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STARTING AN IT COMPANY

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Title: STARTING AN IT COMPANY


1
STARTING AN IT COMPANY
Group 8 Mutia Putri Sona Hovasapyan William Prada
2
STARTING AN IT COMPANY
  • OVERVIEW
  • CISCO
  • TECHNOSOFT
  • DELL
  • SUMMARY

3
Emerging of Digital Economy 2002
Digital Economy 2002 Despite and economic
slowdown and recession, U.S Industries have
continued to build the IT capital stock, to
marshal the human skill and IT services that
make the installed base of IT capital more
productive, and to create as a result the
enduring foundation of a stronger economy

Source Digital Economy 2002, Economic and
Statistics Administration US Department of
Commerce, February 2002
4
Highlights in Economy 2002
  • - During 2000, business investment in
    IT-producing industries accounted for 37 of the
    U.S. GDP.
  • By contrast, in 2001 reductions in business
    investment in IT-producing industries had a
    negative effect on economic growth.

Source Digital Economy 2002, Economic and
Statistics Administration US Department of
Commerce, February 2002
5
Investment in Information Processing Equipment
and Software
Billion of 1996 dollars, annual rate
Source Digital Economy 2002, Economic and
Statistics Administration US Department of
Commerce, February 2002
6
Highlights in Economy 2002
  • Despite the 1.4 decline in the total private
    sector employment during 2001, employment grew by
    0.5 in telecommunication services and 1.4 in
    computer software and service-industries.

Source Digital Economy 2002, Economic and
Statistics Administration US Department of
Commerce, February 2002
7
Continued Strength in IT Service Job
Index, January 1999 100
Number of employees (in thousand)
Source Digital Economy 2002, Economic and
Statistics Administration US Department of
Commerce, February 2002
8
- Some estimates indicate that surge in dot.com
failures that began in mid-2000 peaked in first
half of 2001 and has begun to subside. - 10 of
the 7, 000-10, 000 substantial internet
companies that received some venture funding
closed between Jan 2000-December 2001. - Through
middle of 2001, these failures, staff cuts at
surviving dot.com companies had resulted in an
estimated 135, 000 layoffs .
Source Digital Economy 2002, Economic and
Statistics Administration US Department of
Commerce, February 2002
9
STARTING YOUR OWN IT COMPANY
10
Company Life Cycle
  • Promising Transitional
    Corporate
  • Start-Ups Initiatives
    Initiatives

The Origin and Evolution of New Businesses, Amar
V. Bhide
11
What differentiates companies?
  • Nature of the opportunities
  • Different initial conditions
  • different level of project uncertainty,
  • amount of investment,
  • and likely profit

The Origin and Evolution of New Businesses, Amar
V. Bhide
12

What differentiates companies?
  • Tasks and Strategy
  • - degree to which they rely on prior
  • analysis and planning rather than
  • adaptation to unforeseen circumstances

The Origin and Evolution of New Businesses, Amar
V. Bhide
13

What differentiates companies?
  • Personality and Traits
  • Characteristics of founders that differentiate
  • the successful initiatives from the
    unsuccessful one
  • Social and economic contributions
  • different sizes and maturity affect the
    development
  • of new technologies and market, and the
    interaction
  • with existing economic structures

The Origin and Evolution of New Businesses, Amar
V. Bhide
14
Common Perceptions for IT Start-Ups
Brilliant idea Breakthrough creativity High
capacity to innovate Leadership Management
Skill Technical education High tolerance for
risk/loss
SUCCESSFUL??
The Origin and Evolution of New Businesses, Amar
V. Bhide
15
Initial Conditions IT Start-ups
  • most successful business started
  • with the notion of no proprietary idea
  • and no verifiable human capital
  • ( such as no knowledge, and no
  • reputation )

The Origin and Evolution of New Businesses, Amar
V. Bhide
16
  • Most promising business started by
  • someone who is working for another
  • business, who sees a small niche
  • opportunity. And the person jumps in
  • with very little preparation and analysis - -
  • and pretty much does what somebody
  • else is already doing, but does it better
  • and faster. Amar Bhide

Interview of Inc.com editor-in-chief George
Gendron with Amar Bhide, author of The Origin
and Evolution of New Business, February 1 2002
17
Initial Conditions IT Start-ups
  • most successful business started
  • with no exceptional trainings
  • and no managerial experiences
  • (i.e. Bill Gates, Michael Dell,
  • Steve Wozniak .)

The Origin and Evolution of New Businesses, Amar
V. Bhide
18
Initial Conditions IT Start-ups
  • most start-ups do not have
  • significant up-front investment
  • uncertain market niches

The Origin and Evolution of New Businesses, Amar
V. Bhide
19
Nature of Opportunities IT Start-ups
  • Entrepreneurs pursue highly uncertain projects
  • Face significant constraints
  • Unlikely to generate large profits

The Origin and Evolution of New Businesses, Amar
V. Bhide
20
Tasks and Strategy IT Start-Ups
  • Strategy to face the problems
  • Opportunistic adaptation - High uncertainty
    requires entrepreneurs to extensively adapt to
    unexpected circumstances and opportunities -
    High uncertainty limits the value of prior
    planning
  • and research

The Origin and Evolution of New Businesses, Amar
V. Bhide
21
Personality and Traits IT Start-Ups
  • Important attributes
  • High tolerance for Ambiguity
  • Open-mindedness
  • Ambition
  • IT takes a really extraordinary individual
    to build on a start up business extraordinary
    in terms of someone who has an almost maniacal
    level of ambition, Amar Bhide

The Origin and Evolution of New Businesses, Amar
V. Bhide
22
Continued
  • Resilience
  • Perceptiveness about the wants and needs of
    customers
  • Sales skills
  • Self-control

The Origin and Evolution of New Businesses, Amar
V. Bhide
23
Proportions about Promising Start-Ups
Entrepreneurs with meager endowments
thrive in
INITIAL CONDITIONS
  • NATURE OF
  • BUSINESSES
  • Low investment
  • High uncertainty
  • Low likely profit

No proprietary idea or technology Limited
verifiable human capital
face the tasks of
OPPORTUNISTIC ADAPTATION to unforeseen
circumstances
requiring
  • TRAITS AND
  • SKILLS
  • Tolerance for ambiguity
  • Open-mindedness
  • Resilience
  • Sales Skill
  • Self Control

Unavailability of outside funding
24
Cisco Systems
one of the Worlds most admired companies
  • the world leading supplier of enterprise
    internetworking solutions
  • expanded from a small startup to an industrial
    leader with around 19 billion net income
  • captured 85.5 of the market for routers
  • one of the most successful companies to emerge
    from Silicon Valley
  • http//www.nwfusion.com/news/0516cisshare.html

25
Cisco Systems
  • Nature of Business
  • Core activities (at the time of start-up)
  • the first product the router
  • manufacturing networking and communications
    products
  • Currently
  • provides a broad line of products for
    transporting data, voice, video over LANs, WANs
    and all over the Internet
  • provides strategies and solutions that can help
    solve critical business problems
  • services associated with the equipment and its
    use

26
Cisco Systems
Nature of Business
  • Target Market (at the time of start-up)
  • higher education and research institutions
  • large size corporations
  • Currently targets also small size businesses

27
Cisco Systems
  • Customers
  • Nasdaq, the worlds largest electronic stock
    market, is only as good as our network, and we
    have built this network with Cisco technology. -
    Steve Randich, Executive Vice President,
    Operations and Technology, and CIO, The Nasdaq
    Stock Market
  •   At Sprint, the bottom line satisfying
    customers. We were able to increase Sprint IP
    network capacity by a factor of nine, positioning
    the company to quickly meet new customer
    requirements in Europe and the US -Bob Azzi,
    VP, Network Engineering, Sprint

28
Cisco Systems
  • Customers
  • With more than 3.5 billion viewers watching the
    2002 Olimpics, the network had to be 100 percent
    reliable. There was no margin for error and we
    met our goal. -Bob Donohoo, Chief Network
    Engineer for Olympic Operations and Olimpics
    Network Manager, Salt Lake 2002 Olympic Winter
    Games, IKANO Communications, Inc.

29
Cisco Systems
  • Since the beginning of 2001, 53 public telecom
    companies have filed for bankruptcy.
  • In 2002, publicity held telecom companies
    announced 165,840 job cuts. In the last 18
    months, some 500,000 telecom jobs have been
    axed.
  • We have been stunned as just about everybody
    else has, by the severity of the downturn in
    telecommunications business
  • Anthony Muller, Chief Financial for JDS Uniphase
    headquarters in San Jose

Chris OBrien, Mercury News, Telecom Failure
Hitting Home in Silicon Valley", Sun, Jul.7, 2002
30
Cisco Systems
  • Net Income(Loss)
  • (Dollars in billions)

Cisco Systems, 2002 Annual Report
31
Cisco Systems
  • Ciscos fiscal 2002 revenue of 18.9 billion
    resulted in major market share gains compared to
    their competitors.
  • Fiscal 2002 net income according to GAAP was 1.9
    billion and earnings per share were 0.25, as
    compared to FY 2001 loss of 1.0 billion and loss
    per share of 0.14.
  • Average cash flow from operations(FY 2002) 1.5
    billion per quarter

Cisco Systems, 2002 Annual Report
32
Cisco Systems
Net Sales (Dollars in Billions)
Cisco Systems, 2002 Annual Report
33
Cisco Systems
  • Key players
  • John T. Chambers, President and CEO
  • Widely recognized as one of the great motivators
    and customer driven chief executives in the
    technology business.
  • John P. Morgridge, Chairman of the Board
  • Donald T. Valentine, Vice Chairman of the Board

34
Cisco Systems
  • 2001 Best Investor Relations Officer and
    Best Investor Relations by a CEO - Barons and
    Investor Relations magazines
  • 2002 World Communications Award For Fixed
    Networks
  • Best Trained Sales Force - Sales and
    Marketing Magazine
  • Customer satisfaction rating 4.63 in a five-point
    scale

Cisco Systems, 2002 Annual Report and
http//newsroom.cisco.com/dlls/ts_102402.html
35
Cisco Systems
The Legend
  • Sandra Lerner of Stanford University Business
    School and Leonard Bosack of the Computer Science
    Department wanted to send love letters to each
    other via university e-mail, but the local
    computers at different departments would not talk
    to each other.
  • So they invented the router the black magic box

David Bunnell, Making the Cisco Connection,
UpSide Media 2000
36
Cisco Systems
  • Leonard Bosack
  • Education
  • major in electrical-engineering from University
    of Pennsylvania
  • Stanford master's degree in Computer Science
  • Personal Characteristics
  • Open-minded
  • Philosophical
  • Non-confrontational
  • Hard working
  • Sense of humor

David Bunnell, Making the Cisco Connection,
UpSide Media 2000
37
Cisco Systems
  • Sandra Lerner
  • Education
  • an Economics major from Stanford University
  • Stanford master's degree in Statistics and
    Computer Science
  • Personal Characteristics
  • Aggressive
  • Intelligent
  • Notoriously extravagant
  • Hard working

David Bunnell, Making the Cisco Connection,
UpSide Media 2000
38
Cisco Systems
Behind the Legend
  • Sandy the director of the computer
    facilities at Stanford University Business School
  • Len - the director of Stanford's Computer
    Science Department

David Bunnell, Making the Cisco Connection,
UpSide Media 2000
39
Cisco Systems
  • Needed to find a way to get the
  • local computers networked! Data could be
    transmitted more quickly, reliably and safely

40
Cisco Systems
  • The Breakthrough Idea
  • The Router allows the two LANs to remain
    distinct, while being able to communicate.
  • The Stanford experimenter Bill Yeager developed a
    crude router based on a DEC minicomputer.
  • Bill, Len, Sandy, Kirk Lougheed and others
    created the interface to connect DEC
    minicomputers to the Ethernet network.

David Bunnell, Making the Cisco Connection,
UpSide Media 2000
41
Cisco Systems
Initial Conditions
  • Started the company in late 1984
  • Start-up Budget
  • financed their own start up costs with their
    credit cards.
  • Brand Name
  • cisco Systems (with a lowercase c, as in the
    tail of San Fran)
  • 1986 - cisco shipped the black magic box named a
    router

David Bunnell, Making the Cisco Connection,
UpSide Media 2000
42
Cisco Systems
  • My take on the Cisco vision it was a very
    clever way to sell software by the simple
    expedient of concealing the software inside
    hardware. They (Bosack and Lerner) were in the
    right place at the right time. They also are very
    smart, very hard working and incidentally, very
    lucky. They also had the benefit of being in an
    environment that was on the cutting edge of
    applying networking on a large scale.
  • Ralph Gorin, Stanford University, former
    Director of Computer Facilities

43
Cisco Systems
  • Getting Customers
  • no professional sales staff or official marketing
    campaign
  • founders fired out commercial e-mails to friends
    and colleagues, asking them to spread the message
    to others over the Web's early links
  • have not purchased their first advertisement
    until 1992

44
Cisco Systems
  • 1987 - Donald Valentine, founder of Sequoia
    Systems agreed to front 2.5 million dollars,
    recruit management and salespeople for a 32
    percent share in the company
  • "Apple in 1977 solved no problem. It had to
    create the application. Yahoo! in 1997 had to
    create a business model. But Cisco in 1987 filled
    a desperate need. I never met a company that
    entered the market in such a timely way with no
    competition. Donald Valentine

David Bunnell, Making the Cisco Connection,
UpSide Media 2000
45
Cisco Systems
  • - 1987, Congress made a commercial Internet
    possible
  • - The demand for routers increased dramatically
    by the late 1980s
  • - Cisco's financial success was the need for
    corporations to find solutions for connecting
    computer networks. Without the router, they would
    not be able to connect to other parts of their
    businesses.

46
Cisco Systems
  • As more and more people were replaced with
    employees that Valentine brought in, animosity
    grew between himself and the founders,
    particularly outspoken Sandy -David Bunnell
  • 1988, John P Morgridge, president and chief
    executive officer (CEO)

David Bunnell, Making the Cisco Connection,
UpSide Media 2000
47
Cisco Systems
  • February 16, 1990 - Cisco went public
  • Cisco stock opened at 18 a share and closed
    at around 22.50
  • In August 1990, Sandy left Cisco Systems
  • In December, 1990, two founders of cisco decided
    to sell their two-thirds stake in cisco for about
    170 million

48
Cisco Systems
  • Len - started a new venture, XKL, producing
    server-class computing and networking equipment
  • Sandy - founded a cosmetics company Urban Decay
    in 1995.

49

50
Ashok Subramanian
  • EDUCATION
  • Ph.D.University of Houston, Business
    Administration, 1992 Major Management
    Information Systems Minor Marketing.
  • M.B.A.University of Houston, Business
    Administration, 1987 Major Marketing.
  • B.Sc.University of Bombay (India), 1980 Major
    Chemistry Minor Physics.

http//www.umsl.edu/subraman/ashokvit.html
51
Ashok Subramanian
  • EMPLOYEMENT
  • Associate Professor Management Science and
    Information Systems
  • School of Business Administration
  • University of Missouri - St. Louis

http//www.umsl.edu/subraman/ashokvit.html
52
Ashok Subramanian
  • How did he conceive the idea of his business?
  • I founded that there was a gap between high
    level IT Consulting Group and the mid-size
    company --- Our company provided the IT
    consulting service with lower cost.
  • - Ashok Subramanian

Interview in person with Dr. Subramanian on
10/31/02
53

TECHNOSOFT
  • Company Initial Condition
  • started in August 2000
  • - story
  • start-up budget 500,000.00
  • 3 founders

Interview in person with Dr. Subramanian on
10/31/02
54

TECHNOSOFT
Company Profile
  • Number of employees
  • 11 people (including 3 owners) in US
  • 60 employees in India
  • - 50 software architects
  • - 10 administration staff

55

TECHNOSOFT
Company Profile
Average Annual Revenue
1st year (year 2000) 200,000 2nd year not
even covered cost
56
TECHNOSOFT
  • NATURE OF BUSINESS
  • Company core activities
  • providing high level strategic consulting
  • work
  • Offshore software development
  • Providing IT engineers

57

TECHNOSOFT
  • NATURE OF BUSINESS
  • Company target market
  • mid-size companies
  • - more receptive with the idea of
  • offshore development
  • Software development clients

Interview with Dr. Subramanian on 10/31/02
58

TECHNOSOFT
  • NATURE OF BUSINESS
  • How did the company get the customers?
  • Based on personal contact
  • Word of mouth

Interview with Dr. Subramanian on 10/31/02
59

TECHNOSOFT
  • Economic slowdown
  • Marketing the product
  • - hard to penetrate into market
  • - hard to find new market due to lack of
    reputation
  • The company could not meet the set target

What were the challenges?
Company shut down, in Nov. 2001
Interview with Dr. Subramanian on 10/31/02
60
Ashok Subramanian
  • We did not have any problem with technology.
    Technology is easy to create.
  • - Ashok Subramanian

Interview with Dr. Subramanian on 10/31/02
61
Ashok Subramanian
  • Personalities / Traits
  • It is important to have high tolerance for
    ambiguity
  • Open mindedness
  • It is important for entrepreneurs to know when
    to quit from business
  • It is not good to say, well, I will keep
    doing this business regardless anything.
    Ashok Subramanian

Interview with Dr. Subramanian on 10/31/02
62
Michael Dell entrepreneur
63
BACKGROUND INFORMATION
  • Dell was born on February 23, 1965 in Houston,
    Texas, and attended the University of Texas in
    Austin. Dell has earned the titles of
  • Entrepreneur of the Year from Inc Magazine
  • Man of the year by PC Magazine
  • Top CEO in America Business by Worth Magazine
  • CEO of the Year by Financial World Industry
    Week
  • Was on Business Weeks list of Top 25 Managers
    of the Year from 1997-1999
  • Dell became the youngest CEO to earn a spot on
    the Fortune 500. He also sits on the U.S.
    Presidents Advisory Council on Science and
    Technology.
  • Source NCOE-Stories of Entrepreneurs-Michael
    Dell http//www.ncoe.org/toolkit/stories_dell.html

64
Education
  • Dell enrolled at the University of Texas at
    Austin after graduating from high school in 1983.
    (In reality when he was eight years old, he
    earned his GED equivalent high school diploma).
    His major was biology, but computers fascinated
    him. He finished out his freshman year in the
    spring of 1984, but instead of selecting classes
    for next semester, he used his savings to
    incorporate his business as PC Limited.
  • SOURCE Newsmakers, Issue 2, Gale Group, 1996

65
COMPANY PROFILE
  • Headquartered in Austin, Texas, Dell is worlds
    most preferred computer system company and a
    premier provider of products and services
    required for customers worldwide to build their
    information-technology and internet
    infrastructures.
  • Dell climbs to market leadership is the result of
    a persistent focus on delivering the best
    possible customer experience by directly selling
    computing products and services based on
    industry-standard technology.
  • Revenue for the last quarters totaled 32.1
    billion and the company employees approximately
    36,000 team members around the globe.
  • SOURCE http//www.dell.com/us/en/gen/corporate/fa
    ctpack_000.htm

66
THE BIRTH OF BEING DIRECT FIRST EXPERIENCE
  • Power and the rewards of being direct
  • Dell starts a stamp collection business
  • Bought stamps at an auction
  • Created his own auction
  • Advertised Dells Stamps in Linns Stamp
    Journal
  • Created a twelve-page catalog and mailed it out
  • Made 2,000 and learned an early power lesson
    about the rewards of eliminating the middleman
  • Source Michael Dell. Gale Encyclopedia of U.S.
    Economic History. Gale Group, 1999.
    lthttp//www.galenet.com/serviet/BioRC

67
SEEING THE PATTERN
  • At 16, Dell got a summer job selling newspapers
    subscription to the Houston Post
  • Dell noticed a pattern. He noticed two kinds of
    people who almost always bought subscriptions to
    the Post.
  • People who had just married
  • people who had just moved into new houses or
    apartments
  • The enterprising teenagers paper route made
    18,000, which he used to buy his first BMW.
  • SOURCE Direct from Dell. Strategies that
    revolutionized an industry, 1999

68
ENTER THE COMPUTER
  • Computer interest started at 7, when Dell
    purchased his first calculator.
  • Played with the computers at Radio Shack
  • Apple computer the most popular personal computer
    in U.S. at the time.
  • Dell got his first computer for his fifteenth
    birthday and promptly took it apart to see how it
    worked
  • Like had happens with the stamps, his hobby for
    computers evolved into a business opportunity.
  • Dell enhanced a PC the way another guy would soup
    up a car, and then he would sell it for a profit.
  • Dell learned about the latest prototypes and
    previewing technology that would soon becoming to
    market in the 1982 National Computer Conference.

69
CONT.
  • Dell bought his first hard drive disk, and used
    it to set up a bulletin board system on which he
    exchanged messages with other interested in
    computers.
  • An IBM computer that typically sold for 3,000
    didnt make a lot of sense to Dell because he
    could purchase the same components for 600
  • Another thing that didnt make sense was that the
    people operating the the computer stores didnt
    know much about PCs.
  • Dell started buying the exact same components
    that were used in those machines and he upgraded
    his machines and sold them to people he knew.
  • Dell thought, Wow, theres a lot of opportunity
    here. and his mind started filling with
    questions What did I already know that I could
    use? What did I need to learn? How could I learn
    it?
  • Dell left for college in his BMW with three
    computers.

70
THE MAIN IDEA THE BIG OPPORTUNITY
  • Dell saw a great opportunity in providing
    computing technology in a much more efficient
    way. That was the core idea of what became Dell
    Computer Corporation, and its one that he has
    stuck with ever since.
  • Dell also sensed that the demand for personal
    computers was not being sufficient met (1983).
  • Retail stores sold computers at high mark-up
    prices
  • Employee salespeople who knew little or nothing
    about the product
  • There had to be a better way, and Dell quickly
    thought of one selling customized computers
    directly to purchasers through telephone orders.
  • Direct from Dell. Strategies that revolutionized
    an industry, 1999

71
HOW DELL STARTED HIS BUSINESS
  • Dell started the business with a simple question
    How can we make the process of buying a computer
    better?
  • His answer was Sell computers directly to the
    end customer.
  • Eliminate the resellers mark up and pass those
    savings on to the customer.

Direct from Dell. Strategies that revolutionized
an industry, 1999
72
HOW DELL STARTED MAKING HIS OWN COMPUTER
  • Dell called six or seven engineers and a group of
    engineers that worked as a team and ask them
  • That he wanted to design a PC, a 286 computer
  • He asked what it will cost? How long it would
    take? and what the risks were?
  • Jay Bell, an engineer replied, I can do it in
    about a week, week and a half, for 2,000.

Direct from Dell. Strategies that revolutionized
an industry, 1999
73
SALES FORCE
  • His sales force has to set up their own
    computers
  • This give them a real sense of what the
    uneducated customer would go through to set up
    his system and it help them to develop a more
    intimate understanding of the product they are
    selling
  • That marked the start of his reputation for great
    service, one of the tools for staying ahead of
    the competition

Direct from Dell. Strategies that revolutionized
an industry, 1999
74
THE DIRECT MODEL, VERSION 1.0
  • What marked the official beginning of what they
    call the Direct Model was
  • They were constantly talking with both
    perspective customers and people who bought their
    products.
  • It made more sense to Dell to build a business
    based on what people really wanted rather that
    guest at what they thought they might want.
  • They started with little capital and not extra
    time to fool around with extra excess inventory.
  • The direct model is based on direct selling not
    using a reseller or the retail channel.
  • Dell build a product that could meet the
    customers exact needs.
  • Direct from Dell. Strategies that revolutionized
    an industry, 1999

75
How the direct model works
How the indirect model works
  • There are two sales forces Forces from the
    manufacturer to the dealer, and from the dealer
    to the customer.
  • There is just one sales force, ant its totally
    focused on the customer, and not just any
    customer, but specific type of customers.
  • The direct model it all evolved from the basic
    idea of eliminating the middleman.

Direct from Dell. Strategies that revolutionized
an industry, 1999
76
Business model
  • Dell believed that by assembling computers to
    order he could give customers exactly what they
    wanted at a price that was superior to what they
    might spend for a similar system in a retail
    outlet. (Computer stores example)
  • The best part of this model is that since the
    customer is buying directly from Dell, Dell makes
    more on each unit because they do not have to
    build a distributors markup into their sale
    price.
  • Provides a made-to-order personal computer that
    is shipped within 36 hours.
  • Customers can place orders by calling a toll-free
    number or by logging on to the companys web
    site, where models can be customized on-screen,
    prized, and ordered with a credit card.
  • Michael Dell Business Leader Profiles for
    Students. Vol. 1. Gale Research, 1999

77
COMPETITIVE STRATEGIES
  • Speed to market
  • Superior customer service
  • A fierce commitment to producing consistently
    high quality, custom made computer system that
    provide the highest performance and the latest
    relevant technology to their customers
  • Early exploitation of the Internet
  • Finally, Dells most critical competitive
    advantage is becoming a virtually integrated
    organization.

Direct from Dell. Strategies that revolutionized
an industry, 1999
78
BIGGEST BARRIER TO SELLING
  • Fear of customers of shelling out 4000 to a
    company theyd never heard of without a physical
    store they could walk in.
  • Dell advertised a thirty-day money-back guaranty
    for its products. This gave Dell a reputation
    for reliability.
  • COMDEX 86 Computer show (CCS)
  • Showed the 12MHz 286 that had broken through the
    12 MHz barrier.

Direct from Dell. Strategies that revolutionized
an industry, 1999
79
Target Market
  • Computer enthusiasts
  • Large corporations
  • Boeing
  • Toyota
  • Shell Oil
  • Government
  • Educational Institutions

80

INITIAL CONDITIONS
  • When he started the company?
  • Dell started his company in 1987
  • How much was the startup budget?
  • Dell started up his company with a budget of
    1,000 Dollars!
  • Who were the customers?
  • College students and computer nerds
  • What were the challenges on the way?
  • At the end of 1990s, sales of PCs were on
    decrease in the U.S. and Dells sales growth has
    also slowed. Dell has begun offering its
    products in the stores such as Best Buy and Wall
    Mart but could not get a foothold in the home
    computer market when battling against
    better-known Compaq and lower priced Packard Bell.

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  • CONT.
  • By mid 1993 the Dell Computer Corporation seemed
    to be coming apart in the following
  • Communication between the different divisions of
    the company was poor
  • The sales division did not know the manufacturing
    division could handle
  • Profits and losses could not be tracked by
    product type
  • Plans for a laptop computer powered by a 386
    microchip were scrapped at the last minute when
    Dell realized the product was already obsolete
  • Michael Dell Newsmakers, Issue 2. Gale Group,
    1996 http//www.galenet.com/servlet/BioRC

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Summary
  • For role models to guide us toward our dreams, we
    need look no further than Michael Dell. A
    college dropout, with nothing more than 1,000 in
    his pocket and a good idea. In just 18 short
    years, Dell has built a computer empire
    recognized as one of the top vendors of personal
    computes worldwide. Dells sales have
    skyrocketed to a whopping 31 billion since its
    inception with over 33 thousand employees in over
    170 countries.
  • SOURCE http//www.islandconnections.com/edit/bill
    ionaires.htm

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Case Study Comparison
Initial Condition Initial Condition Nature of Business Nature of Business
Idea Startup Budget Getting customers Target Market
Techno-soft To serve mid-size companies with lower cost 500 000 Personal contacts No advertising Mid-size companies
Dell sell directly to the customer, bypassing the intermediaries (wholesalers, retailers) 1000 Fellow students buying from his collage dorm room Small, medium large size organizations, home users
Cisco The breakthrough concept of the router Personal funds -their own credit cards Through email to the colleagues large size corporation
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Case Studies Summary
Customers and Projects Challenges
Technosoft Strategic consulting work, Off-shore software development Providing IT engineers Macroeconomic slowdown Marketing the product
Dell Assembling computers and selling directly to customers Building the trust selling computers
Cisco Higher-education and research institutions large enterprises Projects connecting networks Getting funding Marketing the product
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Case Studies Summary Personal Characteristics
Ashok Dell Cisco
Ambiguity Tolerance High High ?
Open-mindedness High High High
Foresight High High High
86
Case Studies Summary Personal Characteristic
Ashok Dell Cisco
Perceptiveness High High High
Resilience Medium High Medium
Selling Skills Medium High Low
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