The Apple Impact - beleaguered Dell to sell factories in a cost cutting move

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Sep
05

By: switchtoamac at: 9:58 AM on September 5, 2008 | Comments (0)

News on Wall Street today hints that Dell Inc. the second largest PC manufacturer is planning to sell its worldwide manufacturing plants within the next 18 months in an effort to cut costs.

It is likely that Dell will enter into agreements with Asian contract manufacturers.  This move by Dell is a clear sign of cost pressures facing the firm and recent profitability issues that have failed to satisfy investors.

Numerous outlets have reported this including Bloomberg, CNBC, and Marketwatch.

Commentary - Apple Impact
With Apple outpacing their PC counterparts in both sales and market share growth, it's no surprise that Apple's competitors need to take action.  Dell's business model thrived on the Internet in the 90's and early part of this decade.  More recently however, a shift to laptops and consumer oriented retail stores has been observed in the industry.  Earlier this year, Apple's market capitalization exceeded Dell's by a factor of four.

Apple pioneered the retail trend via the company's Apple Retail Stores which first opened in May 2001.  Apple Retail Stores have been strategically placed in shopping malls and shopping centers.  Dell attempted to roll out their own retail kiosks in an effort to copy the Apple business model but failed in January 2008.

Simply attempting to copy the Apple retail experience proved difficult.  One of Apple's key competitive advantages is it's end-to-end approach to designing both computers and the operating system those computers run (Mac OS X).

Apple does not manufacture their computers but uses Chinese contract manufacturers.  Clearly, this is the model which Dell is attempting to mimic.  Contract manufacturers are able to produce computers at a lower cost per unit thereby saving firms who utilize their services money.

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