in textile market.

Figure 2 gives information on the four types of distribution channel. Dell follows the manufacturer to direct customer channel thus discarding the intermediaries in between.

Source: http://nptel.iitm.ac.in/courses/IIT-MADRAS/Management_Science_II/Pdf/1_4.pdf

A direct distribution channel is where a company sells their products direct to consumers. While direct channels were not popular many years ago, the Internet has greatly increased the use of direct channels. Additionally, companies needing to cut costs may use direct channels to avoid middlemen mark-ups on their products. Distributors, wholesalers and retailers are the primary indirect channels a company may use when selling their products in the marketplace. Companies choose the indirect channel best suited for their product to obtain the best market share; it also allows them to focus on producing their goods. Though, in practicality, a number of other players exist, they can be generalised to the above.

The specific channel of distribution adopted by a company depends, to a major extent, on its business model, the industry type and the scale of its operations. As an Instance, Sony has its own set of company operated exclusive showrooms. The strong brand equity of Sony, the scale of its business and clearly identifiable product differentiations that it enjoys with the consumers, allow it to leverage on its economies of scale and scope by operating its own outlets. Directly, this result in better margins for the company and indirectly it helps building on its already demanding brand leadership.

Dell, on the other hand, relies more on online sales. This is because of the organization of its service delivery utility. Dell's business model is based upon its centralised manufacturing facilities, rather than the nuclear organization at Sony. Online sales suits such a strategy by negating the high costs of transportation and inventory planning issues involved. A manufacturer selling a physical product might require three channels: Sales Channel, Delivery Channel, and Service Channel. In Our case, Dell uses telephone and internet as sales channels, express mail services as the delivery channel and local repair people as its service channel.

2.4 Distribution Channel Activities

Distribution includes different range of activities (Richard Gay, 2007)

Linking many suppliers to provide wide range of consumer choice.

Assist the exchange process - identify the needs of the buyer in the context of product categories, quantities, range etc. and devise manufacturing, inventory and packaging schedules to fit.

Marketing information: This encompass collection, distribution and analysing marketing research information such as the past sales data about the players within the organizations marketing environment.

Promotional activities - This involves setting of promotional objectives and activating the various elements of the marketing communications mix and measuring their effectiveness, this will encompass identify and communicate with prospects.

Pricing: Deciding on the sales terms and conditions at each stage of the value chain.

Risk management - This includes analysis and resource sourcing required for involvement in the channel , the degree of control and influence and the potential benefits such as revenue and profit generation.

Physical Distribution Management - It includes the transportation all aspects of warehousing management and information flows.

Other Activities that may be part of the distribution channels are as follows:

• Order Generation
• Handling of Goods
• Shipping of Goods
• Storage of Goods
• Display of Goods
• Promotion of Goods
• Sale
• Feedback

2.5 Distribution Channel Management

Distribution Channel Management is all about getting the product or service to the right people at the right time under the constraints of profits, efficiency and effectiveness. Successful marketing does not end when a business has developed a product or service and has found its appropriate target audience with a view to selling it at the 'right price'. The next issue that needs to be faced is how they are going to distribute and sell this product/service to these people- the consumers. When a product/service is purchased by a consumer, it may have been bought directly from the business, or it may have been through a number of intermediaries (wholesaler, retailer, etc.): these are known as distribution channels. Small businesses need to acknowledge the different types of distribution channels to utilize sales potential.

Distribution channel management involves a lot of channel decisions, strategic alternatives and numerous linking concepts, all of which would be explored in my research paper.

Distribution channel management involves a lot of channel decisions, strategic alternatives and numerous linking concepts.

The PC industry is driven by rapid technological improvements in components, particularly microprocessors, other semiconductors, and storage devices. The improved performance of hardware has been matched historically by increased complexity of software, creating demand for the latest hardware.

Figure 2 PC Supply Chain

This means that time is a critical competitive factor in the industry in two ways:

1. Firstly, excess inventory loses value (at an estimated 10% per month ;) and costs money
2. Secondly, products incorporating the most advanced technologies are in high demand and carry a price premium

As a result, companies that minimize inventory and bring new products to market faster can reduce costs, increase market share, and maintain higher margins. Two factors come into play in determining the ability of PC companies to manage inventory and introduce new products. First is the standardized, modular nature of the PC. PCs are built from standard components, using common architectural interfaces determined largely by Intel, Microsoft, and, earlier, IBM. PC makers also can outsource much of their production and purchase components from a well-established production network of contract manufacturers and components suppliers. This makes it quite easy for PC companies to introduce new PCs with the most advanced technologies. By the 1990s, PC makers could no longer gain much of an edge by virtue of design and manufacturing, as everyone had access to the same technical information and supply base. The difference among PC companies was determined increasingly by the second factor—the structure of distribution.

The traditional distribution system of the PC industry is an indirect model often referred to as “the channel”. The PC maker sells its products to distributors, who buy products from many manufacturers and then sell them to a variety of retailers, resellers, system integrators, and others, who sell products and services to the final customer. This distribution system was an effective means for distributing high volumes of PCs with a variety of configurations to reach a broad customer base. However, it had inherent weaknesses that left it vulnerable in a time-based competitive environment.

First was its reliance on market forecasting to drive production. Even the most successful PC makers, such as IBM, Apple, and Compaq, were chronically bedevilled by their inability to accurately forecast demand in a market driven by ever shorter product cycles. They were either caught with short supplies of hot products, causing them to lose sales to competitors, or stuck with excess inventories of slow sellers, which clogged the distribution channels and often had to be sold at a loss to move them out. Even with the best forecasting, the indirect model was plagued by the need to hold inventory at each step.

In the early 1990s, it was common for PC makers to have up to 90 days of inventory on hand and in the channel. The high inventory costs and lack of responsiveness of the indirect channel meant that there was an opportunity for someone who could a way to circumvent the channel.

The company that seized this opportunity was Dell, which pioneered a new business model based on selling PCs directly to the final customer, and building the PC only when an order was received Selling directly removes two links in the supply chain where inventory could build up and also enables Dell to know its final customers, provide better service to them, and promote repeat or expanded sales to them.

Build-to-order production allows Dell to introduce new technologies as soon as customers want them and makes it possible to adjust production to demand very quickly. It also means that Dell does not purchase components and assemble PCs until it has received payment from the customer, giving the company a negative cash conversion cycle in which it receives payment from customers before it must pay suppliers.

The current environment for the computer hardware industry is shaped by several macro forces. Primarily, Dell and its competitors are influenced by economic, demographic, technological and national forces. Government, social, physical and national forces peripherally affect the computer hardware industry to varying degrees. The commoditization of the personal computer—a vital tool for business and consumer. Customers- are a key driver for the economics of this industry. Corporate spending accounts for 80% of all technology spending, and economic conditions decreasing business capital expenditures has a negative and direct impact on the computer hardware industry. While this industry is mature in the U.S., leading to decreased growth expectations, computer spending by other countries around the world will likely fill this void.

Pricing in the computer manufacturing industry is extremely competitive. IT reflects the rapid pace of technological change and decreasing PC costs. Since 2000, the prices of chips and disk drives declined and the standardization of primary components of PCs led to a decline in PC prices. Direct sellers, including Dell, have traditionally been able to under-price indirect sellers in the industry including Compaq and HP. However, most PC vendors now offer a desktop model for less than $500 and a laptop for $700. Key success factors for companies in this industry continue to evolve as the industry matures. Specifically, they include:

• Competitive prices
• Superior relationships with suppliers
• Product customization for business and consumer customers
• Quality customer service
• Excellent cost structure

2.5.1 Channel Issues

Some of the channels issues that the companies face are as follows

1. Product related issues
2. Promotions related issue
3. Pricing related issues
4. Target market related issue

Product related issues:

The nature and type of the product decides the distribution option that should be chosen for the product. A few products require special handling. Ex. Flowers, Fragile goods etc.

Promotion related issues:

The type of promotions that are required to sell the products to the customers also decides the distribution options; there are products which require an extensive contact of the sales person with the customer like automobiles etc. and there are products which require no sales assistance from the sales person like milk etc.

Pricing issues:

The price at which the marketer desires to sell their product also decides the distribution option for the channel if a product is prices really less it cannot have many members in the distribution channel as each one of them looks at making their own profit in the channel.

Target market issues:

The distribution channel is successful only if the product can reach the right customer. Choosing a distribution channel is the path to reach the target customer. A key decision in setting of a channel arrangement is for the marketer to choose the approach to reach his target customer in the best possible manner.

2.6 Dell

2.6.1 Company Background

Dell Inc. is a multibillion dollar, multinational technology firm that manufactures, develops, sells and supports personal computing and computer related products. Based out of Texas, it employs over 75,000 people globally and is amongst the biggest players in the personal computing space. With revenues crossing 60 billion dollars in 2009, it is a Fortune 500 listing. Dell is a brainchild of Michael Dell, when he was a student at the University of Texas. PC's limited was started by him with a meagre capital of $1,000. The company produced its first computer in 1985, the “Turbo PC” sold for $1,000. Powered by an Intel 8088 compatible processor running at 8 MHz, it was the start of the most successful story in the modern computing space. Pc's Limited offered these machines in a variety of specifications, customised to each order amongst a pre-defined choice sets. Though not the first company to use this model, it was the pioneer to succeed using it. In its first year of trading, the company grossed over $ 70 million.

In 1988, the company was renamed as “Dell Computer Corporation”. In 1987, the company expand overseas with a fully functional service and assembly centre in Ireland. Within the next few months, the count reached eleven. In June 1998, Dell became public with a 50 million dollar Initial Public Offering, one of the biggest in its times. In 1990, Dell test marketed a multi-channel retail distribution strategy with little success and was forced to return back to its direct marketing channel. In 1992, Dell featured in the Fortune 500 list for the first time. In 1992, it started on line sales, by offering its products, initially through its own website and later on through various partners and compare websites. In 2002, Dell expanded its product line by foraying into the consumer electronics segment. It also started manufacturing computer accessories with the launch of the dell branded home and office printers. In 2003, the company was named “Dell Inc.” so as to parallel its brand name with the variety of product offerings that it started. In 2005, Dell saw its international sales exceeding its domestic ones for the first name. The company was now a truly global performer, featuring in the top 5 power brands, both in the emerging markets as well as the developed economies (Dell Inc., 2006).

2.6.2 Organizational Structure

Dell Corporation's organizational structure is a functional, decentralized structure. The company encourages different departments and functional components to contribute ideas to enhance the strength of the organization. The hierarchical structure provides defines the various functions provided by Dell Corporation, including Business Development, Education, and Global. A decentralized structure provides more learning availability for all members of the enterprise, as decisions come from various levels; in contrast, the centralized structure has more of the decision-making coming from the upper levels of the enterprise, such as the CEO and Vice Presidents. In the divisional organization, every division has its own groups to support that specific division (such as purchasing units and human resources units).

2.6.3 Strategic Direction

Dell is a completely customer centric organization and its business has been built for a direct sale of the products to the customers. They follow the concept of build-to-order strategy for manufacturing and selling PCs. Dell originally sold PCs to individual PC users, by the end of 1980s; it made its way into the corporate market. Dell's direct approach didn't need the various services provided from resellers. Dell concentrated on its efforts on working closely with those departments to simplify their lives and lower the price of PCs to the end customer.

Dell developed a sales force to deal directly with the top executives of companies, and it penetrated into the corporate accounts that had long been dominated by vendors such as IBM, HP and DEC.

Dell has glued to its inherent model of build-to- order business model to increase their profit margins. A main advantage of this build-to-order production is that quite expensive inventory does not pile up and lose its value before it can be sold. The inventory turnover rate of Dell is 60 times per year compared to that of indirect vendors which is 12-15 times more.

Customers often pay for the product before the sale as it is built to order and Dell pays its suppliers for the parts that go into the PC after the customer pays them, which shows that Dell operates on negative conversion cycle.

One of the most important benefits that Dell gains are the customer relationship which is the key area for many businesses. Unlike many manufacturers who do not know who is their end customer is Dell knows its end customer and how much he is spending with the company and feedback the customer gives after the usage of the product.

Dell uses the feedback of the customer to offer add-on and keep-on products and services.

Dell provides system maintenance and customer support services to the customer to help the customer plan PC replacement and to upgrade themselves with the latest technologies.

Dell calls itself a “PC outsourcer” as it takes the responsibility for managing customer's PC inventory, from purchase to disposal. Its manufacturing operations and systems are set up to support their business model which is building PCs to a customer's requirements which includes pre-loading software and making a hard drive “image” of it in the factory, and providing an asset tag that can be scanned to compare to that of the PC throughout its lifecycle.

The build-to-order process is being practiced for years, and involves the entire production process and supply chain. A Dell PC is designed to minimize manual activities in production.

Suppliers are selected with an assurance of high quality material, suppliers are also integrated into production process and system, and the entire production is managed by the combination of all information systems which are internal as well as external.

2.6.4 Distribution Channel at Dell

When Dell started it took a different path than the other suppliers in the retail channel. Dell found a means to sell its products without keeping a large number of inventory, dealer or distributor network. A new channel was invented by bringing in new technology to traditional roles played by the distribution channel. Dell took the orders over the phone and gave the option to the customer to customize their system to suit their own needs and requirements; Dell assembles the products which are made to order and delivers them quickly which ensures high amount of customer service and unachievable cost structure. Because of this Dell grew to $7.8 billion business when large corporations in the field of computers were thinking on quitting the personal computers market (Achieving Competitive Advantage Through Sales and Distribution Strategy, 1997).

The distribution approach of dell is very different. It assembles different technological means such as telephone communications; internet, and call centres, local shipping logistics to gain competitive advantage over other and at the same time provide satisfactory service and products to the customer (Achieving Competitive Advantage Through Sales and Distribution Strategy, 1997). The figure below shows the distribution channel adopted by Dell which is direct distribution channel.

Unlike its competitors Dell discards the services of middle man and hence is able to have holistic control over the quality of the products, customer service, cost and the efficiency over the lead times. The company understands the diversity of each of its market segments in terms of costs, investment levels, support costs, margins and growth. The company does not have to bear any wholesaler or retailer cost, so it saves on that front. It avoids the costs which are associated with the traditional distribution channel by providing tailored needs and services for each of its market segment.

Building to order means the company does not have to pay or worry about the shelf space on the retail counters; the company works on the model of producing the system after receiving a request from the customer with turnaround of eight days of inventory. The customers make the entire payment before the company sought the parts from its suppliers. The company does not have to pay to its suppliers for approximately 30 days. This is quiet useful in technological field which keep changing at a rapid pace. The company reduces the cost and the risk related to the new technological advancement and the products becoming out dated, because of this reason the company is able to product up to date technologically advanced products to its customers.

Bob Barr, Dell's director of product management for e-business states there are four important factors which are responsible for the success of Dell model, they are Dell's “most efficient path to the customer” means direct sales, whether through the Internet, sales teams or online - but not through channel partners. A “single point of accountability” helps quality control and gives customers a sense of reliability. “Industry standard technology” is cheap and commoditized, and “low cost leadership” keeps overhead down.

Selling through Internet

With the growing use of Internet and e-commerce in 1994, Dell started its online shopping as it withdrew from the retail market in the US. It believed that electronic selling will provide a new opportunity for their growth in sales and it would help them to restore their growth.

In the year 1995, after the Internet the buying and selling through the internet had started, Dell has created its own website www.dell.com to provide information and assistance to its customers in technical support and product related information. The web site also contained the company's information such its annual reports, stock price, and other statistical data.

Suppliers

The suppliers for hard drives for Dell are those which are same for the others in the same group such as Intel, Seagate, Quantum, Maxtor, Philips, Nokia, Samsung, Acer etc.

The notebook range of systems of Dell of the lower end models are manufactured completely by mainly Quanta and Arima which are suppliers from Taiwan. The base units of higher-end notebooks are manufactured by Dell.

Dell completely relies on Intel for microprocessors which is a smart decision and which will make the task of product development easy for them.

More than 70% of procurement is done from the Asia pacific region though the manufacturing is concentrated completely in the US.

Dell has redesigned its computers so that same components can be utilized for different models, which in turn helps in the reduction of number of parts in inventory, its cost, economies of scale, and the process of managing their procurement.

From the years 1992 to 1997, the suppliers for dell were reduced by more than 75%. The suppliers who produced more than 85% of their material were also reduced.

Dell has a multiyear planning negotiating and supplying with its suppliers by reducing the complexity of procurement and inventory management.

External Relationships: From Value Chain to Value Web

Dell's core part of the business is based on the value chain. Like other PC manufacturers it does not focus on designing and selling the models and by relying on others to provide components software and parts for its models.

Dell sells its products directly to the end users by cutting out the distributor and reseller.

A big part of its components are manufactured by other manufacturers and suppliers and are shipped directly to the customers. In terms of designing manufacturing and delivering PCs Dell works in a different way than the others.

Because of its unique way of operating and selling PCs, it has changed the general value chain with a new model which can be called as a value web or a virtual corporation.

Indirect value chain

Co-ordination and control of the value network is completely in control of the company, which creates a direct relationship with the end user.

Customer feedback can be taken easily.

The necessary information can be passed on to suppliers who actually manufacture the components.

The value web model illustrates how Dell's distribution model can respond immediately to customer feedback. As all the traditional mediators are removed from the system the gestation period of customer order to receiving the product is reduced substantially.

Inferences

The large chains of retailers and distributors merchants in the US which represents a large chain of marketing and sales channel. Dell has a relatively large chain even in the UK and Europe. Dell Inc. Corporation has more than 100 international distributors.

Dell uses online market for its sales. It uses the e marketing practices and procedures to sell its products and conducts many online campaigns. It builds its awareness for is brand through mass advertising and by maintaining good customer relations.

Dell conducts market research to receive feedback through its customers and uses this feedback to refine its products and develop new products.

E-commerce is used to increase its sales over the internet and to increase customer satisfaction.

Dell Inc. direct to customer model solves the problem to spend the cost on capital for business development, marketing and sales.

By selling directly to the end customer it eliminates the retailers along the way.

Dell is continuously in customer relationship with its customers which gives them 2 main advantages sales and marketing is made very easy, they can easily sense the changing trends in the market.

Dell gains competitive advantage through its technology which is one of its major strengths.

Dell follows a ‘'transformational leadership style,'' Michael Dell applies this style of leadership which involves inspiring employees and increases their efficiency and effectiveness.

Dell convinces its subordinates to make important and positive changes in business operations and management believes in values that go beyond its changes and achieving ways to perform better and it uses IT as a factor for successful business operation.

Dell will make sure to value the voice of their customers and business partners as if they are integrated with the company and by using the customer feedback for analysing and forecasting customer demand and achieving the mass customization.

Dell expects that their success would be consistent and stable and they wish that other companies would implement such leadership models and believe that Information Technology would play a vital role in the growth of the business.

Communication is an important aspect in Dell Corporation because it has a business environment and culture in which interactions are needed, and where much information is acquired.

Due to effective communication within Dell Corporation development of a healthy corporate culture, job satisfaction of employees, and the happiness and productivity of employees is also attained. It helps to manage the company more effectively.

2.4.1 Kanban Process

Kanban Process is defined as “a technique for work and inventory release, is a major component of Just in Time and Lean Manufacturing philosophy” (Fujitsu, 2002). The concept was originally developed at Toyota in 1950; it is an efficient factory production system. The Kanban process also demands huge amount of trust between the company and its supplier

The company works closely with its suppliers and customers. The company makes use of Internet to integrate its customers and suppliers to its manufacturing and logistic function which is based on Just in time management model. The company relies on its robust organization to get the supplies and components when and where required. Any alternative components are acquired through the time of the production process by making use of the ‘Kanban' System. The suppliers of Dell deliver parts when they receive the request or an empty transportation giving request for refill. Apart from the company also makes use of ‘integrated Kanban' process to be more efficient, the integrated Kanban process is divided into two parts.

The first part is the transport Kanban and the other is the production Kanban and the key difference between both of them is the schedule, the transport Kanban works on every day basis where components are manufactured by the suppliers based on the specific order for that particular day. Because of made to order system at times it can be challenging for Dell to identify or forecast the components which would be required which justify the use of Kanban process. The production Kanban gives details about the completion of the production by a specific unit or workstation, depending on which the suppliers are able to find out the time when the assembly line would need their product. The process is based on the production schedules that are fixed and autonomous in nature which helps in successful and effective logistic process. The company makes use of information technology in the best possible manner to encourage trust and cultivate health relationship (Internal Reports).

2.5 Distribution Channel Management - Competitor Analysis

2.5.1 Sony

2.5.1.1 Overview

Sony Corporation is a multinational organization with base in Tokyo, Japan. The company is one of the world's largest media company reporting revenue worth US$88.7 billion in 2008. The company deals in various kinds of products such as video games, cameras, personal computers, laptops, camera, information technology products and other consumer electronics. It also caters to the professional markets. The company is engaged in the electronic business through its five key segments which is the electronics, gaming, entertainment, financial services and others. These segments together make the brand Song as one of the most comprehensive entertainment company globally. The child companies encompass Sony Pictures Entertainment, Sony Computer Entertainment, Sony BMG Music Entertainment, Sony Ericsson (mobile segment) and Sony financial Holdings. The company is also ranked among the top 20 semiconductor sales leader around the world (Inc, 2010).

In the computer and peripheral segment the company combines form, function and the best technology to provide designer and efficient IT and computer products. The company provides wide range of laptops, Sony VAIO being the most popular among youngsters. In this segment the company caters to different demographics such as students, professional and home use. Some of the different products under this segment are business projectors, laptops and computers, computer accessories and memory sticks (Inc, 2010).

2.5.1.2 Distribution channel

Sony makes use of retailers to distribute their products, places where the customer are most likely to buy them. The company uses one level distribution channels from manufacturer to retailer to customer. The company sells its good to big retail chains such as Dixon in UK, the chain then sells the products to the end customers. Apart from that the company also uses zero level channels and two level channels. The figure below shows the one level channel which is discussed above.

Sony in the recent article published in a UK channel commented that "As customers' needs are becoming increasingly diverse, we have decided to focus on our relationships with our specialist distribution to deliver the highest level of expertise and solutions to end users, their experience, reputation and geographical reach will provide a strong platform for Sony." The company intends to strengthen their position in the display market by merging their distribution network. Based on the need and requirement the company makes use of its distribution network. Midwich the UK's leading specialist distributor of commercial and consumer audio visual products and Imago the Video Communications specialist are to become the primary specialist distributors for Sony in the UK (Bicheno, 2008)

2.5.2 Acer

2.5.2.1 Overview

The company was founded in the year 1976 and today is regarded as one of the top give brands in the PC industry. In the year 2000 the company stopped its manufacturing operations to focus its resources on development of technological advanced user friendly solutions. Acer has been able to receive good results because of the specific marketing activities that best suit its distribution channels. The Company ranks fourth in the global PC market behind Dell, Hewlett-Packard and Lenovo, according to the latest figures from analyst Gartner. Acer ranks first in thirteen countries such as Italy, Spain, Austria, Holland, Switzerland, the Czech Republic, Russia, Portugal, Belgium, Denmark, Poland, Hungary and the Slovakian Republic. The product range of the company includes notebooks and Desktops, servers and storage systems, monitors, peripheral devices, digital devices, LCD TVs and e-business solutions for business, Government, Education and home users. The company employs 5,400 people throughout the world and has created a consolidated sales and service network in more than 100 countries. In 2004 the company reported revenues worth $7 billion (Inc A. , 2010).

2.5.2.2 Distribution Channel

The UK market changes its distribution strategy in 2006 by ending its relationship with one of the retail distribution partner Midwich in May. At present its current partners include Northamber, Micro-P, Ingram, VIP, Lynx, computer2000.co.uk etc. (Hailstone, 2006).

The distributor of the company in 2006 complained that the company made it mandatory for them to keep huge amount of stock , in response to this Levit explained: “The amount of stock we had at the beginning of the year was due to the fact that we had a great ‘back to school' in 2005. Everyone in the industry then expected a good Christmas. However, the festive period was not that good, so at the beginning of January we had more stock than normal. This became an opportunity for our distributors and they sold it all” (Hailstone, 2006).

The company has stock cycle of 6 weeks which means that its vendors are required to keep the stock of PCS for six weeks. The company has also faced criticism in terms of service levels which is an integral part of the distribution channel.

“In the UK, service is a key factor. Unfortunately if you burn a reseller it is really hard to win them back. We need to change the perception of Acer's service and get the message out to resellers that Acer's service level has improved” (Hailstone, 2006). The company in 2006 had around four hundred certified resellers between its Acer point and Acer active channel programmes. The resellers are the companies partners with a shop front or demonstration facilities who are expected to make use of their display area of the shop with the products of the company. Acer active partners are b2b VARs that address the SME market who are required to £60,000 a year (Hailstone, 2006).

Levit said “We'd like to have another 100 partners by the end of the year split between Acer Point and Acer Executive, focusing on the SME and consumer markets, we are happy with the number of resellers that we have in the other areas.” (Hailstone, 2006). The company also made a decision to add 100 resellers to its distribution portfolio between its Acer solution and Acer Executive programmes.

2.6 Summary

The literature review section of the dissertation explores the definition of distribution, channel, and distribution channel and distribution channel management. Apart from that the section also examines the activities and the levels of distribution channel. The latter half of the section focuses on the distribution strategy adopted by Dell, Sony and Acer. The final section compares the distribution strategy by all the three players. Dell adopts the direct distribution model whereas the two competitors makes use of indirect marketing model, in UK Sony uses the one level distribution channel whereas Acer too uses one level distribution channel.

CHAPTER 3: METHODOLOGY

Various theoretical and practical methods are implemented to get overall view about the research project. As a practical tool, Web based questionnaire were given to Channel partners and end customer. Various research techniques and its importance are discussed here in detail. This chapter also gives total explanation about the research method to be selected. It also describes in detail questionnaire design.

3.1 Overview

Different research approaches are available but there is no particular method to go about it. Here, it explains about the research method used for the dissertation to analyse distribution channel of Dell Inc., UK.

3.2 Research Methods

There are basically three types of research methods explanatory, exploratory and descriptive. I would be using descriptive research method since I would take assistance of various theories to present the various characteristics of the background study. This type of study basically needs theory to develop the path for collecting data. Descriptive research method is used to collect information and fact about the conditions that is in existence at present (Creswell 1994). This method also offers scope for flexibility incorporating new questions and issues at the time of the research.

Research Approach:

There are generally two types of data collection methods namely:

1. Qualitative method
2. Quantitative method

Qualitative method is used for non numerical data collection. This includes collection of data in form of opinions and knowledge (Kumar 2005). This would include analysis of the strategies, use of interviews and lot of data that is not structured. Quantitative method on the other hand is used to collect numerical data that can be analysed (Marczyk 2005). This generally incorporates use of annual reports, numerical data, and use of questionnaire to for facts and figures which can be better analysed. As justified by Fred Kerlinger for quantitative analysis, he said “there's no such thing as qualitative data, everything is either 1 or 0.” Further, Denzin and Lincoln stated that “qualitative analysis is multi method in focus, involving an interpretive, naturalistic approach to its subject matter”, (1994, p. 2). Further to clear and precisely explain, Kaplan and Maxwell (1994) said that “the goal of understanding a phenomenon from the point of view of the participants and its particular social and institutional context is largely lost when textual data are quantified”.

According to me, both the methods have their own importance and significance. The method can be selected on the basis of the elements included in the analysis. To explain in detail the importance of each method along with few differences are narrated as below. Quantitative analysis is an inductive approach as it is based on assumption of elements whereas qualitative analysis is a deductive approach. In quantitative analysis the researcher is an observer where in qualitative approach the researcher is the part of the research.

Quantitative analysis emphasizes more on quantities. Numbers are used to indicate values and different levels of theoretical concepts. The numbers help in interpreting and providing facts for occurrence of the event. Statistical tools and packages are used in the quantitative positivist research. Quantitative positivist researches sometimes use archived data or judge through structured interviews. The researcher in qualitative analysis uses world for data interpretation shows different variances, which rely on observer and analyst for the event. Contrary to Fred Kerlinger, I believe that everything does not have to be either 1 or 0. I believe in the power of Qualitative analysis which is from a more social perspective.

3.3 Mixture

Some researchers also combine one or more research methods in their study, which they coined as triangulation. Mingers (2001) argued “the real world is ontologically stratified and differentiated consisting of a plurality of structures that generate the events that occur and those that do not occur”. Different paradigms each of which focuses their attention on different aspects of the situation which requires multi-method research to deal effectively with the full richness of the real world. In order to do justice I have chosen a mixture in terms of research approach. I will be making use of case study as well as the questionnaire for my research.

Orlikowski and Baroudi (1991), suggest three paradigms for qualitative research which are philosophically distinct research epistemologies: positivist, interpretive and critical. Positivists assume that the reality is objectively given and is a measurable property independent of the researcher. Positivists study helps in predictive understanding of the phenomena. Orlikowski and Baroudi (1991,p.5) classified Information System research as positivist if any trace of formal propositions, hypothesis testing, quantifiable measures of variables and drawing of inferences of a phenomenon from a sample to a stated population. Gorman and Clayton (2005) suggested a less positivist paradigm by stating that the qualitative approach “lies within the interpretivist paradigm, which focuses on social constructs that are complex and always evolving” as against the qualitative approach which is more of a positivist paradigm. The modus operandi or the method of research was selected from four available and known categories: Action Research, Case - study research, Ethnography and Grounded Theory. I chose the Case - study research as the preferred method since the research is about the distribution channel of one organization, “the quintessential characteristic of case studies is that they strive towards a holistic understanding of cultural systems of action” (Feagin, Orum, & & Sjoberg, 1991)

Yin ( 2003) who is more of a positivist and incorporates the case study approach towards qualitative analysis states that the case study should be “significant, must be complete, must consider alternative perspectives, must display sufficient evidence, must be composed in an engaging manner.” I believe this is more of an idealistic statement which could be a rare possibility in terms of occurrence in research where quite a few unknowns are evident .However we could take it as a model and work our best to get as close as possible to the targeted value. Walsham (1993) unlike Yin (2003) advocates interpretive in-depth analysis however in the same framework of Case study research. Due to the ever volatile and dynamic constraints of our research - the analysis of interaction of the organization with clients and objectification of identity, it was impractical to rely on accuracy of numerical interpretations ( which is why we chose the qualitative approach in the first place) and as a consequence we chose to follow an interpretive in-depth Case - study analysis.

Now we delve further into the realms of our model to explore the directives we can exercise further to make a more subjective study. Case studies are categorized as being single or multiple case designs. Till this point the research equipped me with ample information to make an assessment of the path to be followed in the context of the project. However in deciding the case design to be followed there were a few anomalies which required insight as well as judicial evaluation on my part. The subject of my discomfort was to decide whether to take single or multiple case designs for the project and more importantly how many cases to be considered if multiple shall be the selection. The dilemma between single and multiple did not take long to evaporate since I had some able judgment from my peers and documented proof of the validity of each. It is a known fact that multiple case designs incorporate more of replication rather than sampling logic. When there is non-availability of cases for replication then the researcher is left with single case design. Yin (2003) made an inference that “generalization of results, from either single or multiple designs, is made to theory and not to population”. Multiple cases strengthen the results by replication of pattern making and increases confidence in the theory.

The more construed factor of choosing the number of cases to be considered while performing the research is where I found myself left thinking. There was a plethora of fuzziness with respect to what would be an adequate number of cases which would represent my objectives instrumentally. It can be argued that increasing the number of cases would provide more generality to the study but that would be at the expense of accountability and would take away the essential dogma of qualitative study. I do not mean to absolve the concept of generality in qualitative approach, however would like to limit it in my own research as an expense made to provide a more realistic and descriptive analysis of the subject. Following this thought process I decided on restricting the number of cases to three which could be deemed as debatable to those who consider “the more the merrier” as their ideology.

3.4 Justification of Research Approach

Qualitative method and quantitative method both have their own advantages and disadvantages. The research has used both the methods as and when required. For quantitative data, basic elements were collected through questionnaire. The questionnaire was filled by Dell customers to evaluate and determine quality and service and the important factors for PC or laptop .Even for evaluating information collected through data collection from government websites, company reports and journals qualitative research method is used. For case study, internal documents of Dell were accessed whereas to analyse the distribution channel of its competitors information from the online articles and newspapers was used.

3.4 Data Collection

Here, details about various data collection methods and tools used for data collection are explained.

3.4.1 Primary Data

Primary data can be collected through various mediums like questionnaires, face to face interviews, observations, telephonic interviews, etc. here, online questionnaire were used to collect primary data. It emphasized on collecting the socio dynamic information about the respondents. This method is easy to use and understand, so it was selected for results derivation. Primary data is very important when you need to achieve various research objectives.

3.4.2 Secondary Data

The theoretical framework again made use of electronic and non-electronic sources in an attempt to complete the full circle of data collection. The use of electronic sources includes use of relevant government and non-government websites, online journals, e-books, and also newspaper articles to provide latest information. These sources helped in sorting relevant literature to gather information about existing services, networks, and contacts within the wider training perspective. This includes reports of the growing number of studies about training and development, good practice, and evidence-based developments specific to this project focus.

Non electronic sources include use of books, magazines and hand outs on the topic. Literary method of collecting data made best use of library hours spending a significant time and concentration for extracting relevant data from wide pool of information available.

The research also makes use of various literary models to do justice to in depth analysis. The research would include an audit of current awareness about the barriers to accessing training information and services.

The advantages and disadvantages of using printed media are varied. The advantages would include a large pool of information available from different industry experts, whereas the weakness of this method is the process of finding the relevant information also it is important to keep checking the validity of data. Appropriate measures were taken to encompass relevant data and authenticated latest sources.

3.5 Questionnaire development

Normally, to collect quantitative data Questionnaires are used. Questionnaires are most common tool to obtain data as they are cost effective and easy to interpret the findings of the answers. Questions included in the questionnaire are open ended, close ended, indicated responses and any response. In this dissertation questionnaire were filled by the Dell customers and their channel partners.

Few advantages of using questionnaire are (Zikmund, 2003)

• Cost effective tool
• Easy to interpret the data extracted
• Data can be collected from large group of people
• Possible answer to each question

Few disadvantages of using questionnaire are (Zikmund, 2003)

• Lack of proper information
• It is not flexible as compared to interviews
• People hardly realized the importance of questionnaire

3.5.1 Design of the Questionnaire

In this study, questionnaires were e-questionnaire and nearly 60 questionnaires were emailed to get the necessary data. If a client doesn't have an email address, questionnaires were sent through a survey website. Most of the applicants were friends and relatives. Once the questionnaire was send later on after two days a reminder was send to confirm that the applicants fill necessary data. The applicant has to submit the questionnaire in a week. The applicants were requested in writing that the data collected is only for research purpose and will not be used in any other purpose. From total 60, 50 questionnaires were received which are attached to the appendix. For channel partner another questionnaire was designed.

Customer Questionnaire

For applicants' comfort and easy the questionnaire was divided in two segments. These three segments are:

Segment 1: Personal details

Here, the applicants have to fill necessary personal details such as gender, age, occupation, monthly income etc.

Segment 2: Rationale behind quality and service

The applicants were questioned about important factors for buying PC, they were asked to rate the service of dell, the delivery schedules, the quality of the system and if they would recommend Dell to their family and friends.

Channel Partner Questionnaire

There were in all six questions in the questionnaire designed for the channel partners. Only ten channel partners filled in the questionnaire out of 50 sent out online. Due to the sensitivity of the relation not many channel partner responded to the questionnaire, out of 50 only 30 channel partners responded back with the filled questionnaire. It is also possible that not all the answers by the respondent would be honest since the partners still work with Dell and would give positive feedback most of the time. The questions asked the channel partners to rate the technology system used by Dell to assist its channel partners, communication system, the years they have been working with the organization, the trust factor and others.

3.6 Limitations

The end customer who filled the questionnaire was students, so the findings were limited to demographics. Also as there was time constraint and cost factor involved so the survey was limited. From 60 questionnaires only 50 were filled and returned. It was also noticed that if the survey was conducted with large group of people and with more flexible demographics the results would vary. In terms of channel partners only 30 filled questionnaires were received back due to the sensitivity of the information.

3.7 Summary

This chapter gave minutes about research method and approach used in the research. It also emphasized on questionnaire design and development and data collection.

Chapter 4 DATA Analysis and FINDINGS

This chapter will include the analysis of the data collected through means of questionnaires and analysis of the case study

4.1 Case Study analysis

This section will focus on analysing of two of the research questions which is the effectiveness of Channel management at Dell and its distribution channel as compared to tis competitors Acer and Sony.

Dell has glued to its inherent model of build-to- order business model to increase their profit margins. Dell took the orders over the phone and gave the option to the customer to customize their system to suit their own needs and requirements; Dell assembles the products which are made to order and delivers them quickly which ensures high amount of customer service and unachievable cost structure. A main advantage of this build-to-order production is that quite expensive inventory does not pile up and lose its value before it can be sold. The inventory turnover rate of Dell is 60 times per year compared to that of indirect vendors which is 12-15 times more. Dell Knows its end customers because of the direct distribution channel from manufacturer to end customer as compared to Acer or Sony who have other distributors in between such as Retail chains or agents. Dell does not needs to buy shelf space as compared to Sony and Acer in the retail showrooms, this does not leads to issues between the middleman and the parent company as in the case of Acer as pointed out in the literature section. Because of direct contact with the customer Dell is able to take direct feedback from the customer and make changes accordingly in the product or service quality.

Dell assembles different technological means such as telephone communications; internet, and call centres, local shipping logistics to gain competitive advantage over other and at the same time provide satisfactory service and products to the customer (Achieving Competitive Advantage Through Sales and Distribution Strategy, 1997). In case of Sony and Acer the only means is to buy through a retailer which can be online or traditional retailer chain. One does not have the option of assembling a PC through call centre when it comes to Acer or Sony. The customer will have to visit online or offline shelf to buy the PC.

Unlike its competitors Dell discards the services of middle man and hence is able to have holistic control over the quality of the products, customer service, cost and the efficiency over the lead times. When it comes to Acer and Sony they do not have total control over the quality of the service and products since there is some middleman on whom they have to rely on.

The company does not have to pay to its suppliers for approximately 30 days and since it orders inventory only after receiving the request and money from the client it does not have to pile on inventory, the company gets the money upfront and makes payment after 30 days to tis suppliers. This is quiet useful in technological field which keep changing at a rapid pace. The company reduces the cost and the risk related to the new technological advancement and the products becoming out dated, because of this reason the company is able to product up to date technologically advanced products to its customers. As compared to its competitors

Dell has single point of accountability which helps in quality control and at the same time it also gives customers a sense of reliability. The technology that is being used in the PC industry is most of the time standard and inexpensive. When it comes to Dell low cost leadership keeps overhead down. Sony and Acer as well supply similar kind of technology but Dell takes upper hand because of the low cost in its distribution channel and direct contact with the customer to gain trust and provide required service.

4.2 Survey Analysis

The study did not make any use of statistical analysis in terms of regression or correlation coefficient. The study being a qualitative study did not include even a hypothesis since it intended to reflect the true feelings of the participants as Linet (2009) stated, I didn't want to come up with a hypothesis, as I wanted to make sure that I would only reflect the feelings and ideas of the participants. The responses received through email from 50 respondents were put together in a chart format to derive necessary patterns and comparisons so that good evaluation of the same can be done. Respondents were coded in alphabetical format from A to K to distinguish the various responses to the same question. The respondents were advised in the beginning that the information collected would be used for the purpose of the study only and their responses would remain anonymous.

Two set of questionnaires were designed, one for the end customer and one for the channel partners. The questionnaires as stated earlier were divided into two parts, the first part being the personal information and the second part exploring the rationale behind quality and service in context of Dell computers. The questions were set out in clear and concise format with room for singular interpretation and capability of important information retrieval. Cohen (2007), perspective that “an ideal questionnaire possesses the same properties as a good law, being clear, unambiguous and practicable, reducing potential errors in participants” was followed while formulating the questions. In total 50 online surveys were sent out by emailing it to friends and relatives, of fifty 50 filled questionnaires were received back. There were in all ten questions in the customer questionnaire whereas in channel partner questionnaire there were 6 questions. The questionnaire for the channel partners was send to 50 channel partners out of which all the only 30 responded back. The system was designed in such a way that all the questions had to be answered by the participant.

4.2.1 Questionnaire Analysis and response for the End Customer

4.2.1.1 Demographic

Gender		Age range				Occupation					Income
Female	Male	18-28	29-38	39-48	Above 49	Student	Housewife	Businessmen	Employee	others	Less than 1000 GBP	Bet GBP 1000-1500	Bet GBP 1500-2000	More than 2000 GBP
48%	52%	56%	36%	4%	4%	25%	18%	15%	35%	7%	10%	60%	20%	8%

The above table shows that 48% of the survey respondents were female whereas 52% were male. Both the genders showed equal participation in giving the opinion about their DELL computers, quality and service along with important factors important for considering buying a PC. A different type of customer demographics was covered from students, to house wives, employees to business men.

The table also gives information on the respondents' age group. We can see that the major participation was from the age group 18-28 and 29-38. Both the age groups in total account for almost 92% of the total participation. The age factor here shows that the participants were mature and had their own opinions when it comes to selecting and accepting technology for financial services. They were aware of the technological advancements and were open to use different choices offered to them. Also the large participation from the age group 18-28 could also be because of the use of internet, awareness about computers, and also the younger generation is exposed to the newest form of technological advancement and is capable of comparing the products online and make wise decisions. Another reason for the high percentage among those two groups could be the use of Dell computers by the big organizations. People who are working at one point of time would have had encounter with Dell either personally or through the company. Most workplaces make use of desktops and laptops.

The above table also gives important figures about the occupation of the respondents. Student and employees take up the 75% out of the total respondents whereas housewives account for 18% and the rest 7% fall in the other category. This shows that people making use of the computers are educated and in most cases have stable incomes as shown by the large percentage of employees and businessman. The largest of all the groups was the student and the employee group since they used the computers to the most.

The final portion of the table gives information on the income of the respondents. The highest percentage of the participants fell in the income group of 1000 - 1500 GBP because of the student demographic followed by the next group 1500 - 2000 GBP. The accuracy here however cannot be judged since participants tend to exaggerate their income or may not reveal their true income.

4.2.1.2 Rationale towards quality and service of DELL

This section will explore the consumers' rationale towards quality and services of Dell. One of the major analyses of this section would be important factors for selecting a PC. Under this section, there were in all 6 questions.

Figure shows the number of dell systems each survey participant had, 60% of the respondents had once used the system or owner it, whereas 25% said they have had two dell systems till that date, only 5% stated of having used more than two. The group that had not owned or used the system comprised of 10%. This shows that the brand is very popular among youngsters since it falls in cost effective and efficient product quality. Also the concept of ordering own computer by selecting different parts can be really appealing for the younger crowd.

The next questions asked the participant to rate the service of Dell. They were given five choices with “best”, “good” “not sure”, “average” and “worst”. The figure below shows the results of the survey to this question.

There were some interesting responses to this question. A whopping 65% of the respondent agreed that the service of Dell is excellent or the best. Ten percent said it was good, 7% were not sure about the service, this could be the customer who did not owned the system; Ten percent said it was average whereas eight percent said it was worst.

To the question ‘Are you happy with the delivery schedule? 90% of the respondents stated that they were happy with the on time delivery of their system whereas 10 percent stated they were not.

The next question asked the respondents were asked to rate the quality of the Dell System. The following figure gives information on the respondents rating about the quality of the Dell systems. The customer had the choice of “best”, “good” “not sure”, “average” and “worst”. As show in the figure below the results for this question were divided where around 55% of the respondent said they were best, 17% said they were good while 13% respondent were not sure, 10% said the systems were average whereas 5% said they were the worst.

The second last question asked the respondent ‘You would recommend the Dell system to your friends and family '. The customer again had five choices to select from strongly agree, agree, not sure, disagree and strongly disagree. The figure below gives information on the same. Around 73% of the customers happy to recommend Dell, 7% of the customers were not sure whereas only 20% stated they will not recommend. The figure below gives information on the same.

Figure 13 Recommendation to Family and Friends - Dell as a Brand

The last question asked the participants what was the most important, important and least important criteria while selecting a computer brand. The figure below show the responses from the participants

Cost:

Cost of the system was one of the most important selection criterions with almost 75% of the respondents terming it as extremely important and important criteria. 25% of the respondent termed it as not important criteria which means that there was only small population which was not concerned about the costs of the system whereas 70% of the respondent were concerned about the cost factor

Quality of the System:

Quality was rated as the important selection benchmark of the respondents as shows in the figure. With whopping 95% of the respondent terming it as very important and important criteria, only 5% of the respondent considered the criteria to least important. This shows that most of the customers considered quality as one of the most decisive factors when considering buying a PC or computer system.

Service:

Security was again one of the most important criteria when it came to PC selection with 30% of the respondent treating it as very important; 55% of the respondent thought it to important whereas only 15% of the respondent termed the criteria as least important. This reveals the need of holistic view towards provision of service.

After Sales Service:

This criteria was kept in mind in align with the different services offered to the customer after the product is sold. Most companies do not pay attention to this vital criterion but as made clear by the respondent 66% of the customer termed it as very important and important criteria. On the other hand 44% of the customer do not rated it as one of the decisive criteria while buying PC or computer system.

Brand Image:

Most consumers termed it as important but not very important criteria. 5% of the respondent said it was important whereas 78% said it was important and only 17% said it was least important to them.

Looks:

This criterion asked the customer about the importance of visuals while selecting the personal computer or computer system. To this 26% rated it to be very important, 35% rated it to be important whereas 39% said it was least important, this group is assumed to be the business man and the employees working for the companies.

Provision of Finance:

This option intended to determine the importance of provision of finance option to the customer. In response to this the majority of the customer replied (68%) that this was the least important criteria while making the decision to buy the computer system, 30% considered it to be important whereas only 2% considered it to be very important. This shows that customer most of the time relies on their personal finance to buy personal computers or computer systems. The response could also be because majority of the respondents were students.

4.2.2 Questionnaire Analysis and response for the Channel Partners

There were in all six questions in the questionnaire designed for the channel partners. Only ten channel partners filled in the questionnaire out of 50 sent out online. Due to the sensitivity of the relation not many channel partner responded to the questionnaire, out of 50 only 30 channel partners responded back with the filled questionnaire. It is also possible that not all the answers by the respondent would be honest since the partners still work with Dell and would give positive feedback most of the time.

The first question that was asked was to tick the number of years the channel partner has been working with Dell. The respondent had the option of less than 5 years, between 5-10, between 10-20 and more than 20. It was surprising to see that most of the channel partners had been working with the organization for almost a decade now. 78% of the respondent stated they had been working between 10-20 years whereas 12% stated they have been working with dell from 5-10 years whereas the youngest relation in terms of channel partners that fell in the bracket of less than five years was only 10%. This shows that Dell considers the channel partner as integral part of their businesses and establishes long term relationship with them. The following figure gives information on the same.

The next questions asked the participant to rate the service of Dell in terms of orders and pickups. They were given five choices with “best”, “good” “not sure”, “average” and “worst”. The figure below shows the results of the survey to this question.

There were some interesting responses to this question. A whopping 65% of the respondent agreed that the service of Dell in terms of order pick up and response is excellent or the best. 30% percent said it was good, 2% were not sure about the service, whereas only three percent of the respondent said it was worst.

To the question ‘Have you had any issues with Dell? 70% of the respondents ‘no' confirming that they were happy with their liaison with Dell and haven't had any issues as such whereas 30 percent stated they did had issues in the past with dell due to miscommunication, due to sudden change in the appointing manager and new policies.

In response to the question do you Trust Dell? All the channel partners unanimously said yes to that question. 100% replied yes to the above stated question which shows the relationship Dell established with its channel partners which is one of the key factors in its distributional channel. Dell in its strategic vision has called their channel partners as integral part of their business and it is relevant from the trust the channel partners have on the company.

The next question asked the respondents were asked to rate the quality of the communication systems at Dell. The following figure gives information on the respondents rating about the quality of the Dell systems. The customer had the choice of “best”, “good” “not sure”, “average” and “worst”. As show in the figure below the results for this question were divided where around 55% of the respondent said they were best, 30% said they were good while 4% respondent were not sure, 11% said the systems were average, there was no one who said that the systems were worst, this again can be because the channel partners work with dell and would not like to give extreme negative feedback about the company or it could be the honest response as well.

The last question asked the respondent to rate the technological systems used by Dell to assist the channel Partners. Again there were mixed responses with majority of them giving a positive nod to tell in terms of technology usage. The respondents had the choice of “best”, “good” “not sure”, “average” and “worst”.

Out of thirty 35% of the respondent stated it was best whereas 45% stated it was good , ten percent of the channel partners were unsure about the efficiency of the technological systems used by Dell to assist them whereas 10% said it was average.

4.3 Summary of Results

The key themes or findings of the questionnaire response are summarized as below:

Almost 90% of the participants have had encounter with a Dell machine at one point of time which shows the popularity of the system among students and employees

In response to the questions to rate the service of Dell, 75% participant considered it to be good , however there is still gap of 25% on which the company can focus to improve its customer service. In case of UK it is recommended to have physical contact with the customer rather than outsourcing the customer service to some other country.

Most of the consumers were happy with the delivery schedule of the company which shows the timeliness and quality of its distribution channel. There is still room for improvement however.

72% of the respondent considered the quality of the Dell system to be good whereas around 28% were either not sure or did not considered it to be good. The company here can focus on the quality that is being supplied by its channel partners.

73% customers were happy to recommend Dell to their family and friends whereas 27% were not. This showed that there is still some gap the company can capitalize on when it comes to bringing about customer satisfaction.

Cost, quality and service were the key criteria when it came to making decision of buying a new computer system (laptop and PC). Brand image, looks and after sales services were rated average in terms of importance. Provision of Finance was least important when the customer considered making a purchase of computer system.

Maximum channel partners have worked between 10-20 years with Dell. This shows the commitment and long terms partnership Dell establishes with its channel partners. This is only possible if there is professional and trustworthy relationship between the channel partners and Dell.

95% of the channel partners were happy with the service of Dell in terms of deliver and order pickup.

Around 30% of the channel partners said they have had issues in the past with Dell.

All the channel partners replied that they trust Dell.

85% channel partners agreed that the communication systems at Dell were Good whereas 15% did not believe it to be good.

4.4 Summary

The chapter analysed the findings of the case study and attempted to answer two of the research questions which is the efficiency of Dell in managing its distribution channel and its effectiveness as compared to its competitors. The survey findings revealed that Dell is successful because of its unique distribution channel management and direct contact with the customer, single point of contact as compared to its competitors Sony and Acer ushers in reliability and Trust in customers. The company has discarded the middle man and has gained more control over the quality of products and service it delivers to its customers. Dell knows its customer well and direct feedback from the customer help the company innovate its products and services from time to time.

This chapter also explores data findings collected through the means of Questionnaire from 50 end customers and 30 channel partners. The customer survey findings revealed that Dell was very popular among the student's and most of them have had one machine from the company. The customers in general were happy with the quality of the system and their delivery schedule. Still there were small gaps in terms of service wherein the company can improve and bring forth more value for money for the customer.

The findings of the survey revealed that it is since many years the channel partners have been working with the organization and have established good amount of trust with the company. The technology use by Dell was rated as good whereas the communication system was rated as best. In terms of issues some of the partners have had experienced certain issues but those were due to policy changes, HR changes or technological changes, in general the channel partners did not seem to show any concern towards the service and quality of Dell when it came to distribution management and dealing with the suppliers.

CHAPTER 5: CONCLUDING DISCUSSIONS

Dell has seen a rapid growth to become one of the top three vendors in the PC manufacturing industry, and has seen a substantial increase in share price and market value.

While many other companies were unable to handle the demands of the competition, Dell has proved successful in such an environment.

The main key to success to Dell has been its two innovative practices that is direct sales and build-to-order business model. This model is simple as a concept but highly complex to execute, especially in the present conditions of rapid growth and change. Dell has continually renewed and extended its business model while striking a balance between control and edibility.

Dell's use of IT plays a vital role in the execution of its business strategies. The company has used IT to coordinate its build-to-order processes from order taking through procurement, logistics, production, service, and support. Doing so has enabled it to reduce inventory, speed up logistics and product cycles, understand user markets, and offer additional services to customers.

It also has used IT to achieve integration with its supplier's distributors and strategic partners and for information sharing.

The company has expanded its reach to millions of customers at a very low marginal cost through its use of the IT.

This has been possible by the development of a novel IT structure that is flexible, expandable, and adequately integrated to support key corporate functions.

5.1 Chapter Summaries

The chapter introduced the topic of the dissertation, specified the key aims and objectives of the research. Discussed the research approach in form of secondary and primary data collection through the means of questionnaire and clearly stated the limitations of the research in brief. The chapter also outlines the research structure specifying the contents of each chapter.

Chapter 2

The literature review section of the dissertation explores the definition of distribution, channel, and distribution channel and distribution channel management. Apart from that the section also examines the activities and the levels of distribution channel. The latter half of the section focuses on the distribution strategy adopted by Dell, Sony and Acer. The final section compares the distribution strategy by all the three players. Dell adopts the direct distribution model whereas the two competitors makes use of indirect marketing model, in UK Sony uses the one level distribution channel whereas Acer too uses one level distribution channel.

Chapter 3

This chapter gave minutes about research method and approach used in the research. It also emphasized on questionnaire design and development and data collection.

Chapter 4

This chapter explores data findings collected through the means of Questionnaire from 50 end customers and 30 channel partners. The customer survey findings revealed that Dell was very popular among the student's and most of them have had one machine from the company. The customers in general were happy with the quality of the system and their delivery schedule. Still there were small gaps in terms of service wherein the company can improve and bring forth more value for money for the customer.

The findings of the survey revealed that it is since many years the channel partners have been working with the organization and have established good amount of trust with the company. The technology use by Dell was rated as good whereas the communication system was rated as best. In terms of issues some of the partners have had experienced certain issues but those were due to policy changes, HR changes or technological changes, in general the channel partners did not seem to show any concern towards the service and quality of Dell when it came to distribution management and dealing with the suppliers.

Chapter 5

This chapter stated the conclusion, recommendations, and outcomes and stated the chapter summaries.

5.2 Outcomes

As stated before, my study is more practical in nature than theoretical. It is a case study of the distribution channel management systems at Dell. My work is of immense importance in understanding the industry dynamics related to distribution channel management within the personal computing space. I anticipate the comparative analysis, situational study and suggested recommendations would be of specific interest to the local management team of Dell, to whom my work would be available as a management report.

5.3 Recommendations

The channel distribution is good at Dell, but there is always a room to make it better. This section will attempt to answer the fourth research question ‘how the distribution channel at Dell can be enhanced further'.

As stated in the responses from the customers, there is a scope to improve its services. This can be done by more of customer involvement in the service delivery. For example for the sake of service Dell can think of opening up face to face customer service branches, so that the customer does not always feel that they are talking to people who physically do not exist. Also this will give edge in terms of localization of service delivery; this can be specifically useful for the UK market which does not believe in outsourced service. As per the new international research that is being carried by Logical CMG, the companies are making subjective rather than objective decisions when it comes to outsourcing of their customer service processes. The study also revealed that specifically in United Kingdom and France outsourcing is seen as highly risky strategy on part of the organizations (Outsourcing Risks: Fears more subjective than actual, 2003) since the citizens or the natives do not appreciate talking to non-native over the phone when they call up the customer service number. Dell on the other hand completely relies on over the phone sales and service with limited and not physical outlets to establish rapport with the customer.

With channel partners in order to avoid any issues the company should identify the best executives for them and also inform them of any changes taking place in the organization which are relevant to them. It is very common for conflicts to take place where there is distrust and lack of transparency. The channel partners may feel avoided at the first place and frequent encounters can lead to issues having an impact on the efficiency of distribution or sales. By swiftly communicating the conflicts, the channel can retain trust among the channel partners. So whenever there is a conflict it should be communicated immediately and it should be solved at the earliest.

Dell should make an attempt to build stronger relationships with each member of the channel at each step by communicating and building relationships. There should be proper communication throughout the channel and every member in the channel should contribute for a healthy relationship. Transparency should be maintained throughout the channel in a manner that each channel partner feels part of the channel and work with each other to attain success and financial goals

By avoiding the conflicts in pricing, a pricing model should be established and the pricing strategy should be formulated and all the members should stick to it. If there are conflicts or differences in the pricing, they should be solved immediately.

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