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Management Information System – Dell Essay

How does it differ from traditional business models – e. . Vertical Integration? Vertical Integration deals with the development of all the research, develop moment, manufacturing, and distribution capabilities in-house. Dell treats suppliers and service providers as If they were Inside the company. The difference in the levels of integration is quite evident in the Dell’s business model. What are the advantages of direct business model from verbal integration? Some of the major Advantages off direct business model over vertical Integration are: Eliminate risks and cost of carrying large finished good inventory

High velocity(very less time spent by the product in inventory) Direct customer relationship Build-to order Just-in-time manufacturing – high velocity and reduced channel cost 4. How is inventory value measured? The accounting method that a company decides to use to determine the costs of Inventory can directly impact the balance sheet, income statement and statement of cash flow. There are three inventory- costing methods that are widely used by both public and private companies: First-Len, First-out (FIFO) this method assumes that the first unit making Its way Into Inventory Is the first sold.

For example, let’s say that a bakery produces 200 loaves of bread on Monday at a cost

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of $1 each, and 200 more on Tuesday at SSL . 25 each. FIFO states that If the bakery sold 200 loaves on Wednesday, the COGS is $1 per loaf (recorded on the income statement) because that was the cost of each of the first loaves In inventory. The $1. 25 loaves would be allocated to ending inventory (appears on the balance sheet). Last-in, First-out (LIFO) 1 OFF older inventory, therefore, is left over at the end of the accounting period.

For the 200 loaves sold on Wednesday, the same bakery would assign $1. 25 per loaf to COGS, while the remaining $1 loaves would be used to calculate the value of inventory at the end of the period. Average Cost This method is quite straightforward; it takes the weighted average of all units available for sale during the accounting period and then uses that average cost to determine the value of COGS and ending inventory. In our bakery example, the average cost for inventory would be $1 . 125 per unit, calculated as [(xx $1) + (200 x $1. 25)]/400.

An important point in the examples above is that COGS appears on the income statement, while ending inventory appears on the balance sheet under rent assets. 5. Can other traditional firms adopt the Dell model? Why? Why not? It is difficult to adopt the Dell Model because efficiency would take Dell only so far. It wouldn’t fuel the kind of growth that doubles revenue in five years. The other key is Dell’s ability to re-apply its specification model to the right products at the right time. “We have to keep throwing stuff in the hopper at the top,” Rollins says.

But that’s tricky. As Michael Dell explains it, Dell operates on a belief that all technologies follow a similar pattern. Soon after a technology product comes to arrest, it is a high-priced, high-margin item made differently by each company. Over time, the technology standardizes, the way PC’s standardized around Intel chips and Microsoft operating systems. Then parts makers’ blossom, manufacturing costs drop and the technology starts becoming a commodity. Dell monitors those patterns. At a certain point between standardization and communication, a technology is ripe for Dell.

The incumbents are making 40% or 50% profit margins and are vulnerable to Dell storming in and making a profit on far slimmer margins. Yet there’s still plenty f room for Dell to drive out costs by perfecting manufacturing and using its buying power to get cheaper parts. “Our business model excels in that transition,” Rollins says. For most of Dell’s existence, it has applied that capability to PC’s, moving up the chain into higher-priced laptops, workstations and, lately, servers. Now Dell is increasingly moving beyond computers, like when Wall-Mart moved beyond its traditional base of rural stores and applied its model to urban areas.

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