For decades Dell took advantage of the commoditization of the PC market by being the low-cost leader but they need to do more if they want to increase their earnings. The PC and Laptop markets are under pressure from netbooks and PCs in general are getting real competition from Apple. And if you’re Michael Dell, you have to kick yourself on a daily basis when you realize Apple, the company you once suggested should be shut down is not only taking marketshare from your company, it is doing it with products which do the same thing as yours but cost twice as much.
You see Dell has done such a great job becoming the low-cost leader that in the mind of many, their brand equates to cheap, cheap, cheap. And in a market growing rapidly this is not a bad reputation to have. The problem of course is if the PC market does not grow in double digits and gets more competitive, it is tough to find more revenue and of course earnings.
So my advice to Dell would of course be to move up market. Go after Apple head-to-head. Give those people who want an ultra-thin Mac laptop a way to get the sleekness of a Mac with the ability to run Vista.
And they have done exactly that with their new sleek and expensive Adamo Laptop introduction. The Texas-based company has done a great job branding the device in a way that exudes fashion, style and sleekness. This is why I read with interest comments from Chris Dawson over at ZDnet which basically made fun of the new Dell branding and emphasized the economy is not ready for a laptop which is so expensive.
While Dawson makes great point after great point, his takeaway is wrong in my opinion because Dell needs to do something, anything to boost margins. This strategy has worked very well for Honda when they launched Acura and Toyota when they launched Lexus and Nissan when they launched Infiniti.
Can the same thing be done in the world of computers? Yes. It already has as a result of Dell purchasing Alienware. It is also working for Sony which has higher margins on its Vaio line than many other PC makers because they have Mac-like designs. Also notice the Sony URL for this brand is “sonystyle.” I think Dell did the exact right thing by announcing this computer and yes, Chris, this is a terrible economy for this new product but Dell needs a boost to its margins and history shows us that launching a high-end brand is the way to make this happen.