Part D. Evaluate the Company's tangible and intangible resources?

Which are more important as a

source of competitive advantage? Why?

Tangible Resources

• Financial Resources: Multi-billion dollar company, slow down of the industry has led to
limited borrowing power – nothing to sell means no income to pay back borrowed funds, not
much ability to generate internal funds other than stockholder’s equity – limited inventory
means nothing can be sold just to make money.
• Organizational Resources: The reporting structure hasn’t changed since the company started,
it has only evolved. The company started out as Michael Dell doing computer upgrades in his
dorm room. The company is still led by Michael Dell as organizational structure is implanted
as the need arises. As a company, they participate in just-in-time manufacturing.
• Physical Resources: Dell carries 4 days of inventory and has urged suppliers to build inventory
bases close to Dell’s factories for cost sharing.
• Technological Resources: Not many secrets exist in the world of PC making and distribution.
Therefore, they don’t have a competitive advantage.

Intangible Resources

• Human Resources: The fact that Michael Dell still runs the company is a great advantage to
the company. He has been a part of the entire process from his dorm room to the products that
earned them $56 billion in 2005.
• Innovation Resources: Mostly Dell has piggybacked on other company’s ideas. They started
making peripherals and venturing into the consumer electronics industry only after their
competition did the same.
• Reputational Resources: Dell has a very strong brand image. They are known for thinking
ahead like in situations where their notebook battery needed to be recalled. They did so before
they “had to” and that earned them favor with consumers. Also, they have worked to maintain
a level of customer service and satisfaction from the initial purchase through the need for
technical support.

In the PC and IT industries, intangible resources are always going to be more important. There are
dozens of people in the world that can take apart a machine and see what’s in it. This makes the
physical resources publicly accessible.

Part E. What are the main capabilities of the Company? Does the Company have a core
competence?
According to this analysis, the main capability of Dell is to produce a low-cost, customizable machine
for any use. They have models made specifically for the home and personal use. They have models
made for use in schools and for use in businesses. They have also recently produced a model that is
superior in the gaming community.

A core competency that they have cultivated is that of customer service. They try hard to maintain
current customers with technical support as well as entice new customers with customizable machines
that are built to suit the needs of that person.

Core competencies are defined as “resources and capabilities that serve as a source of a firm’s
competitive advantage over rivals.” Thus, core competencies are groupings of resources and
capabilities. Not all of a firm’s resources and capabilities are core competencies.

Part F. Does the Company have a sustainable competitive advantage?

Valuable Capabilities: Their lack of on-hand raw material inventory is a valuable capability for the
future. If technology and innovation take a step forward whether minute or gigantic, Dell is able to
initiate the changes timelier than their competitors. They have also made a successful step into
peripherals such as printers and scanners as well has consumer entertainment like cameras and
televisions

Costly to Imitate: Historically, Dell was ahead of the curve because of their business model.
However, their lack of foresight to initiate necessary changes in PC development has put them in the
same position as their competitors.

Non-substitutable: As a product, the Dell PC is easily substitutable by any competitors brand PC or by

a notebook. What Dell does have as an advantage is the ability to make their product customized by
the order at a lower cost. Their competitors have initiated customizable models but they come at an
extra cost.
Part G. SWOT ANALYSIS

Strengths: customer service, brand image, established as a company

Weaknesses: affordable pricing leads to inferior product, no sustainable technological advances or

improvements

Opportunities: knowledge resources-they employ good minds, availability to integrate into new
markets

Threats: fierce competition with little privacy as to use of technology

Part H. GENERAL PROBLEM STATEMENT

During the late 80s, Michael Dell and his company, Dell Inc., revolutionized the global PC market by
using the ‘Dell Direct Business Model’, where it eliminated all kinds of middlemen and directly
supplied customized PCs to the customers. In January 2004, Dell entered into a technology partnership
with Fuji, Xerox, Kodak and Samsung, followed by a strategic partnership with Microsoft Corporation
and Oracle Inc. It set up the Dell Enterprise Command Center to support the server and storage
customers in the region. During the second quarter of 2006, Dell announced that it would fall short of
both its expected revenue and earnings. The company’s bottom line was growing sluggishly and its top
line growth was also experiencing a decline for the last six quarters. Dell had been facing challenges in
the corporate market also. Due to an increase in the internet traffic, the enterprising customers shifted
to more powerful servers, instead of assembling together lower-end models where Dell had its
competence.

Part I. What is the Company's business-level strategy? Is the strategy appropriate to offset the forces
in the industry? Do you recommend any changes?
In the case, Dell exhibits a cost leadership business-level strategy. The company operates based on the
“Dell Direct Business Model”, where it eliminates the middlemen and directly supplies customized PCs
to the customers.

From this model is how Dell enjoys most its competitive advantage over its competitors. However, this
edge is dwindling as most competitors offer customizable features. Further, competition in the low-cost
PC market is getting fierce as more competitors are beginning to emerge.

In order to compete in the market Dell needs to make a slight adjust to its business strategy. Rather than
selling direct only, Dell needs to add a reseller channel. The market is maturing and new means of
getting the product to the customer need to be examined.

Also, rather than hassle with all the sharks in the low-cost PC segment, Dell should explore other
opportunities in internet based computing, healthcare, education, and increase B2B offerings and
solutions.

In the short run, Dell should follow the above strategies, as well as look for ways to cut costs, listen to
customer concerns, and focus on new product development.

In the long term, Dell should increase research and development spending in order look for future
trends and increase innovation.

Part J. What is the Company's position today?

In 2007, Dell created a blog called IdeaStorm where customers can suggest new products and services.
The company had begun to realize they had stopped listening to customer complaints.

In early 2007, Michael Dell, had returned as CEO and began an aggressive cost-cutting program to
turnaround the company.
In 2007, Dell changed its direct-sales model to offer computers in retail outlets, after losing the title of
top PC maker to Hewlett-Packard Co (HP). Dell is currently the second largest computer retailer in the
world behind HP.

In 2008, Dell focused on regaining lost market share instead of immediate profits.

In September 2007, Dell announced that it would take its newly developed retail channel strategy
overseas, selling computers through China’s largest electronics retailer.

In February 2009, Dell Computers announced that it would strive to cut an additional $1 billion a year
from the company’s costs by 2011.

2010, since launching its $ 1 billion cost initiatives last fiscal year, about 70 percent of Dell’s total
product volume has been redesigned and optimized to reduce costs.

2010, Dell continues to build its emerging country presence as combined revenue from the BRIC
countries—Brazil, Russia, India and China—grew 16 percent sequentially. Sales in BRIC now
comprise 10 percent of total company revenue.

Now, Dell introduces a new specialized cloud computing infrastructure to the mainstream.

Stock Price (March 24, 2006 – March 25, 2010): 30.06 – 14.99, a 48% decline.

Dell’s stock has been on the fall since the case study originally was published. However, brighter days
are ahead as CEO Michael Dell’s long-term strategies are beginning to show results. Since 2009, the
stock has began to rebound, up to $15 from a low of around $9 per share.