Dell 2006 Annual Report Download - page 9

Table of Contents
DimensionTM desktop computers and InspironTM notebook computers in retail stores in the Americas and announced
partnerships with retailers in the U.K., Japan, and China. These actions represent the first steps in our retail strategy, which
will allow us to extend our business model and reach customers that we have not been able to reach directly. Outside the
U.S., we sell products indirectly through selected partners to benefit from the partner's existing customer relationships and
valuable knowledge of traditional customs and logistics in the country, to mitigate credit and country risk, and because sales
in some countries may be too small to warrant a direct sales business unit.
Competition
We face intense price and product feature competition from branded and generic competitors when selling our products and
services. In addition to several large branded companies, there are other smaller branded and generic competitors.
Historically, we competed primarily based on the customer value that a direct relationship can bring, technology,
performance, customer service, quality, and reliability. Our general practice is to rapidly pass on cost declines to our
customers to enhance customer value.
As a result of the intensely competitive environment during Fiscal 2007, as well as our decisions to de-emphasize lower
priced, entry-level products, we lost 1.1 points of share during calendar 2006, finishing the year as the number two supplier
of personal computer systems worldwide and the number one supplier in the U.S. This was principally the result of share
loss in the U.S. Consumer segment.
We expect that the competitive pricing environment will continue to be challenging. However, we believe that the strength of
our evolving business strategy and indirect distribution channels, as well as our strong liquidity position, makes us well
positioned to continue profitable growth over the long term in any business climate. For consumers, we recognize the
increasing importance of product "ID," which is the appearance, ease of use, and ability to interact with peripheral products
like cameras and MP3 players, and are focusing more resources on being competitive in this area.
Manufacturing and Materials
We manufacture most of the products we sell and have manufacturing locations worldwide to service our global customer
base. See "Part I — Item 2 — Properties" for information about our manufacturing locations. We believe that our
manufacturing processes and supply-chain management techniques provide us a distinct competitive advantage. Our build-
to-order manufacturing process is designed to allow us to significantly reduce cost while simultaneously providing customers
the ability to customize their product purchases.
Our manufacturing process consists of assembly, software installation, functional testing, and quality control. Testing and
quality control processes are also applied to components, parts, and subassemblies obtained from third-party suppliers.
Quality control is maintained through the testing of components, subassemblies, and systems at various stages in the
manufacturing process. Quality control also includes a burn-in period for completed units after assembly, on-going
production reliability audits, failure tracking for early identification of production and component problems, and information
from customers obtained through services and support programs. We are certified, worldwide, by the International Standards
Organization to the requirements of ISO 9001: 2000. This certification includes our design, manufacture, and service of
computer products in all of our locations.
Although we manufacture most of our products, we have relationships with third-party original equipment manufacturers that
build some of our products (such as printers and projectors) to our specifications. In addition, we are exploring the expanded
use of original design manufacturing partnerships and manufacturing outsourcing relationships in order to deliver products
faster and better serve our customers in certain segments and geographies.
We purchase materials, supplies, product components, and products from a large number of suppliers. In some cases,
multiple sources of supply are not available and we have to rely on single source suppliers. In other cases, we may establish
a working relationship with a single source or a limited number of sources if
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