Dell Case analysis

Dell
Strategic Management case

Driving forces
• Innovation
• Asian competition
• Competitive Market

Industry issues
• 2008-2009 Great recession
• New entrance
• Substitution (I-pad)
• Competition

Competitors strategies
-High spending on R&D (Apple and HP) that makes them to gain high profit margins
- Distribution strategy of competitors include direct marketing as Dell, distribute in
public retailers as Wal-Mart or exclusive stores as Apple.
-Lowering cost to get back to profitability (Gateway)
-Acquisition of other companies (HP acquire Compaq)
-Asian competitors (Acer, Toshiba and Lenovo) win at emerging markets and
developing countries.
-Apple introduce I-pad and cannibalized 25% of notebook sales
-IBM, HP and oracle had advantages over Dell in introducing services for their
customers
IBM had sold its laptop, hard drive, and printer businesses to focus on building its
services business.
- HP acquired Electronic Data Systems in 2008 to boost its expertise in services.

SWOT analysis
• Strengths
• Strong market position supported by strong brand value
• Strong sales and marketing*Differentiated Products
• Because of its direct model, Dell was able to be described as having a differentiated product.
Every PC assembled would be somewhat different from the previous based on customer
order.
• Customer Service
• After sale customer service was another one of Dell’s strengths. A customer with a problem
could reach a technical support staff through a “hotline that was manned 24 hours a day”
• Dell’s Direct Model allowed Dell to manufacture machines that were “modified tocustomer
needs” and based on Just -in-Time inventory* Dell's brand is one of the best known in the
world.* Sell directly to consumers* Keep costs below competitors

SWOT analysis
• Weaknesses
• Customers cannot go to retailers because Dell does not use distribution channels.
• Low market share in the International Market
• Compared to its rivals, Dell had a low market share in the international market.
• They build computers, not develop them.
• They have weak business relationships with many computer retailers.
• They do not have unique technologies to offer the market.

SWOT analysis
• Opportunities
• European Market Dell has an opportunity to increase its market share in the European
market.
• Growing Economy Increasing growth in the economy is an opportunity for Dell to increase its
market share and at the same time production as well.
• Increased communication and technological inclusion also create great opportunities for Dell
• Threats
• Strong Brands in the Market (IBM)
• Changing Consumer Needs
• Increasingly popular brand name in the competition
• Increasingly lower prices for product amount for their competitors

Firm strategies issues
• No investment in R&D
• Distribution strategy issues
• No innovation
• Closing company’s desktop plants due to cost pressure
• sales is centralized in USA
•After sales service and customer service quality became to be average
• Servers, software and consulting is weak point when compared to competitors
• Dell’s emphasis on cost reduction and competitive pricing meant that it was no
longer perceived as providing high-quality personal computers or the quality service to
go with them.

Dell sales
1995 2005 2007 2008 2010
Revenues 3,500,000,00 55,800,000,0 57,400,000,0 61,100,000,0 52,900,000,0
Net income 2.4 3,600,000,00 2,600,000,00 2,900,000,00 1,400,000,00
0
10,000,000,000
20,000,000,000
30,000,000,000
40,000,000,000
50,000,000,000
60,000,000,000
70,000,000,000

Net income trend
201320122011201020092008200720062005200420032002200120001999
2.373.492.641.432.482.952.583.573.042.652.121.252.241.671.46

Dell, -41%
HP, 11%
IBM, 31%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Stock Price 2007

Mission & Vision
Mission
“…to be the most successful computer company in the world at delivering the best
customer experience in the markets we serve”
Vision
“…to lead in all regions we serve. The foundation of our success is the same in the United
Kingdom and France, China and Japan, Canada and other countries.
Customers want technology products that are relevant to them, offer great value and
can be easily purchased and used.
That’s what our team around the globe consistently delivers”

Past strategies adopted by company
1-Corporate level
• In July 2004, Kevin Rollins replaced Michael Dell as Chief Executive Officer, allowing the
founder to focus on being Chairman of the Board.
however. Rising sales coupled with rapidly falling net income caused Michael Dell to rethink
his retirement and resume his role as CEO in January 2007.
• R&D investment
Dell Market
RD 1% 5%
0%
2%
4%
6%
RD

2008
2009Closed Tennessee
Closed Texas
desktop plant
N.Carolina Close
Open assembly
lines in A North
Carolina plant
Jan
2011
2005
Corporate level

Corporate level
•Michael Dell in 1995 after huge growth he temporarily slowed the corporation’s growth
strategy while he worked to assemble and integrate a team of experienced executives
from companies like Motorola, Hewlett-Packard, and Apple.
•Instead of spending its money on new computer technology, Dell waited until a new
technology became a standard. Michael Dell explained that soon after a technology
product arrived on the market, it was a high-priced, high-margin item made differently
by each company. Over time, the technology standardized—the way PCs standardized
around Intel microprocessors and Microsoft operating systems.

Line of business level
•Distribution strategy
firstly Management decided in 1995 to abandon distribution of Dell’s products through
U.S. retail stores and return solely to direct distribution.
Over time, Dell’s competitors had imitated Dell’s direct marketing model, but were also
successfully selling through retail outlets.
A presence in retail was becoming especially important in countries outside North
America. Sales in these countries were often based on the advice of sales staff, putting
Dell’s “direct only” business model at a disadvantage. In response, Dell began shipping
its products in 2007 to major U.S. and Canadian retailers, such as Wal-Mart, Sam’s Club,
Staples, and Best Buy. This was soon followed by sales elsewhere in the world through
DSGI, GOME, and Carrefour, among others, to number over 56,000 outlets worldwide

Line of business level
•In other lines rather than desktop
Dell (along with HP) offered x86 open-system servers. In order to better compete in the
large enterprise market segment, Dell purchased Perot Systems, an IT services company, in
2009.
Even after this acquisition, however, services accounted for only 13% of Dell’s sales.

Function level
2007, when Michael Dell resumed being the company’s CEO, Dell has made more than
10 acquisitions, cut about 10,000 jobs, and hired executives from Motorola and Nike to
add more excitement to its product line.
90,000
78,000

Function level
Manufacturing
Dell drove down costs further
by perfecting its manufacturing processes
and using its buying power to obtain
cheaper parts.
Dell IBM HP
Revenue per
employee
1,000,000 333333.333 500000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Revenue per employee

Strategic options
25%
31%
18%
11%
11% 4%
Sales
desktop PCs mobility
software and peripherals servers and networking
services storage
Dell is diversified
company worked in the
following areas

Corporate Level
Strategic Options

Evaluation-ve+veImplementationStrategies
Increased
Contribution out
of US
Cost, ControlSecured
business
Select 10 centers
around the world
Decentralization
SurveysCostRestore
competit
ive edge
-Increase quality &
quantity of customer
services and
maintenance centers
More investment in
customer service &
after sale service
Market share of
HQ PDCts
Cost, RiskyHQ
products
High NI
Reach MKT level (5%)Increase investment
in R&D

Market shareFew
custom
ers
Few
customers
with high
revenue
Marketing & sales
team
Customized desktop
lines for corporations
with internal system
Contribution of linesMore cost
effective
-MarketingDifferentiation of
Laptops to 3
categories
NINicheIncrease
revenue
Specialized line for
customized laptops
Customized Laptop
with unique quality
(high Price)
Market share of large
enterprise
Increase the
large
enterprise
MS
Outsourcing and
merging
Increase Investment in
Services & servers

MS% gain for each
line
CostRestore
brand
value
Marketing & Media
campaigns
Brand positioning
NIRiskHigher NI-Standard
manufacture line
More cost effective
Manufacturing
Productivity per
head
TurnoverNIIncreased
productivity
(Recruitment &
training & evaluation
Displace revenue per
head strategy to
Profit per head
strategy

Dell Case analysis

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Dell Case analysis