How Was Dell Twice as Fast for Half the Price?

Michael Dell sold a 12 MHz 286 computer for $1,995 while IBM sold a 6 MHz 286 for $3,995. The Dell computer was twice as fast and half the price, and the company still made a decent margin.

In the mid-1980s, soon after the first engineers were hired to build Dell computers from scratch, Dell started selling so many computers so fast that it competed with IBM. Clever engineers and a supply chain built because the company had no capital made the pricing work. When Dell would sell, say, 200 computers in a day, the signal went back to suppliers, who delivered parts to the factory every day or every few hours, and Dell shipped the computers out to the customer. The supply chain was unbelievably efficient and held the freshest parts at the best cost. As material costs came down, Dell benefited and could get the latest technology to the customer faster than anybody else.

Retail shops did not sell Dell computers. Customers called or faxed an order. Most of the business went to businesses.