New Product Development in Dell - Essay Example

Dell has always been known for its unique method of selling computers directly to s through the internet or through advertisement in magazines. This has given it an edge over competitors. An informed consumer prefers direct selling than purchasing through the computer store (Goolsbee, 2001). Now Dell is gaining distinction and market power through new product development (NPD). NPD involves bringing a completely new service or product to the market. It involves idea generation, product design to detail engineering including marketing of the product and market analysis. Innovations in products give the firm an edge over competitors and thus they are able to capture the major portion of the market. Dell was founded in 1984 with a simple concept of selling computers through the internet directly to consumers which demonstrated that they understand the customers’ needs and interest (Chou, Tan & Yen, 2004). It could thus eliminate retailers and deliver faster. They introduced a demand driven supply chain in which the traditional build-to-stock approach is replaced with a build-to-order model. It was thus able to reduce inventory, cut costs and reduce production cycles. Veryzer (1998) contends that radical or discontinuous new products play a significant role in building competitive advantage and contribute to a company’s growth and profitability. At the same time companies moving into global markets find developing new products is becoming more complex as expertise can be scattered through out the world. Methodology of new product development continues to evolve and grow in complexity and effectiveness. Competitive pressures, advanced information technology and web-enabled NPD are the next step in process for companies that have already structured their NDP processes (Erlandson, 2001). As Dell continuously develops new product, it is in the process of taking the next step forward. A well-defined, well-practiced system for managing product development from inception to launch leads a firm to success. As costs of development grow larger, opportunities shrink. Firms then turn to automate the NPD process. Dell has kept pace with the technological advances that continue to accelerate; it has also been able to beat competition that continues to escalate, and most importantly, it has been able to recognize the consumer tastes and market demand. Dell has continuously been innovating new products due to which it always has a sizeable number of customers to its credit. In 2003, Dell moved into the broader consumer electronics market. Because of its well known direct business model, they could be successful in this venture too. The idea was to dominate all aspects of home technology, which includes home computing, entertainment and all the associated peripherals (Shim & Spooner, 2003). They already have a music store which allows consumers to download music to a PC. They also introduced the 17-inch Dell W1700 LCD TV. Dell also introduced latest handheld, the X3, which is a thinner and lighter version of the currently available X5. They offer Wi-Fi capabilities as an option for the device. While Dell still sells low priced machines, it introduced high-priced machines and targeted three different groups of consumers – those who are technologically conscious of what they want, the gaming enthusiasts who want lots of power and graphics features and the third group comprises those who own a MP3 player, have more than one printer at home, one or two PCs and a wireless network at home (Lee, 2005). With such a strategy they created a market for their new product. Their target was the affluent group which had money to spend on computing. Through this strategy, they also expected to generate revenue. This was considered essential because by selling computers at a very cheap rate they had generated sales in terms of units sold but not added to the company’s revenue. Along with the new product they have value-added services which help to expand the customer base. While for their other PCs the standard warranty is 90 days, for the new product they provide warranty for one year apart from providing the customers with a special number for support and service. Interrelationships between firms can naturally evolve as more business is done via e-commerce (Morgan, Naude & Baxter, n.d.). Dell computers has exploited this by creating premier pages and are now able to develop linkages with their largest customers. They have thus created an extranet based sheared service center to handle ordering and invoicing and then they move on to services aspects. After 2005, Dell is now introducing a new line of computers which will be sold through retailers all over the world (Toptechnews, 2007). For the first time they have decided to sell through Wal-Mart and other stores – a departure from their usual system of selling through the internet. This new line of computers has design as their priority and they are concentrating on notebook which is now an accessory as companies give freedom to employees to work from home. In essence, Dell is able to recognize the market and customer needs and creates a market for itself through NPD. Dell has a separate product development division – the Business Product Group and the Consumer Product Group. Dell has to rethink its strategy of direct selling and is now attempting to sell through retailers globally. Although at every stage they have been quick in recognizing opportunities and translating it into action by innovating new products, but their profits and revenue has gone down remarkably. New product development requires ingenuity in product designing and creation and then market analysis. They did make extensive efforts to identify target group while designing the new products. Their ideas, concept and technology development were all in place but of late competition has overtaken them. They did capture a good market share not just in the US but even in other countries but due to their marketing approach and low-cost computers the advantage that they gained due to new product development was lost. While Dell did involve itself in all these activities, but research suggests that their direct selling concept seems to have now been the cause of their downslide. The right resources have also to be allocated to the NPD process, which is where Dell lacked. References: Chou, D. C., Tan, X., & Yen, D. C., (2004), Web technology and supply chain management, Information Management & Computer Security Vol. 12 No. 4, 2004 pp. 338-349 Erlandson, D., (2001), Are You Ready to Web-Enable Your NPD Process? 20 June 2007 Goolsbee, A., (2001), Competition in the computer Industry: online versus retail, The Journal of Industrial Economics, Vol. XLIX, No. 4 pp. 487-499 Lee, L., (2005), Will Dells Up-Market Move Compute? Read More