FC NOW: The Fast Company Weblog
March 23, 2006
Dude, You're Getting an Alien
Dell has bought Alienware, a niche computer maker that sells high-end machines optimized for gaming. At a glance, Dell's strategy seems to be to control a competitor, considering Dell has started selling its own expensive gaming PCs. But, Dell claims that Alienware will be left intact, without changing anything, the name, the brand, or the components.
One can then guess the strategy is to diversify its offerings, selling machines that use AMD processors rather than Intel's. And to sell machines that appeal to a different market, young gamers, as compared to its mainstream computers. I think this is why Dell is not integrating Alienware into the organization. Alienware needs to stay autonomous, needs to be authentic, to appeal to its niche audience. If the Dell name was slapped on Alienware's colorful machines, many fans would cry, "Sell out!" I am sure some will, anyway.
With this move Dell is extending its reach to a new market, without alienating that market as the company moves into it. And Dell is doing so without the expense of creating a new product, branding a new product, or marketing it. It is expansion with little risk. But will the move work? Will Alienware's core audience remain with it?
Posted by Kevin Ohannessian at March 23, 2006 2:30 PM | Category: competition |
3 Comments
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It makes perfect sense that Dell would want to take over a quality competitor like Alienware. However, the first thing you hear generally in corporate takeovers is the reassurances of how the company doing the takeover won't change the product. Of course, it's just spin, they don't want to damage the brand during the takeover. The changes happen subtly, down the road.
Dell ripped me off on upgrades and I've therefore been concidering Alienware as an alternative for my next buy. What will I do now? I wish Gateway would get there act together.
Its simplistic to view this acquisition solely in chess moves - 'controlling a competitor', 'diversifying into AMD chips' or even, 'reaching a new market'. While all of these may be viable reasons, I believe that there is more to this move than meets the eye. My suspicion is borne out by amazingly similar moves in the same time period by very large firms in totally different industries, viz., Colgate's purchase of Tom's of Maine and L'Oreal's of The Body Shop. In all three cases, the acquiring firm is one that a) does not have an intangible quality, approach or brand image that the acquired firm does and b) have all promised that the acquired firm's brand and product strategy will remain untouched and each will operate as an independent unit with the continued guidance and support of the original founders.
Mayhaps, what all of these acquisitions imply is an acknowledgement that there are intangible qualities important for good business and continued growth beyond the obvious bottom line that the behemoths have followed till date.