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Commoditization: Dell's Brand Dilemma

Alan Brew

For people looking for a decent PC at a good price, Dell was for many years the obvious choice.

Originally called “PC Limited”, Michael Dell’s empire was built on a simple idea: IBM-compatible PCs configured-to-order from stock components.

With a perfect combination of availability, price and reliability, the company (renamed Dell Computer) caught the global upswing of demand and for many years vied with HP for the number one spot in the PC market.

But over the last decade Dell has faced increasingly steep competition. By the late 2000s Dell’s business model was no longer as efficient or competitive with high-volume Asian contract manufacturers.

Any company based on a manufacturing model will — sooner or later — become commoditized. And Dell is now caught in a classic commoditization pincer. It is being squeezed between cheaper Asian PC manufacturers such as China’s Lenovo and more innovative brands such as Apple and Samsung.

Dell tried to take on the MacBook with a sleek line of laptops named Adamo. The goal was to create the same design cachet around Dell that Apple had so successfully created.

But Dell is Dell and Adamo is better known as a French crooner. The line was quietly withdrawn two years after launch. Attempts to move in to the tablet market have also flopped.

Now, according to some views, we are moving into a post-PC era. Tablets and smartphones have superceded the desktop and laptop. In the last quarter of 2012, Dell’s PC shipments fell by 21 percent (according to Gartner).

Dell is desperately struggling to find product and brand relevance and the stock market has been impatient for results. After weeks of rumors, Dell recently announced that it would become private again in a $24.4 billion leveraged buyout. Read about the LBO.

What is Dell? Apart from PCs the company also produces servers, data storage devices, network switches, software, computer peripherals, cameras, printers, MP3 players and more. The product line is sprawling leaving the brand unfocused.

Michael Dell hopes that away from the relentless spotlight of quarterly reporting he can focus on the long-term task of transforming his business and refocusing the brand. But given the seismic changes taking place in the ways in which we use computers, his focus may have to be on something other than PCs.

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