Competition

The concept of competition is well known in the fields of economics. In everyday usage, it also connotes a kind of positive, creative energy that fuels our markets. As mainstream use of the Internet grew exponentially through the 1990s, so did competition among the industry's many players. Hordes of upstart companies that became known as dot-coms emerged. They competed aggressively with one another, and with traditional industry leaders, to gain dominance in market niches such as online discount travel services and online product evaluation services. Competition was particularly intense in the online services sector between America Online (AOL) and rivals like Compuserve and Prodigy, and in the personal computer (PC) industry as players like Dell Computer Corp. used the Internet to challenge the dominance of larger competitors.

AOL made one of its first competitive moves in the early 1990s. Launching an intense branding program, which included giving AOL software away for free, the company also began growing its content via alliances with news firms like Tribune Co., Knight-Ridder, and CNN. By the mid-1990s, rivals CompuServe and Prodigy had begun to eat into AOL's market share. To boost subscriber rates, AOL forged an important agreement with Microsoft Corp. in 1996. As a result, AOL agreed to include Microsoft's Internet Explorer browser in its software, and Microsoft agreed to include AOL software on its Windows 95 platform. AOL sought similar alliances with AT&T Corp., Apple Computers, Sun Microsystems, Hewlett-Packard Co., and Netscape Communications. The firm also continued to hone its services to make them as easy to use as possible. According to AOL CEO Steven Case, as quoted in the October 1996 issue of Forbes, "If you want to reach a mainstream audience, you have to make it more plug and play. One-stop shopping. One disk to install. One price to pay. One customer service number to call." AOL set its competition back even further in September of 1997 when it purchased the consumer online service of CompuServe Corp. The acquisition boosted AOL's subscriber base to more than 10 million, placing major rivals such as Microsoft Network, AT&T WorldNet, and Prodigy at a distant second place.

Like AOL, Dell Computer Corp. also proved successful in its efforts to outperform competitors. When the firm was founded in April of 1984, it used a direct sales model rather than going through traditional retail outlets. As a result, Dell's machines were less expensive than those of other PC vendors, such as IBM Corp. and Compaq Computer Corp. In addition, the firm began offering on-site setup, maintenance, and repair services for its products in 1987. When Japanese PC firms began lowering their prices, Dell hired a former IBM Corp. executive to oversee the firm's efforts to manufacture machines higher in quality than those of their Asian rivals. Along with focusing on improved technology, the firm also continued to develop its customer service practices. All employees were required to attend a six-week training program to learn how to answer questions, resolve complaints, take orders, and help clients select the best options for their computing needs. Weekly staff meetings included discussions about how to best resolve customer complaints. Dell's efforts, along with its leading ranking on J.D. Powers & Associates' first customer satisfaction survey regarding PC makers, moved the firm from 22nd place to sixth place among the largest U.S. PC manufacturers.

Dell was unique among PC makers in the early 1990s because it actually gained from the economic recession of the time, as those shopping for PCs began to seek less expensive options. However, at the same time the firm found itself facing competition from up-start direct sales vendors, such as Gateway 2000, which eventually usurped Dell as the top U.S. direct seller of PCs. One of Dell's most important moves in its quest for PC market share was to begin selling its PCs and related equipment on the Internet in 1996. Customers were able to place their orders on Dell's Web site as easily as they had done via the telephone. In 1997, roughly one-third of the orders Dell received were being placed on the Internet. More importantly, the majority of these online customers were new to Dell.

When PC prices began falling in the late 1990s, Dell found its Internet savvy even more important. As stated in a BusinessWeek Online article, "Thanks to efficiencies created, in part, by Dell's Web-based supply chain, the company can remain profitable even while it launches a bloody PC price war." In 2001, Dell unseated competitor Compaq Computer as the worldwide leader in PC sales.