	You are here: Home > Current Topics > In The News > Competitive Advantage

In the News

In the News

25 July 2006 - International [United States]
Competitive Advantage
The current market for personal computers reveals many interesting aspects that most students of business studies would recognise. At the heart of much of the market is the notion of competitive advantage. As there are many firms all offering good quality products at reasonable prices, firms are having to look elsewhere to try and find the factor or factors that will persuade customers to buy from their firm as opposed to any other firm.

One such firm is Dell. Dell has used direct selling as the basis for their growth since they began. It has been a very successful measure but with other firms joining the market and existing firms finding new ways of stealing a march on Dell, its situation has changed. Last week, the company announced that its profits would not be as high as analysts had predicted. The profits warning cut its shares on the New York Stock Exchange by 13% in trading at the end of last week.

Part of the problem, it seems, is other firms such as Hewlett-Packard and Lenovo, a firm that acquired IBM's Personal Computing Division in May 2005. Lenovo have a global turnover of $13 billion. Another problem is that the global PC market is starting to slow down - you might argue that it is reaching the maturity stage in the product life cycle. Of course, the maturity stage could now last many years but it seems the period of rapid growth in sales has now gone. In future, PC manufacturers will have to rely on new technology along with customer replacements to boost sales.

Dell has to think about how to gain some form of competitive advantage in this highly competitive market. One of the things that they have always prided themselves on is their customer service. However, as the firm has grown in size, diseconomies of scale can be seen to have set in and for some customers the ordering and support services offered by Dell may have become rather less satisfactory than the company would like.

As a result, Dell is planning to invest $100 million in improving the quality of its customer service. It wants to improve the way in which customers can order and track their equipment. It is trying to simplify the ordering process and have recruited an extra 2,000 customer services staff to help it improve the experience for customers. Dell clearly believes that this is where it can seek to gain a competitive advantage.

The coming months will be important for the PC manufacturer; it will be hoping that Microsoft finalise the launch of its new Vista software and that this will provide a trigger for a fresh round of sales of new PCs. If it can get the investment into customer service right, it might believe that it is in a strong position to exploit this much-needed sales boost.

Listen to the podcast [mp3 1.1 MB]

Answer interactive questions on this news item

Search the In the News archive:

You can search the In the News section by using the form above or browse the stories using the links below.