DELL STRATEGIC MANAGEMENT ASSIGNMENT/CASE STUDY SOLUTION

Dell Strategic Management Assignment/Case Study. It reviews the organizational structure, vision,
mission, SWOT, PESTEL Analysis, Strategic Group Map Competition and Product Positioning Map of
Dell.
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INTRODUCTION
This report undergoes a strategic management overview of Dell, one of the leading PC vendors of
the world with a unique operations model focusing on built to order and direct to consumer
frameworks. The report begins with a comprehensive overview of the companys operations, its
hierarchy, location and principle of logistics. An understanding of the vision, mission and objectives
allows for the strategic analysis to be put into context and perspective. Our first strategic analysis
tool is the SWOT analysis followed by an internal and external factor analysis. This is accompanied by
a TWOS matrix allowing the report to pin point specific strategies which may help the organization
cash on its strength and opportunities to offset threats. An overview of the life cycle of the industry
is followed by a PEST analysis. Understanding the political factors is critical and along with the
location principles explained in the first section allows us to pin point some strategic direction for
the company. Similarly the economic, social and technological factors are discussed for the industry
and the implications for Dell on a strategic level. A competitive analysis with other names in the
industry is done through a product positioning map on the factors of price and customization.
OVERVIEW OF PRODUCT AND SIZE
Dell became the leading PC Vendor of the world in 2001. One of the most unique proposition of Dell
is the by passing of reseller through a direct to final buyer strategy. This accounts for 90 percent of
its sales leading to the reporting of higher profitability and revenues for the company. This direct to
buyer results in a consumer intensive strategy is called by many as the key to the success of Dells
model of business (Kraemer, et al., 2000). The direct relationship with consumers not allows for
reduced costs, better inventory decisions and increased revenues but also allows for a better
understanding of what the customer requires. The PCs are therefore built to the exact specifications
as required by the customer. This is a sharp contrast to the conventional model of PCs which are
based on vendors who make attempts to predict the demands of the market. This built to order
strategy helps Dell in multiple fronts, reducing overheads and increasing return on investments at
the same time as allowing for a better understanding of the market and consumer needs. This
specific strategy comes with several complications in operations. The operations need to make sure
that all parts and components are quickly available so that customized configurations can be
handled quickly. The capabilities of production and logistics of supplies must be optimized in order
to make sure that there are quick turnarounds and orders are processed efficiently.
The requirements of such an operations means there is an interesting structure of logistics. There is
a focus on outsourcing of activities which are non strategic while the emphasis is laid down on key
strategic areas. There is a relationship intensive strategy with partners who provide the components
and elements of the Personal Computers so as to provide value added products. The actual
production network of Dell is spread around the world ranging from America, Europe to Asia. Some
of the production cycles are outsourced to other manufacturers. There is also a reliance on the
supply of several components such as CD ROMs and Disk Drivers to outsiders. Partnership with
software providers such as Office also allows it to further increase the value of final product. Outside
partners are also used for installation, repairs on the site and integration of the overall systems.
Resellers are used for recommendation of the product to consumers.
LOCATIONS
The location factor of Dell is critical to the effectiveness of its built to order model. The basic decisive
factor in choosing a location is to understand how costs can be minimized, built to order models can
be extended and direct sales can be maximized around the world with minimum time and maximum
customer satisfaction. Specific locations and their selection depend upon labor rates in an area, the
transportation infrastructure, political barriers and the closeness to high demand areas.
The headquarters originally was in Austin Texas, where the company was formed. Manufacturing
units exist in Tennesse as well. Currently the manufacturing units in America are limited to these two
areas. Brazil has a manufacturing unit of Dell in Eldorado do Sul. This location point was decided on
the basis of the need to supply the South American market. There were also political factors such as
the avoiding of tarrifs because of the choice of location. The European, Middle Eastern and African
market are combined as one sector; the headquarters of which is based in the UK. Ireland is used for
a production unit because of the tax incentives available over there (Loughran, 2000). Logistic hubs
and technical support units are also deployed around the continent.
Manufacturing units are placed strategically in the Asia-Pacific region as well. Malaysia because of its
appropriate labor rates, political incentives and closeness to suppliers were chosen as the central
location. Production units are placed around the continent including one in China with close
suppliers in Taiwan.
HIERARCHY
The organizational hierarchy can be seen as follows:-


VISION, MISSION, GOALS AND OBJECTIVES
VISION

Its the way we do business. Its the way we interact with the community. Its the way we interpret
the world around usour customers needs, the future of technology, and the global business
climate. Whatever changes the future may bring, our visionDell Visionwill be our guiding force
The vision statement is able to put forward one of the most important principles behind the
operations of Dell. The industry that Dell operates in is one of the most dynamic and ever changing
one in the international market. Fluctuation of technology and consumer demands mean that
change is the only constant. This is why the lack of prediction leads to the vision statement which
focuses on the interpretation of strategy through consumer needs, technology trends and
international business climate.
MISSION STATEMENT
Dells mission is to be the most successful Computer Company in the world at delivering the best
customer experience in markets 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
BUSINESS OBJECTIVES
Dells business objectives include quality, leading technology, competitive pricing and flexible
customization support. Through a strong quality assurance team and in house capabilities to build
most of its product it has been able to develop a strong QA engineering function. Through a
participative culture of employees and a drive to meet future market needs it is able to incorporate
all development of technologies in its expansion. Its business model has always been successful to
stay on top of technology. Utilizing a build to order model it has been able to incorporate leading
technology as well as provide flexibility of products to consumers. Through the removal of middle
men in sales as well as developing in house capacities and optimized inventory management; Dell
has also been able to achieve cost leadership in many market segments of the computer industry.
CULTURE, VALUES AND HISTORY
Dell has a highly customer centric culture. Founded by Michael Dell in 1984, the company was
founded to serve the customers directly with PCs that were able to meet specific needs. The
company was named PCs limited at that time. There has been one belief that has always driven the
organization right from the beginning which is to be completely consumer focused to the point that
they are able to incorporate customized requirements during ordering processes. The company was
able to go public within 4 years. Dell made its entry into the laptop market in 1991 marking an
aggressive growth rate in the following years becoming one of the top 5 computer companies of the
world. Dell believes in high turnover solutions which are also available on their website. A
technology savvy culture with a focus on consumer needs drives the operations and initiatives at the
company. Another driving factor for Dell has been delivering the computers directly to consumers.
This build to order strategy has removed the middle man, increasing turnovers and decreasing costs
for all parties involved. This allows Dell to sell at a highly competitive rate as compared to the
competition. It is this consumer driven culture, innovative values and cost optimization that sets Dell
apart (Dell, 1999).
Company Culture as cited by the companys website (www.dell.com) includes
- Meritocracy: Making sure that employees are rewarded for doing a good job in order to
enforce better performance and motivate the human resource in meeting measurable objectives
- Direct Relationships: Focuses on a relationship intensive strategy internally and externally
making sure that the environment is based on two way communication
- Empowerment: One of the most crucial factors of an innovative company is empowerment.
Highly employee participation culture is seen at Dell.

SWOT ANALYSIS
STRENGTHS
The business model of dell which focuses on a built to order framework where the
middleman is removed and PCs are sold directly to the end buyer
Strong strength of sales strategy through a variety of mediums ranging from
conventional to e-commerce
Elimination of the mark ups added by the reselling party through the direct sales to
end buyer resulting in lower costs to consumer without cutting down margins for
Dell
Reliability that comes out of a built to order model reduction of over-heads related
to large inventories and finished goods.
One of the industry leads in the Personal Computer market
Considerable number of manufacturing units across the world
Strong brand value and power in B2B as well as B2C
Significant margins over costs of production because of the direct sales to the end
buyer
A highly relationship intensive strategy starting from the consumer sector and
extending to the corporate and government sectors
Holds a large share in the market of personal computers
Through the built to order model of production, Dell is able to achieve a quick
turnover as well as decrease the stock required in the inventory
High level of quality assurance through extensive testing in the production process
A wide array of customers including specific market segments such as hospitals and
universities
Top ranked Server on Intel technology by the publication Technology Business
Strong understanding of individual customer segment needs
Wide array of methods of advertising and marketing
There are not a lot of production units and regional offices in the west including
the United States
For some consumers it is an inconvenience that Dell PCs cannot be purchased
through retail outlets
It has not been able to penetrate into several international segments as a leading
supplier even though the number of locations in the international market are great
In the printer market it does not produce its own products rather purchases it
from Lexmark
There is a strong dependency on outside suppliers from foreign lands which leads to
a strong dependency on fuel supply and their prices leading to fluctuation
The size of the company comes in the way of faster growth
There is a continuing demand for personal computers
There is a strong and evolving market for notebooks and tablets
There are strong opportunities of partnership in the market including one potentially
with Microsoft
There is a strong margin of expansion in consumer electronics
Consumer spending on technology is relatively untouched compared to other
products
Strong growth in the market of color printers
There are more mergers and 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
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
WEAKNESSES
OPPORTUNITIES
THREATS
Source: (Kharif, 2005) and (Dell, 1999)


Key External Factors

Weight

Rating

Weighted Score
Opportunities
There is a continuing demand for personal
computers
.1 3 .3
There is a strong and evolving market for
notebooks and tablets
.1 4 .4
There are strong opportunities of partnership
in the market including one potentially with
Microsoft
.1 4 .4
There is a strong margin of expansion in
consumer electronics
.05 2 .1
Consumer spending on technology is relatively
untouched compared to other products
.05 2 .1
Strong growth in the market of color printers .05 2 .1
Threats
There are more mergers and acquisitions
happening in the industry a threat of strong
consolidation trend in the PC industry
.05 3 .15
The influence and dependency on outside
suppliers means increasing oil prices are
.05 3 .15
crippling the spending of the consumers on
PCs
The demand of commercial usage of PCs are
not increasing at the same pace
.025 2 .05
Strong competition continues to act as a
threat
.15 3 .45
The growth of the market has slowed down .1 2 .2
Strong fluctuation in price .025 4 .1
Computing power fees has reduced .025 3 .075
The market has widened .05 3 .15
The fluctuating value and devaluation of
currency continues to happen in the
international market
.05 2 .1
Total 1 2.85

INTERNAL FACTOR EVALUATION (IFE) MATRIX


Key Internal Factors

Weight

Rating

Weighted Score
Strengths
The business model of dell which focuses on a
built to order framework where the
middleman is removed and PCs are sold
directly to the end buyer
.1 4 .4
Strong strength of sales strategy through a
variety of mediums ranging from conventional
to e-commerce
.05 3 .15
Elimination of the mark ups added by the
reselling party through the direct sales to end
buyer resulting in lower costs to consumer
without cutting down margins for Dell
.025 3 .075
Reliability that comes out of a built to order
model reduction of over-heads related to
large inventories and finished goods.
.05 3 .15
One of the industry leads in the Personal
Computer market
.1 4 .4
Considerable number of manufacturing units
across the world
.05 4 .2
Strong brand value and power in B2B as well
as B2C
.05 4 .2
Significant margins over costs of production
because of the direct sales to the end buyer

.05


3

.15
A highly relationship intensive strategy starting
from the consumer sector and extending to
the corporate and government sectors
.025 3 .075
Holds a large share in the market of personal
computers
.05 3 .15
Through the built to order model of
production, Dell is able to achieve a quick
turnover as well as decrease the stock
required in the inventory
.05 3 .15
High level of quality assurance through
extensive testing in the production process
.05 3 .15
A wide array of customers including specific
market segments such as hospitals and
universities
.05 4 .2
Top ranked Server on Intel technology by the
publication Technology Business
.05 4 .2
Strong understanding of individual customer
segment needs
.025 3 .075
Wide array of methods of advertising and
marketing
.025 4 .1
Weaknesses
There are not a lot of production units and
regional offices in the west including the
United States
.025 2 .05
For some consumers it is an inconvenience
that Dell PCs cannot be purchased through
retail outlets
.025 1 .025
It has not been able to penetrate into several
international segments as a leading supplier
even though the number of locations in the
international market are great
.05 2 .1
In the printer market it does not produce its
own products rather purchases it from
Lexmark
.025 1 .025
There is a strong dependency on outside
suppliers from foreign lands which leads to a
strong dependency on fuel supply and their
prices leading to fluctuation
.05 2 .1
The size of the company comes in the way of
faster growth
.025 1 .025
Total 1.00 3.15

TWOS MATRIX
Strengths Weaknesses
The business
model of dell
which focuses on
a built to order
framework
where the
middleman is
removed and PCs
are sold directly
to the end buyer
Strong strength
of sales strategy
through a variety
of mediums
There are not a
lot of production
units and regional
offices in the west
including the
United States
For some
consumers it is an
inconvenience
that Dell PCs
cannot be
purchased
through retail
ranging from
conventional to
e-commerce
Elimination of
the mark ups
added by the
reselling party
through the
direct sales to
end buyer
resulting in lower
costs to
consumer
without cutting
down margins
for Dell
Reliability that
comes out of a
built to order
model
reduction of
over-heads
related to large
inventories and
finished goods.
One of the
industry leads in
the Personal
Computer
market
Considerable
number of
manufacturing
units across the
world
Strong brand
value and power
in B2B as well as
B2C
Significant
margins over
outlets
It has not been
able to penetrate
into several
international
segments as a
leading supplier
even though the
number of
locations in the
international
market are great
In the printer
market it does not
produce its own
products rather
purchases it from
Lexmark
There is a strong
dependency on
outside suppliers
from foreign lands
which leads to a
strong
dependency on
fuel supply and
their prices
leading to
fluctuation
The size of the
company comes
in the way of
faster growth

costs of
production
because of the
direct sales to
the end buyer
A highly
relationship
intensive
strategy starting
from the
consumer sector
and extending to
the corporate
and government
sectors
Holds a large
share in the
market of
personal
computers
Through the built
to order model
of production,
Dell is able to
achieve a quick
turnover as well
as decrease the
stock required in
the inventory
High level of
quality assurance
through
extensive testing
in the production
process
A wide array of
customers
including specific
market segments
such as hospitals
and universities
Top ranked
Server on Intel
technology by
the publication
Technology
Business
Strong
understanding of
individual
customer
segment needs
Wide array of
methods of
advertising and
marketing

Opportunities S-O Strategies W-O Strategies
There is a
continuing
demand for
personal
computers
There is a
strong and
evolving
market for
notebooks and
tablets
There are
strong
opportunities
of partnership
in the market
including one
potentially with
Microsoft
There is a
strong margin
of expansion in
Expansion
intensive
strategy into the
personal
computer as well
as laptop Market
[Combination of
Strength 1,
Strength 5,
Opportunity 1]
Strategize such
that all future
developments
are in line with
the evolving
technology and
focus on a
corporate social
responsibility
agenda (Strength
number 14 and
Opportunity
number 1)
The development
of further
production units
as well as retail
units in the
United States [A
combination of
Weakness 1,
Weakness 3 and
Opportunity 5]

Diversification
strategy towards
the printer market
into the color
printers
including
development of
internal
capabilities
[Weakness 4 and
Opportunity 6]
consumer
electronics
Consumer
spending on
technology is
relatively
untouched
compared to
other products
Strong growth
in the market
of color
printers


Threats S-T Strategies W-T Strategies
There are more
mergers and
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
The demand of
commercial
usage of PCs
are not
Provide
attractive pricing
and discounting
packages on
specific products
to the B2C
market [A
combination of
strength 9 and
Threat 4]

Counter
competition and
increasing market
share by
penetrating into
the Asian and
European market
for leading
supplier position
in maximum
locations [A
combination of
weakness 3 and
threat 1]


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

LIFE CYCLE OF THE FIRMS INDUSTRY
STAGE 1: DEVELOPMENT OF THE PRODUCT
The first stage of the life cycle is marked by a research intensive and secretive process. The more the
innovation in a PC company, such as apple, the more investment goes into the research process.
Code name are usually utilized without naming it till its developed completely
STAGE 2: ANNOUNCEMENT OF THE PRODUCT
This stage is not to be mixed with the actual product introduction stage. The purpose is to bring the
media and big guns to an event and announce what will be coming through in the near future. The
product does not always reach its final shape at the time of announcement of the product.
STAGE 3: INTRODUCTION OF PRODUCT
The introduction of the product is the stage when the final product is ready to be delivered to the
consumers. At the time of announcement, the supply of the product is not that high and expensive
in order to hit big profits. At this point of time, a new product is also started to be developed which
means Stage 1 of a future product starts at the Stage 3 of the new product.
STAGE 4: MAINTENANCE
It is during this stage of the life cycle that the price starts decreasing and the supply increases
getting even with the actual demand in the market. The products will be send to all major sales point
of Dell around the world at a lower cost than before. It is at this stage of the new product that the
future product is announced.
STAGE 5: RETIREMENT
Since Dell operates in a highly technological environment, changes and advancement are frequent
which results in a relatively quicker retirmenet of products. This is now replaced by the introduction
of the product which incorporates new technology.
IDENTIFICATION OF ENVIRONMENTAL CHANGES
POLITICAL FACTORS:
The political factors include legislature, government regulations and other restrictions/provisions of
political nature. This directly implicates the conditions under which Dell has to operate. Political
factors have caused certain restraints from time to time because of the political instability. Some of
the political factors include the ones that come as a direct result of signing of World Trade
Organizations. Market access is one such factor. For example, Texas and Malaysia, two of the top
choices for Dell in the region are central to U.S Tennesse and to Asia Pacific respectively. Ireland,
another hub of Dell, is in close proximity to United Kingdom, Germany and france. Tarriff free access
to markets are one of the biggest political incentives to Dell. Political changes which cause an impact
on market access and their conditions can have consequences on pricing strategy of Dell as well as
supply choices. Political incentives such as tax holidays provided by Malaysia are another such
political factor. Low corporate taxes, financial incentives, land support and per capita grants per
employee are other such factors which contribute to the political dynamics of the operating
environment for Dell.
ECONOMIC
The economic situation around the world, in specific regions have a direct impact on two things. A)
The changing economic situation and landscape has a direct impact on the pricing strategy and profit
margin of Dell and B) Economic turmoils such as the one faced right now by the world decreases
consumer power to buy the Dell products. Currency fluctuation and Changes in Oil prices are
another factor which causes strong disruption in pricing models of Dell. Strong dependency on
foreign supply means these two factors become all the more critical.
SOCIAL
Demand for computers has a strong dependency on several social factors. One of the most critical of
these social factors is the level of education that prevails within a country. Higher education
standards lead to strong demand for the PCs around the globe.
TECHNOLOGICAL
Technological changes in environment include the advancement of components, more efficient
parts, internet access, newer ways to market the product and the pace at which products keep
getting smaller and faster. This change in speed and size is central to the changes that are required
on a regular basis by Dell in order to keep up with the business environment.
Source: (Kharif, 2005)
STRATEGIC GROUP MAP COMPETITION
PRODUCT POSITIONING MAP
HP: HP is the closest competition to Dell. With a strong advantage over Dell in the segment of
Printers, it has an edge on that front. On the other hand Dell continues to have an edge in terms of
its competitive price over HP. The weakness, however, remains in the printer segment infront of HP
(Schmid and Kelber, 2005).
IBM:
Dell and IBM do not have conflicting target market segments. However, IBM seems to have a better
penetration into the Asian market as well as better access to cheaper wage rates. One of the most
important competitive edge for IBM is the server market (Schmid and Kelber, 2005).
Apple Computers:
Apple is one of the most innovative firms in the PC market. Their target market is different from Dell
as well. They are more innovative and sell the products on premium prices. Leading edge design and
low variety in products are the features of Apple.
Note: The product positioning is based on customization and cost. Customization is seen as the
variety in product portfolio as well as the customizable specifications within one product.
PRODUCT POSITIONING MAP
Expensive

Apple


Customizable HP Generic


Dell

IBM
Inexpensive
RECOMMENDATIONS
RECOMMENDATIONS FOR STRATEGY IMPLEMENTATION
Dells strategy has been focused on building computers that can be ordered by consumers through a
strong internal capability of manufacturing and quick inventory turnarounds. This build to order
strategy has been the differentiating factor for Dell for the past few decades. The removal of the
middle man gives it high margin in direct sales as well as provides low costs to its consumers. One of
the strong strategic advantages for Dell has been its ability to adapt to changes. As an employer Dell
has focused on a strong relationship with employees, focusing on their motivation, well being,
reward strategy and empowerment strategy. Its strategic supply chain management, data
integration with suppliers, relationship intensive approach and integrating physical store sales with
online sales has made sure Dell continues to grow at an exceptional rate.
The following are recommended as strategic line of action for Dell
An involvement in CSR activities including a Green Campaign for collection of old
PCs/electronic equipment for recycling/disposition in an environmental friendly way.
This will lead to better image in the society as well as sustainable development and
cost efficiency in the long term
A series of internal marketing efforts to maintain a highly innovative culture within
the organization for a re enforcement of its employer values for high performance
management and employee participation.
Venture into R&D partnership with an established company sharing intellectual
resources and the hardware infrastructure of Del for development of technology
savvy products for future.
Building more manufacturing plants around the world and specifically in the US.
Global expansion should be met with region specific capacity building as well as to
reduce supply chain costs/complications and dependency on external factor
Internal capacity building for the development of printer products in order to cut
down its costs, increase quality and increase market share in competition to HP.
CONCLUSION
The industry of personal computers, laptops and related hardware is one which evolves
continuously. The result of globalization, political incentives and technological advances can be seen
on a regular basis. This means that a reassessment of strategy for all the players in the industry is
important in order to keep the respective competitive advantage going. Dells structure allows for
efficiency, cost optimization, customer relationship intensive strategies and optimum supply chain.
This report assessed the strategic direction that Dell has been taking on the basis of its external
environment and internal capabilities/limitations. Through TWOS, PEST, positioning maps and
internal/external key factor evaluation, the report came up with a five point recommendation
focusing on research and development, production plants, internal capability development, high
performance management and corporate social responsibility.

REFERENCES

- Dell, M. (1999). Direct From Dell: Chairman and Chief Executive Officer, Dell Computer
Corporation. Collins
- Kharif, O. (2005). Dell, Time for a New Model? BusinessWeek
- Schmid, N. and Kelber, A. (2005). The Dell Company A Strategic Analysis. Management
Seminar. Hochschule
- www.dell.com
- www.hp.com
- www.ibm.com