dell Business Model – How does dell make money

If you look at the list of inventions that have changed the world dramatically in the last several decades then computers would be on top. You cannot even imagine the current world without computers. Computers are everywhere in this current day and age. There are more people using computers than ever before. Almost all kinds of businesses are using computers. This is because they make their work fairly easy. It doesn’t matter what kind of a business you are running, you need a computer. It can be an IT company or a delivery service, everyone has a computer. But this was not the case a few decades ago. When the first computer that was ever created was as big as a room. The first generation of computers used vacuum tubes. From then until now computers have come a long way. The initial intention of creating computers was not for personal use.

When scientists computers they did it to serve scientific and mathematical purposes.  Computers were invented so that scientists could do large and complex calculations in less time. Computers can do calculations within a fraction of a second that would take humans several years to complete. As time passed scientists were able to come up with more and more compact designs. Not only that but they have managed to increase the power of the computer while decreasing the size. Several industries started using computers. But it took many years for companies to manufacture computers that could be sold to common people. Once PCs started becoming a thing then there was no stopping for computers. Selling PCs to customers compelled companies to come up with advanced versions to sell more computers. 

Due to this several companies started competing with each other. This ensured that the companies made computers that are faster and portable. These companies are the reason why we are able to use such good computers today. One of those companies is Dell. Most people might have heard about Dell. But not everyone knows it’s business model and how it makes money. Well, this article is completely about that but before knowing about its business model let’s know a little bit more about the company.

What is Dell?

As you already know Dell is a computer technology company that manufactures and repairs computers. This American company was founded in the year 1984 by Michael Dell. You may not know this but Dell was not the name of the company when it initially started. Michael Dell was studying at the University of Texas when he started his company.  His dorm room served as the headquarters. Back then it was known as PC’s limited. Michael Dell thought that selling customized computers directly will be cost-effective and have a great value proposition. This idea made him put out ads in national computer magazines. Soon he started receiving calls from customers to place orders with their desired features. After receiving the orders Michael Dell would then buy parts wholesale and reassemble them into the computers. These computers looked similar to IBM models. This was a huge success as Michael Dell got more and more orders every day. 

Within a short period of time, Michael Dell was earning more than $80,000 per month. This resulted in getting capital of $1000 from his family to expand his business. To pursue his business idea Michael Dell decided to drop out of college and incorporated PC’s limited into Dell Computer Corporation. The company released its first computer with an original design in 1985. It was known as Turbo PC and they sold it for $795. The company was on the path of success from the first year of starting its operations. In the first year, it generated $6 million in revenue. The next year it generated $40 million in revenue. Not only in the PC market but Dell also became one of the top companies in the mail order industry. The company went public in the year 1988 and it managed to raise $30 million dollars. 

In the beginning, it did not want to sell computers to individual buyers as they saw that profit margins were low. But it all changed when their site took off. Now the consumers who already bought computers previously were looking for computers that were more powerful and needed less support. Dell was the company that has such computers. From the late 1990s to early 2000s Dell was able to steadily capture the market share. When other companies were struggling Dell was growing and growing. In 2002 the company started manufacturing other products like printers, audio players, and televisions. Currently, it is one of the largest PC vendors in the world. 

Business model of Dell

Dell at one point was the leading PC vendor in the world. So let’s look at the things that helped it in achieving this feat. 

Low price

This is probably the most important reason why dell was so successful all these years. It managed to offer computers to its customers at very low prices. But it doesn’t mean that the quality of the computers was bad. Despite the low prices of the computers Dell managed to make them fast and powerful. 

Providing services for large corporations and public sector companies

Dell provides technology and support for national as well as international corporations. It understands the type of operations that the computers are required to perform and provides the companies with suitable technologies. Apart from these the company also offers products and services to government properties. Not only that but they also provide services to educational institutions, law enforcement agencies, and health care properties. 

Computer Solutions for small and medium-sized businesses

There is no need to emphasize how important computers are for businesses these days. Dell offers them products and services that satisfy all their needs. Small and medium-sized businesses are the ones that use all kinds of services offered by Dell. Even the services provided to these businesses are different compared to others. 

Products for consumers

These are the products that are offered to individuals or people in IT firms. These products and services are for those people who want to use computers for some of the most basic but important operations. People who fall into this category are common people who use computers for entertainment, storing information, gaming, etc. 

How does Dell make money?

Like many large companies, Dell also has multiple revenue streams. However, Dell has only two ways in which it makes money. Here they are.

Selling products

This is something that you already know about. The main source revenue of for Dell is by selling computers. This is what the company is known for and this is what it does. Offering good computers for a comparatively cheap price is why it is still one of the largest computer manufacturers in the world. Apart from computers, it sells other hardware products like printers. Not only that but Dell also makes some money by selling software solutions. 

Services

Apart from selling computers it also provides other services to its customers. It has customer centers where it repairs computers. It also assists the customers on how to use their products. This is not only for hardware products but also for software products. 

Conclusion

This is the business model of Dell. Though it is not the top PC manufacturer as it used to be Dell is still one of the largest and trusted computer technology companies in the world. Providing great quality products at low prices is what made it so successful. It is currently the third-largest computer manufacturer in the world. You can learn about other interesting business models on Zeen. Click here to know about the business model of Goldman Sachs.

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