Question

Required:

How was Dell computer working capital policy as a competitive advantage? Write at least 200 words.

Please write in your own words. Thank You!

Answer 1

Dell maintained a low inventory policy and worked on direct sales model eliminating all types of middlemen including distributors, retailers.
This allowed Dell to operate on a 15-20% higher profit margins which they shared with clients in terms of lower costs.
Dell only maintained sufficient stock to meet a demand for 12 days and made new PCs only after receiving a confirmed order.
As compared to its existing initial competitors including IBM, Compaq Dell could make faster deliveries, take back quicker returns and also realise cash sooner
This helped Dell to innovate more, invent new products and recieve client feedback directly
Furthermore, since there was no middleman, Dell was able to fix damaged part sooner as against its competitors thus making it an excellent service provider.
Last but not the least, Dell was able to finance its growth in the initial years through internal financing and hence had no dilution of control/interference from outside investors.
All the energies of the company were invested in producing, innovating and focusing on after sales service.