Dell 2001 Annual Report Download - page 5

Table of Contents
The Company believes that the direct model provides it with several distinct competitive advantages. The direct model eliminates the need to support an
extensive network of wholesale and retail dealers, thereby avoiding dealer mark-ups; avoids the higher inventory costs associated with the wholesale/retail
channel and the competition for retail shelf space; and reduces the high risk of obsolescence associated with products in a rapidly changing technological
market. In addition, the direct model allows the Company to maintain, monitor and update a customer database that can be used to shape future product
offerings and post-sale service and support programs. This direct approach allows the Company to rapidly and efficiently deliver relevant technology to its
customers.
The Company believes that it has significant opportunities for continued growth. While the Company believes that its business strategy provides it with
competitive advantages, there are many factors that may affect the Company's business and the success of its operations. For a discussion of these factors, see
"Item 1 — Business — Factors Affecting the Company's Business and Prospects."
Direct Customer Relationships
The Company utilizes its direct customer relationships to understand its customers' needs and to deliver high quality computer products and services tailored
to meet those needs. For large corporate and institutional customers, the Company works with the customer prior to the sale to plan a strategy to meet that
customer's technology needs. After the sale, the Company continues the direct relationship by establishing account teams, consisting of sales, customer
service and technical personnel, dedicated to the Company's large corporate and institutional customers. The Company also establishes direct relationships
with small-to-medium businesses and individuals through account representatives, telephone sales representatives or Internet contact. These direct customer
relationships provide the Company with a constant flow of information about its customers' plans and requirements and enable the Company to weigh its
customers' needs against emerging technologies.
Cooperative Research and Development
The Company has successfully developed cooperative, working relationships with many of the world's most advanced technology companies. Working with
these companies, the Company's engineers manage quality, integrate technologies and design and manage system architecture. This cooperative approach
allows the Company to determine the best method and timing for delivering new technologies to the market. The Company's goal is to quickly and efficiently
deliver the latest relevant technology to its customers.
Custom-Built Computer Systems
The direct model is based on the principle that delivering custom-built computer systems is the most effective business model for providing solutions that are
truly relevant to customer needs. This concept, together with the Company's flexible, build-to-order manufacturing process, enables the Company to achieve
faster inventory turnover and reduced inventory levels and allows the Company to rapidly incorporate new technologies and components into its product
offerings.
The Internet
The Company leverages its direct customer relationships by continually striving to make it easier for customers to choose, purchase and support their
computing environments. The Company enhances and broadens the fundamental competitive advantage of its direct model by continuing to apply the
efficiencies of the Internet to its entire business. Approximately half of the Company's technical support activities occur online and approximately three-
quarters of the Company's order-status transactions occur online.
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