Abstract

US-based Information Technology company, Dell Inc. (Dell) and India’s leading vacuum cleaner and water/air purifier company, Eureka Forbes Ltd. (Eureka Forbes), were regarded as pioneers in direct marketing. The direct marketing strategy also helped the companies gain the market leadership position in their respective industries. Though Dell became successful due to its direct selling model in the 1990s till the mid-2000s, it started facing decreasing sales from then on, eventually losing its market leadership to Hewlett Packard Company in 2006. In the mid-2000s, some analysts criticized Dell for sticking to its direct-only business model. According to them, the business model that had made Dell so successful in the past was no longer as effective and the company was losing its competitive edge. In 2007, Dell announced its intention of moving beyond the direct-only model that it had zealously followed until then. Hence, it decided to shift its focus from direct marketing and to sell its personal computers through retailer stores such as WalMart and Carrefour. Similar to Dell’s strategy of moving beyond the direct selling model, Eureka Forbes also shifted its strategy from direct selling and focused more on its retail business. This was a bid to increase the visibility of its products and push up sales by selling through the retail division. Analysts in general appreciated Dell’s new channel strategy as many of them had been saying for a long time that such a change was necessary for the company. They felt that Dell would benefit from its foray into retail as well as its new channel initiative. On the other hand, some analysts felt that Dell was taking a huge risk by straying from what had made it so successful in the PC industry. Similar doubts were raised by analysts when Eureka Forbes shifted its focus from direct selling. They opined that Eureka Forbes, being a new player in the retail business, could face tough times ahead. However, after facing a few initial hitches due to its shift from direct marketing and its entry into water purifiers, Eureka Forbes continued to retain its market leadership position in the vacuum cleaner and water purifier markets. Going forward, Eureka Forbes had ambitious plans to enter the packaged water segment.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Study the direct-only business model of Dell and Eureka Forbes and discuss its advantages and disadvantages.
• Understand the reasons behind Dell’s and Eureka Forbes’s decision to move beyond their direct-only model.
• Understand the issues and challenges faced by companies in managing the supply chain and in launching new channel strategies.
• Understand the issues and challenges faced by companies making a transition from a direct selling model to a multi-channel model.

Keywords

information technology, direct selling, direct marketing, channel strategy, distribution channel, supply chain, logistics, just-in-time delivery, retailers, value added resellers, market leader, accounting irregularity, Original Equipment Manufacturers, Personal Computers, vacuum cleaner, water/air purifier, packaged water segment, bottled water segment, Eurochamps, advertising, Customer Relationship Management, marketing mix, Dell, Hewlett-Packard, Apple Computers, Walmart, Carrefour, Eureka Forbes, IBM, Securities and Exchange Commission, Electrolux, Forbes Gokak Ltd. Compaq, Gateway Computer Corporation, Acer, Michael Dell.