The Impact Of The Internet Commerce Essay
The technological progress has been ignored in most of the economic theories. If economic development feeds on knowledge and innovation, current advances stem mainly from the computer industry, a force of innovation devoted essentially to the generation and use of knowledge (Gilder, 1989). By analyzing the industry of computers and choosing Dell as a reputed organization model, this paper will look at the impact of the internet and e-commerce on Dell and how the company has successfully managed their business strategy using e-commerce and supply chain as a new ways of doing business.
To build this report, the information was collected from a variety of sources, as, books and internet.
Description of Dell Capital Services
Dell is one of the world's top providers of computer goods and services to businesses and clients. The corporation has revenues of $38.2 billion worldwide. Based in Round Rock, Texas, United States, the company employs over more than 76,500 people as of 2009 staff worldwide. European Dell's manufacturing business is situated in Ireland, with a plant in Limerick, and a UK/Ireland sales and carry operation in Bray/Cherrywood (Wikipedia, 2010 ).
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The company is the State's biggest profits generating technology firm. During 2002, Dell's revenue equated to 5.8 per cent of gross domestic product. During the same time epoch, Dell's exports of EUR.7bn account for 7.8 per cent of all Irish exports. In year of 2006, Fortune magazine ranked Dell as the 25th-largest company in the Fortune 500 list, 8th on its annual "Top 20" list of the most-admired companies in the United States. In 2007, Dell ranked 34th and 8th respectively on the equivalent lists for the year. A 2006 periodical identified Dell as one of 38 high-performance companies in the SHYPERLINK "http://en.wikipedia.org/wiki/S&P_500"&HYPERLINK "http://en.wikipedia.org/wiki/S&P_500"P 500 that had consistently out-performed the market over the previous 15 years (Money, 2010).
Michael Dell, back in 1984, While a student at the University of Texas at Austin, he founded the company as PCs Limited with capital of $1000 and the unique idea to sell computer systems directly to customers. Now he heads up one of the world's most successful corporations with his direct sales approach acting as the cornerstone of the company's global success (Magretta, 1998).
What Is E-Commerce?
The e-commerce can be define as a new business methodology that addresses the needs of organizations merchants and customers to cut costs while improving the excellence of goods and services and rising the speed of service delivery, by using internet. It differs from the traditional electronic commerce, in the way that it enables the trading of products, money and information by electronic means from computer to computer. Business is done automatically and there is no longer a need for physical currency or commodities to do business (Goel, 2004).
Types of E-commerce
There are at least five or more types of e-commerce models. For this study we will focuses on the meanly tree types of e-commerce used by Dell. The B2C, B2B and the C2C. (Laudon & Traver, 2003)
Business to Consumer (B2C)
As the name suggests, it is the model involving businesses and consumers. This is the most common e-commerce segment. In this model, online businesses sell to individual consumers. When B2C started, it had a small share in the market but after 1995 its growth was exponential. The basic concept behind this type is that the online retailers and marketers can sell their products to the online consumer by using crystal clear data which is made available via various online marketing tools. E.g. An online pharmacy giving free medical consultation and promotion medicines to patients is following B2C model (Morley & Parker, 2009).
Business to Business (B2B)
It is the largest form of e-commerce involving business of trillions of dollars. In this form, the buyers and sellers are both business entities and do not involve an individual consumer. It is like the manufacturer supplying goods to the retailer or wholesaler. E.g. Dell sells computers and other related accessories online but it is does not manufacture all those products. So, in order to sell those products, it first purchases them from different businesses i.e. the manufacturers of those products (Worthington & Britton, 2006).
Consumer to Consumer (C2C)
It facilitates the online transaction of goods or services between two people. Though there is no visible intermediary involved but the parties cannot carry out the transactions without the platform which is provided by the online market maker such as eBay (Stair, Reynolds, & Reynolds, 2008).
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. A computer manufacturer depends on suppliers for parts when designing and manufacturing a PC for the mass market (Frazelle, 2001).
How does Dell's Supply Chain work?
Due to its efficient supply chain management, Dell is capable of shipping a PC within 24 hours of receiving an order. The introduction of the internet and e-commerce has helped Dell improve this efficiency and profitability. At Dell, the traditional supply chain has two fundamental differences: disintermediation and real-time production. Dell sells directly to its customer, cutting out the middle man, the distributor and retailer. When a layer that exists between two other layers is removed like this, it is known as disintermediation (Holzner, 2006).
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As Dell manufactures the products and then sells them directly to the customer, Dell creates disintermediation - the outside retailer is cut out of the process. This reduces time and costs in the process and also ensures Dell is better positioned to understand its customers' needs directly.
Crucially, Dell's supply chain costs are reduced on the storage side too by its efficient relationship between orders and production. Each individual PC that is ordered is only manufactured AFTER the order is received and only using the freshest raw materials, which are delivered to the factory several times a day. This is known as just-in-time production or real-time production. There is no warehouse for either raw components or finished goods. Each computer has been paid for and has been built for a specific customer before it is shipped (Holzner, 2006).
Real time production ensures no costs are incurred from rising inventory stocks. Output is always driven by actual customer demand. Each individual product is created with the latest technology and each product is custom-made to exactly what the customer wants (Boyson, Harrington, & Corsi, 2004).
Dell's direct selling started off using the customer channels of mail order and ordering using toll free phone numbers and this has grown to embrace online sales channels too.
How Does Dell Use E-Commerce To Improve Supply Chain?
When internet technology arrived, Dell was quick to set up the ecommerce processes that would enable it to also sell directly online to customers. Selling online allows the whole process to be automated and more efficient. Since 1996 when Dell opened its website www.dell.com for e-commerce, the company has had huge sales success. By 1997 the company recorded $1 million in online sales. By 2000 the company's internet sales had reached $50 million a day (BYRNE, 2000).
The full product range of Dell is online with detailed information to help all her costumers to make their purchase decision. It's simply; they just need to follow the easy, automatic instructions that come up on screen. These allow customizing the computer that they're looking for, with the features that they need. It's possible to increase the hard disk space and see the difference, on the overall price. Then is given a variety of options on how to pay, either directly online or via a customer service operator. There is even an automated leasing option available through a financing arrangement that Dell has here with Permanent TSB (Chaffey, 2006) .
After this process, the order is then passed automatically through to the production department at Dell's factory where it will be manufactured to the customer specification, tested and shipped out to them. All of the systems relating to the sale are done through e-commerce: order placement, order tracking, payment processing, inspection, testing and delivery (Dell).
Similarly, internally at Dell, the whole purchase and procurement of materials is automated between Dell and its suppliers. At www.valuechain.dell.com, Dell shares information with its suppliers on a range of topics, including product quality and inventory (Dell, value chain).
The crucial benefit is the total automation of the whole process, which not only makes it faster and more efficient, but also much more cost effective, especially given the volume of business involved. Dell's global website receives more than 1 billion page requests per quarter at 80 country sites in 28 languages and 26 currencies (Dell).
Dell's approach to e-commerce simulates the benefits of face-to-face contact between the buyer and the seller. This ensures that staff can be focused on delivering a quality product and providing excellent customer service and support.
How Dell's E-Commerce Focus Improves Customer Service
Dell has created many features and services online to help the customer see the whole purchasing process clearly. The premise of Dell's business is selling directly to customers - customers tell Dell exactly what they want and Dell provides them with the goods directly. As well as being able to customize the product, customers can track the progress of the order as it is produced and delivered. This can help the customer see the stages of the process and likely delivery times (Kalakota & Robinson, 1999).
Customers can create and view their service records online. This includes product support, shipment and delivery dates. Each purchase comes with a service tag code, which can track the model bought and its service requirements. This allows Dell customer service representatives to quickly and efficiently handle requests (MacGregor & Vrazalic, 2007).
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This level of 24 hour customer service and fast response time helps Dell build strong customer relations, which of course is crucial for the company in its understanding of customer needs. It is also a very cost-effective way of providing sales and support - cost savings which can be passed on in the form of better prices to customers. Success depends greatly on the efficient management of the website. The customer must have a convenient experience when shopping online and have faith that Dell will successfully complete the order and safeguard financial details.
Customers need to be comfortable using paperless transactions without face-to-face contact. It is crucial that customers consider purchasing online as an alternative to the traditional method of going into a retailer and buying a product off-the-shelf.
It can be seen that Dell is focused on enhancing its image and relationships, not only with customers, but also with employees and the wider community. To do this, the website is also used as a communication tool for news, press releases and general information to help customers, employees, the media and prospective employees find out more about the company (Kalakota & Robinson, 1999).
In its own business, Dell has improved and broadened the essential competitive advantages of the direct model by applying the efficiencies of the Internet. Today, Dell operates one of the highest volume Internet commerce sites in the world based on Microsoft Corp.'s Windows operating systems. Dell's high return to shareholders has been the result of a focused effort over time to balance growth with profitability and liquidity. Dell has consistently led its largest competitors in each of those categories.
To conclude, it can be seen in this paper that Dell is an example success, of the relationship between business strategy and technology management, building competitive advantage generating customer satisfaction and innovation.
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