"Dell is Not a High-Tech Company"
One of the most basic rules of economics is that in a commodity business (i.e., many producers creating an essentially identical product), there is one and only way to prosper: become the low-cost producer. Build a better cheaper mousetrap and the world will beat a path to your door.
An important component of production costs is simply time. Build cheaper mousetraps faster and the world…
Keeping these basic rules in mind:
The latest front line in Dell’s relentless battle to bring down the cost of the personal computer is a fiddly little label stuck to the casing.With PC assembly time down to less than four minutes, the 30 seconds it can take to apply the ubiquitous security holograms and logos for Microsoft and Intel have become a significant manufacturing bottleneck. Talks are under way to eliminate what Dell production managers grudgingly describe as “other people’s advertising.”
…
“Dell is not a high-tech company,” says David Gibson, a professor at [the University of Texas] who studies innovation. “It probably has the most efficient business model in the world, but the key to that success is its sales model and logistics efficiency.”
It’s hard not to think of the Dell laptop I’m using to compose this blogpost as “high-tech.” On the other hand, it’s very easy not to think of automobiles as “high tech.” Perhaps people twenty years from now will think of personal computers the way we think of cars today.
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Meanwhile, although Dell may have no market power as a seller (i.e., it is only successful because it expressly tries not to behave like a monopolist), it does have market power as a buyer, what economists call monopsony (or at least oligopsony). And of course, Microsoft and Intel have market power as sellers of their respective products to Dell. This is a key issue in AMD’s antitrust lawsuit against Intel.
Market power as buyer versus market power as seller — bring in the game theorists!
But one thing is certain: no matter how these market power games play out, consumers are the winners. Isn’t capitalism grand?
Hat tip to Newmark’s Door.
For Discussion: If Dell isn’t a “high-tech company,” then what is? What does it mean to be “high-tech”?
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Dell is not a high tech company in that it does not really do much R&D.
It doesn't develop chipsets. It doesn't support cutting edge technology. It doesn't write custom software (for the most part). The most high-tech part of its operation is automation (actually putting together the machines) and tech support. Both of these functions, however are handled by all manufacturing companies – high tech or not. Indeed, there is very little difference between Dell and Nabisco.
Companies like IBM are high tech. They develop software for retail. They design and manufacture 2 independant processor/system lines besides mainstream merchant chips for the retail server market. In short, companies that are high tech seek to provide added value, instead of lower cost to the consumer.
I think the writer's definition of "high tech company" is similar to mine in referring to a company whose business model is built around some unique technological innovation or collection thereof. Dell is not. The laptop you buy from Dell is indistinguishable (except for bearing a different logo and being rather flimsier) than the one you might buy from IBM. The desktop computers they sell are even less technologically differentiated than their laptops, being indistinguishable (except for their higher price and again the logo) from the ones you could buy from a hole-in-the-wall system build shop run by Taiwanese immigrants.
A "high tech company" needs a unique _product_. Dell's advantage has nothing to do with technology and everything to do with the way the business is run.