Case Study 1 DELL INC.

2005

DELL OVERVIEW:
Dell is a technology company, offering a broad range of product categories including; laptops, desktops PCs, servers, monitors, printers and other electronic accessories. Dell is the number one supplier of personal computer systems in the United States, and the number two supplier worldwide.

HISTORY:
Dell started from Michael Dells dorm room at University of Texas in 1983. He used to assemble computer systems on order and within a year his sales reached approximately $80000 a month. He founded the company in 1984 with the name PCs Ltd, which was changed to Dell Computer Corporation in 1988. The company adopted the built-to-order concept in order to improve the profit margins and to reduce the costs and risks of holding inventories. From 1990 to 1994, due to large scale operations, the company started retailing as well but discontinued the practice in 1994 due to reduced profit margins associated with retailing their products. Initially, Dell used to sell through mail and phone orders. In 1988, they added a sales force to enhance their partnerships with corporate and government customers. In 1994, they started selling through their website and by 1999 they were the largest internet retailer. Due to cost implications, Dell focused more on the corporate and government customers and ignored household consumers. In spite of this ignorance to customer, Dell had grown to be the largest PC supplier in the World with a global market share of 18% within 20 years.

VISION STATEMENT:
It's the way we do business. It's the way we interact with the community. It's the way we interpret the world around us our customers' needs the future of technology, and the global business climate. Whatever changes the future may bring our vision Dell Vision will be our guiding force.

MISSION STATEMENT:
Dell's mission is to be the most successful computer company in the world at delivering the best customer experience in market we serve. In doing so, Dell will meet customer expectations of; Highest quality Leading technology Competitive pricing Individual and company accountability Best-in-class service and support Flexible customization capability Superior corporate citizenship Financial stability

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Case Study 2 DELL INC. 2005

OBJECTIVE:
To provide the best possible customer experience by offering superior value; high-quality, relevant technology; customized systems; superior service and support; and differentiated products and services that are easy to buy and use.

STRATEGY:
Dells vision is to use following strategies:

Simplify information technology for customers. Provide quality personal computers, servers, storage, and services affordable focus on making information technology affordable for millions of customers around the world Simplify how customers implement and maintain information technology and deliver hardware, services, and software solutions tailored for their businesses and homes through customer intimacy. Offer custom-built products and custom-tailored services. Market the product directly through advertising on the internet and television. Direct contact with customers as customer can contact via telephone, kiosks, and our website, www.dell.com, where they order according to their requirement. Be environmentally responsible in every stage of the Dell product life cycle Build environmental consideration into from developing and designing energy-efficient products, to reducing the footprint of our manufacturing and operations, to customer use and product recovery.

ABOUT DELL FUNCTIONS:

MANUFACTURING: Dell manufactures its computer systems in six locations; two in America, each one in Brazil, Ireland, Malaysia, and China. The core manufacturing processes are assembly, testing and quality control. Parts, components, and subassemblies purchased from suppliers are tested and held to quality standards Because of its build-to-order manufacturing process. To ensure a defect-free product, testing is performed at various points during assembly process and on the final products. MARKETING: Dell uses comparable sales and marketing approaches across its customer groups. Within each region, the sales and marketing force are divided among the various customer groups to meet each customer groups specific needs. Dell divides its customers into three groups.

Relation; large corporations and government

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Case Study 3 DELL INC. 2005

Transactional; small to midsize businesses and individuals Internet; customers who order through internet.

FINANCE WITH FINANCIAL ANALYSIS: Dell Inc.s Geographical Area Information-Jan 2005: The Dell Inc.s major source of revenue and income is American Businesses comprises of 51% of total revenue and 60% of the profitability. Afterwards European market, American consumers and Asia Pacific are there respectively. The market share carries the same pattern having 29.10% shares in USA and 11.70% in Europe and 8.30 in Asia pacific. The number of shares has increased in all the markets since 2003. Dell Inc.s Analysis of Consolidated Financial Statement: The revenue of the Dell Inc. had been inclining since 2003 and it had increased by 39% in 2004 as compared to 2002 and 42% that of gross profit. The net income of the Dell Inc. was $3043 m in 2004 as compared to 2,122 in 2002, a 44% increase. Despite of having 72% of the liability financing in the total assets, the company had not paid any interest expense in the year 2004 and on the remaining balance, no dividends were paid. These two points had managed to maintain the profitability. Rival Firms Analysis of Consolidated Statements of Income-2004: As the Dell Inc. has been put into the competition with the HP, IBM, Gateway and Apple, the position gets clearer. When the revenues are compared the gateway revenue stands first at $3,649,734m than IBM $96,293, HP with $79,905 and Dell with $49,205. The cost of revenues is quite high of the Dell Inc. leading at 82% which makes the gross profit affected as compared to its rivals. In the head of operating expense, Dells investment in the research and development is $463m which is quite low as compared to the IBM, HP, and Apple. The Apple, even though, very little competitor to Dell but invests more than in Research than that of Dell. The Dell Inc. is supposed to reduce its operating cot and invest the savings in the research so that it can compete with its giant and growing competitors. The Gateway could not compete as its selling and administrative expenses had drastically hit the income. The net income, when compared, is highest for the IBM with 8.6% of its total revenue amounted to $8,430m while $3,497m of HP and Dell with $3,043m. Dell was only successful to converts 6% of its revenue in to net income. The figures are attractive but can further be improved having cut down the operating cost while inkling the research and development investment.

SWOT ANALYSIS WITH EFE AND IFE MATRIX:

OPPORTUNITIES
Diversification strategy by introducing many new products to its range.

THREATS
Competitive rivalry that exists in the PC market globally.

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Case Study 4 DELL INC. 2005

Making and selling low-cost, unbranded low-price computers to PC retailers in the World. ASIA is untapped market and hold potential for increased PC usage in future. Printers and service market are mostly untapped. Cost reduction in latest technology. Strong growth in the market of color printers There is a strong margin of expansion in consumer electronics Consumer spending on technology is relatively untouched compared to other products There is a strong and evolving market for notebooks and tablets There is a continuing demand for personal computers There are strong opportunities of partnership in the market including one potentially with Microsoft. Partnership or acquiring of suppliers.

Major competitors in the market.

Aggressive competitors.

marketing

by

Global economic recession Aggressive pricing wars Rapid technological advancement

Expected computer sales increase but many areas may lack phone and internet service Bargaining of suppliers

Low education rate.

The demand of commercial usage of PCs are not increasing at the same pace Strong competition continues to act as a threat

The growth of the market has slowed down Strong fluctuation in price Computing power fees has reduced The market has widened The fluctuating value and devaluation of currency continues to happen in the international market There are more mergers and

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Case Study 5 DELL INC. 2005

acquisitions happening in the industry a threat of strong consolidation trend in the PC industry The influence and dependency on outside suppliers means increasing oil prices are crippling the spending of the consumers on PCs

PROPOSED STRATEGIES TO EXPLOIT OPPORTUNITIES:

The development of further production units as well as retail units in the United States. Diversification strategy towards the printer market into the color printers including development of internal capabilities. Strategize such that all future developments are in line with the evolving technology and focus on a corporate social responsibility agenda. Expansion intensive strategy into the personal computer as well as laptop Market. Provide attractive pricing and discounting packages on specific products to the B2C market. Counter competition and increasing market share by penetrating into the Asian and European market for leading supplier position in maximum locations

PROPOSED STRATEGIES TO COUNTER THREATS:

EXTERNAL FACTOR EVALUTION MATRIX (EFE):

KEY EXTERNAL FACTORS Opportunities Diversification strategy by introducing many new products to its range Making and selling low-cost, unbranded lowprice computers to PC retailers in the World ASIA (India, Pakistan and Bangladesh) are the untapped markets Printers and service market are mostly untapped Market penetration in education and Government markets Cost reduction in latest technology Partnership or acquiring of suppliers Threats Competitive rivalry that exists in the PC market globally Major competitors in the market. Weight 0.10 0.08 0.10 0.08 0.05 0.05 0.08 0.05 0.05 Rating 3 4 4 3 2 2 2 3 3 Weighted score 0.3 0.32 0.4 0.24 0.10 0.10 0.16 0.15 0.15

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Case Study 6 DELL INC. 2005

Aggressive marketing by competitors Global economic recession Aggressive pricing wars Rapid technological advancement Expected computer sales increase but many areas may lack phone and internet service Bargaining of Suppliers Low education rate Total

0.08 0.05 0.05 0.06 0.08 0.02 0.02 1.00

4 3 2 2 3 1 2

0.32 0.15 0.10 0.10 0.24 0.02 0.04 2.89

STRENGTHS
Largest Market Share In Pc: Dell is the World's largest PC maker. it holds 29.1 percent of the total market for personal computer sales in America. It has 11.7 percent market share in Europe and 8.3 percent in Asia-Pacific. These market shares are continuously growing. Direct Sales Approach: It improves profits as no retailers involved in distribution and also it gives opportunity to Dell to have a direct contact with customers. So its reliability among customer increases

WEAKNESSES
No Proprietary Technology: Dell have no proprietary technology, the currently used technology by dell are shared by the other major competitors

Lacking In Product Line And Service Breadth: Dell has only proficiency in personal computers while Hewlett Packard has also some command on pc with its printer and scanner likely IBM after joining hand with Lenovo has its name in server industry. Lack Of Internet And Phone Facility: The direct sales approach is not the preferred distribution in some locations where internet and phone facilities are either not available or difficult to avail.

Build To Order Approach: It reduces costs and risks associated with carrying large stocks of pars, components, and especiallyfinished goods. So this makes De4ll efficient in inventory management.

24X 7 Customer Support: Dependency On Suppliers: Internet customers can access a wide As its core function in manufacturing is range of information any about Dell assembling the components and also product and service offerings, configure having low inventory level, so Dell is and purchase system online, and access very much dependent on its supplier, volumes of support and technical especially if it will get orders in bulk information. Internet also provides volume. reliability in support and services as it has a direct contact of customer with

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Case Study 7 DELL INC. 2005

Dell. Latest Technology: As Dell quickly produces customized products while achieving rapid inventory turnover. This flexible manufacturing process is that Dell can quickly incorporate new technologies or components into its product offerings. Wide Range Of Products: It Offer wide range of products like PC, Server, Laptops, Monitors and LCDs, Data storage devices etc.

INTERNAL FACTOR EVALUTION MATRIX (IFE):

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Case Study 8 DELL INC. 2005

KEY INTERNAL FACTORS Strengths Dell is the World's largest PC maker. Direct sales approach Growing market share Build to Order approach Efficient Inventory management 24X 7 Customer support Low manufacturing cost Long term partnerships with reputable suppliers of name-brand parts and component Dell has total command of the supply chain Dell has a reliable support and service Well-Known for online selling of Computers Dell always keen to embed latest technology in its products Offer wide range of products like PC, Server, Laptops, Monitors and LCDs, Data storage devices etc. at low prices Weaknesses Dell not able to attract the students of schools and colleges Dell have no proprietary technology, the currently used technology by dell are shared by the other major competitors Lacks the product line and service breadth of Hewlett Packard and IBM The direct sales approach is not the preferred distribution in some locations

Weight 0.07 0.03 0.07 0.06 0.06 0.04 0.04 0.03 0.06 0.06 0.04 0.04

Rating 4 2 4 4 3 3 2 2 3 3 3 2

Weighted Score 0.28 0.06 0.28 0.24 0.18 0.12 0.08 0.06 0.18 0.18 0.12 0.08

0.06 0.03 0.06 0.04

4 3 4 2

0.24 0.09 0.24 0.08

Dell is dependent on its suppliers Lack of technological expertise in upper management Ineffective entrance into profitable markets Total

0.03 0.07 0.01 1.00

4 2 2

0.12 0.14 0.02 2.79

COMPETITORS:

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Case Study 9 DELL INC. 2005

The level of competition facing Dell is formidable, with Hewlett-Packard and IBM being the chief and Gateway and Apple as minor competitors. Dell could maintain profitability by competing on the basis of price, technology availability, performance, quality, reliability, service and support. Here, some information about the competitors of Dell is being mentioned.

HEWLETT-PACKARD:
By most accounts, Hewlett-Packard is Dells closest competitor. Currently, Dell commands 18.3 % of personal computer shares in world compared to HP with 15.7% shares. Hewlett Packards merger with Compaq made it a quite large company with $79,905 million total revenue compared to Dell total revenue of $49,205 on May 2002 but the net income of both the companies are almost same, HP with $3,497 and Dells $3,043 million. HPs main income source is its printer business which generates 70% of income. To compete, Dell Inc. started selling printers but its still only a distant contender to HPs command of the printer market.

IBM:
In Dec 2004, the Lenovo group limited acquired IBMs personal computing division, made IBM a giant competitor of Dell. Lenovo is the largest producer of personal computer in Asia and enjoys significant wage advantages over Dell. However, Dells low-cost, low-research approach to manufacturing has hampered its ability to compete with IBM. IBM invests a huge amount in research and development (research and development) as a result has been thriving in the upper and middle sections of the server market while much of Dells sales is in the lower less profitable end of the server market.

GATEWAY COMPUTERS:
Gateway has improved over last few years. Gateway, under Ted Waitt, sought to imitate Dells low inventory, manufacture as order production process. However, Gateway opened 264 stores but it failed and had to be closed down. The gateways holds only 6% of the total market share along with the revenue of merely $3,650 million and lose of $475 in 2004 compared to Dells 29% market share. As competition in the personal computer industry remains tight, it is distinctly possible that gateway will not be able to survive.

APPLE COMPUTERS:
Under Steve jobs, Apple has introduced innovative designs for its brand of personal computers. The use of color, styling and a commitment to its own operating system means that Apple has clearly a unique product line. Apple has enjoyed phenomenal success with its iPod line. Apples total revenue of $8279 million in 2004 is drafted by Dells 2004 total revenue of $49,205 million. Likewise, net income of Apple was $276 overshadowed by Dells $3,043. Apple with 3% shares in US and 5% in international market seems an unlikely competitors to Dell. However, Apples philosophy of innovation, experimentation and leading edge design is a stark contrast to Dells focus on cost and inventory control.

COMPETITIVE PROFILE MATRIX FOR DELL (CPM) :

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Case Study 10 DELL INC. 2005

DELL Critical success factors Market share Inventory system Financial position Product quality Consumer loyalty Sales distribution Global expansion e-commerce Customer service Price competitive Management experience Organization structure Production capacity weight 0.15 0.08 0.10 0.08 0.02 0.10 0.15 0.10 0.10 0.02 0.01 0.05 0.04 1.00 Rating 3 4 4 4 4 3 2 3 3 3 4 3 3 Weighted Score 0.45 0.32 0.4 0.32 0.08 0.3 0.3 0.3 0.3 0.06 0.04 0.15 0.12 3.14 Rating 3 2 4 4 3 3 3 3 3 2 3 3 4

IBM Weighted Score 0.45 0.16 0.4 0.32 0.06 0.3 0.45 0.3 0.3 0.04 0.03 0.15 0.16 3.12 Rating 3 2 3 3 2 3 4 2 3 3 4 3 4

HP Weighted Score 0.45 0.16 0.3 0.24 0.16 0.3 0.6 0.2 0.3 0.06 0.04 0.15 0.16 3.12

RECOMMENDED STRATEGIES:
Dell may use following strategies to make it competitive member of its industry. Reduce administrative expenses to cut some costs

Conduct aggressive ad campaign to promote Dell Direct Selling Continue to innovate Expand distribution network Appeal to mass market Keep costs low and quality high Leverage design of hardware and software Improve R&D

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Case Study 11 DELL INC. 2005

They should increase their product line and introduce new stylish products as their competitors doing. They have to focus on consumer market rather than selling to single households and consumers. They have to be independent of suppliers by having enough merchandise inventories

EXPECTED RESULTS:
The following results may be expected from the above recommended strategies. There is a great potential in the Asian market, Dell can grasp the chance to capture the market share. If Dell succeeds in reducing the cost of revenues which are quite higher than that of rivals the profitability can further be improved. Another thing with respect to strategies if dell adopts strategy of mass customization and efficient production, supply and distribution so they can fulfill the needs of everyone at anytime. And their supply chain will be strong enough. By improving research and development dell will able to develop tailor made products (specific to customers need) and can also easily observe the reasons why competitors are competing better.

CONCLUSION:
Although the figures suggest that they are going fine in personal computer markets but in some areas they are facing some very stiff competition from their main rivals HP and IBM. Since HPs merger with Compaq they are making huge revenues as compared to Dells mainly because of the printer market. Although Dell also started to sell printers but the way they sell it is not going to get them any way closer to HP. Rather than purchasing printers from Lexmark and then re-brand them as Dell they should also look forward to a merger with Lexmark to compete in printer market. Similarly in Asian market where Lenovo is the market leader has acquired IBMs division will be giving extreme competition to Dell where the computer market is expected to grow abnormally in the next 5 years and in places which lack telephone and internet facilities. So they will be required to start some distributions centers over there to capture the market. Further they need to develop some R&D if they want to compete with IBM in server market.

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