During the heyday of the technology boom throughout the 1990’s many companies experienced enormous success for a few years, however without creating a solid internal framework many of these companies did not survive. An exception to that business trend is Dell, which was able to address its problems associated with rapid growth, and build itself into a lasting profitable company. Dell was able to create this lasting profitability with three essential ingredients: 1. “Virtual Integration” 2. Real value customer service features 3. Tailoring Manufacturing to customer needs.

In 1993 Dell reached a point where it had grown too large, without making the necessary internal improvements to stay profitable. Dell reached a “Eureka” moment in 1993 when its cash flow sank to $20 million, net income was negative $40 million, and its market share had shrunk considerably. By bringing in several seasoned managers to focus on specific aspects of the business Michael Dell hoped that Dell could become a synchronized, efficient, and profitable business again. These improvements lead to Michael Dells breakthrough concept of “virtual integration,” which goes a step further than traditional integration by connecting the right parts together in the business.

From this concept three key integrations formed: 1. A symbiotic relationship between Dell and its suppliers; 2. Customers linked directly to manufacturer; and 3. End user were linked to proper customer service assistance. Each one of these measures enabled costs cuts; quicker deliver time, and a more reliable finished product. For instance, with this new symbiotic relationship with its suppliers allowed Dell to trim the number of suppliers it used from 204 to 47 in their Austin facility between 1995 and 1998. These integrations caused the number of days a PC sat in inventory from 32 days to 7 days. By customizing orders the customer received a product tailored to their desires while Dell saved money and time on manufacturing.

Tailoring manufacturing to a customer's specific needs allowed Dell to integrate production schedules with sales flows, assemble all parts of the PC on site, and install the specific software that the customer requested. These manufacturing interactions sped up the final products completion time to thirty-six hours. The swiftness of the manufacturing process added value to the customer by quickening the delivery time. As well suppliers wanted to do business with Dell because there inventory levels rarely pilled up. The advantages in this chain of integrations added value to the customer’s product, while also adding value to Dell as a corporation. Dell's corporate value made it one of the best investments in the 1990’s.

Dell did something else other PC companies were not doing; strategically targeting only the customers they wanted. By defining their customer as a ‘knowledgeable PC user’ Dell made their task of providing a PC easier. Their customers did not need to go to a retail store to gain knowledge about their product. This enabled the ‘Direct Model’ for purchasing PC’s to work.

Dell further expanded its ability to meet customers needs by classify customers into specific categories. Customers were categorized into Relationship buyers, large businesses and institutions, and Transaction buyers, small business and home PC users. The Relational buyers made up a significantly larger portion of Dell’s business but also had different needs than Transaction buyers. Every relational buyer was assigned a representative who guided the business and institution through each stage of the buying experience. By integrating both Relational and Transaction buyers into their business system repeat purchases were quick and easy, purchasing history could be consulted, and follow up customer service was able to be more effective.

Dell’s business structure of “virtual integration” allowed it to excel in an incredibly competitive industry. It's competitiveness in the industry resulted from a highly efficient business model that sought out every opportunity to work more productively without compromising the quality of their product. Production efficiency lowered cost which in turn provided Dell with larger profit margins. As Porters Five Forces demonstrates, when bargaining power of buyers is high, the potential for price battles increases. Dell combated failing into the trap of a price battle by making a PC that was a better product than the competitors, yet near their competitor’s price. There costs were able to stay competitive while delivering an exceptional product because their business kept internal costs low, thus showing the effectiveness of “virtual integration.” Like Honda, Dell was able to provide a technologically superior product at a reasonable price. As well, Dell was able to evade a price war because its customers were aware of the technological value in a Dell PC.