Value Geek

Dell: Where's the Competitive Advantage?

Dell DOES have a moat, and its the same moat that Walmart has. Dell doesn't need to diversify into software or services, it just needs to maintain and increase its market share in PCs and laptops. Walmart was derided by analysts for years while it pursued the strategy of using razor-thin margins to build market share. Have you taken a look at Walmart's stock price recently?

In the end, consumers want goods to be available at all price points, from the luxury top-of-the-line products (Apple/Alienware/Neima... Marcus), to middle-of-the-road prepositions (HP/Target), to minimal-quality value products (Dell/Walmart). While everyone can run a global supply chain and build computers to order today, foreign PC manufacturers do NOT have a competitive edge because computer assembly is not labor-intensive. The major costs are the CPU and the OS, and Dell has volume discounts on both.

In the past, Dell has imitated the Walmart strategy too aggressively, and has cut even essential expenditures like customer service and R&D, which resulted in a loss of market share. Michael Dell is in the midst of correcting these mistakes. I bet that 5 years from now, Dell will still be providing value computers to millions of customers around the globe at razor-thin margins, and will be making a decent profit doing so.