Dell’s Global Business Strategy

Dell has been expanding its presence outside the United States since the early 1990s. In fiscal 2006, 41% of Dell’s $56 billion in revenue was generated outside the United States. Dell’s strategic goal is to be the low-cost player in the global industry. It does not alter its business model from country to country; instead, it uses the same direct selling and supply chain model that worked so well in the United States. Dell is thus pursuing a global standardization strategy. Dell’s basic approach to overseas expansion has been to serve foreign markets from a handful of regional manufacturing facilities, each established as a wholly owned subsidiary. To support its global business, it operates three final assembly facilities in the United States, one in Brazil (serving South America), two in Ireland (serving Europe), one in Malaysia (serving Southeast Asia), and two in China (serving China). Each of these plants is large enough to attain significant economies of scale. When demand in a region gets large enough, Dell considers opening a second plant; thus, it has three plants in the United States to serve North America, and two in Ireland to serve Europe. With sales growing rapidly in India, the company will bring an Indian plant online in 2007. Each plant uses exactly the same supply chain management processes that have made Dell famous. Taking advantage of its supply chain management software, Dell schedules production of every line in every factory around the world every two hours. Every factory is run with no more than a few hours of inventory on hand, including work in progress. To serve Dell’s global factories, many of Dell’s largest suppliers have also located their facilities close to Dell’s manufacturing plants so that they can better meet the company’s demands for just-in-time inventory. Dell has set up customer service centers in each region to handle phone and online orders and to provide technical assistance. In general, each center serves an entire region, which Dell has found to be more efficient than locating a customer service center in each country where the company does business. Beginning in 2001, Dell started to experiment with outsourcing some of its customer service functions for English-language customers to call centers in India. Although the move helped the company to lower costs, it also led to dissatisfaction from customers, particularly in the United States, who could not always follow the directions given over the phone from someone with an Indian accent. Subsequently, Dell moved its call centers for English language businesses back to the United States and the United Kingdom. Dell continues to invest in Indian call centers for its retail customers, however, and in 2006, it announced that it was opening a fourth Indian call center.