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Case Study of Starting Dell Computers

by Ron Kurtus (revised 20 September 2015)

The creation of Dell Computers by Michael Dell is a good case study of entrepreneurship.

Dell showed skills in salesmanship early on in his youth. While in college, he built a desktop computer by buying parts from local dealers. He then started making and selling computers to his college classmates. Business was so good that he quit school to start up his computer business.

Questions you may have include:

This lesson will answer those questions.



Interests and skills

When Michael Dell was 15, he showed a fascination of the inner workings of a computer by breaking down his brand new Apple II computer and then rebuilding it.

Dell did not excel academically while attending Memorial High School in Houston, Texas. However, he exhibited great business instincts while selling subscriptions for the Houston Post. He was able to sell $18,000 in subscriptions by focusing on selling to newlyweds, thus earning himself a BMW automobile.

This ability to sell was an important element in his future business success.

Starts part-time business

Dell realized that the IBM and IBM-compatible personal computers were not made of IBM parts, but rather stock parts from various vendors. He then built his own computer. Friends in school asked if he could build computers for them too.

Got idea

In 1984, while a student at the University of Texas at Austin, Dell got the great idea of making IBM-compatible computers to sell to fellow students at a price much lower than they would have to pay in a computer store.

Plan of action

His plan of action was to buy a needed parts, recruit some students to help him, advertise through word-of-mouth, and then sell to other students on campus. This was his initial business plan.

Initial funding

With capital of only $1000, Dell started a part-time business, working out of his off-campus dorm room.

Starts Dell Computers

By 1985, the demand for his computers motivated Dell to focus full-time on his business.

Wrote business plan

Dell dropped out of school and wrote a detailed business plan.

Got funding

Dell pitched his idea to friends and family.

His grandparents had enough faith in his idea and his determination that they provided him with $300,000 so that he could expand his business into a full-scale company.

Marketing

He advertised his computers—which were custom-made according to a selection of options—through popular computer magazines. His prices were lower than retail stores and were sold and shipped directly to the customers.

Business model

This business model—which was the first of its kind in the computer business—and his reputation for quality and customer service resulted in an astounding $73 million gross in the company's first year.

Summary

Michael Dell showed interest in the workings of computers, as well as astute skill in business. He got the idea of putting together IBM-compatible computers from stock parts and selling them to other students. Demand for his computers motivated him to form a company, using capital from his family.


Be aware of new trends and markets


Resources and references

Ron Kurtus' Credentials

Websites

Entrepreneur Resources

Books

Top-rated books on Dell Computers

Top-rated books on Starting a Business

Top-rated books on being an Entrepreneur


Questions and comments

Do you have any questions, comments, or opinions on this subject? If so, send an email with your feedback. I will try to get back to you as as possible.


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