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Advantage Dell - Relative Cost Analysis

Dell had a cost advantage over competitors in 1996 and 1998 for selling PCs to businesses. In 1996, Dell's cost of goods sold was lower due to purchasing supplies later, having lower inventory carrying costs, no channel related costs, and no channel markup. The total cost advantage was $299, or 12.92% of revenue. By 1998, Dell's cost advantage had decreased slightly to 11.93% of revenue, as the cost differences between Dell and its competitors had narrowed.

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Lokesh Sharma
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2K views

Advantage Dell - Relative Cost Analysis

Dell had a cost advantage over competitors in 1996 and 1998 for selling PCs to businesses. In 1996, Dell's cost of goods sold was lower due to purchasing supplies later, having lower inventory carrying costs, no channel related costs, and no channel markup. The total cost advantage was $299, or 12.92% of revenue. By 1998, Dell's cost advantage had decreased slightly to 11.93% of revenue, as the cost differences between Dell and its competitors had narrowed.

Uploaded by

Lokesh Sharma
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Dell's Cost Advantage in 1996 (For Business Market) Dell's Price ($)= Dell's Gross Margin = Dell's Cost

of Goods Sold for one PC ($)= Rate of Decline of supplies prices= Competitor's days of inventory= Dell's days of inventory= Competitor's COGS due to slower inventory turnover= Annual Cost of Capital Channel Cost Channel Markup Dell's Advantage due to Supplies purchased later ($) = Dell's Advantage due to Lower Inventory Carrying Costs ($) = Dell's Advantage due to No Channel Related Costs ($) = Dell's Advantage due to No Channel Markup ($) = Total Dell's Advantage from Above ($) = Dell's Advantage as % of Revenue = 2313 21.5% 1816 0.6% 65 15 1892 15% 2.50% 7% 77 37 58 127 299 12.92%

Dell's Cost Advantage in 1998 (For Business Market) Dell's Price ($)= Dell's Gross Margin = Dell's Cost of Goods Sold for one PC ($)= Rate of Decline of supplies prices= Competitor's days of inventory= Dell's days of inventory= Competitor's COGS due to slower inventory turnover= Annual Cost of Capital Channel Cost Channel Markup Dell's Advantage due to Supplies purchased later ($) = Dell's Advantage due to Lower Inventory Carrying Costs ($) = Dell's Advantage due to No Channel Related Costs ($) = Dell's Advantage due to No Channel Markup ($) = Total Dell's Advantage from Above ($) = Dell's Advantage as % of Revenue = 1977 22.5% 1532 1% 45 7 1618 15% 2.50% 5% 86 24 49 77 236 11.93% <= Dell's Advantage has reduced by 1 % Point.

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