Article: Dell Computer, Using E-commerce To Support the Virtual Company

Dell Computer has been touted by itself and others as a quintessential Internet company.  The 

Internet has given Dell a means for extending the reach and scope of its direct sales business 

model at a relatively low marginal cost.  It has done so in part by automating functions such as 

product configuration, order entry, and technical support, enabling the company to grow 

revenues without a corresponding increase in customer service costs.  Also, it has used the 

Internet to coordinate a network of suppliers and business partners who carry out many of the 

processes involved in building, distributing and supporting personal computers.   Dell refers to 

this network of partners as a “virtual company” linked electronically by the Internet.  Another 

name for this type of industrial organization is the value web (Kraemer and Dedrick, 2000). 

In early 2000, Dell began to redefine itself as the company that “knows how E works.”  

Capitalizing on its reputation as an e-commerce pioneer, Dell has offered to share that expertise 

with its customers as they develop their own e-commerce capabilities.  Dell is using the virtual 

company approach to expand the scope of its business without a commensurate expansion of its 

own work force and without making a major acquisition.  It is doing so by developing a network 

of software and services companies that offer technologies and skills that Dell lacks in its 

existing value web.  However, Dell remains focused on the fact that it is still a hardware 

company.  Its e-commerce efforts are aimed at improving its own efficiency, enhancing 

customer satisfaction, and reaching new product markets, rather than transforming itself into a 

services provider as its competitors such as IBM, Compaq, and Hewlett-Packard are becoming. 

A close analysis of Dell’s use of the Internet and electronic commerce illustrates the strategic 

and organizational challenges that face any company that is serious about embracing the 

Internet and trying to tap its potential.  It also offers insights into a new form of business 

organization that may become more prevalent in the networked economy. for more details click here